Skip to main content

Stand Firm on Russian Sanctions

In the few days, the discussion of Russia has acquired a new dimension. The announced withdrawal of Russian forces placed close to the Ukrainian border and a slight but significant easing on the previously blood-curdling rhetoric coming from Moscow has made some people think that the crisis, fomented and largely organised by the Kremlin, may now be beginning to ease.

Certainly the imposition of sanctions although it has had relatively little direct effect, has indirectly caused the government of Vladimir Putin some real problems. Western companies involved in the Russian market have radically reconsidered the risks of doing business in Russia and almost all have curtailed their investment plans. Some such as Blackstone and Adobe have announced plans to leave the Russian market altogether. The market capitalisation of the Moscow stock exchange has plunged. Inflation, at 8%, is already climbing further. Russia has faced investment shortfalls for some time, but is now facing huge capital flight- estimated at over £120 billion this year alone. Emergency interest rate rises have failed to defend the Rouble, which has fallen over 20% since the crisis began.
The core of the Russian economy remains energy. The World Bank estimates that 16% of Russian GDP, 52% of its government revenues and 70% of its export revenues come from oil and gas. The weakness of the global oil price (Brent is trading at $85/bbl. as I write) is probably the major cause for concern in the Kremlin right now, and as the markets price in a possible global slowdown and both Saudi Arabia and the United States pumping at high levels, together with the return of Libya and Iraqi oil to the global market, there is little that seems able to support a sustained recovery in the oil price in the coming months. Thus we are seeing open debate within the Putin administration as to how to cut expenditure to fit these reduced circumstances.

Nevertheless, we should remain deeply concerned over the potential use by Russia of its control of European gas supplies to threaten the stability of the entire European gas market in order to support its continuing attacks against Ukraine and to weaken support inside the European Union for the democratic course that the Ukrainian people have chosen.
Since the bloodshed on the Maidan began in January, Russia has illegally seized Crimea- although President Vladimir Putin assured the world he would not- and been directly implicated in military operations in Eastern Ukraine. The unconvincing denials and outright falsehoods put out by Mr Putin and echoed by Kremlin funded propaganda outlets have undermined any trust that we might have placed in the word of the Russian government. Shockingly Russian military forces also appear to be ultimately responsible for the deaths caused by the downing of Malaysian flight MH17. To add insult to injury, we should note the callous disregard that has been shown for the victims and their families, with the despicable theft of victim’s valuables and their appearance for sale on Russian websites.

Nor is it simply insult and rhetoric that Russia continues to direct at Britain and its NATO allies.

Beyond the continuing Russian intervention in Eastern Ukraine, Russian military activity continues at a high level. Large scale “exercises” and regular incursions by Russian military aircraft into or close to the airspace of Finland and Sweden as well as NATO states seems designed to test NATO readiness, and maintain a high level of tension. The kidnapping of an Estonian security officer on September 5th and the seizure of a Lithuanian fishing boat in international waters on September 18th reminds us of the continued pressure our Baltic allies have had to endure. Other activity in cyberspace also suggests no let-up in the pattern of hostility towards NATO and the EU.

Under these circumstances it is pretty hard for us to take Russian assurances about their being a reliable partner in the European gas market at face value. The Russian government has been prepared to use their control over gas as a political weapon in the past, and there is a real chance that they may do so in the coming winter.

Yet the strategic position of Russia is weakening. Greater energy efficiency and new sources of power, such as renewables and shale gas is already causing a structural shift in the global energy market. European demand for Russian gas is also set to fall, as customers seek to diversify their sources of supply- not least because Russia is now perceived as a threat, instead of a partner. Mr Putin, not for the first time, has chosen a path of confrontation that will ultimately cause major damage to Russia. Indeed, the country may already be facing a period of considerable instability, and Mr Putin’s popularity- currently said to be stratospheric- may prove to be very shallow, as his problems mount.

Nevertheless, unless and until Russia gives up its reckless adventure in Ukraine and respects international law, it is critical that we keep up the pressure on the Putin regime. A further frozen conflict- as in Georgia and Moldova- is unacceptable.

Russia has chosen a dishonest, dishonourable and dangerous path, and Britain and its NATO and EU partners must maintain the current regime of sanctions- and even add to them if necessary. There can be no return to business as usual while Russia remains a real threat to European peace.


It is a threat that must be answered with a clear-eyed and disciplined assessment of the long term costs of dealing with a rogue regime in Moscow versus any possible short term benefits of a relaxation of the sanctions regime. 

Comments

Popular posts from this blog

Concert and Blues

Tallinn is full tonight... Big concerts on at the Song field The Weeknd and Bonnie Tyler (!). The place is buzzing and some sixty thousand concert goers have booked every bed for thirty miles around Tallinn. It should be a busy high summer, but it isn´t. Tourism is down sharply overall. Only 70 cruise ships calling this season, versus over 300 before Ukraine. Since no one goes to St Pete, demand has fallen, and of course people think that Estonia is not safe. We are tired. The economy is still under big pressure, and the fall of tourism is a significant part of that. The credit rating for Estonia has been downgraded as the government struggles with spending. The summer has been a little gloomy, and soon the long and slow autumn will drift into the dark of the year. Yesterday I met with more refugees: the usual horrible stories, the usual tears. I try to make myself immune, but I can´t. These people are wounded in spirit, carrying their grief in a terrible cradling. I try to project hop...

One Year On

  Head vabariigi iseseisvuspäeva! Happy Estonian Independence Day! It is one year since I stood outside the Estonian Parliament for the traditional raising of the national flag from Tall Hermann tower. Looking at the young fraternities gathered with their flags, I was very sure that Estonia too would soon be facing the aggression of the criminal Russian regime. A tragic and dark day. 5 eyes intelligence had been clear: an all out invasion was going to happen, and Putin´s goals included- and still include- "restoration" of Russian imperial power across Europe, even to the Atlantic. Yet there was one Western intelligence failure: we all underestimated the guts of the Ukrainian armed forces, the ZSU, and its President and people. One year on, Estonia, and indeed all the front line states against Russia, knows that Ukraine saved us. Estonia used that time to prepare itself, should that "delayed" onslaught ever be unleashed, but equally the determination of Kaja Kallas, ...

A Hard Frost

  After a week of slush and damp, tonight there is a hard frost in Tallinn. The general election campaign has started with the parties submitting their lists of candidates and announcing their programs. The polls seem to show a polarization of views. Although the Liberal Reform party of PM Kaja Kallas is set to remain as the largest party in the 101 seat Riigikogu, the steady rise of the far right EKRE seems to place them firmly in second place, replacing the Social Liberal Centre Party, who seem set to lose several seats. In addition to the Conservative Isamaaliit and the Social Democrat SDE, there is a fair likelihood that a new party will join these in Parliament, namely the Business/Green minded Eesti 200. The Greens and the Libertarian "Right wingers" look like they will struggle to gain seats. A Moderate Reform/SDE/E200 coalition would be a good outcome, but the numbers will have to fall just so, otherwise there remains the chance of another Centre/Isamaa/EKRE coalition...