Ukraine, sanctions, and Putin’s rotten goods

Protest near the White House against Russia's aggression against Ukraine, March 2014

Protest near the White House against Russia's aggression against Ukraine, March 2014 

2016/11/20 • Analysis & Opinion

Article by: Vitaliy Portnikov

During Barack Obama’s farewell meetings with the leaders  of the five leading European countries, Ukraine was one of the main topics of discussion. The US president and his European counterparts agreed that sanctions against Moscow should be retained until Russia fulfills the Minsk agreements.

Thus the main goal of Russia diplomacy — the removal of sanctions while continuing the Minsk agreements and control over the Donbas — remains an unrealized dream. It really was an ambitious goal. The Kremlin wanted for the US and EU sanctions to be lifted precisely when Russian companies still have the chance to obtain new loans to cover their debts. If sanctions are not lifted by next year, many Russian state companies will become insolvent and be forced to default. This is Vladimir Putin’s nightmare.  Because the actual refusal by Russian state companies to pay their debts will occur against the backdrop of disappearing reserves. And the struggle over financial flows that is taking place literally before our eyes only aggravates the turbulence in Russia’s leadership. The recent arrest of Alexei Ulyukayev, the minister of Russia’s economic development, is one of the manifestations of this instability.

What will Putin do now? It is not difficult to predict. Russia’s important task now will be to reach an agreement with the new US administration. Putin will need to convince Donald Trump that he is the best ally in the fight against the “Islamic state.”  Exchanging sanctions for the Russian-US antiterrorist alliance can become an important part of Kremlin’s new agenda. It can be part of the same “reset” discussed by representatives in Trump’s entourage.

But will Putin succeed in this maneuver? Its use is limited by the concluded negotiations between Obama and the Europeans. Sanctions against Russia are turning out to be an important part of Euro-Atlantic solidarity, a demonstration of readiness to comply with the norms of international law and to protect these norms. It is unlikely that the American administration will sacrifice Euro-Atlantic solidarity for Putin.

The Russian president has already tried to cheat Barack Obama, to prove to the 44th US president that he is an ally in the fight against the “Islamic State” and that for the sake of this myth it is worth closing one’s eyes to what the Kremlin is doing in Ukraine. But it turns out that the Russian army has been fighting not with the “Islamic state” but with the Syrian people. That it is killing not the extremists but the residents of Aleppo. What Putin is interested in is not the destruction of terror but the victory of his ally Bashar Assad.

Putin will try to sell Trump rotten goods.

Translated by: Anna Mostovych
Source: Radio Svoboda

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  • laker48

    “Putin will try to sell Trump rotten goods.”
    Nothing new under the sun. Whatever RuSSia touches, it immediately turns into manure.

  • Dagwood Bumstead

    I fail to see why Pedo Putolini would want the sanctions lifted. Has he not repeatedly stated that the sanctions aren’t doing Dwarfstan any harm at all, that they are actually strengthening the country by making it independent of western goods (e.g. medicines) and services? That Moscow’s Great Friend Peking will simply take over where the west left and supply Moscow with all funds necessary at mate’s interest rates, bla bla bla?????

    The reality, of course, is very different from the rosy picture the dwarf is painting. Like the Allied blockade of Germany and Austria-Hungary in WW1 the sanctions, paltry as they are, are slowly but surely crushing Dwarfstan’s economy like an anaconda crushing its victim.
    Moscow’s Great Friend Peking is proving to be anything but, ruthlessly exploiting Dwarfstan’s weakness, getting what it wants at rock bottom prices. And the dwarf had better stick to any agreement he signs with Peking to the letter. If he doesn’t, Peking will simply take what it considers its rightful Pound Of Flesh.

    • laker48
      • Dagwood Bumstead

        The interesting thing is that much of what is happening now (though not all) was predicted by Russia’s former Deputy Prime Minister Alfred Koch in October 2014. His piece still makes for a good read today; it was posted on informnapalm.org in German, and the original Russian version appeared on rufabula.ru. As I couldn’t find a translation in English online, I translated it for a friend, and luckily I saved the translation which follows below:

        Alfred Koch
        5/10/2014

        In short. What do we have here. The sanctions against us won’t be lifted. We haven’t seized the Donbas. And as it turns out, we didn’t even want to. People (many) died. Among them also Russian citizens/civilians (Bürger can mean either- DB.).

        The oil price is sinking. The budget is going to the devil. Economic growth is equal to zero. There is no industrial growth. Foreign exchange intake is shrinking. The state’s balance of payments worsens day by day.

        Soon times will come, when even critical import will become problematical (medicines, spare parts for electrical gear, for control and measurement apparatus in medicine, energy etc), because there will be a shortage of convertible currencies.

        The ruble is falling. By the end of the year inflation will be a
        double-digit number. In combination with zero growth it will be a
        classic stagflation- the nightmare of every politician.

        Capital export (more accurately, flight- DB.) from Russia will be around 150 billion. Investments will be frozen, and those done by the state will only be a waste of money.

        The real estate market will collapse. Together with it first the
        developers, and then the banks that financed them will fall. Peoples’ bank deposits will disappear together with the banks. Inflation will devour the people’s wages.

        Judicial arbitrariness will take gruesome forms. People will simply disappear who knows where. Whereby- where is known. But at the top they will simply shrug their shoulders and say that they don’t have a clue. That they are still searching. But they aren’t magicians.

        The political system will turn into a quirk fulfillment and wild fantasy execution of a single person, who because of boredom and supersaturation is in a state of an absolute prostration. The state will take forms which best match his personal phobias and complexes.

        The media will be finally satanised, and will accuse the West and the Ukraine of everything. The authorities will throw themselves before China, in the hope that it will throw them money. There won’t be any. Because most of all it is interested in a weak and agonising Russia.

        Then the authorities will throw themselves before the Americans. The Americans will grin broadly and say: “1. Putin to The Hague (like Milosevic). 2. Demonopolising and privatising of the media. 3. Free elections with participation rights for all those interested under control of international observers. 4. Constitutional reform. 5. Renouncing of the nuclear status and disarmament under NATO control. 6. NATO military bases on Russian soil.”

        We will reject all this. Then the Americans will say: “Then go back to the Chinese.” The Chinese will say: “OK. Good. We will help you. But we have one condition: exchange of peoples. We have no complaints against Russians whatsoever, but our people are more effective. Nothing personal, just business.

        See for yourselves: when you take over a farm as manager and see that the herd consists of cows of the central Russian breed, you will understand that it must be exchanged for the Holsteiner breed. Simply because the Holsteiner breed will give more milk at the same cost. And this herd must be processed to sausage.

        And you have no aversion to the central Russian cows. You simply don’t need them for your tasks. It’s the same here: which arguments should they be? We need your resources. We don’t need you. What should we feed and maintain you for? Become sausage. Our Chinese will do our tasks better.”

        Shocked by this truth, we will fall back before the Americans. And will fulfill their conditions.

        That is where our fight for the Russian World will lead, the fight for an “own civilisation”. The loss of sovereignty and possibly the
        decay of the state- that is a realistic perspective at this starting
        point.

        • laker48

          That’s what I’ve been posting in other words since the illegal annexation of Crimea by the RuSSian Federation. I wrote in the summer of 2014 that Crimea and the hybrid war in Donbas were two millstones tied to RuSSia’s neck that would eventually drown it in a cesspool filled with its own feces. You’re the first one pointing at the $600 B long term debt obligations of RuSSian corporations coming due by the ed of 2017 I’ve been writing about for more than two years now.

          • Dagwood Bumstead

            And the dwarf already had several others before 2014- Transnistria, Abkhazia, South Ossetia- which all demand huge subsidies from Moscow to stay afloat. To compound his problems, he has added yet another millstone: Syria.

          • laker48

            We’re now living in the most dangerous time bracket of late, as the Dwarf may choose to start at least a regional conflict in Syria during the two month “interregnum” in the US. I know that it may seem too much of a stretch, but the Dwarf is desperate and he didn’t pass the test to become a KGB general for his excessive penchant for uncalculated risk taking. Let’ hope that the US is redy for this possible scenario. The fascist RuSSian Federation may disintegrate before the end of this decade, and president-elect Trump may take credit for this.

          • Dagwood Bumstead

            I believe the dwarf will wait until Trump is inaugurated. At the moment NOBODY knows what Trump’s policies toward Moscow will be, and he may well be inclined to make a deal with the dwarf. Until Jan. 20th Obama is still Pres and if the dwarf tries any funny stuff there’s a serious risk of Obama slapping another round of sanctions on Moscow- sanctions that even Trump probably won’t lift without a quid pro quo and that Dwarfstan’s economy can ill afford.
            Heck, Obama might even finally authorise immediate shipping of, say, 2,000 modern antitank missiles from US stocks in Europe to Kyiv if the dwarf tries any funny stuff, whether in Syria or the Donbas. If you were the dwarf, would YOU want to take that risk if Trump MIGHT be willing to deal favourably? I’d wait and see what Trump has to offer.

          • laker48

            Let’s wait and see, as the Dwarf is desperate and tries to play poker with an extremely weak hand. Chances are fair to good that Trump will call his hand out, though. I still expect that the Obama administration will legislate all existing and any possible new sanctions into law, what will make them not only Trump-proof, but impossible to remove by any future administration without drumming up at least 2/3 of votes in the House and the Senate.

          • Quartermaster

            If the sanctions are encoded into law, it only takes a majority vote to repeal them.

          • laker48

            No. Go back to the Cuban sanctions legislated over half a century ago! Over 90% of them are still in force albeit the bulk of them have been unnecessary for at least two decades.

          • Dagwood Bumstead

            IF the dwarf starts anything new I believe it will be in Belarus rather than Syria or the Donbas. From his viewpoint there are several advantages and few disadvantages.
            First, he can sell the annexation of Belarus as another step in restoring Dwarfstan’s Greatness to the gullible Dwarfstanians, a further step on the way to a New Russian Empire. After all, the euphoria of “Krim Nash!” has pretty much disappeared by now. His standing will increase with the Dwarfstanians again.
            Second, he gets rid of Lukashenko who is by no means as pliable as the dwarf thought he would be, and can appoint his own man to be in charge.
            Third, he can add the strength of the Belarusian armed forces to Dwarfstan’s.
            Fourth, he gets an extra length of frontier with the Ukraine which will increase Kyiv’s defence problems, plus he can finally get the bases that Lukashenko flatly refused him.

            Drawbacks? Only the risk of further sanctions, but given that Lukashenko has no friends in the west I believe that the dwarf will only have to face a few weak verbal protests, nothing more.
            In sum, huge advantages, almost no drawbacks. I’m surpised the dwarf hasn’t sent his little green men into Belaurs yet.

          • Alex George

            “Drawbacks? Only the risk of further sanctions…”

            There is another drawback – the Belarusian political elite has little contact with or affinity for the Russian political class any more. And many ordinary Belarusians are ambivalent towards Europe but do not wish to be ruled by Moscow.

            In eastern Ukraine in 2014, the Ukrainian government did not recruit volunteers, at least initially. Some volunteer battalions were raised by far right groups, some by oligarchs, but some groups just coalesced spontaneously. If the same thing were to happen in Belarus, Putin would find himself in another meat grinder, and may even do what he did in Ukraine – turn a populace which is neutral towards Russia,into a hostile one.

    • Alex George

      “Moscow’s Great Friend Peking is proving to be anything but, ruthlessly exploiting Dwarfstan’s weakness, getting what it wants at rock bottom prices.”

      Couldn’t have put it better.

      The sanctions are extremely important. They don’t affect trade very much. But the prevention of refinancing loans is crucial. Russia defaulted on its loans in 1998 (it was bailed out that time by the EU) and hasn’t been able to get significant loans since. So it does its borrowing through its State Owned Enterprises. If they can;t get their loans refinanced, then the Russian elite are in deep trouble.

      • Dagwood Bumstead

        The country IS in deep trouble. The sanctions forbid loans to (semi-) state-owned banks and companies (e.g. Sberbank, Gazprom) who collectively owe some $600 billion. This means they cannot be refinanced, but the companies have to cough up to meet the terms of the original loans…… which they can’t. Moscow’s reserves are currently far less than $600 billion and due to the dropin oil and gas prices, plus EU customers shifting to more reliable suppliers the state’s and companies’ incomes have dropped as well. It doesn’t take a mathematical genius to see TROUBLE.
        Furthermore, although loans to private companies and banks aren’t forbidden, western banks are very reluctant to lend them $$$ as there’s no guarantee that the sanctions won’t be extended to them as well- and why run the risk?

        The 1998 loans to Russia by various parties including the IMF were done at the insistence of Bill Clinton despite the reservations of the lenders. The increase of the oil price after 2000 enabled Moscow to repay those loans, but even if Trump were ever to insist on similar emergency loans to Moscow at a future date, I don’t see that happening, especially as there’s little likelihood of oil prices going up again and saving Pedo Putolini’s bacon.

  • zorbatheturk

    Assad has killed far more civilians than IS.

    • Turtler

      That “sideshow” can consistently field more troops than Putin has, at rates of attrition and replacement above what we’ve seen in most of history.

      The PRC and Russia are far greater individual threats, at least right now. But they didn’t kill thousands of Americans in a single day or launch overt terrorist attacks throughout the Western world. The Jihadis still need to be dealt with.

      And Assad is at least as much a problem for his connections to Iran and Hezbollah as he is for his ties with Pooty.

      • zorbatheturk

        Obviously China and Russia dare not kill any Americans directly. Estimates of death in Syria from Assad’s forces, armed by Putin, range up to 470,000. Less than 200 Albanian Kosovars murdered by Serbian death squads in 1999 prompted NATO to go to war and a United Nations mission into Kosovo: UNMIK. A new country eventuated. So, how many deaths in Syria will it take till Assad is stopped. A million? As for IS ” troops “, there is no shortage of underemployed Arabs willing to fire AK-47s at someone. I wonder where they get all the ammo? Copper is expensive. Some factory in Russia is doing OK.

  • Greg

    Trump is just stupid enough to accept and believe Putin’s lies! the world faces a serious dangerous next few years. Putin wants to expand his empire and Trump wants to make a deal with Russia! Many innocents will die to satisfy the ego’s of 2 men.

    • laker48

      Well, I wouldn’t put the cart in front of the horse. Let’s wait for his first 100 days after taking office.

    • Quartermaster

      Much will depend on who Trump listens to. We’ll simply have to wait and see what happens.