Ukraine Crisis: weighing costs and benefits of sanctions for Europe

Over time, the economics of a situation tend to trump all other factors.  In the case of the Ukraine Crisis, Russia’s deepening economic crisis will either break the Putin regime or force Europeans to capitulate on sanctions.  With the Ukraine Crisis once again escalating, it would appear Russian President Vladimir Putin believes Europeans have a weaker resolve than the Russians do.  

On the other hand, it could also signal a new end game strategy for Putin.  Not only will the capture of Mariupol directly link Russia to the seized-Ukrainian territory of Crimea, it is a major industrial center and port that will serve as a tangible spoil of war Putin can use to placate the anger of economical hurting Russians.  In other words, Putin seems to believe Europeans are willing to lift sanctions whenever he chooses to end the Ukraine Crisis, but he needs to seize enough Ukrainian territory to make the economic pain worthwhile in the minds of the Russian People to secure his political power.

As Europe’s economies are struggling and sanctions against Russia are making things worse, there is clearly a compelling economic argument for European political leaders to use any and all rationales to capitulate on their efforts to punish Putin for his abuse of Ukraine.  Given Ukraine has traditionally been a part of Russia’s sphere of influence with a puppet government in Kiev, Europeans continuing to sacrifice for the elusive political freedoms of Ukrainians is becoming a harder sell.  Even in terms of national security, there is a chance that Russia’s increasingly aggressive behavior toward other countries is only a response to sanctions and the sacrifice of Ukraine would pacify Putin’s need to feel secure.

That said, the world is a much different place than it was when individual countries could act as they please.  Consequently, Putin’s outdated thinking where Russia must be protected from the West runs counter to the need of the International Community to globalize and remain open.  Meanwhile, there is little evidence to suggest Putin would feel compelled to end his aggressive policy toward Russia’s neighbors, if Europeans sacrificed Ukraine.  At most, it might pacify his power lust for a small length of time.  At the same time, the removal of sanctions may have few benefits for European economies due to the reality that collapsing oil prices are causing the most damage to Russia’s economy.

The real question for Europeans is whether there is a greater benefit for continuing to stand up to Putin or allowing Russia to act with impunity.  To help answer that question, it is necessary to ask what happens when sanctions are maintained for a protracted period.  In terms of economics, European economies are shifting their trade practices to compensate for the loss of the Russian market while suppressed energy prices and ongoing conflict with Russia serve as an incentive to continually reduce reliance on Russian natural gas.  Consequently, there is a long-term benefit when it comes to European national, economic, and energy security, if sanctions against Russia are maintained.

In terms of the Russian economy, Russia has certainly not been shy about expanding its trade relationships with countries like China, Iran, and North Korea in order to compensate for the losses of European markets.  What this mean is that the Russian economy will be more diversified when the Ukraine Crisis eventually ends, which will be good for the Russian People.  It also means Russia will have stronger ties to countries that are viewed unfavorable in the West.  As such, there is some potential future benefit to the prolonged Ukraine Crisis for Westerners should the Russian government turn a new leaf when the conflict ends and the Russians seek to renormalize relations with the West. 

What will happen in Russia as a result of the Ukraine Crisis is difficult to foresee.  To a large degree, President Vladimir Putin is quite skilled when it comes to speaking to his own People and vilifying the West.  Economics, however, dictate the Russian People will only tolerate conflict for so long, especially when they are increasingly asked to sacrifice.  For Westerners, there are more benefits to standing up to Vladimir Putin’s domineering foreign and military policies than to capitulating.  Clearly, there are costs to this ongoing conflict, but there are far greater costs if leaders like Vladimir Putin are allowed to act against neighboring countries and their own People in order dominate the International Community.