TOWARDS A TRADE WAR WITH RUSSIA?

"Fears of a damaging trade war between Russia and the west grew as Moscow banned imports of a wide range of agricultural and food products and threatened possible sanctions on aerospace, shipbuilding and auto sectors. Escalating its response to western sanctions over the country’s role in the Ukraine crisis Moscow barred imports of meat, fish, seafood, vegetables, fruit, milk, dairy products from the US, the EU, Australia, Canada and Norway for a year. A wide range of processed foods were also added to the blacklist of prohibited goods. The government also threatened more counter-sanctions as it sought to punish the EU, US and its allies for the introduction of sector-wide measures against Russia last month. Prime Minister Dmitry Medvedev confirmed that the cabinet was discussing a proposal to ban European and American airlines from flying over Russian airspace en route to Asia. He added that Moscow was also “potentially ready” to introduce protective measures in a number of industrial sectors, including the automobile industry, shipbuilding and aircraft production. Moscow’s latest move comes as tensions over Ukraine rise, with Nato warning of a renewed Russian troop build-up on its border with Ukraine and some western governments fretting that Russia might invade the neighbouring country under the guise of a humanitarian or peacekeeping mission.... Hitting back with drastic protectionist measures reverses Moscow’s earlier stance. Until this week, government officials had frequently accused the US and the EU of abusing their power and endangering the global system of free trade with their punitive steps against Russia, and had pledged not to engage in tit-for-tat measures. “There is nothing good in sanctions and it was not an easy decision to take, but we had to do it,” Mr Medvedev said. ."

Kathrin Hille, "Russia threatens to go beyond food sanctions". The Financial Times. 7 August 2014, in www.ft.com.

"Europe’s announcement of sectorial sanctions against Russia is welcome news. Russian President Vladimir Putin’s continued aggression in Ukraine should not go unanswered by the international community. Over time, this latest round, which affects military, financial, and oil sectors will surely bite. Whether they will change Putin’s calculus in the short term, however, is far less certain. In fact, Putin’s moves to date signal his intentions loud and clear. Far from seeking options for a face-saving de-escalation, Putin is posturing for more military intervention. The latest reports from U.S. intelligence suggest that Russia has not only been supplying a steady stream of high-end weapons and training to rebels in Ukraine; but they are also firing artillery from across the border. As former U.S. ambassador to Russia Michael McFaul plainly observed, “Instead of using [the Malaysian Air crash] as a pretext for ending this war, he seems to be doing the opposite, doubling down.” This should really not surprise us. Just because many of us think it would be unwise for Putin to continue to escalate this crisis, does not mean that he won’t do it anyway. Buoyed by Russian domestic public opinion, Putin has demonstrated remarkable resolve in the face of increasingly tough sanctions and isolation from the international community. The fact that escalating the conflict or even invading Ukraine may not be in Russia’s long-term interests is beside the point. If we continue to try to predict Putin’s behavior based on what we think is “wise” versus what he is actually doing, we will continue to be surprised. And the Russian president has made it pretty clear how much farther he may go. According to General Philip Breedlove, NATO Supreme Allied Commander, Russia continues to amass combat forces on the Ukraine-Russia border. There are now well over 12,000 Russian combat troops deployed there, including seven battalion task groups and some special operations units, poised and ready for a full scale invasion if and when the time comes".

Janine Davidson, "Putin Appears to Be Angling for Invasion, Not De-Escalation". The Council on Foreign Relations. 30 July 2014, in www.ft.com.

Judging the mind of Russian Federation President Putin is a difficult, frustrating and at times indeed dangerous game. With however that being said, it seems evident to me, that Moskva has decided for predominately primat der Innenpolitik reasons not so much deescalate in the Ukraine Crisis but to hold on firmly to its existing policies. Indeed if one accepts the analysis of the American commentator Janine Davidson, Russia has decided to engage in a sort of flucht nach vorn . To openly accept the hesitant challenge offered up by the Western Powers and to respond in kind if not worse. 'Worse' of course being not so much retaliatory Russian sanctions (short of confiscation of Western investments and properties in Russia proper), as a partial or indeed full-scale invasion of Ukraine by the Russian forces stationed on Ukraine's eastern borders. And how likely is that? Given the investment that President Putin has made in the entire Ukrainian imbroglio, one is tempted to say that 'very likely' if the rebellion in Eastern Ukraine shows signs of collapsing. Short of a Damascene conversion of Moskva to rational decision-making, it defies the trend of Russian decision-making going back almost a year now, vis-`a-vis Ukraine, to expect Russia to simply abandon its puppets in Donetsk & Luhansk. Therefore do not expect for now a 'trade war' qua 'trade war' between Russia and the Western Powers. The retaliatory measures just announced are merely for internal Russian consumption and amour-propre. The key question has yet to be answered: will Russia stage a repetition of what occurred in Georgia back in 2008 and invade Ukraine or not?