In the Spiral of Escalation (II)

EU and NATO support new US sanctions against Russia. More sanctions against Nord Stream 2 and Sputnik V not to be ruled out.

BERLIN/MOSCOW | | russische-foederation

BERLIN/MOSCOW (Own report) - Berlin-supported US sanctions along with calls for other sanctions by German politicians are accelerating the escalation spiral in the conflict between the West and Russia. Last week, the new punitive measures taken by the Biden administration target not only officials and organizations in Russia, but also the country's financial sector, prohibiting U.S. financial institutions from buying Russian government bonds beginning in mid-July. This measure is causing alarm within the German branch, because of Biden's threat to expand the sanctions. Representatives of companies point out that sanctions against Iran had initially targeted US enterprises, before Washington extraterritorially expanded them. Countermeasures are being discussed in Russia. US experts warn that measures against a "national economy like the Russian" could cause enormous "collateral damage." In Washington, not only devastating sanctions targeting Nord Stream 2 are already being demanded, even sanctions targeting the purchase of the Sputnik V Covid-19 vaccine are being considered.

New US Sanctions

The latest US punitive measures announced by the Biden administration last Thursday are exacerbating the conflict between the West and Russia. The measures include the expulsion of ten Russian embassy diplomats in Washington and the expansion of sanctions against Russia. Individual sanctions were imposed on a total of 40 persons or organizations, of which eight had been, selected together with US allies in Europe. Sanctions also target six technology companies allegedly cooperating with Russian intelligence services. Washington is accusing Moscow of being responsible for hacking operations on US targets and of interference in the US presidential elections - as usual, without providing evidence. The same applies to another allegation, the Biden administration is using to impose unspecified sanctions "given the sensitivity of this matter." This is based on claims that Moscow had offered bounties to Taliban militants for killing American soldiers.[1] The EU and NATO - including Germany - have issued statements in support of these US sanctions.[2]

Feared Expansion

Most problematic is the fact that the current round of US sanctions is also targeting the Russian financial sector. US financial institutions are prohibited from buying new bonds to be issued, beginning June 14, by Russia's Finance Ministry, its Central Bank and the National Wealth Fund, RDIF. Even though the immediate consequences of this measure is still considered manageable, because US investors hold only 7 percent of Russian government debt denominated in rubles, according to Oxford Economics in London.[3] However, US President Biden threatens to expand, in the future, US sanctions, if necessary. Employees of major financial institutions told U.S. media that they feel "uncomfortable" with the current situation and that it is feared that there could soon be "more to come."[4] Representatives of the financial sector pointed out to the "Handelsblatt" that, in the past, sanctions, for example, against Iran, had initially targeted US financial institutions before they were expanded to all companies with business interests in the USA. In fact, shortly after the new US sanctions were announced, the Russian finance ministry felt compelled to postpone auctions of Russian bonds and to cut its borrowing plan by an initial ten billion euros.[5]

"Enormous Collateral Damage Possible"

The conflict threatens further escalation. Moscow has sharply protested the US measures and imposed counter-sanctions. On the one hand, they affect ten officials, including the US Attorney General, the Secretary of Homeland Security, FBI Director Christopher Wray as well as Director of National Intelligence Avril Haines. They are refused entry into Russia. US government officials will have their entry permits for short-term activities denied. The work of US foundations and US NGOs in Russia will be further restricted. According to information provided by the foreign ministry, Moscow intends to additionally reduce the US embassy and consulate staff from 450 to 300 and impose measures targeting US companies.[6] Business circles fear the situation could get out of hand. Voices are being raised in Russia, calling on Moscow to dump the remaining US government bonds onto the market, as a countermeasure against Washington. "When you begin to attack a national economy like Russia's," observed a former Sanctions Department advisor of the US Treasury Department, "it becomes obvious that the collateral damage ... could possibly be enormous."[7]

"Excluded from SWIFT"

In the meantime, German politicians have begun to call for further sanctions, because Moscow is resisting western aggression also at the military level. This applies, for example, to the current maneuvers in western Russia, not far from the border to Ukraine. For years, NATO units have been carrying out combat exercises as close as possible to the Russian border. Last year, within the framework of their new "Defender Europe" exercise format, the United States and its European allies rehearsed the transatlantic transfer of large US troop contingents and their approach toward Russian borders from Western and Southern Europe. Then, in the vicinity of Russia's borders, concrete exercises targeting Russia were carried out. This year's "Defender Europe" maneuvers started recently. (german-foreign-policy.com reported.[8]) German Chancellor Angela Merkel and US President Joe Biden have both reacted to Russia's maneuvers - on its own territory - with the demand that Moscow immediately withdraw its troops.[9] The Chair of the EPP EU parliamentary group, Manfred Weber (CSU), floated the suggestion, for the case that Moscow allows "the situation in Ukraine to escalate" or even "invades," to exclude Russia from the Society for Worldwide Interbank Financial Telecommunication (SWIFT).[10]

A Devastating Blow against Nord Stream 2?

The escalation began after Germany's efforts to maintain a modicum of cooperation with Russia, in the interests of German industry, were made known. This pertains to the Nord Stream 2 gas pipeline and Berlin's plans to cooperate with Russia for the use of hydrogen as a new source of energy. (german-foreign-policy.com reported.[11]) In addition, the German government has recently confirmed that it is considering buying Russia's Covid 19 vaccine Sputnik V.[12] In the US Congress, however, there is bi-partisan pressure on the Biden administration, to impose new devastating sanctions on Nord Stream 2, to ultimately prevent its completion. Under consideration are measures to target Nord Stream 2 AG, the company behind the project, whose investors also include the German companies Uniper and Wintershall alongside the British-Dutch Shell, the French Engie and the Austrian OMV.[13]

Sputnik V in the Crosshairs

In addition, it seems that sanctions are not being ruled out in the case of the purchase of Sputnik V. US officials suspect one of the Russian research institutes participating in the development of the Sputnik V of having been involved in an alleged Russian chemical weapons attack - as usual, again without evidence - and therefore has placed it under sanctions. This refers to the 48th Central Research Institute.[14] A US government official was quoted saying that US sanctions are "generally not focused on legitimate humanitarian exports or assistance."[15] However, Judy Twigg, a professor of political science at Virginia Commonwealth University, noted that Sputnik V will not be coming to Germany and other EU countries as 'humanitarian assistance" but as part of a business deal. Twigg suggests that Washington could proceed to apply sanctions to the Russian vaccine as more vaccine alternatives become available to cover people in the EU and elsewhere.[16]

 

[1] Biden bestraft Russland. Frankfurter Allgemeine Zeitung 16.04.2021.

[2] US imposes sanctions on Russia over cyber-attacks. bbc.co.uk 16.04.2021.

[3] David E. Sanger, Andrew E. Kramer: U.S. Imposes Stiff Sanctions on Russia, Blaming It for Major Hacking Operation. nytimes.com 15.04.2021.

[4] Michael R. Gordon, Vivian Salama, Anna Hirtenstein: U.S. Puts Fresh Sanctions on Russia Over Hacking, Election Interference. wsj.com 15.04.2021.

[5] Mathias Brüggmann: Russland und die USA: Es droht ein neuer Wirtschaftskrieg. handelsblatt.com 16.04.2021.

[6] Ann M. Simmons: Russia to Expel 10 U.S. Diplomats From Embassy in Moscow. wsj.com 16.04.2021.

[7] Mathias Brüggmann: Russland und die USA: Es droht ein neuer Wirtschaftskrieg. handelsblatt.com 16.04.2021.

[8] See also Kein Lockdown für Militärs.

[9] Merkel und Biden für Abzug russischer Truppen. tagesschau.de 15.04.2021.

[10] Weber fordert neue Sanktionen gegen Moskau. Frankfurter Allgemeine Zeitung 12.04.2021.

[11] See also German-Russian Energy Bridge.

[12] Bundesregierung plant bilaterale Gespräche über Sputnik V. aerzteblatt.de 08.04.2021.

[13] Jessica Donati, Michael R. Gordon, Brett Forrest: Biden Faces New Pressure to Act on Russia's Nord Stream 2 Gas Pipeline. wsj.com 16.04.2021.

[14] U.S. Sanctions and Other Measures Imposed on Russia in Response to Russia's Use of Chemical Weapons. state.gov 02.03.2021.

[15], [16] Andrew Rettman: Could US sanctions hit Russia vaccine sales to EU? euobserver.com 16.04.2021.