Russia took Crimea, gave weapons to terrorists who shot down a civilian passenger plane, and has now invaded eastern Ukraine. Hawks in the United States want us to provide greater support to NATO but NATO doesn’t really have a plan. I believe that economic sanctions can work and that prior to the United States increasing its contribution to NATO both the United States and Europe should give sanctions a shot.
It makes no senses to me for the U.S. to subsidize NATO while Europe through its trade subsidizes the Russian economy. Some claim economic sanctions won’t work but economic sanctions did work. Economic sanctions led to the bankruptcy of the Soviet Union.
The situation today is not the way it was after World War 2 when NATO was created. Europe can now afford to contribute to its own defense.
At the very least the west should stop subsidizing (either directly or indirectly) the Russian invasion of Ukraine. Western bankers and Gazprom executives want an IMF bailout. But there are Russian troops on Ukrainian soil. Is Ukraine still a sovereign country? Why should the west give Ukraine money and watch it flow to Russia?
Putin says the Russian army can be in Kiev in two weeks. Currently the Russian Ruble is at 37 per dollar near its all time low. If the Russians do go into Kiev into two weeks American sanctions (even without the support of Europe) could drive this ratio to 50.
President Obama should give a press conference announcing new economic sanctions.
Option One: Stop using Export-Import Bank to fund projects in Russia. This proposal has the support of conservatives in Congress.
This prohibition should be implemented on ongoing already approved projects as well as new projects.
Option Two: Prohibit the Overseas Private Investment Corporation (OPIC) from participating in any ongoing or future deals in Russia.
Option Three: Disqualify any company that does business with certain Russian sectors from obtaining any assistance from the U.S. Export Import Bank or the overseas private investment corporation.
Option Four: Request Congress eliminate tax incentives for any company that trades in certain sectors, including energy, with Russia. The goal here is to prevent Exxon and other U.S. energy firms from partnering with Russian firms until after Russia leaves Crimea and Ukraine.
Option three and four are crucial. Why should U.S. taxpayers pay for a NATO build up while U.S. corporations get tax breaks for doing business with Russians?
Option Five: Repeal Most Favored Nation Status for Russia. Interestingly, Russia now has MFN status but Ukraine and many other ex-Soviet states do not.
Option Six: Follow through with prohibitions on World Bank projects with Russia.
The G-7 has already supported halting new World Bank projects in Russia.
It is clear that Putin has not gotten this message probably because the World Bank has not yet acted.
The World Bank should cut off assistance to projects that have already been approved.
President Obama and the U.S. Congress should condition future U.S. support of the World Bank to a rule prohibiting any World Bank assistance to Russia until a set of conditions was met. This would reduce our influence over the World Bank, a cost that I am willing to take.
Option Seven: Stop subsidizing Russia through the International Monetary Fund.
A I mentioned, IMF funds to Ukraine go directly to Gazprom.
IMF finances and politics are complicated and Russia is actively trying to reduce U.S. influence in the IMF.
Putin is a good poker player but the dollar is going up and the Ruble is falling. The IMF needs our support more than we need them.
Russia has invaded a neighboring country.
History has shown that the costs of ignoring such actions are huge.
Impose half of the sanctions on this list even in a watered down version the Russian Ruble will go to 50 per dollar. If Russia does not back down the next list will devalue the Ruble to 100 per dollar.