Sanctions stand-off

HOW to react to the downing of flight MH17 over the Eastern Ukraine? That is the dillemma presently occupying the minds of world leaders.

The rhetoric is similar across the globe. Even though leaders like Dutch Prime Minister Mark Rutte (whose country gave up 192 of the 298 dead on the Boeing 777) and German Chancellor Angela Merkel have hitherto not publicly indicated who they regard as the guilty parties, behind the scenes everyone outside Russia is saying more or less the same thing.

The overwhelming consensus is that the pro-Russian separatists who control much of the Eastern Ukraine shot down the plane a week ago. It may have been a case of mistaken identity, with the rebels thinking they had a Ukrainian military transport in their sights, but it appears pretty certain that they were the ones who flipped the switch.

The big thing is, however, whether the Russian government shares responsibility. Some reports state that the rebels captured a highly sophisticated “Buk” anti-aircraft missile system from the Ukrainian army; others allege that Russia supplied the system.

Whatever the truth, everybody agrees that Russia has, through political and military aid, enabled the separatists to continue their war - and, therefore, also to the downing of MH17.

Economic ties that tangle

The problem is how to react, especially towards Russia. Simple it is not, especially in the light of the intensive economic ties between Russia and especially the European Union.

Indicative of the sensitiveness of the situation was a summit held earlier this week by the EU ministers of foreign affairs in Brussels. The Eastern European member states – the Baltic states, Poland, Hungary and the like – pushed hard for severe economic and military sanctions.

But in the end the ministers, who may only take decisions based solely on unanimity, could agree only on extending the list of individuals surrounding Russian President Vladimir Putin targeted for sanctions.

France is presently building two huge naval helicopter carriers for the Russian navy to the tune of €1.1bn. British Prime Minister David Cameron invoked the “appeasement” policy of the 1930s towards German dictator Adolf Hitler to denounce the transaction, but French President François Hollande countered by calling the British “hypocrites”.

If the sale of the ships were to be cancelled now, France would have to pay a huge penalty fine, the French say.

French newspapers on Tuesday also gleefully pounced on news reports from London indicating that the British government had refused to cancel licences for the export of arms to Russia, worth millions.

And then there is, of course, always the fact that the EU is largely dependent on the import of Russian natural gas. There are influential voices saying that Europe ought to lessen this dependence, but even if they are listened to, it will take years to take effect. One may therefore assume that Russian gas will, for the time being at least, be exempted from any sanctions.

It may not come as a suprise that America, whose economic ties to Russia are far weaker than those of Europe, has announced considerably stricter measures. Last week, the Americans blocked high-profile oil companies and banks from lending money from US institutions.

In contrast to the EU sanctions, which may be viewed as largely token in nature, the US sanctions carry real bite.

South Africans with a long memory will remember that none of the international sanctions during the 1980s had much effect against the apartheid government. That was, until Chase Manhattan Bank announced that it was not going to roll over their loans to the then South African government.

That really hurt. And these financial sanctions played a role, albeit a subsidiary one, in moving former president FW de Klerk to end apartheid and legalise the ANC and SACP in 1990.

We may expect that the Russian individuals in Putin’s vicinity who are now targeted by the EU will largely shrug their shoulders and continue doing whatever it is they are doing. The sanctions will be an irritation, but they are rich enough not to be intimidated. And besides, they are influential enough to be compensated by the Russian government.

But if the Americans carry their financial sanctions through, that would be different. It may very well be a game changer. The Russian economy is already rather wobbly, and the Russian voters could probably blame Putin for a complete collapse.

It would, therefore, not be in Putin’s interest to dig his heels in too deep.

History shows that governments usually defy sanctions if these would require them to relinquish power.

This is not the case with the Russians. If Putin ditches the rebels, his total control over the Russian media would allow him to hide the extent of his defeat.

It will be extremely interesting to see how the power struggle, especially between Washington and Moscow, will develop in the coming days and weeks.

 - Fin24

* Leopold Scholtz is an independent political analyst who lives in Europe. Views expressed are his own.
We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For 14 free days, you can have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today. Thereafter you will be billed R75 per month. You can cancel anytime and if you cancel within 14 days you won't be billed. 
Subscribe to News24
Show Comments ()
Rand - Dollar
Rand - Pound
Rand - Euro
Rand - Aus dollar
Rand - Yen
Brent Crude
Top 40
All Share
Resource 10
Industrial 25
Financial 15
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders