Piecemeal Sanctions Won’t Deter Russia

Why is Russia’s foreign policy so erratic and belligerent? Can anything be done about it?
September 24, 2014 • Commentary
This article appeared on Forbes on September 24, 2014.

Sometimes, Russia reminds me of my favorite childhood television show, Pinky and the Brain. At the start of each episode Pinky asks his companion Brain, the genetically engineered super‐​genius mouse, what they should do tonight, to which Brain invariably responds: “The same thing we do every night, Pinky — try to take over the world!” One imagines Vladimir Putin’s Security Council engaging in the same exercise. Putin responds: “We’ll do the same thing we do every night — provoke tensions in a small neighboring country, claim to be protecting ethnic Russians, and then initiate a covert land grab!” Cue theme music.

Joking aside, there is no denying the pattern in Russia’s relations with its neighbors. Trade barriers, ‘passportization’ of diaspora Russians, and support for separatists in states from Georgia to Ukraine have led to the re‐​ignition of a number of post‐​Soviet ‘frozen conflicts.’ This pattern obscures the fact that these conflicts are irrational; Russia rarely succeeds in changing the status quo, while sanctions undermine the Russian economy. The Kremlin itself seems detached from reality, blaming Western provocation and CIA spies for everything. But why is Russia’s foreign policy so erratic and belligerent? Can anything be done about it?

Western attention focuses almost exclusively on Vladimir Putin, who has captivated our imaginations as a strongman and ex‐​spook. But a focus on Putin’s personality alone ignores his ‘inner circle’ of unelected advisors, who feature heavily in Kremlin decision‐​making despite a lack of formal ministerial portfolio. The media’s focus on individuals is accurate in this regard: Institutions typically do not feature in the decision‐​making process, which is dominated by personalities, and bears little resemblance to Western democracies. Where strong foreign policy institutions would allow for measured debate and bureaucratic advice, personalities dominate Kremlin decisions.

Most of the decision‐​makers in the Ukrainian crisis belong to the group known as the Siloviki, former members of the security services who share a common worldview with Putin. They wield a vast amount of influence on foreign policy. Although the Siloviki do not possess a single worldview, they are generally nationalistic and supportive of Russia’s ‘return to greatness.’ As such, they perceive actions like NATO expansion as a threat to Russian interests, one worthy of drastic actions like supporting rebels or committing troops in Ukraine.

Personal perceptions are extremely influential in decision‐​making, with suspicion and hostility towards the West often the norm. Putin, for example, appears to genuinely believe that the United States has tried to overthrow his regime. Former U.S. ambassador Michael McFaul ascribes this to Putin’s KGB past and lack of understanding of the American political system, which leads him to “grossly exaggerate the role of the CIA in the making of our foreign policy.’’ This paranoia should deeply worry U.S. policymakers, as these personalities and their delusional perceptions shape Russia’s policy responses.

Western responses to the Ukraine crisis have already been somewhat shaped by this reality. Policymakers boast of “smart sanctions,” which aim to hurt individuals close to Putin. The sanctions do target some decision‐​makers, although the majority of the more than 150 individuals sanctioned thus far are either Ukrainians, or military commanders who have little say in policymaking. Seven key decision‐​makers (all but one are Siloviki) have been sanctioned, including Sergei Ivanov, Putin’s Chief of Staff, plus eight individuals close to Putin, such as Yuri Kovalchuk, often described as “Putin’s banker.” The impact of these sanctions is unclear, although broader economic sanctions are having some effect: the Ruble is in freefall, and it is getting harder for Russian companies to borrow cash or conduct joint ventures. But the Kremlin’s policy in Ukraine has not wavered.

The loss of property and vacations in London and Paris is inconvenient to the Siloviki. But it does not threaten their hold on power. Even the economic impact of sanctions on firms is unlikely to do so. Only one action can produce these results: cutting Russia’s oil and gas revenues in the long‐​term. The regime relies heavily on state income from these resources, which allows them to buy support from elites and retain control of media, keeping them in power. Cutting the flow of riches to the Kremlin — currently at least 50 percent of government revenues — would make them think twice on foreign policy.

Current sanctions do make it more difficult for Russia’s energy companies to do business. Yet the US imports no Russian energy, and sanctions on energy imports are not on the table for the EU. Many European states, like Estonia, are entirely dependent on Russian gas supplies. It would be extremely painful for these states to cut off oil and gas imports from Russia, particularly at the start of winter. It isn’t possible to cut off Russian energy cold‐​turkey. But this is the time to begin thinking about long‐​term divestment of Russian energy supplies. A European shift to other energy suppliers will greatly diminish the Kremlin’s revenue stream, weakening those in power.

It is possible for European states to shift away from Russian energy supplies. Many European energy needs could be supplied from new sources of liquefied natural gas (LNG), as exports expand from the United States and Canada. Oil — accounting for half of Russia’s natural resource revenues — is easier to replace: it can be shipped anywhere and suppliers are currently plentiful as global oil prices fall. The primary obstacles are not technical, but political. First, current European efforts focus on conservation as the key way to curb demand for Russian gas. But this is likely to only reduce demand by about one quarter of current supply, not nearly enough. Second, narrow bureaucratic debate typically trumps security concerns. Various proposals for new LNG terminals in the Baltic states, for example, have been stalled or rejected by the European Commission on technical grounds, while states bicker amongst themselves about who gets the new facilities.

The Ukraine crisis provides an opportunity for European states to refocus their attention away from these political issues and towards shedding their reliance on Russian energy over the long‐​term. Putin’s perceptions and those of the Siloviki will dictate Russian foreign policy so long as they feel secure. Blocking the Kremlin’s key source of income by divesting Europe from Russian oil and gas could prove painful enough for leaders to move away from aggression in the long‐​term. We cannot reduce the pernicious impact of personality on Russian foreign policy, but perhaps, slowly, we can reshape the incentives of Putin and his inner circle.

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