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Sat March 8, 2014
How Sanctions May Affect Russia's Moves In Ukraine
Originally published on Sat March 8, 2014 6:23 pm
ARUN RATH, HOST:
One of the options that the United States and the European Union are considering as a way to punish Russia is the use of sanctions. Here to discuss that with me is Matthew Rojansky. He's the director of the Kennan Institute at the Woodrow Wilson Center. Matthew, thanks for being with us.
MATTHEW ROJANSKY: Sure. Happy to be with you.
RATH: So the U.S. has already imposed some sanctions against Russia. Essentially the government revoked some travel visas for Russians involved in actions in Crimea, but that's it. What does that tell us about how much leverage the U.S. has with Russia?
ROJANSKY: That's right. What the U.S. government at this point has actually implemented, as I understand, is not that different from the measures that have been in place actually since late 2012 when the United States signed into law a bill called the Magnitsky Act, which was about human rights abuses in Russia. But very similar to what's been threatened and then implemented now, it denies visas to a certain set of named individuals. And then it seeks to potentially freeze their assets.
And I think a similar measure has been adopted thus far with respect to the so-called chain of command in Russia, the people who have been directly responsible for the decisions that have violated Ukraine's sovereignty and territorial integrity. But again, that's a limited set of people, so we're not talking about, you know, anything like a trade embargo.
RATH: When it comes to trade, what could the U.S. do?
ROJANSKY: Well, there's a tremendous amount more that the United States can do. To put it in context, you've got to remember that our trade relationship with Russia is still relatively anemic. We're talking maybe 30 or $40 billion a year in total bilateral trade, which might sound like a lot of money but actually it's less than half a percent of total U.S. trade, less than 2 percent of Russia's trade. So the effects are going to be limited.
That said, it's going to be a two-way street. And that's the problem. If we seek to freeze the assets of Russian companies, if we seek to block their ability to import or export, the Russians have already made it clear, they'll respond exactly in kind. They may even respond disproportionately, as they've done in the past. And it's going to hurt American companies.
RATH: So what about Europe? Obviously closer to Russia geographically, what kind of leverage does the EU have?
ROJANSKY: Well, conceivably, the EU has much, much more. Germany's economic relationship alone is - simply dwarfs that of the United States and Russia. And then obviously Europe consumes and pays for a tremendous amount of Russia's energy exports. Again, it's that two-way street problem, though, that the Europeans have got to judge that punishing Russia or seeking to deter Russia is important enough that they're prepared to endure the Russian response because there will be one. The Russians have been very clear about that.
RATH: Both the European Union and the United States have already pledged financial support to the government of Ukraine. Is that a better way to go than sanctions, or is there a downside to that?
ROJANSKY: Well, I would say it's not either or. I think that in any case, the new government in Kiev is in desperate need of financial support. I have to be honest, I think that the estimates that are coming out are just grossly inadequate. The market is just so deeply, deeply dysfunctional that you are talking about a complete reinvention of what it means to do business and have economic growth in a basically unreformed post-Soviet economy.
And that's like a multi-hundred-billion-dollar undertaking. So when the United States talks about $1 billion of loan guarantees and the European Union says 15 billion - although if you actually break that number down, there's not a lot of new money in it. It's kind of repackaging of old money. And the IMF says, you know, yeah, maybe we could chip in 10 or 15 billion, too, but it's going to come at a cost. You're going to have to do all these difficult reforms that are going to cost you money and cost you votes and so on.
You know, I don't think the Ukrainians have a particularly rosy economic scenario ahead. So in any case, they're going to need a tremendous, tremendous amount of assistance.
RATH: That's Matthew Rojansky. He's the director of the Kennan Institute at the Woodrow Wilson Center. Matt, thank you.
ROJANSKY: Happy to do it. Thanks. Transcript provided by NPR, Copyright NPR.