Home 2022 Russian Sanctions Will Not Work

Russian Sanctions Will Not Work

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Russia ordered its military to take a peacekeeping role in disputed regions of eastern Ukraine, that prompted the Western democracies to impose sanctions on Russia” –Paul Ebeling

In the US, the timid sanctions included some Russian banks and wealthy individuals and oligarchs. Plus a ban on purchasing the country’s debt. These actions are aimed at hurting the rich and powerful in Russian President Putin’s inner circle. These actions will not make much if any difference.

As it was in the past the issue in Russia is that the population is mainly poor with average annual per capita income about 20% of that in the US. Ultra-wealthy individuals sit at the Top of the economic pile. So, only the poverty-stricken will feel the bite of sanctions not the elite. Russia has always treated the poor as peasants.

The record of sanctions is that they fail, as there are always workarounds and the sanctions will not stop the rich from getting money in or out of the country.

Russia has been subject to sanctions for yrs dating back at least as far as the Y 2014 annexation of Crimea. The behavior of the country has not changed since.

Lots of things make the Ukraine situation far more complicated then it might seem. The matter revolves around the economics of 2 Key parties. While the US and Russia are not dependent on each other, the same is not true of Europe and Russia. They are joined at the hip, at the very least when it comes to energy. And that means there cannot be a shock-and-awe style imposition of sanctions on Russia. A total economic blockade would likely hurt Europe as much as Russia. In the short and medium-term, it is impossible for Europe to phase out Russia’s energy.

Russia needs Europe’s money. Revenue from energy exports accounts for approximately 40% of the country’s federal budget. Without that money there would be a gaping hole in the Russian government’s wallet. It is very dependent on getting money from the ground, the idea that Russia would turn off the energy pipelines is seen as farfetched. Russia wants to be seen as a reliable supplier.

All this means that while the Biden White House may be apoplectic about President Putin’s actions in Ukraine, the Russia-Europe economic entanglement is in the way of a simple solution. Russia wants the income and Europe cannot live without the Crude Oil and Nat Gas.

The Big Q: Who will want to get in the way of such a beneficial relationship?

The Big A: No body. Hence, Russian Sanctions Will Not Work!

Just In: Russia has told Ukraine it is ready to halt military operations if Kyiv meets a list of conditions. Moscow demands that Ukraine cease military action, change its constitution to enshrine neutrality, acknowledge Crimea as Russian territory, and recognize the separatist republics of Donetsk and Lugansk as independent states.

This was the most explicit Russian statement so far of the terms it wants to impose on Ukraine to halt what it calls its “special military operation”, now in its 12th day. Ukraine is aware of the conditions, they were told that all this can be stopped in a moment.

There was no reaction from the Ukrainian side yet.

Have a prosperous week, Keep the Faith!

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Paul A. Ebeling, a polymath, excels, in diverse fields of knowledge Including Pattern Recognition Analysis in Equities, Commodities and Foreign Exchange, and he is the author of "The Red Roadmaster's Technical Report on the US Major Market Indices, a highly regarded, weekly financial market commentary. He is a philosopher, issuing insights on a wide range of subjects to over a million cohorts. An international audience of opinion makers, business leaders, and global organizations recognize Ebeling as an expert.