The underlying principle of the European Union is the belief that an international regime of free trade will give nations an incentive to cooperate for common economic goals and reduce or even eliminate the risk of military conflict. EU policy makers have been proceeding on the assumption that after the dissolution of the USSR it was possible to bind Russia and the other former states of the USSR into this international regime. Suddenly they have come face to face with the reality that Putin and the other people who control the Russian government have no wish to be so bound and seem entirely willing to use all means at their disposal to resist it.
In Crimea at least Russia has demonstrated its willingness to use military force. It is also demonstrating its willingness to use muscular economic sanctions.
Russia Steps Up Economic Pressure on Kiev
Russia and Russian state companies have increased the economic pressure on the new pro-Western government in Kiev over the past week, closing the border to most trucks, shutting a Ukrainian factory in Russia and yet again raising the price of natural gas.
The actions revive an array of Russian economic foreign policy tools used for years and made possible by Russia’s robust domestic consumer market and the country’s energy exports.
About a quarter of all Ukraine’s exports go to Russia, and factories here have benefited from a growing demand in the defense sector and rising consumer purchasing power.
One of the realities for the interim Ukrainian government is that the economy remains heavily linked to Russia. The expressed desire of the western part of the country to move toward closer ties with the west does not undo those linkages quickly and easily.
Russia is of course not heavily dependent on its economic relations with Ukraine. Its principal treading relationships are with the EU and China. Just as the takeover of Crimea raises questions about how much further Putin is willing to go in terms of military intervention, these economic sanctions raise the question of what impact economic sanctions made against Russia would have on its policies.
Obama is in The Hague for a hastily called meeting of the G7 nations to discuss economic and military options for responding to the crisis. It seems that they are going to have to face the reality that Putin is not going to be easily cajoled. One does not have to grant legitimacy to Putin's actions in order to accept the reality that he is strongly convinced of the validity of his position and will likely stick to it.