Kyiv, March 16, 2014. The world’s leading economies stand on the brink of applying harsh political and economic sanctions against Russia as the latter continues its military occupation of Ukrainian Crimea. Having launched a not so covert military invasion in Ukraine, Russia may have triggered certain processes which may sooner or later lead to the collapse of the Russian economy. Numerous nations, including the U.S. and the EU, have called upon Russia to comply with international treaties, respect the sovereignty of Ukraine, withdraw its troops from Crimea and start negotiations. All to no avail.
The international community began discussing the threat of imposing political and economic sanctions immediately after Russian troops entered Crimean peninsula on March 1. The European Union and the United States declared their readiness to impose such sanctions as early as March 17. The determining point lay solely with whether Russian occupied Crimea continued with its plans to hold an illegitimate referendum on March 16. To no one’s surprise, Russia remains the only state to support the self-proclaimed legitimacy of the Crimean referendum. This stands in stark contrast to the overwhelming majority of the rest of the world, including the US, EU member states and most of the UN Security Council who refused to recognize any degree of legitimacy.
Senior EU officials have already drafted a list of those who “do not respect the territorial integrity of Ukraine,” and therefore are being hit by sanctions, freezing of bank accounts and visa restrictions. Among those on the prepared list are such well-known figures as Russia’s leader Vladimir Putin, Minister of Foreign Affairs Sergei Lavrov, Head of Federal Security Service Aleksandr Bortnikov. As reported by finance.ua the list embraces 120-130 names of senior Russian officials, diplomats and managers of large companies.
Last Friday US Secretary of State John Kerry met with Lavrov in a last ditch attempt to persuade Russia to withdraw its troops and abandon plans for the referendum this Sunday. The talks ended with separate statements that no “common ground” was found in the discussions, however the US Secretary of State went on to warn that the West would be forced to take “very serious steps” if Russia “does not find a way to change course.” Earlier President Obama informed that visa sanctions would be imposed on those “who take part in the military intervention to Ukraine.”
The European Union is one of Russia’s largest trading partners, the collapse of which will have drastic implications for Russia’s economy. Nearly 50% of Russian exports go to the EU, while 7% of EU exports go to Russia. Additionally, the imposition of sanctions will threaten over USD 160 billion of Russian deposits held in Western banks.
Since the beginning of 2014 Putin’s foreign policy has not been of much assistance to Russia’s economy. The country’s MICEX stock index has dropped by more than 16%, since Russian troops were deployed on Ukrainian territory. The cost of preventing the collapse of Russia’s economy has now increased by half since the confrontation began, reads reuters.com. One of Russia’s major banks, Renaissance Capital, estimated the monetary outflow in the first quarter of 2014 to be USD 55 billion, while the total outflow in 2013 was USD 63 billion. Since the beginning of 2014 the value of the Russian Ruble fell 9.8%.
The illegitimate referendum in Crimea takes place today. The question tomorrow will be whether Russian citizens believe that supporting such illegal acts, on the territory of a sovereign state, in contravention of major agreements and treaties is worth the price.
