Why America Will Have To Go It Alone With Sanctions Against Russia

Tensions in Ukraine continue to rise as the international community struggles to find an effective response to defuse them. US Secretary of State John Kerry has offered aid to Ukraine in the form of a $1 billion loan guarantee, and State Department officials have predicted movement on sanctions later in the week if the situation is not resolved.

If the United States chooses to pursue economic sanctions or military action against Russia for its actions in Ukraine, it is unlikely to find an ally in the EU. While the EU wishes to develop its relationship with Ukraine as is obvious from its Eastern Partnership initiative and push for an association agreement, its existing relationship with Russia limits the extent to which it can do so.

The EU, which has never quite been the powerful foreign policy actor that it would like the world to think it is, remains in an economically weakened state going into 2014, and for its continued economic growth, it requires sources of affordable energy, particularly for its largest economy, Germany. In 2011, following the Japan earthquake and subsequent Fukushima nuclear disaster, Germany, which obtained nearly a quarter of its electricity from nuclear power plants, underwent a period of anti-nuclear protests. In reaction, Angela Merkel’s government committed to shutting down Germany’s nuclear reactors by 2022 and proceeded to permanently close nearly half of them that year (this, in my opinon, was a short-sighted and reactionary decision). However, Germany still needed a source of energy to fuel its growth – with increasingly limited options meeting its cost and “green” requirements.

Meanwhile, under Putin, Russia has seen itself transformed from an industrial economy to an exporter of raw materials – particularly natural gas, which energy-hungry Europe eagerly eats. In addition to the existing gas pipelines, most of which ran through transit countries such as Ukraine, Belarus, and Poland, 2011-2012 saw the completion of the Nord Stream gas pipeline, which runs through the Baltic Sea, bypassing Eastern Europe and providing a direct link between Russia and Germany. While Nord Stream does not completely alleviate Germany’s dependence on the overland pipelines running through Eastern Europe, it does reduce it by about half.

Russia’s ability and willingness to manipulate natural gas prices to bring about its policy goals in countries that it views as belonging under its sphere of influence have been amply demonstrated in 2005/2006 and 2009. Although Russia’s gas trade is a significant part of its economy and it would be extremely detrimental to disrupt supplies to Europe, historically, Putin has proven that he is unafraid to escalate the means used to “protect” the interests of “Russian speakers” in Russia’s periphery, even if that means hurting Russian citizens domestically (as in the case of the economic costs of propping up breakaway states such as Transnistria, Abkhazia, and South Ossetia – Russia funnelled nearly $1 billion into South Ossetia over two years). In this case, Western European energy interests are more secure than they were in the past due to the existence of the Nord Stream pipeline, meaning that a Russian shut off to Ukraine would affect Western Europe far less than in the previous cases, which both occurred in early January at the peak of winter. Western Europe has some natural gas stores, helped along by a mild winter and reduced usage overall but any disruption to supply could still potentially cause prices to skyrocket, a situation that Germany would like to avoid.

Also relevant to Germany’s unwillingness to impose economic sanctions on Russia is the very nature of the German economy, which is hugely export-dependent. Although Russia is not the number one importer of German goods, Germany does have a nearly $3 billion trade surplus with Russia which it would be hesitant to sacrifice. Additionally, over 6,000 German companies operate in Russia. Interruptions to Germany’s exports, which are a significant part of the Eurozone’s continued recovery, would be undesirable due to their potential impact on the entirety of the European economy.

The final nail in the coffin will most likely come from the UK. The home of “Moscow on the Thames”, a large community of wealthy Russians in London, has already expressed reluctance to impose any sort of sanctions on Russia that limit Russian access to British financial centres. While not a member of the Eurozone, the UK is an influential member of both the EU and G8.

Germany’s importance to the EU’s common foreign policy decisions cannot be underestimated. Within the frame of the EU, Germany has demonstrated its readiness to wield outsize influence (as in the case of the European Central Bank, where Germany’s central bank has largely kept the ECB acting in line with its interests, like austerity measures, despite all central banks having equal votes). Germany will probably behave in this manner with regards to Russia as well if it feels that its economic interests would be threatened by the imposition of sanctions, and it is for this reason that Chancellor Angela Merkel continues to push for a diplomatic solution as the US calls for economic sanctions. Unless Germany changes its mind, it is highly unlikely that the EU will support potentially disruptive economic or trade sanctions against Russia.

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