Russia’s economy isn’t looking so hot.
Western sanctions – imposed following Russia’s invasion of Ukraine – are making it harder for Russian companies to trade on international markets. In addition, the sustained drop in global oil prices has drained the Russian government of the money it needs to pay its bills. For a country as dependent on energy exports as Russia, falling oil prices are a big problem.
But not that big a problem.
Because President Putin can always rely on the Europeans to come to his rescue. After all, the word ‘sanctions’ has a very different definition in Europe than in Canada. Where we regard trading in breach of ‘sanctions’ as a crime that should meet penalties, many European businesses see sanctions as an obstacle to be navigated rather than as a barrier. If these businesses overcome the obstacles and make a buck without getting caught, they’ll do so.
To see this greed in action, just read this article from Sunday’s Financial Times. It reports on a French businessman whose Russian business contacts had been sanctioned. But it notes that the businessman then received an offer from a different Russian firm. One that somehow knew all the details of his previous deals with the sanctioned contact. The implication is clear to understand: the new business offer was actually from the sanctioned individuals who are now simply acting under a different name. In Canada, we wouldn’t permit this game. But in the EU, the rules are different. As such, instead of abandoning the deal, the French businessman played the game. As he puts it, "We ran a quick check, and none of the shareholders given in the company registry is on any black list. That’s all we can do, although we can probably guess what’s going on here."
But this isn’t just about greed. It reflects a much deeper problem. Once again, Putin is playing us for fools. Aware European governments have never had much interest in enforcing sanctions (French and German companies traded with Saddam Hussein for many years in breach of tough sanctions), Putin is skillfully sidestepping those sanctions.
And the problem goes even deeper.
Because the Russian leader’s confidence is also increasingly evident on the battlefield. While Mr. Putin months ago promised to remove his military forces from eastern Ukraine, he’s actually done the opposite. The Russian supported rebel offensive rumbles on. At the moment, for example, the rebels appear to be attacking industries in Ukraine’s south-eastern city of Mariupol. Home to a crucial sea port, Mariupol is crucial to Ukraine’s better economic future. That makes it a prime target for Putin’s aggression.
All of this means that the West has much work to do. We urgently need to tighten sanctions on Russia (especially Russian financial investments in Europe) and restrict those loopholes in which too many companies are operating.
And it’s not only for the sake of Ukraine that we need to act. It’s also crucial for the security of NATO’s Baltic member states: Estonia, Latvia and Lithuania. With alarming regularity, Russian military aircraft are now flying threatening missions near the air space of these allied nations. Russian aircraft have sometimes even entered their sovereign air space. These actions have forced President Obama to consider deploying heavy military equipment to the Baltics.
Regardless, we must get serious about hurting Putin where it counts – in his pocket. Pursuing that objective in the coming weeks, the West must ensure our sanctions are as robust – and as impenetrable to cheating – as feasibly possible.
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