Forbes. April 28, 2014.
-----------
BRIEF INTRODUCTION by
Hugo Adan. 04-28-14
Much of this is wishful thinking,
but read it anyway. It sums up what the neocons expectations are from sanctions. The
intentions are very evil, they do not plan to hurt the designated person, but
their children: “Yakunin’s children live abroad—the real strength of the
sanctions lie in the fact that they are designations. In effect, they are
the financial equivalent of leprosy”; no concern for Human Rights, only hate-crime. The real effect on
Russia is clear: they are been forced to
drop the USD and hit US companies with Russia allies. Forbes article was based on the Treasury
Department’s report: Ukraine-related Designations - Department of the
Treasury 4/28/2014, OFFICE OF FOREIGN ASSETS CONTROL OFAC's SDN: List of individual and companies
to be hit by new sanctions. http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20140428.aspx
----------
The US Treasury Department announced further
sanctions today on seven Russian officials and 17 Russian companies, including
Igor Sechin, the head of Rosneft, Russia's largest oil company, several
financial institutions and a number of firms connected to the energy
sector. These will include visa bans,
asset freezes and further restrictions on trade.
When the first round of sanctions were
imposed, the Russians largely laughed them off and critics of the
administration pounced. How could visa
bans and asset freezes affect the calculus of Putin’s most ardent supporters? What effect will it have on the ones don’t
travel extensively the West or keep assets in foreign banks?
Originally, these rules were
designed to lock terrorists out of the global financial system. As Juan Zarate, one of architects of the new
techniques, explains in his book Treasury’s War:
The point
was not necessarily to freeze assets in US banks—though that was a benefit—but
instead to use the designations to make it harder for individuals who were
financing terrorists to access the formal financial system. Our analyses
therefore focused on the networks of actors and institutions providing the
financial backbone to the terrorist enterprises. (Treasury's War: The
Unleashing of a New Era of Financial Warfare. By Juan Zarate)
Before long, the new techniques were
expanded beyond counterterrorism and deployed against nation states, such as
North Korea and Iran, to great effect. When coordinated with allies these
are even more effective, but are powerful even if pursued unilaterally.
That doesn’t mean that the sanctions
will deter Putin—like any lunatic out on a ledge, the decision to jump is his
alone—but his actions will incur ever increasing costs that will undermine his
already weak regime.
To understand how the sanctions
work, let’s look at the case of Vladimir Yakunin, Putin’s close friend and the
head of Russian Railways. He told the Financial Times,
“I did not intend to travel to the US. I have no assets. So it does
not bother me at all.” Even if we assume he’s telling the truth about his
assets (which is doubtful), the sanctions still hit hard.
While asset freezes and visa bans
are somewhat of a nuisance—Yakunin’s children live abroad—the real strength of the sanctions lie in the fact that they
are designations. In effect, they are
the financial equivalent of leprosy, discouraging financial institutions from
touching the targeted entity in any way.
What many people don’t realize is just how pervasive the US
financial system is. If, for example, Mr. Yakunin
wanted to buy a nice vacation house in Dubai. He’d have to pay for it
somehow. Yet to transfer the money, he would need to use a bank and
that’s where things get difficult. Every financial institution needs a
correspondent banking relationship with a US entity in order to do business.
The penalties for defying US Treasury designations can be
quite severe—HSBC was fined $1.9 billion—and if
the offending bank wants to continue to do business in the US, it complies.
In effect, once you are designated, you are cut off from the
international financial system.
Further, the sanctions apply not only people like Yakunin,
but also entities they control.
In his case, Bank Rossiya was also
designated. So it can no longer do business with any bank that deals in
dollars either. In fact, they can’t deal with any entity that does
business in the US, which is why Visa and MasterCard
MA
+0.51% cut off service.
The new sanctions tighten the noose even further because companies in the financial and energy sectors are now being targeted
aggressively. That means that their ability to do business
internationally will be greatly curtailed. The EU will be
announcing their own sanctions later today, magnifying the impact.
And it doesn’t stop there.
Because the sanctions are designed to be incremental, nobody knows for
sure who will show up on the list next. So the entire Russian economy is
effectively being isolated in a much more effective way than it would be under
a traditional sanctions regime. It is not specific activity
that is being proscribed, but financial relationships themselves.
The effects are already being felt. Russian
corporations can’t roll over their loans
and have had to cancel IPO’s. The
Russian government has had to call off all but
two bond auctions since the beginning of the crisis. This adds to capital flight, puts
pressure on the Ruble and creates inflation. At the same time, it limits investment in the country and
lowers income.
Recognizing the serious peril the
its economy finds itself in, Standard & Poor’s recently downgraded Russia to one
level above junk status, which will lead to further capital outflows as bond
funds reallocate their portfolio’s to manage risk. And the crises
is still young, things will only go downhill from here for Putin’s regime.
While it’s true that the nationalist fervor in the wake of
the Ukraine crisis have increased Vladimir Putin’s
approval ratings, it is doubtful that will last. The May holidays—a big deal in Russia—are coming up
and many Russians will have to alter their travel plans. Others will find
that their credit cards don’t work. Foreign adventures become decidedly
less attractive when they inhibit the ability to enjoy your life.
When Russians arrive back home, they
will find things only getting worse. The
Russian economy is expected to fall into recession this quarter
and Putin’s continued adventures will only get more expensive. Before
long, imported goods will become scarce and social payments will need to be
cut. Russians will begin to remember what the Soviet Union was really like.
In the years to come, decreased gas
exports to Europe and a softening market for oil could
cost the Russian economy as much as $100 billion annually—roughly 5% of
GDP. Putin promised a new stronger Russia, respected throughout the
world. Now he is delivering an impoverished pariah state.
Perhaps most importantly, it’s hard to see how Putin will prevail.
Ukraine is
a big place and occupying it would take hundreds of thousands of
troops—something Russia can’t afford financially or militarily. There is,
in fact, very little he can do besides make threatening noises while Obama’s
sanctions erode the Russian economy.
And that means trouble. Running an aggressive, authoritarian state
takes money. You need a hefty military budget, a large internal
security service, lots of money sloshing around to buy the loyalty of officials
and extensive social benefits to keep the populace docile. Even a brutal,
corrupt ruler needs internal support.
The truth is that Putin is a KGB operative to the core
and, as David Paul recently pointed out in an excellent article in the Huffington Post, the KGB has been losing since the 1970’s.
He has rather sloppily blundered into the same mistakes his predecessors
made in Afghanistan decades ago.
As strange as may seem, Vladimir
Putin, the bare-chested, horse riding tiger hunter, is about to be taken down
by a bunch of accountants.
---------------
RELATED
ARTICLES
US Russia sanctions hit
Sechin, Volodin, Chemezov, Kozak ...
But no big names on the corporate list.
Why US sanctions could play into Putin's hand -
CSMonitor .. "I think Putin can actually benefit from these
sanctions," says Nikolai Petrov
=========
No hay comentarios:
Publicar un comentario