Russia Loses, But Who Wins? - Global Trade Magazine
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  January 27th, 2015 | Written by

Russia Loses, But Who Wins?

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After Western leaders threatened Monday to intensify sanctions against Russia following escalated fighting in Ukraine—30 people were killed in rocket fire in the coastal city of Mariupol over the weekend—one has to wonder at what point those sanctions become injurious to the West itself.

As in the past—fighting began in April and has claimed more than 5,100 lives—the West’s weapon of choice with Russia is trade and when cuts were initially announced, Moscow sounded a defiant tone. Monday brought a similar tone, albeit somewhat hollow. Consider that initial sanctions came as Russia’s economy was fueled by, well, fuel. Oil. But as the price of crude has tumbled so has the Russian economy with existing sanctions more than playing their part, taking it back to the bad old days of food shortages.

With the import of Italian and French cheeses severely limited, the market for such items has gone from luxury to underground as Russians now have to get their cheese through a seedy, speakeasy system reminiscent of prohibition. Sanctions have been so devastating that just the threats of further ones sent Russian currency tumbling another 3 percent Monday; the Russian ruble has lost about half its value in the past year.

Whatever your ideas on justice, or just desserts, may be, the fact is a weakened or near-collapsed Russian economy will have a devastating effect on the rest of the world. With the global economy so interconnected, so interdependent, so, well, global, the failure of one major economy will eventually drag down others. Just consider Russian debt: firms there owe more than $500 billion in external debt, $130 billion is due by the end of the year.

And if you think that a little Russian pain now will serve the greater good of getting rid of strongman Vladimir Putin, well, all indications are that such pain only further endears Putin to his countrymen, especially when he places the blame for Russia’s current problem at the West’s doorstep.

If you were waiting for an answer, sorry, we’re just asking the question: when is enough not only enough but injurious? When does cutting off the Russian nose begin to spite the face of the global economy? Okay, not the greatest metaphor ever, but you get the idea.