It’s quite likely, as so many commentators from Bob Gates on down have noted, that there is little likelihood of forcing Russia to disgorge Crimea. But much remains in play in Ukraine: namely will Russia try to annex the eastern portion of the country too and will Russia succeed in putting Viktor Yanukovych back into power? Beyond Ukraine there is also much at stake, as I have previously noted: The world is watching what happens in Ukraine and the less of a price that Russia has to pay for its conquest, the greater the likelihood that other predatory states will be tempted to stage similar power grabs.
The Russians who are most vulnerable to Western retaliation–the infamous oligarchs–are certainly worried about what will happen. As New York Times correspondent Ellen Barry notes from Moscow, “the prospect of losing access to Western finance is a frightening thought for Russian business leaders.”
And what would truly frighten them would be “any sanctions’ affecting banks. Large Russian corporations have significantly increased foreign borrowing in recent years, and 10 were negotiating loans when the crisis boiled over, said Ben Aris, the editor and publisher of Business New Europe. Financial sanctions could set off a chain reaction of blocked transactions, frozen accounts and bank closings. “
The West has leverage should it choose to use it. So far President Obama has not been aggressive in implementing sanctions, hoping no doubt that Putin can be encouraged to pull out of Crimea on his own. Fat chance. Barring any miraculous chain of heart on the part of the former KGB agent in the Kremlin, it’s time to get tough with precisely the kind of financial sanctions that the Russian elite fears. We need to make clear that Russia will pay a price for transgressing the most basic norms of international conduct.
Putin could, of course, try to retaliate by blocking natural gas shipments to Ukraine and to customers in the rest of Europe, such as Germany. But that would be a costly course for Moscow to adopt: Lost gas shipments means lost revenue and the Russian state is totally dependent on oil and gas revenues. Putin has some leverage; it is true, but the West holds a stronger hand–should it choose to play it.