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07 August 2014

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Medicine Man

I can't be alone in thinking that losing our advantages in those markets is a fitting punishment for our moralistic hubris. We abuse our leverage and the tools of coercion get slapped out of our hands. Just so.

ex-PFC Chuck

"Once new market channels are opened in response to sanctions, it becomes extremely difficult to win back those markets when sanctions are lifted."

Ding!

(I think I just posted the above to the wrong thread. Apologies.

toto

" Doesn't Washington understand the principle that a mere allegedly "regional power" like Russia is quite capable of making more trouble for the West than we can inflict on it?"

No, because it's not true.

The current round of "sanctions" is mostly a mixture of grandstanding for internal consumption, and a signal that *real* sanctions are definitely possible in the future. Europeans, in particular, are trying to build a credible threat that they are ready to implement severe economic retaliation, even at their own cost, if the Russians actually move in (which they won't).

This silliness will die down after the Sovkhoze Rebellion gets mopped up. While various Hasbara services were busy yelling at each other, the adults (i.e. the Germans) were working out the likely outcome:

http://www.independent.co.uk/news/world/europe/land-for-gas-secret-german-deal-could-end-ukraine-crisis-9638764.html

Russia gains Crimea, Ukraine gains independence, South-East regions gain increased autonomy and Europe "gains" Ukraine (and its "interesting" economic situation). Everyone gets something.

Except for the bungling rebels and the romantic adventurer (the worst kind) who is leading them. I think I'll manage to refrain mine eyes from tears.

Haralambos

I would suggest you read this: http://vineyardsaker.blogspot.co.uk/2014/08/you-wanna-be-uncle-sams-bitch-pay-price.html

I do not think any of this is "silliness," to use your word.

nick b

Walrus,

From what I have read, the new Russian sanctions will effect a little less that $9 billion worth of goods from the combined $32 trillion US and EU economies.

These sanctions are now official, but many of these products have already been effectively banned through health protection measures already taken by Russia via the WTO. See: http://www.trust.org/item/20140806142635-hjise

When you ask who is going to be hurt the most? I believe it could well be the Russian consumer. Russians already spend a far greater amount of their household income on food stuffs: 31% vs. the 6.6% we pay here in the US or the 9.1% in the UK. See: http://www.vox.com/2014/7/6/5874499/map-heres-how-much-every-country-spends-on-food
Russia imported $43 billion worth of food last year, and must now make up $9 billion of that this year. This will undoubtedly cause some food shortages and higher prices for consumers. Higher prices bring inflation, causing higher interest rates. Higher rates for borrowing will continue to hurt the Russian economy overall and the average Russian citizen.

I saw today also that major airline stocks in the US and Europe were off on average 6% on the news of possible trans-Siberian air restrictions, causing losses in the billions of dollars to market capitalization. But Russia still seems to have gotten the worst of it. Aeroflot, the Russian state owned carrier was down 10%, and has lost 50% of its market capitalization since the beginning of the year. http://rt.com/business/178488-russia-airspace-loss-sanctions/

Overall, I agree with your premise that these tit-for-tat sanctions continue to alienate the US and EU from Russia, and that is self defeating for all parties concerned. However, I believe it will ultimately hurt the Russian economy and thus its citizens to a greater degree.

Alan

toto,

so what does the US and NATO gain in your scenario? In my opinion the US will torpedo the German plan as they have countless others before it. We'll see.

FB Ali

nick b,

This is not a numbers game - who loses more.

Sure, Russian consumers are going to feel the pinch, but if you believe the State Dept twits who think this will cause an outcry, think again. Read in the Saker's post on the sanctions how he thinks Russians are likely to react.

Do you remember the siege of Leningrad in WW2? People literally starved to death. But the city did not surrender.

Man

@nick b

Hello,

My name is Vladimir Putin.
I've just read your comment here, and realized that you're completely right!!!
We seem to not have thought this through...glad smarter heads than ours are at it...

Babak Makkinejad

In regards to this German plan; I have a bridge in Brooklyn that I am trying to sell...

Babak Makkinejad

I agree and since "that which does not kill you is only bound to make you stronger", I expect Russia to emerge stronger in a few years.

I think the significant of the sanctions is this: they make war more probable as they eliminate the benefits of Peace.

I mean, if SWMBO keeps turning her back on you in bed, eventually the marriage will end.

In which case, China will be thus having the choice of several spouses or concubines - US, EU states, Russia, Iran, Brazil and many many others.

Peter Brownlee

Sending the always snarling Rasmussen to Kiev -- presumably to rev up that mob -- right now shows there are lessons still to be learned.

Throwing paper airplanes at a tank might work but it would need quite a lot of them.

nick b

Dr. Makkinejad,

China will have that choice in any case, no?

Fred

toto,

Russia has already gained Crimea and Ukraine is already independent. What this article states is the the Western nations - namely the US will recognize the Crimean annexation by the Russian Federation and promise one more time not to provide Nato membership to Ukraine. The former does not matter and the later promise is worth about as much as one of Victoria Nuland's cookies.

The silliness will die down right along with the thermometer because the Ukrainians aren't going to freeze to death for the Svoboda and Privat Sector coup government. Do you really think the later is going to defend the gas 'bi-lateral' pipeline that runs into Germany with all the Russian gas?

Fred

nick b,

"Russia imported $43 billion worth of food last year, and must now make up $9 billion of that this year."

They have $9 billion they won't be spending in the US or EU to buy food. However it is not the Russian Federation government that is going spend it. It is going to be spent in the global marketplace. It is US and EU companies that are now 1) stuck with allot of groceries in the pipeline and allot less customers 2) US and EU farmers and fisherman who are going to watch their commodity prices drop. Depending on how thin their margins are and their customer profile some of them are going to suffer major losses. Not that Obama cares, he's a lame duck. The neocons? They are secure in their think-tanks and Ivy League sinecures.

oofda

FB Ali,
Don't blame the State Dept folks, they have a pretty good idea what is going on in Russia. Like those in the intel community, they get ignored.


That said, it will adversely affect the Russian consumer. Remember that people going to markets in Moscow and other cities often use geiger counters to check their food-of often comes from Byelorussia- and land still affected by Chenobyl.

The beaver

To all,

U.S./NATO/ISAF forces use the NDN to get in and out of Afghanistan. What is going to happen now?

VietnamVet

Walrus,

By imposing sanctions the West’s intention was to force Russia to end support for the pro-Russian rebels in Ukraine. Russia countered by imposing their own sanctions on the West. This will continue to escalate. Neither side can back down. The West needs Ukraine’s resources to exploit and a failed Russia. Russia cannot allow a declared militaristic enemy to control its border with Ukraine. Sooner or later the outrage at the bombardment and starvation of a million ethnic Russians will force Vladimir Putin’s to rescue Donetsk. If WWIII breaks out or not, depends on whether NATO’s sends troops in to protect Western Ukraine.

The sanctions will hurt the West far worse than Russia. The West is falling apart. Austerity is ravaging Southern Europe. In the USA white women without a high school diploma lost five years of life between 1990 and 2008. Russia has $500 billion in reserve and is an energy exporter. The USA was once the safe haven for capital flight. The full faith and credit of the U.S. government means nothing when it provokes never ending insane wars. The used auto and fracking subprime derivative schemes are on the verge of collapse. The Islamic State is on a roll in the Levant. The Middle East supply of oil is at risk by the escalating Sunni Shiite Jihad. Ebola, war and sanctions will limit air travel. Weird Weather Phenomena dominates the news. Today, two hurricanes are hitting Hawaii.

24/7 Propaganda tries to hide the truth but reality always bites back.

Anderson

It would seem possible, indeed likely, that your President Obama has in fact lost his mind.

Surely the office of president is not that isolated that he could otherwise truly believe his own nonsense.

Or is he just completely befuddled by it all and too busy thinkng about the next round of golf...?

pbj

Sounds like they're on the right track, if the story is real.

Madhu

I hope there is such a resolution to the crisis but this Germans-as-the-adults scenario only shows to me as an American that American national interests are not well served by being a member of NATO.

I understand the British and Poles/Eastern Europeans want us to stay in NATO in order to balance out German power but what does that have to do with American interests? And I understand American atlanticists and poli-sci theorists think the US will lose its primacy without NATO as a place to play hegemon, but I still think it makes no sense in this century and post-Soviet Union.

It's easy to sneer at "small time" American losses from Russian trade but those are American jobs and it's a competitive world out there. We also have other interests outside of Europe that are poisoned by the bad blood over Ukraine. Publics in Russia and the US are being primed to dislike each other with has its problems for American interests.

The grandstanding by the NATO generals is particularly disgusting and unhelpful. European security for Americans: we can check in but we can never check out.

Why Washington elites think this is good for American interests is beyond me....

Augustin L


Own goal. Here's president Obama's snub to Mitt Romney during the 2012 presidential debate: ''Governor, I’m glad that you recognize that al-Qaida’s a threat because a few months ago when you were asked, what’s the biggest geopolitical threat facing America, you said Russia - not al-Qaida — you said Russia. And the 1980s are no calling to ask for their foreign policy back because, you know, the Cold War’s been over for 20 years. But, Governor, when it comes to our foreign policy, you seem to want to import the foreign policies of the 1980s.” It Looks like the forces who were aligning themselves in the shadow behind Romney are now running the sinking ship.

Eliot

"Do you remember the siege of Leningrad in WW2? People literally starved to death. But the city did not surrender."

Few Americans know much about the eastern front. Nor have they read much Russian literature. They have no sense of the Russian ethos. Perhaps it was different once, I grew up in the aftermath of the cold war.

"if you believe the State Dept twits who think this will cause an outcry, think again."

I wonder how much higher Putin's poll numbers will go.

- Eliot

Bandolero

Babak

I think that plan looks more like a British plan forwarded to the Germans so that Merkel would present it to Putin. And likely she did, with some words like: my British partners ask me to present you with this plan. And then Putin, after he heard the plan in short, may have answered: Isn't it amazing in what kind of a fantasy world the Brits seem to live? To what Merkel may have answered: that I thought myself, too, when I spoke with the Brits about Juncker.

Really, I think that plan is totally unserious. Russia isn't in to get out with a black eye and pay for it. Russia is in to get Kiev back.

Bandolero

Walrus
"As a friend whose economic knowledge is far better than mine pointed out; Once new market channels are opened in response to sanctions, it becomes extremely difficult to win back those markets when sanctions are lifted."

I totally agree with that statement and I think that's what Russia is looking for. Food has a lot to do with habbits.

The sanctioned food imports are only a tiny faction of the Russian food market, but an interesting one: usually relatively high priced food stuff for the better situated. It's expensive and prestigeous to eat EU stuff. Most people in Russia eat Russian food, that's usually cheaper. So, with the sanctions Russia cracks open the hi-end food market to their own industry and the industry of friendly countries. It means these producers have now a unique chance of persuading more wealthy customers how fine their hi-end products are. When convinced that this domestic hi-end food stuff (and that originating from friendly countries) is good or even better then the EU stuff, wealthy people will likely continue to buy it regardless of whether sanctions are lifted or not.

And why not? Maybe a steak from Brazil is not less tasty and prestigious than salmon from Norway. And so on. If the upper Russian class really misses some EU/US food products, because they can't find a tasty replacement Russia can lift the sanctions for these specific products later.

And what's also a fine coincidence is that it looks like that next month India, Pakistan, Iran and Mongolia will join the SCO.

http://macedoniaonline.eu/content/view/25830/53/

Although SCO is a security related organization members have a tremendous desire to link each other economically to back up the security co operation with economic relations and trust. So, a Russian hi-end food market desiring imports could be a very nice welcome gift for the new SCO members, I guess.

Add to this that externally the food sanctions will hit in targeted EU countries conservative farmer folks where many old anti-Russian ressentiments can be found, at least in Germany that's defitiely the case.

But all in all, I would say, the Russian food sanctions are still hardly more like a signal "we mean business." The real game would be when Russia sanctions car/car part/machinery imports from EU (and US) and shifts these markets to be supplied from Eastern Asia instead. It would hit Europe hard.

jeff

The problem is they erode the general movement toward free trade that has a lot to do with the end of world wars. WW1 was certainly caused by fighting over trading blocs and colonies and WW2 the same.
The entire purpose of the IMF and World Bank was to create a global economy where no one is shut out of markets. You see this clearly in Iraq where the US didn't mind China coming in and getting big oil contracts, the point was to open up a closed market. With the end of US hegemony I suspect we may start going back to these closed market systems.

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