Money talks

Charles King (not further identified) says in this morning’s New York Times:

Mr. Putin used a novel justification for his country’s attack on a neighboring state: protecting the interests of both Russian citizens and “compatriots” — code not just for ethnic Russians but for anyone with a political or cultural disposition toward Russia.

Novel is in the eye of the beholder.  Only someone unaware of the dissolution of former Yugoslavia in the 1990s could call this notion novel.  And only someone unfamiliar with the doctrine of responsibility to protect could call it R2P, as King does. Strategic interest is far more important to Putin than protection of civilians, no matter what their nationality. Crimea may be an ethnic mosaic to King, but it offers a nice warm water port with a mostly friendly local population to Putin.

The question is Lenin’s:  what is to be done?  In the Administration they are concluding correctly that there is little the West can do to reverse the situation in the near term.  None of the tough talk includes tough action.  Kicking Russia out of the G8, canceling trade missions, travel bans, visits to Kiev and consultations with allies are all more symbol than substance.  Even reviving missile defense is not something that will force Russia out of Crimea any time soon.  The offer of European observers to protect the Russian-speaking population of Crimea is clever–because Putin will reject it, thereby undermining in Western eyes his rationale for sending in troops–but it will do nothing to alter the situation on the ground.  Russian troops are in Crimea to stay for the foreseeable future.

Crimea is not an isolated incident.  It is symptomatic of a broader effort to revive Russian power in the world and to project it aggressively to protect Russian interests.  We see the results not only in Ukraine but also in Moldova, Georgia, Armenia and Syria.  Putin’s effort is not focused on one place.  Nor should the Western response be.  Responding more broadly runs the risk of restarting a kind of Cold War, but not responding more broadly runs the risk of encouraging Putin to act aggressively elsewhere, making a new Cold War inevitable.

The key to a broader response is finance.  Russia is far more integrated in the Western financial system than the Soviet Union was.  Freezing Russian assets and blocking financial transfers could have a real and immediate effect on Russia’s creditworthiness and the availability of financial resources for more adventures in other countries.  The US Treasury traditionally opposes action of this sort for fear of disrupting the world financial system, but Treasury Secretary Lew’s strong statements on Ukraine suggest he might be game this time around.  It will be particularly important to target what is done against transactions that help Russia’s surrogates in Transnistria, South Ossetia, Abkhazia, Nagorno-Karabakh and Damascus.

High oil prices–sticking still around $100 per barrel for the past three years–have been a boon to Putin’s Russia and have financed its projection of power.  Russia is still the world’s largest oil producer.  There is little the US can do to quickly bring oil prices down, but it should do nothing to keep them up.  This means no public movement of military assets, which often causes a jump in oil prices.  It likely also means approval of the Keystone pipeline from Canada and of more natural gas exports from the US, both of which have potential to put a long-term lid on global oil prices or even bring them down a bit.  Not to mention development of Ukraine’s shale gas, which is a direct if long-term threat to Russia’s gas exports to Europe.

President Obama is wanting to make Putin’s move into Ukraine costly.  The way to do that is to hurt his finances, sooner rather than later.  Money talks.