The Alliance of the Threatened

BERLIN/WASHINGTON/MOSCOW | | russische-foederation

BERLIN/WASHINGTON/MOSCOW (Own report) - The EU and USA have expanded their sanctions against Russia and - in addition to individuals - have now also placed important Russian companies on their lists. Washington has restricted dealings, for example, with Rosneft and the Gazprombank. Brussels has announced the possibility of preventing EU companies from doing business with Russian companies and is planning to list them by the end of July. German business circles are protesting. They have already suffered billions in losses. Experts are warning that, with its sanctions against Russia, the West may experience, in the economic arena, an overreach similar to that experienced by the US in the military arena with its war on Iraq. With the power of the West obviously waning, it has already become noticeable that even close allies are defecting. Observers explain this with the Crimea conflict: NATO countries had been unable to retain the Crimea within the reign of its allied Ukrainian government; therefore it seems that an alliance with NATO countries would no longer be a reliable assurance against ones enemies. Defections can be noticed in Asia and Latin America, not least of all because of the recent founding of the BRICS development bank, rivaling the US-dominated World Bank. Russia and China are among the founders of this bank.

Sanctions against Russia

The EU and USA have expanded their sanctions against Russia. Washington has restricted dealings with important Russian companies including Rosneft, the country’s largest petroleum company, Novatek the second largest gas producer, after Gazprom and the Gazprombank. It has also frozen assets of eight Russian defense companies. The EU will suspend development bank activities with Russia - the activities of the European Investment Bank and the European Bank for Reconstruction and Development (EBRD). The EU is also considering freezing assets of Russian firms. By the end of July, the list will be made of companies affected. This possibly could be a step toward far reaching economic sanctions.

Billions in Losses

In the event sanctions are expanded, German business circles are warning of a dramatic slump in German exports. Business with Ukraine has already suffered painful losses, according to the German Committee on Eastern European Economic Relations. German exports to Ukraine have declined by 31 percent in the first four months of 2014, in comparison to the same period last year. This represents an export volume of a half-billion Euros. Exports to Russia sank 14 percent. However, because of the volume of overall exports to Russia being a multiple of that to Ukraine, the losses figure at around 1.7 billion Euros.[1] German companies' losses will significantly increase if economic sanctions are expanded.

As in Iraq

Even beyond their direct impact on German businesses, the expansion of US and EU sanctions are ratcheting up the power struggle with Russia in a way that could become highly risky. For years, economic sanctions have been the US instrument of choice in power struggles with its opponents, with Libya and Iraq and more recently with Iran, according to an analysis published by the European Council on Foreign Relations (ECFR). The Ukraine crisis could mark the turning point. "Going after Russia, the world's 9th largest economy, may represent the kind of overreach in economic coercion that the Iraq war demonstrated in the military arena." It can be expected that the "alliance of the threatened" could join together to find ways of escaping US economic control. "And Europe too might want to question the desirability of being so exposed to the predilections of the US treasury - as the current predicament of BNP Paribas indicates."[2] France's largest bank, BNP Paribas, agreed to pay a fine of around 6.6 billion Euros because it had violated US sanctions. In any case, such efforts can be seen in Russia. "The multi-polar world is striving to 'de-Americanize' the global economy," according to the Russian media.[3]

No Longer Able to Enforce

In reaction to the Ukraine crisis, observers are noticing prudent efforts of withdrawal from the West all over the world. Already last April, the power struggle over this East-European country played a role in unofficial discussions during President Obama's visit to Asia. In East and Southeast Asia, the conflict over the Crimea is seen as a possible "litmus test" of how far NATO countries are still able to impose their wills on their opponents, according to reports from that region. US allies are "concerned" that Washington, for example, could fail to enforce territorial claims to islands in the East and South China Seas against China, just like it failed to enforce Ukraine's claims on the Crimea against Russia.[4] Experts note that even Japan, one of the US' staunchest allies, no longer exclusively relies on Washington, but has opened up to Russia to strengthen its position in disputes with China over the islands. Similarly, South Korea is seeking Moscow's support in its disputes with North Korea.[5]

Close Ties to Russia

The ECFR draws similar conclusions about the Middle East. The author of an analysis on that region points out that Egypt, for example, refused to vote in favor of the March 27 UN resolution condemning Russia's take over of the Crimea. In April, Egyptian Foreign Minister Nabil Fahmy declared in Washington that his country is seeking a "global rebalancing to diversify its portfolio of strategic and economic relationships." Cairo is seeking to intensify its relations with Moscow. Even Israel, which had not participated in that UN vote, is currently developing "rather close relations with President Putin," the ECFR writes. It can, of course, not be expected that the West’s Middle East allies are planning to go over to Russia. They are simply seeking additional options.[6] But this alone would strengthen "Russia’s geo-political position" in the Middle East.

Who is Really Unpopular

The Russian President's Latin America visit has provoked angry commentaries in German media. Vladimir Putin recently visited Cuba, Argentina and Brazil and concluded important business deals. Cuba had voted against the UN resolution, Argentina and Brazil abstained. "Today, the cooperation with the Latin American countries is one of the keys for Russian foreign policy," President Putin is quoted saying. German media angrily remarked, "following Crimea's annexation, Vladimir Putin would be isolated internationally. At least this is what Western politicians had predicted." It is now evident, however, "who really is unpopular" in substantial parts of Latin America - "not Russia but the USA."[7] With Putin in attendance, a new development and monetary fund was launched in Brazil - as a direct counterpoint to the World Bank and the International Monetary Fund (IMF), based in Washington and under predominant US influence. The New Development Bank (NDB), founded by Russia, China, India, Brazil and South Africa, will be based in Shanghai.

Boomerang Effect Not Excluded

Last Wednesday, Putin warned that the EU and US sanctions could have a boomerang effect. Yesterday that effect was announced. The power struggle has escalated - the outcome is open.

Other reports and background information on the power struggle with Russia can be found here: The Crimean Conflict, The Free World, Energy as a Weapon, Global Policy Orientation, A New Grand Strategy and Energy as a Weapon (II).

[1] Ost-Ausschuss-Umfrage zur Ukraine-Krise. www.ost-ausschuss.de 27.06.2014.
[2] Anthony Dworkin, Daniel Levy, François Godement, Kadri Liik, Mark Leonard, Piotr Buras: Ten global consequences of the Ukraine crisis. www.ecfr.eu 16.06.2014.
[3] Die Entamerikanisierung der Weltwirtschaft. german.ruvr.ru 03.07.2014.
[4] U.S. Beefs Up Military Options for China as Obama Reassures Allies in Asia. online.wsj.com 27.04.2014. S. dazu Ein weltpolitischer Lackmustest.
[5] Anthony Dworkin, Daniel Levy, François Godement, Kadri Liik, Mark Leonard, Piotr Buras: Ten global consequences of the Ukraine crisis. www.ecfr.eu 16.06.2014.
[6] Daniel Levy: In Middle East, Ukraine crisis vindicates disillusion with West. www.ecfr.eu 28.05.2014.
[7] Mit Russland gemeinsam gegen die Gringos. www.welt.de 16.07.2014.