A few new stories this morning highlight different aspects of the Ukrainian crisis how the threat of sanctions is being perceived.
Firstly, EU and US sanctions placed on Russia could have wider reaching consequences, one Kremlin aide told the press. If Russia is prohibited by law from using USD, the worlds reserve currency, it would be unable to payback loans made in USD and ultimately may have to use another settlement currency.
The threat of sanctions is being downplayed by Russia and language used even has echoes of the old
Cold War. Nikita Khrushchev is often misquoted as telling Western Ambassadors in 1956 “We will bury you“; his words “Мы вас закопаем” (My vas zakopayem) are better translated as we will dig you in, or even we will outlive you.
The Kremlin aide in this comment mentions Russia’s excellent “relations with our partners in the east and south” and is confident about Moscow’s ability to reduce economic dependence on the West to nothing, even profiting from the situation.
The effect of sanction of global financial markets could be further reaching than any previous similar measures, as discussed by the Midnight Breakfast blog. Ukrainian dependence on EU and US funding could be a great drain on both economies. EU dependence on Russian energy (Putin turned the gas off on Ukraine in January 2006, when temperatures in Kiev plummet below zero) would give Russia great bargaining power.
Meanwhile, the Latvian government has taken legal steps towards issuing asset freezes and travel bans against certain Ukrainian citizens. Latvia is a Baltic Sea country and former Soviet State which is now pat of the EU and, since January 2014, trades in EUR.