How Russia will respond to new US sanctions

Group-think on Russia is usually thoughtless.

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of this site. This site does not give financial, investment or medical advice.

Friday the 13th of April was full of surprises. Rocket attacks, added sanctions, accusations, hazing, assumptions without the “boring” burden of proof, and so on. Someone is getting on a real testosterone-fired high from all this gunslinging. The US freely continues tightening its sanctions screws against Russia and just about anyone who is not on “the team” or has a worldview that is not in agenda-lockstep.

Russia must now consider its response(s) in turn.

Isaac Asimov wrote “I believe in evidence. I believe in observation, measurement, and reasoning, confirmed by independent observers. I’ll believe anything, no matter how wild and ridiculous, if there is evidence for it. The wilder and more ridiculous something is, however, the firmer and more solid the evidence will have to be.”  Seems Mr. Asimov’s words simply slip through the ears of many, and dissipate in the geopolitical air.

Therefore this past Friday a bill appropriately named “On measures counteracting unfriendly actions of the United States and/or other foreign states”, was reviewed by the leaders of all factions of the State Duma. This proposed bill seeks to impose various measures as a response to American trade restrictions as well as those countries that have adopted similar restrictive measures against Russia.

The range of affected goods manufactured in the USA as well as those countries who have joined with the USA in restricting trade with Russia may include pharmaceuticals, manufactured goods, agricultural products, cigarettes and alcohol. However, there is to be no ban against importing such items “for personal use”, even if brought into Russia by non-Russians.

Additionally, there may be specific regulations concerning banning certain software, technical, and even legal and financial services. Also under consideration is suspending cooperation with the USA in the nuclear, aircraft construction, and rocket engine industries.

On the table for consideration also is for Russia to increase charges for air navigation and overflight services for the US and other countries which support unfriendly, trade restrictive sanctions. In short, the legislation under review in Russia will seek to develop a mechanism to replace goods and services of American origin.

As concerns the movement of people, there is also one item being discussed which might be a list of US citizens who will be banned from entering or doing business with Russia, the list will be determined later by the government should it feel it to be appropriate. At the same time draft legislation mentions a possible prohibition or restriction on attracting citizens of the United States and/or other foreign states, including highly qualified specialists, from employment in the Russian Federation.

Many in the duma see the proposed legislation as an incentive for the enhanced development of the Russian industrial sector and the Russian Federation’s response to what it believes are the unfriendly policies of the US and other states aimed at undermining Russia’s sovereign territorial integrity and destabilizing its economy.

Trade turnover between Russia and the United States in 2017 increased by 15.8% and amounted to 23.1 billion dollars. Russian exports to the US increased by 14.7%, to $ 10.6 billion, and imports by 16.8% percent and amounted to 12.5 billion. Therefore, America’s trade surplus with Russia for 2017 was 1.9 billion dollars to the USA’s advantage. At the start of 2018 Russian metals and mineral products led exports to the United States, and the main imports from the United States were cars, and heavy equipment.

Where will all these tit for tat sandbox tactics take us? Looking back to 2000 since Vladimir Putin became president of the Russian Federation; his record has been transparent and publicly stated both inside Russia and declaratively on the international stage. The ambition for Russia is not global hegemony or heaven forbid – European conquest.

Russia has been seeking a regional sphere of influence and interactivity with nations directly on its national borders, its geopolitical neighborhood, or through alliances directly related to its perceived national security interests. That said, it is not by any stretch of the imagination “empire building” given the reach and scope of its comparatively limited international involvements.

Since the start of this 21st Century, the Russian sphere of influence has not been achieved by conquest, domination or old-school regime-change. It has been attempted through close financial ties, direct foreign investment, free trade zones, treaties, security alliances, and a network of geopolitical agreements that closely remind me of the (pre-EU) European Economic Union.

Given the current state of affairs in this sanctions-mad world, several Russian companies have taken proactive steps to ready themselves for potential exclusion from the SWIFT interbank payments system. This is an extension of the bullying effect a politicized US Dollar, and the increasingly inclusionary/exclusionary practices, or as some have observed – the “weaponization” of the greenback. These companies include those who have recently been “sanctioned” by the USA this past month, and those who plan ahead for contingencies.

The Russian state technology giant Rostec is one that will now use Russia’s new equivalent to the SWIFT interbank cash transfer system called SPFS. Rostec consolidates strategically important Russian companies. It has divisions in aircraft, electronics, and armaments. It unites companies like Russian Helicopters, Kalashnikov, and Rosoboronexport. Last month, another Russian state-owned firm, Rosneft, announced it had tested the SPFS in December with Gazprom bank, and is ready to seamlessly use it if need be.

The potential exclusion of Russia from SWIFT has concerned the country’s banks since 2014, when the EU and the US introduced the first round of international sanctions against Moscow over alleged involvement in the Ukraine crisis and reunification with Crimea. Recently, the head of the Central Bank, Elvira Nabiullina, said at a meeting with President Vladimir Putin that Russia is ready, if needed, to disconnect from SWIFT and smoothly function.

It may very well be that today’s Russia is demonized mostly for its desire to put national sovereign interests ahead of globalization. That said, it has also been apparent over these past 18 years that Russia’s actions and intentions on the world stage have been congruent, openly stated and have not been nearly as opaque or unipolar as some others. They have in fact been in keeping with the guidelines and treaties set out in the charter of the UN as regards the ethical behavior of Governments, and diplomatic conduct in the international arena.

Where will we go from here now that inertia and the rules of the sandbox have taken over diplomacy? It has been said that Washington is considering announcing still further sanctions against Russia on Monday April 16th, or maybe it will change its mind and stop this circle game – who knows? Who benefits? Seems this just might be the ideal moment to dial back on the rhetoric and think this through. I believe there are a number of countries in Europe and elsewhere in the ‘sandbox gang’ who would truly appreciate in their private heart-of-hearts any de-escalation ASAP.


The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of this site. This site does not give financial, investment or medical advice.

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