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March 03, 2014

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Alex

On your 1), I've been reading Svetlana Alexeivitch's La Fin de'l Homme Rouge (dunno what the original title is) and it is just astonishing how much a lot of the worse ex-apparatchiks she interviews sound like UKIP candidates. Social authoritarianism, entitlement, and whining about the kids nowadays are probably human universals, and universally unattractive.

dsquared

So – there are steps the UK can take to defend the rights of (most of) the Ukranian people which involve neither instant sunshine nor sending the Staffordshires to the Vistula. These steps involve clamping down on the financial services industry, threatening the capital’s capital

This looks like wishful thinking to me. You can't just go around freezing anyone's bank account if they've got a name that ends in "sky", any more than Scoop Jackson could intern anyone with Japanese facial features. Most of the oligarchs with assets in London aren't part of the Russian state and it's not at all obvious how messing around with their human rights [1] would put any sort of pressure on Putin at all. The 1982 economic sanctions on Argentina didn't extend to the freezing of bank accounts for individual Argentineans.

At the end of the day, there are so many bad people who come to London because there are so many people who come to London; similarly there's so much dirty money here because there's so much money here. It's not because any official or semi-official policy of turning a blind eye.


[1] Oh yes. If someone's not actually guilty of a specific crime, themselves, then singling them out on the basis of their nationality for punitive expropriation of their assets is just exactly the sort of thing that the ECHR is quite particular about. You could probably put together a list of designated persons like there is with respect to Iran and Zimbabwe, but it would be a lot more difficult as there's much less of a connection between the actual oligarchs and specific acts in Ukraine.

dsquared

Also, I think analyses like Ben Judah's are ten years' worth of oil revenue out of date. Back in the late noughties, Russia's wealth was overseas. Now it's mainly in Russia, and the overseas stuff is bolt-hole money, plus stuff owned by people like Roman Abramovich, who still call themselves "oligarchs" but are actually just rich guys. To put it in perspective, he's referring to $56bn flowing out of Russia in 2012, but for that year the current account balance was an $81bn surplus and the foreign exchange reserves are about half a trillion.

Chris Williams

You and your _facts_, Daniel... Yes, it was named individuals with close state ties that I was thinking about. That and the infrastructure.

dsquared

Well, Switzerland's already frozen Yanukovych's accounts (although I personally suspect that this is going to be every bit as big a bust as the non-existent Mubarak $70bn. Freezing corporate accounts of Gazprom would obviously have a big effect, although this really would be an act with consequences obviously. I'm sure that plenty could be done, just not that it could be done easily, in a way that didn't look like economic warfare or only by hurting politically unpopular constituencies.

Cian

I've not been following this that closely, so my analysis may be way off.

But it seems to me purely at a foreign policy level Putin's actions are completely rational. Sevastopol is of great strategic importance to Russia (obviously) and is leased until 2042, with it's status after that uncertain. If NATO managed to integrate the Ukraine into the west sphere of influence, it's status would be pretty certain and not in a good way (at least if you're Putin).

Sure you have the other factors that can be used to justify it, and Putin may well believe justify it (essentially Russian speaking and pro-Russian, gained by the Ukraine in questionable circumstances). But Sevastopol seems more than worth it.

As an aside, John Kerry really is the worst secretary of state in quite a well. Never ever make threats that you have no hope of delivering on. And what is the US end game here?

ajay

But it seems to me purely at a foreign policy level Putin's actions are completely rational.

Only in a very narrow sense: it was completely rational for the UK to want to keep the Suez Canal, which was at least as strategically important to us as Sevastopol is to Russia. But that didn't turn out well.

dsquared

I think this ends up blowing up in Putin's face. He's spent 2% of his reserves today on the foreign exchange consequences of it (not to mention a 150bp rate rise in an economy that wasn't going well to begin with). I suspect that there was some dim idea of creating a new South Ossetia-like statelet in Crimea, but this seems very unlikely to me - Crimea isn't a tiny and economically unviable strip of land that can be kept going by subsidies, it's got 2m population and a substantial industrial and business community of its own, also it's pretty difficult to have shipping as one of your biggest industries if you're a country that nobody recognises. The Russian soldiers are popular there now, but foreign soldiers are the sort of thing that people get bored with really quickly.

So as long as everyone keeps their cool (potentially a big ask), this ends up de-escalating and he ends up marching his troops back home again, with not much to show for it except a lot of missing money. I would guess he'd still regard it as worth the expense though, as it underlines the message that, awful though it is to admit, Ukraine is not regarded by anyone in the world as much more than a means of stopping Russia from bumping into Poland, and barring some massive global realignment, they are always going to be screwed around with like this.

pdm251

One wonders if the U.S. will reevaluate its contract with Rosoboronexport to supply aircraft to the Afghan military, or ban it from doing private sales in the U.S. And if the EU will follow suit as well.

ajay

"awful though it is to admit, Ukraine is not regarded by anyone in the world as much more than a means of stopping Russia from bumping into Poland"

Given that Russia's on very good terms with Belarus and has plenty of troops in Kaliningrad, the main way of stopping Russia from bumping into Poland is actually Poland being in NATO. If Poland hadn't joined NATO - and there were a lot of people in the 1990s saying that eastward expansion of NATO was an unnecessary provocation to Russia, which after all had legitimate security concerns, etc - we'd probably have seen Russian troops in Gdansk by now.

pdm251

Judah's biting comment on the hedge fund mentality is spot on, for a lot of reasons involving other questionable sovereign wealth (mis)management funds one could name (*cough* Libyan Investment Authority *cough*), but the gaz more than the gazdollars is what matters in 2014.

Diplomatic cover for Putin's mucking about in the Russian near abroad comes from that. I don't think the EU is going to put in place anything like the U.S.'s Magnitsky Act for that reason, even as outrageous as the Crimean Intervention appears.

Alex

Useful gas-related map: http://t.co/gHOsQdP4Lr

note that the most key of the key nodes seems to be in Lvov.

ajay

One wonders if the U.S. will reevaluate its contract with Rosoboronexport to supply aircraft to the Afghan military

That deal collapsed last year over Russian support for Syria. http://thediplomat.com/2014/03/from-delhi-to-kabul-via-moscow/

Chris Williams

Another useful gas map, with consumption figures. Moral of the story: be French.
http://yearbook.enerdata.net/natural-gas-consumption-in-the-world.html#natural-gas-consumption-in-the-world.html

Alex

Jonathan Steele has called on the US to "back off", presumably by removing the 30,000 Marines currently storming up the beaches of Yevpatoria or wherever.

Chris Williams

Christ, what an arsehole.

However this one ends (and I hope it ends as D2 predicted, but I'm not confident that it will) we've already got a fine collection of nationalist bullshit coming from both the pro-Russia and pro-US sides of the debate. I can't work out whether Lavrov's bare-faced lying is worse than Kerry's total hypocrisy. Perhaps I don't need to choose? "No war but the class war: no commentary but meta-commentary!"

dsquared

Yes I thought that Steele article was very disappointing. As far as I can tell, the US/UK/EU can hardly back off this one any more than they have done already; all they're doing is slowly chucking Russia out of as many of the "global clubs of people who can be trusted to act in a sensible and grown up manner" as possible, all of which it was a mistake (albeit an understandable and in many ways commendably optimistic one) to have let them into in the first place. In terms of actual action aimed at preserving the integrity of Ukraine, we've all but sent a telegram saying that we don't give enough of one.

Reading back my earlier comment, it looks like I'm against financial sanctions on Russia which I'm not - I just don't think they'll have any major geopolitical benefit. Just clearing out some of the dodgier Russian institutions would be a material gain for market integrity though.

Cian

Well the UK's reasons for occupying Suez were rational. They miscalculated, but it was hardly irrational. At least in the US, this is being discussed as Russia is being irrational, or wants to recreate the Russian empire, or Putin is Hitler. Which is stupid. And worrying if western leaders believe that, as it means that there's no negotiation to be had.

The people who run the Kremlin are thugs, but they're very smart thugs, who appear to be happy to plan for the long term. Putin is many things. But I don't think it's smart to underestimate him, or to treat him as stupid.

Daniel:
Well the cost of something depends upon its worth. Losing Svastopol in 2042 would be a huge blow. Keeping it might be worth a bit of short term pain, particularly if you can weather out the economic cost with some patriotic gain (this is going to be pretty popular domestically). Putin seems to think in the long term, so it seems unlikely there wasn't some planning for this 'opportunity'.

I suspect that there was some dim idea of creating a new South Ossetia-like statelet in Crimea, but this seems very unlikely to me - Crimea isn't a tiny and economically unviable strip of land that can be kept going by subsidies, it's got 2m population and a substantial industrial and business community of its own,

How would that industrial community be affected by this? Who are their trading partners? Surely if they have a viable business community, they wouldn't need subsidies? This is an honest question, btw.

A good outcome for Russia (which may be the endgame) would be:
+ A 99 year lease (or whatever) of the port with full autonomous control of naval facilities by Russia.
+ A treaty that the Ukraine would never join NATO, or partner with them
+ A treaty that the Ukraine would never join the EU
+ And some renegotiation of the natural gas stuff.

None of that requires occupation, or creating client states.

also it's pretty difficult to have shipping as one of your biggest industries if you're a country that nobody recognises.

How so? A port is a port, no?

Cian

Damn it.

While Steele is an idiot, he's kind of right for the wrong reasons.

If you're going to make threats, make threats you can actually deliver on.

ajay

Well the UK's reasons for occupying Suez were rational. They miscalculated, but it was hardly irrational. At least in the US, this is being discussed as Russia is being irrational, or wants to recreate the Russian empire, or Putin is Hitler.

There's a distinction that I think you're blurring between "it is rational for me to desire such an objective" and "it is rational for me to seek to obtain it using the means I am using". It is rational for me to desire, say, a pint. It is not irrational for me to attempt to get one by stealing the pint belonging to David "Gargantuan Dave the Crusher" Flaherty down my local.

It was rational for Russia to want to keep Sevastopol. Not so rational for them to invade Crimea to keep it. Sevastopol was not in danger in the short or medium term: there was a lease deal that would last to 2042, as you point out. In the longer term, there was no reason why the lease should not be renewed - assuming that Russia refrained from behaving like a pillock in the intervening 28 years. Why wouldn't Ukraine want to keep hold of a lucrative lease arrangement with a friendly neighbouring country?
Of course Russia isn't a friendly neighbour now. Now they have to keep the port by force, because their chance of keeping it peacefully is now pretty tiny.

dsquared

How so? A port is a port, no?

Not really. A port that nobody will ship anything to (because the internationally recognised government has declared that it is closed and the rest of the world respects that decision) isn't a port. Northern Cyprus has a bunch of basically defunct ports like this.

Obviously, "only recognised by Russia and Belarus" gives you a few more trading opportunities than "only recognised by Turkey", but even so, you're basically conking local industry if you depart from the normal community of nations. You can handle this in somewhere like Transnistria or Abkhazia, where the local middle class is non-existent and the local elites are all crooks, but both Crimea and Donetsk seem to have a large community of people who would rather earn their living by honest means.

I don't agree that losing the Sevastopol base in 2042 would be a massive blow to the Russians. For one thing, they've been preparing for it for years and building up their other base. For the other, it is not as if the Black Sea Fleet is a jewel of the Russian armed forces. In many ways, the key geopolitical role of the Black Sea bit of the Russian Navy has been to hang around in Crimea, occasionally bumping into something Ukrainian, in order to create an excuse to intimidate Ukraine.

I also don't agree that the Kremlin are clever thugs. In terms of thinking of anything major they've done which hasn't been a greater or lesser fuck-up, I'm basically coming up with "export natural gas to Europe and don't piss off your major customers more than two years out of three". I think they've blundered into this one out of a sense of "how dare they!", combined with all the wrong kind of 1968 nostalgia, quite possibly combined with a lot of encouragement from their mates in the Autonomous Republic of Crimea. I suspect they'll blunder back out again when they realise how much more trouble it all is than it's worth, or when the Crimeans get sick of them.

jamie

I thought Putin's best bet was to replay 2004 and just wait it out to the point where Ukranians got so disillusioned once more that they voted whoever the pro-Russian guy is then back in. I mean, people were already smacking their lips over thge braciung dose of austerity Ukranians were in for while in our tender clutches. Of course, what Russia is actually doing may be a kind of force multiplier for that. The purpose may simply to put a huge amount of stress on a weak and not especially legitimate government.

The best rationale behind the Crimea intervention I can think of is that treaty arrangements notwithstanding Ukraine wouldn't be allowed to join the EU while leasing the Russians a base. Can't see the Poles having it for a start; or the US.

Dan Hardie

Most of this is wrong. If you're making a list of states more or less completely dependent on Russian gas for their electricity generation, then Ukraine is near the top of the list. Anyone in Ukrainian government knows they can't fight the Russians unless someone starts supplying large quantities of gas, which neither the EU nor the US can or wants to do. So the Ukrainian government won't fight the Russians.

It's been four years since I was in Ukraine, and I see at least some of my Ukrainian contacts are saying 'yes, fight the Russians' - and legally, Ukraine has every right to resist an armed invasion of its territory. But you can't fight someone whose very first move will just be to say 'I'm turning your power off, pretty much all of it'.

Bottom line: the Ukrainians are going to have to negotiate from a position of weakness, and the EU and US cannot be more bellicose than the people whose territory has been invaded (although John Kerry may not have realised that yet). As I say, I think a large number of Ukrainian citizens may have trouble accepting that, which- along with the general massive instability that led to Yanukovich's ousting, and the incoherence of Ukrainian politics ever since independence- means that it's possible there will be quite a few changes of Ukrainian government over the next year or two, some of them as a result of street politics or violence.

The only senior Ukrainian politician I've talked to was Sergey Tigipko, who's spent the last few years as a lieutenant of Yanukovich: I'd like to see how, and where, he is now. It will be interesting to see if he's followed Yanukovich to a safer jurisdiction, or if he thinks he can get away with lying low in Ukraine for a while.

Most of my youngish reform-minded friends were pretty keen on Yatseniuk, IIRC, but he's been handed not one but several massive problems. Even if he didn't have to deal with a Russian invasion of Ukraininan territory, he'd still have to deal with an administratively nightmarish, very possibly bankrupt state in which there is no clear source of political authority. Yatseniuk is possibly the least-enviable politician in Europe right now.

Dan Hardie

Richard, Dsquared, Alex- still on for the George this evening? If so, shall we say about 6.30, or 7, or maybe later?

Steele's a well-travelled, well-informed man- for example, his recent book on Afghanistan is a lot more right than wrong, in contrast to most other productions on the same subject, and he never went along with the free-market boosterism common among observers of early '90s Russia. But he's basically an ex-CPGB type who was reflexively pro-Soviet in the Cold War and is reflexively pro-Moscow now. I remember the very right-wing Norman Stone saying to me 'Most of the Western correspondents in Russia are awful, but Jonathan Steele speaks the language and understands the place. (Pause). He's an old Commie, of course...'

ajay

If you're making a list of states more or less completely dependent on Russian gas for their electricity generation, then Ukraine is near the top of the list. Anyone in Ukrainian government knows they can't fight the Russians unless someone starts supplying large quantities of gas, which neither the EU nor the US can or wants to do.

But then again the counter to this is that most of the Russian gas exports go via Ukraine - so they'd be losing billions in foreign exchange if they cut off Europe. And Ukraine has got four months worth of reserves stored up... http://www.reuters.com/article/2014/03/03/ukraine-crisis-gas-demand-idUSL6N0M02L020140303?type=companyNews&feedType=RSS

Would leasing a base to Russia really be a barrier to EU membership? I've never seen that suggested before (for example, when it was suggested by various Cypriot politicians recently...)

Chris Williams

Dan H: thanks for the Stone anecdote. More data: most of my ex-CPGB (or other varieties of Thirdness) friends have also shifted, apparently without irony, towards a reflexive pro-Moscow position, despite the fact that if you want to see capitalism red in tooth, claw and not a lot else, that's the place to look. Must have been something in the water, or perhaps they just liked tanks _a lot_.

Cian

I don't agree that losing the Sevastopol base in 2042 would be a massive blow to the Russians.

If nobody has it, that's fine. If NATO were to lease it (which they seemed to be aiming towards), that's a completely separate thing. Which I think is the real worry here for Russia. As is Ukranian entry into NATO. These are hardly paranoid fears.

In terms of thinking of anything major they've done which hasn't been a greater or lesser fuck-up, I'm basically coming up with "export natural gas to Europe and don't piss off your major customers more than two years out of three".

I think Georgia worked out fairly well for them. A bit of short term outrage, followed by a definite check on western expansion. Syria worked out pretty well. They're not obviously losing in the Stans. They've also mostly taken control over Russian resources, and they've rebuilt Russia into a minor power that has to be reckoned with. For the most part bordering countries are at least respectful, if not semi-clients. Given where they came from, and the fact that the US seems to think that the Cold war is ongoing (US domestic rhetoric on Russia is truly bizarre on a good day) that's not bad, particularly given the alternatives.

Obviously if one thinks that their objectives should be to maintain good relations with the west (or bizarrely, as commentators in the US seem to think, with the US) then it's been a failure.

I think they've blundered into this one out of a sense of "how dare they!", combined with all the wrong kind of 1968 nostalgia, quite possibly combined with a lot of encouragement from their mates in the Autonomous Republic of Crimea.

Possibly, but it did look like they were taking advantage of stupid blunder by the Ukranians (the Russian language thing) to put into play a planned operation. And this fits into Russian policy in the region for the last 10 years or so.

I suspect they'll blunder back out again when they realise how much more trouble it all is than it's worth, or when the Crimeans get sick of them.

This is of course possible.

I can see several ways out of this for Russia where they get what they want in a way that the west can't complain about too much. They could for example push for the Russian speaking parts to be semi-autonomous (to protect them from Ukrainian chauvinism. ), and thus protect their interests that way. So I don't agree that this is necessarily a mistake.

That said, long term occupation, or the equivalent, would certainly support your argument that this was a fuck up.

Dan Hardie

This article is well worth reading. Full disclosure: it's by a good friend of mine.

Ajay: but in 2009, the Ukrainians* dared the Russians to stop sending gas through the pipelines if they didn't give in to Ukrainian demands, it was Kyiv who folded first. I remember it well, because I was covering it as a journalist: dsquared will confirm then that I predicted, weeks in advance, how the dispute would end - in fact I think I predicted when it would end, to within about 24 hours. I'd say there's no reason to think that the Ukrainians are in a stronger position five years on.

If anything, they're weaker, because the Russians have been expanding non-Ukrainian pipeline routes and post-Yanukovych Ukraine is a disunited country with violent street protests, ie not the kind of place where politicians want to risk telling the populace that there's going to be less electricity for the foreseeable future. Perhaps an appeal to Ukrainian patriotism can overcome that, but I have to say I'd be surprised.

However, I may be wrong. Tarik, who wrote the article I linked to, knows far more about Ukraine than I do, as well as Russia, Poland and the old USSR. It's notable that while he's always been very anti-Putin, he's writing that the main danger right now is bellicose rhetoric- so he rates the chances of war as higher than I do.

*Or rather that fool Yushchenko. Tymoshenko, who despite her faults has a brain in her head, and also made a fortune in the gas industry, worked out very early on that Ukraine would lose any gas-pipeline chicken game, and thrashed out an agreement with Putin in late November 2008- which Yushchenko then ripped up, before having to concede worse terms after the pipeline shutdown in early 2009.

Cian

Ajay, in the context of Russia vs the Ukraine, Russia is "David Flaherty".

In the longer term, there was no reason why the lease should not be renewed - assuming that Russia refrained from behaving like a pillock in the intervening 28 years.

You're joking right? Even if one ignores the lease's controversy in much of the Ukraine, there's the history leading up to the agreement, tensions over its implementations and the fact that leaders in NATO have expressed considerable interest in it. Plus the fact that the 'pro-western' Ukranian politicians are openly hostile to Russia, and were engaging in NATO operations.

However the Tarik Amar article would suggest that this is more about spheres of influence. Which also makes sense. Russia is the Ottoman empire, rather than Germany.

ajay

If NATO were to lease it (which they seemed to be aiming towards)

Really? Curious to know more. I mean, if Ukraine joined NATO, then obviously Sevastopol would be a NATO port. But there was a plan for NATO to lease it from a non-NATO Ukraine? Who would be doing the leasing? NATO collectively?

teraz kurwa my

If freezing the assets of the Russian economic elite is an egregious racist violation of human rights then that means any economic measures against Russia (or any other country) are by definition the same except worse because of their broader effect. I'm not quite sure if d2 actually believes this, but it is a pretty far reaching argument against any economic action against any country under any circumstances and is certainly not the norm under which the world has operated.

dsquared

But there was a plan for NATO to lease it from a non-NATO Ukraine? Who would be doing the leasing? NATO collectively?

And why would the North Atlantic Treaty Organisation want a base on the Black Sea?

Igor Belanov

f Poland hadn't joined NATO - and there were a lot of people in the 1990s saying that eastward expansion of NATO was an unnecessary provocation to Russia, which after all had legitimate security concerns, etc - we'd probably have seen Russian troops in Gdansk by now.

This is hyperbole, and resembles AJP Taylors's arguments about Germany, just with 'drang nach westen' instead of lebensraum. Russian actions in the Crimea are clearly regrettable and aggressive, but they due already possess an armed enclave there and the population is ethnic Russian. There would be no similar justification for action in Poland, and no logical benefit to Russia. Putin is a calculating autocrat, and Russia is not the Third Reich.

dsquared

It is kind of hyperbole - after all, Russia actually did have troops in Poland all through the Warsaw Pact years, but absolutely refused to do anything with them, even when Jaruzelski was begging them to. There are some hornets' nests that even the Soviet Union didn't want to stick its dick into. But the general truth - that Poland is the country that Europe wants to look like it will fight to protect, and Ukraine isn't - is what I was trying to get at.

Cian

There's a US fantasy among the more bellicose elements about projecting US Power there by grabbing the base. I'm not saying it's a good plan, or a rational plan or even a plan that has much chance of coming to fruition.

But if you're Russia and already feeling vulnerable over the Ukraine...

I mean I know McCain is a fruit loop with zero influence, everyone on this board presumably knows this. Do the Russians? And do they want to assume he (or his like) will have zero influence in ten years?

Cian

I can't find the cite for the NATO lease thing. I think I'm conflating two completely different stories because I'm an idiot.

Igor Belanov

I think the obvious differences between Poland and Ukraine are that the Poles effectively started their democratic process nearly 10 years before the fall of the Berlin Wall, whereas Ukraine practically fell into independence and has always struggled to establish a stable democracy; Poland is ethnically and nationally very homogenous after the post-WWII cleansing; and, despite Belarussian Russophilia, it shares a border with Russia only at the Kaliningrad enclave.
I don't think Ukraine was ever likely to get more than half-hearted support from NATO because of the risk that its latent instability would lead to just this kind of crisis boiling over into war.

Cian

This Anatole Lieven piece is good. According to him everyone fucked up, and everyone is a loser (save possibly China). It sounds plausible.

http://www.zocalopublicsquare.org/2014/03/02/why-obama-shouldnt-fall-for-putins-ukrainian-folly/ideas/nexus/

teraz kurwa my

I suspect that if Poland had not been allowed to join NATO in spite of the overwhelming public support, on the grounds that we can't offend Russia, then Poland would be quite a bit more nationalistic and unstable than it is today and quite a bit more belligerent on issues in its 'near abroad'.

teraz kurwa my

Re Poland's early de facto beginning of its political transition. Yes, I think that helped. Mainly because you had a large set of what were effectively professional politicians ready to step in at all levels of government, with well established affiliated networks of experts. The mass blacklisting of Solidarity activists actually helped here. You also had long and detailed negotiations between Solidarity and the Party with working groups for every major policy domain. The senior opposition figures were all well known with significant public legitimacy. The same was true on a local level for many activists. The other countries had to create all that from scratch in a few months. That meant lots of crooks, lots of opportunists, and lots of apparatchiks (not necessarily mutually exclusive categories).

Chris Williams

In any case, it seems that I was on the nail with my initial prediction that the UK would be offering all aid short of actual help:
http://www.theguardian.com/world/2014/mar/03/uk-seeks-russia-harm-city-london-document
"Not support, for now, trade sanctions … or close London's financial centre to Russians."

ajay

If freezing the assets of the Russian economic elite is an egregious racist violation of human rights then that means any economic measures against Russia (or any other country) are by definition the same except worse because of their broader effect.

The distinction here is between freezing the assets of the Russian state, which has committed crimes against international law for which it should be punished, and freezing the assets of various private citizens, who haven't. If you look at what we've done to, say, Iran, you'll notice that the sanctioned-entity lists include lots of state-owned companies and persons connected with the Pasdaran, but they don't say "anyone and everyone Iranian".

dsquared

Even the USA's sanctions on Iran, which are pretty much the toughest financial sanctions in the world and which apply as a blanket measure against any Iranian companies, don't apply to Iranians living in the USA with green cards.

As I say, this is twenty-years-ago thinking. Russia isn't ruled by a clique of corrupt international expats centred around Boris Yeltsin any more. It's ruled by a clique of corrupt political thugs centred around Vladimiar Putin. The guys we all see propping up the bar at Mahiki got their money in a pretty disreputable manner for the most part, and certainly some condign anti-money-laundering enforcement would be a great idea, but it's just not true to think that we can put pressure on Putin this way.

Chris Williams

OK, but what about (a) the 'bolt-hole money' you mentioned above, and (b) the assets and ability to do business of Gazprom?

This is of course all moot since as that sneaky Downing Street snap just made clear, I was right to be pessimistic about movement on this one.

dsquared

Things could be done with respect to the offshore money, but it wouldn't have much practical effect on the Putin clique; it would piss them off mightily, but it wouldn't affect their day-to-day decision making. After all, you're freezing it rather than confiscating it, and more or less by definition while they're making decisions in Moscow, they don't need to draw on their rainy day fund in London.

Doing a number on Gazprom would be a fairly major strike at the Russian state, but at this point one has to consider that if Gazprom's bank accounts are frozen, this is going to affect their willingness to supply gas. We got through the whole Cold War without serious interruption to the hydrocarbons trade, which makes me think that cutting it off is a pretty serious thing to do. As Dan H says, the most immediately affected country would be Ukraine (I can also confirm he made that prediction), so I would want to see somewhat more evidence that they actually wanted us to do this before reaching for the financial levers.

All this, of course, is to do with trying to use the City as an instrument of economic war. If we've got decent evidence that Russian money in London is dishonestly got, then we should be freezing it anyway, and we should be making much more of an effort to get such evidence. But just tightening the screws to try and get our own way in Ukraine seems to have loads of disadvantages to me:

1) it creates the impression that we are A-OK with being a place of business for criminals as long as they are politically allied criminals.

2) simultaneously, it pushes the money of any foreigner who might sometimes want to be politically inconvenient to the USA or EU in the direction of places like Dubai or Singapore where there's a lot less control

3) because the sanctions target an industry which we have and our EU partners don't, it encourages Europe to adopt a more bellicose approach than actually makes sense.

I think this trend started with Qadaffi and Mubarak, where about five minutes after they died and the political wind changed, people were suddenly raising all hell about the fact that they had a bank account (Swiss politicians were *pissed off* to suddenly become the object of condemnation from the USA, which had written the chques to Mubarak in the first place). It also started the trend of ludicrously overestimating the amount of money - the $70bn figures for Yanukovych are literally absurd.

Although financial sanctions do have a role in the world, and it's probably true that we are in general too slow in using them, I do think it's a bit worrying that they're portrayed as a cost-free and minor thing that everyone should regard as step one, in cases where nobody is suggesting a trade embargo.

dsquared

(Also to note, of course, that a thoroughgoing campaign of cracking down on dirty money in London would not obviously ally us with one side as opposed to another in a Russia-Ukraine conflict. The idea of getting tough on Russian oligarchs and crooks while continuing to welcome Ukrainian oligarchs and crooks doesn't really appeal to me all that much).

Alex

PS, you all need to watch @shustry on twitter. amazing strategic nonviolence by Ukrainian Col. Yuli Manchur at Crimean airfield.

Chris Williams

My line is more that we need to consider the long-term downstream risk of welcoming everyone's money. And clearly I wouldn't wish you stricken by poverty, but the 'investment' we're getting from all this cash is not necessarily a good thing for the majority of the British population: we are paying for the public goods which the money is parasitic on. Nissan spends a billion quid on a factory? More jobs for skilled workers. Rich guys spend a billion quid on Knightsbridge property? More rent-seeking, plus jobs for slaves and minimum wage security guards.

Alex

Chris, aren't you trying to use foreign policy with regard to Russia to get your way on domestic policy there?

Guano

"My line is more that we need to consider the long-term downstream risk of welcoming everyone's money."

Yes, quite. What are the implications of Boris and Gideon going around the world saying "London is open for business"?

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