Only days ago it seemed that the 28 members of the European Union didn’t have it in them to jeopardize their relationship with Russia, for the sake of Crimea or Ukraine.
For the last several months, Angela Merkel spoke to Vladimir Putin on the telephone at least once a week. There’s an entry on the Russian government website for each conversation with a brief summary. Since April 30, Merkel and Putin talked about finding a solution to the crisis in Ukraine 17 times. Here’s an example: http://eng.kremlin.ru/...
François Hollande spoke to Putin about the situation in Ukraine 10 times since April 30. He also hosted Putin and Merkel at the D-Day commemoration in Normandy in June.
Petro Poroshenko spoke to Putin on the phone six times since he was elected President of Ukraine last May 25th.
Prime Minister Mark Rutte of the Netherlands spoke to Putin by phone six times since MH17 went down on July 17.
After all these conversations failed to improve the situation in Ukraine, the EU announced its decision to impose sanctions on Russia as a penalty for the actions it condemns:
|"The package of new restrictive measures agreed today by the European Union constitutes a powerful signal to the leaders of the Russian Federation: destabilising Ukraine, or any other Eastern European neighbouring State, will bring heavy costs to its economy. Russia will find itself increasingly isolated by its own actions."|
|Kirill Dmitriev: Thanks in part to our work, Russia was in third place last year, as you know, in attracting foreign investments.
Vladimir Putin: The US was in first place, China was in second (with what, 127?) and we have 97.
Kirill Dmitriev: Yes, and this is a jump from eighth place to third in just one year. What’s important is that investors are still interested – $3.6 trillion investments came to meet in St Petersburg [International Economic Forum] – and investors say that they strongly oppose sanctions, which they see as a very dangerous precedent for their own countries and their own economies.
Vladimir Putin: Indeed.
|It’s easy to picture what could happen to Russia’s economy if the flow of capital is shut off. Investors can diversify and reallocate elsewhere from their laptops. Similarly, Russia can diversify as a supplier of natural gas to other markets away from the EU, too, but it has no advantage because it needs more than a laptop. It needs infrastructure and technical expertise. The sanctions will be a hindrance to both.
Meanwhile, the US is gearing up to enter the field as a liquid natural gas exporter and Russia has no ability to compete because of the artificial price it needs to sustain itself. There isn’t a true global market for natural gas and Russia disguises its arbitrary pricing by linking it to the price of crude. When the US reaches the target capacity that meets demand in Japan, Korea, and the EU, it will supply liquid natural gas at a true market price lower than the level Russia needs for its own reasons.
Japan signaled this week that it likes this idea very much by jumping on the sanctions bandwagon, too.
Now there isn’t any reason for anyone in the world to gloat about Russia getting screwed seven ways 'till Sunday by the sanctions. The competition is between the West’s oligarchs and Russia’s oligarchs. The rest of us are bystanders.
Competition will probably matter much more than sanctions as Russia struggles to free itself of its internal limitations. It's not entirely clear how the sanctions would be applied in every instance. Is the CEO of Royal Dutch Shell going to look at joint projects like the one at Sakhalin differently now that MH17 went down? Or is he going to put the interest of the company's shareholders before all else?