Russian government officials and businessmen are readying for sanctions resembling those applied to Iran after what they see as the inevitable annexation of Ukraine’s Crimea region, according to four people with knowledge of the preparations.
Iran-style retaliation from the West, which would include freezing Russia’s foreign reserves, banking assets and halting lending to companies, is being treated as an unlikely worst-case scenario, according to the people who asked not to be identified as the talks are under way. Officials are calculating the cost to the economy, the people said.
Some political leaders are hoping that President Vladimir Putin will moderate his response to the crisis, the people said. A sanctions war, with Russia retaliating against the West, could wipe out 10 years of achievements in financial and monetary policy, one of them said. Such escalation could erase as much as a third of the ruble’s value, another said.
In Washington, U.S. Secretary of State John Kerry yesterday said at a congressional hearing that sanctions on Russia could “get ugly fast” if events justified them. Group of Seven countries called on Putin to “immediately halt” efforts to pry Crimea away from Ukraine, to reduce Russian forces to pre-crisis numbers and to allow international monitors and mediation.
The EU announced a three-stage sanctions process against Russia last week, starting with the suspension of trade and visa-liberalization talks. Stage two includes asset freezes and travel bans for as-yet unidentified officials and would be imposed if Russia boycotts international talks on a settlement. Stage three envisages “additional and far-reaching consequences” if Russia further destabilizes Ukraine.
Russia’s position is unchanged by the threat of sanctions, foreign minister Sergei Lavrov said March 4. Three days later, he cautioned Kerry against “hasty and ill-considered moves” that could hurt relations.
The government is in talks with Russian billionaires and state companies about risks they face in case of western sanctions, the people said. The Kremlin needs to know which companies are most likely to be affected by fallout including loss of access to new foreign loans and facing margin calls, they said.
Business is not yet showing too much concern about the possible sanctions, according to three top executives who took part in meetings.
The EU, Ukraine and Russia are economically dependent on each other in many regards, so strict sanctions will be hard on all sides, Putin has said.
“In the modern world, when everything is interconnected and everybody depends on each other one way or another, of course it’s possible to damage each other — but this would be mutual damage,” Putin told reporters March 4.
Full article: Russia Preparing for Iran-Style Sanctions (YaLibnan)