US Economic Warfare #3: Ukraine, Parts 1 and 2

If the US had such a powerful non-military weapon (secondary sanctions and mafia diplomacy), why didn’t they use it when Russia annexed Crimea in 2014 – the “first” Ukraine “war”?

 

Multiple reasons, explains says Jordan Schneider’s interview with Eddie Fishman. (1) It happened suddenly and without warning. The Americans were caught unawares, and thus had no strategy in place on how to react. They found themselves continuously reacting to events on the ground. (2) Russia was (is) a huge economy and the world’s largest exporter of fossil fuels, so the cascading effects of crippling the Russian economy were too risky. (3) The world was still recovering from the 2008 financial crisis, and Obama wasn’t sure if it was safe to rock the world’s economic boat. (4) Europe was entirely dependent on Russian oil and natural gas.

“(The West) don’t know what kind of sanctions are tolerable to their own economies.”

(5) Neither the US nor the EU was willing to risk all-out economic war with Russia. They didn’t know how Russia might react – could it trigger a military war on Europe? (6) The US wasn’t sure how much effect the sanctions would even have. Because, behind the scenes, Russian officials were telling the Americans:

“One of the things the Russians would say to me is, ‘We survived Leningrad, we could survive this.’ Their definition of what they were willing to tolerate was well beyond the realm of what we would consider tolerable.”

 

(Since the theme of these blogs is about American unilateralism via economic means, I won’t go into how the West finally acted on the Crimean invasion. Those actions were limited and constrained and don’t fit into the theme here).

 

When Russia invaded Ukraine again a couple of years back, the US decided to put sanctions on the Russian central bank. Since pretty much all forex went through the Russian central bank, effectively Russia was being cut off from international trade. This would mean Europe would lose access to Russian oil and natural gas. But this time around, the EU was willing to accept the economic consequences. The EU felt they needed to put their foot down, else who knew what Russia might do next (Of course, it still took more than a year for the EU to actually wean away from Russian oil and gas).