Crimean Parliament Seeks Formal Union With Russia

One day after a disputed and widely deemed unlawful referendum in Crimea, the Crimean Parliament declared Crimea’s independence from Ukraine, formally asking Russia to annex it, the New York Times reports. This comes after 96.6% of voters in Crimea support joining Russia. With this, the crisis in the Ukraine hit its peak to date and the West now needs to follow up its rhetoric with credible actions that impose “high costs” on Russia.

President Putin’s swift and decisive move – in sharp contrast to the West – into the Crimean peninsula, which took advantage of early Ukraine crisis turmoil, now affords Russia a significant strategic advantage. Putin can react to punitive measures the US and its European allies impose from a position of relative strength.

Most importantly, the Ukraine crisis also marks a break from “pragmatic” Russian foreign policy on the Eurasian continent as perceived by the West. In 2010, Janusz Bugajski of CSIS provided insightful analysis by elaborating on the problem with the word “pragmatic” in this context: “[It] has been loosely applied in describing Russia’s foreign policy by implying partnership, moderation, and cooperation, as well as by counterposing it to an ideologized and expansive imperial policy characteristic of the Cold War.” He stresses that – different from Western understanding of “pragmatic” – it is pragmatic imperialism that can describe Putinist Russia’s foreign policy, with its key objective restoring Russia as a neo-imperial state, or at least a regional superpower. Bugajski details Russia’s re-imperialization as follows:

“To achieve these long-range objectives, the Kremlin is intent on expanding the ‘Eurasian space’ in which Russia is the dominant political [and cultural] player, and thus the (…) Euro-Atlantic zone of security would become increasingly fractured and neutralized. In this strategic struggle, ‘Eurasianism’ for Moscow involves two interconnected approaches: transforming Europe into an appendage of the Russian sphere of influence and debilitating Euro-Atlanticism by undercutting Europe’s connections with the United States.”

President Putin appears to be working toward both strategic objectives as the following energy sector developments highlight.

Regarding the first strategic objective – Europe’s transformation into a Russian energy appendage – which is already under way, Russia utilizes state-controlled natural gas monopoly Gazprom in an attempt to solidify its long-term European gas market dominance.

 Given Germany’s central role in Russia’s European energy strategy, Breaking Energy recently published a 3-part series on Gazprom’s German operations. 

europe nat gas pipes

Germany is an indispensable US ally, particularly with regard to imposing tough sanctions on Russia, but trade sanctions could result in “high costs” for all sides in a globalized world with deep economic interdependency. However, US-German actions vis-a-vis Russia are distinct from the asset freezes and travel bans on 21 Russian and Ukrainian officials imposed by the  EU and U.S. President Obama per executive order.

This so-called “first round” of sanctions – focused only on individuals – is fairly modest and has been telegraphed for sometime. Targeting individual Putin allies and advisers, while attention grabbing, is a far cry from imposing “high costs” and Putin appears to have circumvented some of these measures. According to Bloomberg citing Fed data, the Federal Reserve recorded a record decrease of $104 billion to $2.86 trillion in US government securities held in its custody in the week ending March 12. This fuels speculation that Russia may have shifted its holdings out of the U.S. in anticipation of Western sanctions. It is also possible the officials on the sanctions list have done the same.

Western governments understand that an escalation beyond this “first round” of sanctions will likely have negative repercussions for all participants in terms of lost trade, potential expropriations, general market uncertainty, and Europe’s case, a medium-term decrease in energy security. As such, the decision to move forward with more punitive sanctions will come down to individual governments’ pain threshold for bearing the costs.