(More) sanctions and things

July 11, 2014

There have been more than a few entries about sanctions in this blog over the past months – since 27th February relating to the current Ukrainian situation – not to mention tweets regarding the timeliness – or not – of much harder hitting sanctions than those that are already imposed.

“…….sanctions are traditionally employed (be they targeted at individuals or nations alike) to change the direction of the leadership and not as a punishment for past deeds……”

“Perhaps the EU Member States, in an effort to support the “EU brand” in Ukraine, would be wise to make a very public declaration that all assets held within their sovereign territories belonging to, or believed to belong to, any names that would have been on an agreed sanctions list, will now be subjected to criminal investigation regarding money laundering as a far better alternative?”

Just a few historical quotes from entries that still hold true with regard to the illegal annexation of Crimea.

When all is said and done the personal sanctions with regard to Crimea – that in many cases (but not all) should now be discontinued in favour of criminal money laundering investigations considering the fact many of these people now have no direct control over current events in Crimea and thus cannot affect the direction of policy – should be seen separately to any sanctions imposed over events in eastern Ukraine, though there is an overlap in personnel responsible for both.

Those with a hand in events in eastern Ukraine that were also in part responsible for Crimea should remain subject to sanctions for their course can still be changed with regard the east.

Sanctions are not meant to be a punishment, but persuasive tool to cease and desist a current course of action.  The rule of law is designed specifically to punish after due process.

Probably the most clever of EU Member State sanctions is that related to Crimean exports that now require Kyiv’s approval when heading to Europe – thus tyeing the fate of Crimea to Kyiv for anything heading west.

Turkey too has banned all Crimean shipping from its ports unless the documentation states “Crimea, Ukraine”.  Documentation stating “Crimea, Russian Federation” will not be allowed to enter Turkish ports.

There is then the continued insistence by the international airspace agencies that Crimean airspace is controlled by Ukraine and not Russia.

As such the international community and Crimean neighbours are insisting that Crimea remains Ukraine as far as their interaction with it goes – Quite rightly.

After all, the sanctions imposed relating to Crimea are much more to do with The Kremlin’s unilateral assassination of regional and international laws, treaties and agreements regarding territorial inviability – and the precedent that sets regionally and globally – than it has to do with what particular nation or parcel of land has been illegally subjected to a land grab.  For the international system, it is the principle and not the victim that matters more in the grand scheme of things.

Events in eastern Ukraine and any sanctions that are connected are therefore somewhat different.

There has not been, and in all likelihood will not be, the annexation of Luhansk or Donetsk.  Troops from the Russian Federation are extremely unlikely to cross the Ukrainian border under any overt and conventional pretext.  Peacekeeping without the invitation of Ukrainian authorities in Kyiv simply won’t fly and will be seen as an act or war – internationally.

Though 8 Russian Federation brigades still sit on the Ukrainian border, it is highly unlikely they will cross it.

Whether they are there as an intended psychological threat, a real threat that must consistently be factored in to Ukrainian planning, or perhaps to prevent and/or eliminate a bitterly disappointed and disaffected leader like Igor Girkin/Strelkov returning to Russia with a large number of well-armed men – which would present a threat to The Kremlin that lacks any other real organised potential opposition – remains to be seen.

However, with both President’s Poroshenko and Putin needing to emerge from the current circumstances with a publicly perceived victory, it really doesn’t take much imagination that to do so, finding a common enemy would be a simple and easy solution.  Step forward Igor Girkin/Strelkov (and men) who has been highly and publicly critical of the lack of Kremlin support on numerous occasions lately.

Anyway, yesterday saw 11 more people added to the sanctions list regarding Ukraine.  As yet the names remain unpublished.  Thus whether all relate to events in the east, or whether some are peculiar and specific to the Crimean situation remains to be seen.

That takes the European list to 61 regarding Ukraine.  (The current Belorussian sanctions list contains 225 by way of comparison).

No sector sanctions forthcoming – yet.  Tuesday/Wednesday next week may yet see further broadening of sanctions after another attempt at negotiations by the Contact Group.  Those negotiations seem almost certain to fail given the immediate rhetoric from the anti-Kyiv fighters yesterday.  However, that may change over the next week and it is perhaps wise to delay any large expansions of sanctioned people and/or sector sanctions until those talks occur and actually do fail.

In the meantime, talk peace – wage war.

So what to think about the expansion of the sanctions list yesterday?

It very much depends on how any reader views sanctions.  Being somewhat leery of sanctions generally myself, it appears to me their greatest impact is often the very threat of them – and then the lifting of them if ever implemented, by way of political and diplomatic results.  Their actual effect once implemented oft being a pain withstood for a very long time by those to whom they are applied.

It also has to be said, that it seems that if they take a long time to actually be agreed and implemented, they take even longer to be lifted once in place.  Those of Crimea for example, seem likely to be in place for decades, no different to those imposed on Israel by the European States.

It is perhaps their secondary and indirect effects through capital flight, market confidence and reduced FDI etc., that cause more immediate pain than the longer term effects of sanctions themselves.  Markets, however, tend to have no political conscience and adapt to any new norms rather swiftly – unless the sanctions imposed are truly restrictive to the markets themselves.

That said, there was no choice with regard to Crimea for the reasons given at the beginning of this entry.  International norms were cast asunder by The Kremlin.  That action demanded a response and could not be ignored.

The addition of 11 names by the Europeans in the grand scheme of things, seems to be more of a reminder to decision makers who have influence on events in Ukraine, the international community, markets and interested by-standers, that whilst they may not be sector sanctions – yet, if ever – sanctions are very likely to continue indefinitely and expand, quite possibly, to Belorussian numbers amongst the Kremlin and Russian elite – and by indirect extension,  entities to which they are connected.

The larger that list grows, the larger the entities connected to them grows.  Ultimately the more difficult and tricky it becomes for those who would interact with them, never quite sure whether they are in breach of any sanctions or not.  Is any deal worth the risk, or should they look elsewhere for easier fruit to pick?

Leery of sanctions I may be, but I recognise the need to have them in the tool-box, regardless of how effective they are when actually applied.  To expect a nuclear options, such as the suspension of Russia from the SWIFT banking system for example, is simply not realistic.

Therefore dabbling at the periphery, causing the least amount of pain to the Europeans, is about as much as can be expected even if and when sector sanctions come.  Thus if they come, a few banks, possible VTB or Sberbank may get unwelcome attention.  Technology transfer etc.

Of far greater benefit to Ukraine will be the direct assistance and solid political support it receives over the long term.



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