In theory, Europe is in a stronger position than America to punish Russia's ruling elite because many of Russia's richest families and institutions own property or investments across the continent.
But Europe is far more reliant on Russian oil and gas, and leaders fear further disruptions to their fragile economies after years of a debilitating regional debt crisis.
German Chancellor Angela Merkel, the continent's most powerful leader, signaled that Berlin was not prepared yet to seek economic and financial sanctions. She has said that might happen if Russia destabilizes regions beyond Crimea — comments widely interpreted to mean eastern and southern Ukraine.
But Merkel said leaders had directed the European Commission to start preparing the ground for them.
Merkel told German lawmakers that the Group of 8 forum, formed when Russia joined seven economically advanced nations, was no longer a viable arrangement. A G-8 summit that was to take place in Sochi, Russia, hosted by Putin, is now on ice.
So is an EU-Russia meeting scheduled for this year, French President Francois Hollande said.
Some political analysts say Putin has banked on the EU putting its commercial interests above principle on Crimea. They describe the Russian leader as skeptical that European leaders are willing to see their economies and their own political fortunes suffer.
Swedish Prime Minister Fredrik Reinfeldt acknowledged those concerns.
Merkel’s Russia Envoy Says Sanctions Unlikely to Impress Putin
U.S. sanctions on Russia are counterproductive and probably won’t make President Vladimir Putin bow to Western demands on Ukraine, said Gernot Erler, the German government’s coordinator for relations with Russia.
Erler’s comments in an interview in Berlin today reflect German restraint on punishing Russia for its annexation of Crimea and differ in tone from Chancellor Angela Merkel, who has said Russia risks “massive economic and political harm” if it doesn't change course. Erler, whose Social Democratic Party is Merkel’s junior coalition partner, plans to travel to Moscow for talks with Russian officials on March 24-25.
Financial sanctions ordered by President Barack Obama yesterday and Russia’s response of denying entry to nine U.S. officials show that “we're already seeing a spiral,” which makes “saving face” more difficult, Erler said.
STORY: Russia Is Taking the Sanctions Threat Seriously—With Good Reason
“Starting the spiral of sanctions reduces possibilities for dialogue,” Erler, 69, said at his office two blocks from the Brandenburg Gate. “That’s regrettable. Based on experience, I have low expectations about the short-term effectiveness of sanctions.”
“Russia views itself as a world power at eye level with America,” he said. “We’re dealing with a very self-confident power, that won't change its policy under outside pressure. That wouldn’t work with America, either.”
Erler also warned against “completely excluding” Russia from the Group of Eight nations, a day after Merkel said the forum “doesn't exist anymore” for now. Still, Erler said there’s “a strong consensus” in German policy toward Russia.
Are you suggesting that other countries won't support sanctions against Russia, because their trade with Russia is important to Russia's economy?
That may be so, but the rankings you quoted (e.g., Germany is Russia's 2nd largest trading partner) are looking into the wrong end of the telescope. Looking in the other lens, we can see how important trade with Russia is to the trading partners.
Yes, Germany is a vitally important trading partner to Russia. But on the other side, Russia is Germany's 11th largest trade partner. The total turnover with Russia (imports + exports) makes up less than 4% of Germany's trade. For this reason, a big cut in trade between the two countries would cause some economic pain in Germany -- but much, much more pain in Russia.
In contrast to Germany, China is very unlikely to participate in any economic sanctions. However, while China is Russia's number one trade partner, Russia is only China's number nine, accounting for no more than 2.5% of China's foreign trade. If Russia's economy vanished tomorrow, the economic effect would be much less than what China weathered when all of its partners slowed down in 2008.
There are small and weak economies (like Ukraine's) that really depend on their trade with Russia. The big economies don't, so any strong country that chooses to sanction Russia has high leverage -- their tickle is matched by Russia's ache.
Russia NEEDS the world's major economies, but they don't need Russia to anything like the same degree.
None of this says that sanctions will contribute to the Kremlin making moves more consistent with the wishes of the West.
Nor does it make the case that sanctions won't backfire, by spurring Putin to even worse behavior.
However, as far as I understand Russia's domestic politics, the great majority of his public approval -- and his support from Russia's lesser strong men -- is based on maintaining ever-growing flows of cash, economic growth, and military expenditure. Putin doesn't stand for any ideology; he's done nothing (as far as I'm aware) about the corruption that strangles his country from one end to the other -- indeed, he is the chief practitioner and benificiary of corruption; he has demolished political freedoms, press independence, and anything we would understand as rule of law; and he has offered no realistic solutions to the staggering depopulation of the Russian countryside, environmental catastrophes that would be intolerable scandals in the West, life expectancy at the bottom of industrial countries, or Russia's looming demographic collapse.
In other words, Putin neglects -- or actively betrays -- the majority of what in other countries would be considered fundamental duties of government. His selling point, is keeping the money valve open.
If sanctions persist, and that valve starts clogging, we'll see how well the Russian people like him.
A percentage of Russians hate him -- I think at least a few millions, who tend to be in places of more influence than the average Russian citizen. I expect that when cracks start showing in his armor, they won't waste time pressing their attack.
If the West can document that Putin PERSONALLY receives billions per year from Russia's petroleum trade -- something that may be accomplished in coming weeks -- I shall watch the public reaction in Russia with curiosity.
Thanks for the reply. I think the EU is divided on these sanctions. I found that the number 1 import of Russian goods are the Netherlands with $75 billion and only a export of 5 billion to Russia. germany and italy are nearly a 50/50 with exports/imports.
I think russia will now be looking toward Asia, building better trade with China and india and south America. China could easy build the infrusture of pipelines for russia to export the oil and gas to Asia. this inturn will in the future shield Russia from US and EU.
Putin rating have gone through the roof now in Russia. it's at 80% high now. most people there still believe in the motherland Russia. it will always have a view that America is out to destroy them. old cold war thinking will never change that quick after having 70 years brainwashing under the USSR.
here is more support that Russian is looking at a bigger picture now, for the future with the BRICS nations with over 42% of the worlds population.
Sanctions effect: Russia to change its economic partners…for the better
Western sanctions might push Russia to deepen cooperation with BRICS states, in particular, to strengthen its ties with China, which will possibly turn out to be a big catastrophe for the US and the EU some time later.
On March 18, the spokesperson for the Kremlin, Dmitry Peskov, claimed in a BBC interview that Russia would switch to new partners in case of economic sanctions being imposed by the European Union and the United States. He highlighted that the modern world isn't unipolar and Russia has strong ties with other states as well, though Russia wants to remain in good relations with its Western partners, especially with the EU due to the volume of deals and joint projects.
Those “new partners” are not really new since Russia has been closely interconnected with them for almost 13 years. This is all about the so-called BRICS organization, consisting of Brazil, Russia, India, China and South Africa. BRICS represents 42 percent of the world’s population and about a quarter of the world’s economy, which means that this bloc of states is an important global actor.
China, India back President Putin in Crimean reunification with Russia
Vladimir Putin stressed the support China showed during the UN Security Council meeting as the council sought to declare the Crimean referendum illegal. “We are grateful to all those who understood our actions in Crimea,” Putin said. “We are grateful to the people of China, whose leadership sees the situation in Crimea in all its historical and political integrity. We highly appreciate India’s restraint and objectivity.”
Moscow vetoed the resolution, while Beijing abstained.
This step wasn’t seen by mass media as clear support for the Crimean reunification and even deemed as a ‘slap in the face’ for Russia by Western diplomats.
Yet, the step by Beijing was considered as clever and politically far-seeing.
China wasn’t able to veto the resolution on Crimea alongside Russia as it has its own domestic issues like Tibet, Xinjiang, Hong Kong and Taiwan. But it has now deepened its relations with Moscow and gained a potential ally for the future when Beijing will have to make hard political decisions.
these countrys you speak of Ozjohn actually have grown their wealth from the west and Europeans.
would they be capable in carrying on happily without their main traders today i wonder?
really what is Russia capable of in taking from china? its billions of tonnes of junk they export to us?
no,,, just the vegetables and cellphones that they consume today and no more.
as for china,,, would china itself like to give up on the great products they receive from us today and take Russian products instead?
really the BRIC states deserve each other in a sense.
personally i would love to see trade stopped between NZ and China,,, their wealth had come about by pretty dubious means.
and i cannot stand their junk.
we only trade with them because America shut us out over the nuclear thing.
i really dont see a problem with China having Russians gas myself,, the world needs to stop been so reliant on fossil fuels anyway.
who knows how China would pay for it if the world stopped trading with China,,, worst scenario sort of thing...
personally i think the Europeans today are financing shit heads basically(persons who control Russia) that to me is more of a Chinese thing so the Chinese should be taking the Russian gas.
that would clean up the books of the world just nicely,, BRICS States kissing each others ass.
at least for the moment Putons other massive corruption scandal in the huge timber industry there, they actually have something to wipe each others asses after kissing it.
India,, dont forget Briton helps to hold India up with some in-house thing there, thats not a small amount from memory.
South America,, well say no more,,, my experiences through Russia and eating the worst foot and mouth beef i have ever had anywhere in the world,, i guess its for borsch only because its surly not friable.
at least with that rubbish beef, the sausage will never become extincted there.
but somehow i know Puton will keep eating the stuff we also eat in the west and Europe, i will guarantee it.
such a good man to his people.
Ozjohn i dont know what personal life you have spent around Russians.
my time there i found a huge amount of people who hate him, his corruption is really unbelievable and so blatant.
people die around him.
Russian reporters who write about him, thats none edited by the system do not live in Russia.
propaganda is massive that plays in things like this.
i have spent my time there, i feel for the people i met and lived with, what they have to go through with this rubbish.
and i know they are not part of your 80% popularity list,, i can think of only one person who maybe be on it.
so really do you actually believe a lot of this stuff you put in here?
Thanks for the reply. I total agree with you on most of what you have wrote. yes China is not the one been sanction or any of the other 4 BRICS nations only Russia. but in the mean time is still supporting Russia action on the Crimea.
see sanctions only work if all the big player are on broad. Germany and italy don't want to rock the boat either as they depend on the Gas to keep the manufacturing and living standard up.
China will keep going a long selling their 2nd rates good to NZ,USA,Australia and Europe because they are not in the firing line in sanctions. the western countries now have become so depend on china for cheap good. china now make over 55% of world TV now. only 14 year ago it was the USA who had the title now it almost dead there.
Australia made billions out selling minerals to china that why we survived the GFC 2008. but slowly we are losing our manufacturing here to china same with you there in NZ. we are now pushing for free trade with China. I don't like this because we will end up like the USA who has free trade and they are stuffed now with their economy.
Obama can't rock the boat with china because China now has the largest foreign holder of U.S debt which owns more about $1.2 trillion in bills, notes and bonds, according to the US Treasury.
In total, China owns about 8 percent of publicly held U.S. debt. Of all the holders of U.S. debt China is the third-largest, behind only the Social Security Trust Fund's holdings of nearly $3 trillion and the Federal Reserve's nearly $2 trillion holdings in Treasury investments, purchased as part of its quantitative easing program to boost the economy.
To put China's ownership of U.S. debt in perspective, its holding of $1.2 trillion is even larger than the amount owned by American households. U.S. citizens hold only about $959 billion in U.S. debt, according to the Federal Reserve.
Other large foreign holders of U.S. debt include Japan, which owns $912 billion; the United Kingdom, which owns $347 billion; Brazil, which holds $211 billion; Taiwan, which holds $153 billion; and Hong Kong, which owns $122 billion.
See also: Debt Ceiling History
Some Republicans have expressed concern over the amount of U.S. debt owned by China. Republican U.S. Rep. Michele Bachmann, a 2012 presidential hopeful, joked that when it came to the debt "Hu's your daddy," a reference to Chinese President Hu Jintao.
Despite such joking, the truth is the bulk of the $14.3 trillion U.S. debt - $9.8 trillion in all - is owned by the American people and its government.
That's the good news.
The bad news?
That's still a lot of IOUs.
I gone off the tracks here but it shows how the world is F**K up now and really the whole world now is to afraid to act on a country who has annex one. a specially when the country is a superpower who has a bud who is a superpower to back you up.
Thanks for the reply. I think that a good army can only be supported by a good economy. in Russia and china terms they don't have the same overheads as us western countries in wages and living. USA,Europe,NZ and Australia are way ahead in living standard compared to this countries.
but you only have to look at the USA and how a might country has come crashing to it's knees, because of the debt with China and free trade. World people don't know the war with USA and China has been going on now for 10 years. it's economy on control of minerals.
if you went back to the united states of America President John F kennedy and Reagan they had no debt to worry about so they could act on dealing with countries like a superpower. eg Cuban missile crisis told the USSR this is only going to end one way.USSR back off. now President obama come along and says to Russia we will cut your mastercard off.
With Russian people thinking well, if they have travel out of there country and have lived a while abroad I do believe these people are not really Putin follows because the grass is green here then in Russia. eg take the women I know in the Crimea. love her to bits. only 3 months ago she could not get enough of the EU. now she thinks Putin is a great man who save her country.
Now Crimea is under Russian control the wages go up and Army pension x 3 compared to Ukraine. but that means that the cost of living will go up there too.
so yes Putin has a spike in the rating poles. it givn him and edge over the west now. lets face it, Ukraine was not running that country very good. so much corruption in the Government stealing Gas of Russia from the pipeline and Russia knew.
Whats got me interested now is where are the new Russian broader going to be now. will it be all of the Ukraine without the baltic states or is it the whole package. Russia want it back to 1941 broader maybe with out poland that was divided by Germany and USSR.
For major European powers, Russia means business, literally. Germany needs Russia’s gas to power homes and businesses. The bespoke-suited bankers of London’s financial district rely on Russian cash to keep their investment houses humming. In a port roughly four hours’ drive from Paris, hundreds of French workers have jobs because of a $1.7 billion deal to sell two Mistral warships to Moscow.
Russia is Europe’s third-largest trading partner, and Europe is Russia’s biggest. Last year, more than $400 billion worth of goods moved between the two, compared with just $38 billion in trade between Russia and the United States. The disparity makes Washington’s decision to slap sanctions on Moscow easier than the options being mulled in the E.U.’s administrative capital, Brussels. It also makes Europe’s choice more consequential.
“It’s all very well for the Americans to say, ‘Let’s do this.’ But they don’t border Russia, and they’re not engaged in lots of trade with Russia,” said Margot Light, a professor of international relations at the London School of Economics.“For sanctions to work, it’s going to take a lot of pain.”
That interdependence cuts both ways, giving Europe enormous leverage over Russia but also putting Europe at risk of hurting itself as it tries to put the squeeze on Putin. Southern Europe — including nations such as Italy that have shown stiff resistance to getting tougher on Russia — is particularly vulnerable as it emerges from the wreckage of a crippling debt crisis.
Tougher sanctions would “hit the Russian economy, but equally it will hit the E.U. economy,” said Nigel Kushner, chief executive of the London-based corporate law firm W Legal. “The only difference is that the Russians will get their goods from somewhere else. The E.U. companies will suffer because they can’t necessarily sell elsewhere.”