Long-Term Solutions to the Ukraine Crisis

As I argued in a piece over at Forbes yesterday, western sanctions to roll back Russian action in Ukraine have been largely ineffectual. These sanctions - including asset freezes and visa bans – are ‘targeted’ at those suspected of having influence on Putin. Yet the sanctions, designed to be minimally painful for European states, are toothless - the majority of individuals sanctioned have only a minimal role in policy – and they won’t fix the long-term problem.

Over 150 individuals have been sanctioned by the United States and European Union, including 65 Ukrainian rebels, whose inclusion is presumably intended to inhibit their ability to wage conflict. The remainder are Russian, but most have no access to the corridors of power. Anatoly Sidorov, for example, the Commander of Russian military units in Crimea, is likely uninvolved in the policy formulation process. Other names are stranger, such as Ramzan Kadyrov, head of the Chechen republic. No doubt, he’s a trenchant proponent of the rebels, but he doesn’t influence Russian policy. In all, I estimate only a small proportion of those included in joint sanctions are actually involved in high-level decisionmaking.

The sanctions also vary in impact. Vladislav Surkov, suspected mastermind of Russia’s Crimea strategy, joked with reporters that sanctions didn’t worry him, as his only interest in the United States was Tupac. His point is valid: for those with no assets in Western Europe or the United States, sanctions are merely inconvenient.

Newer sanctions on companies certainly carry some more bite, restricting the ability of Russian banks to raise capital on Western markets. But they still don’t touch Russia’s key source of government revenues, an estimated 50-70% of which come from oil and gas sales. Unfortunately, Russia supplies one-third of Europe’s natural gas, and several countries (e.g., Estonia, Latvia) are entirely dependent on Russian energy. An immediate stop to imports is simply not possible, especially at the start of winter.

In the long-run, however, the most energy-dependent countries are also those most worried about Russia for security reasons. Now is an excellent time for these countries to begin to slowly divest themselves of Russian gas and oil. Dependence is a two-way street, after all: Russia is dependent on European payments for energy, and it will be difficult, time-consuming, and expensive for Russia to find alternate buyers for its resources.

The United States can help Europe with this process. The global energy market is being reshaped by innovations like fracking and liquified natural gas (LNG) transports. Thanks to shale gas, the United States is now one of the world’s largest producers of LNG, with shipments set to leave ports as early as 2015. Indeed, House Speaker John Boehner argued in March that the United States could help to curb Russia’s influence by encouraging natural gas exports to Eastern Europe. But for the sake of their own security, European states must begin the long process of shifting away from Russian energy supplies, and turning off the spigot of energy wealth that keeps the Kremlin afloat.