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The Fine Line Regarding US Sanctions on Russia

The people of Crimea toasted each other on their city squares while Russia’s deputy Prime Minister sat back and laughed at Obama and the sanctions that have been declared on Russia. He wondered if it was a joke and tweeted his amusement, questioning if it was really thought all the way through given the fact that some on the list have neither property nor accounts abroad.

Those who have been put on the list are looking on it as an honor and not a punishment. Putin ideologue Vladislav Surkov would be just one case in point, stating that, “The only things that interest me in the U.S. are Tupac Shakur, Allen Ginsberg, and Jackson Pollock. I don’t need a visa to access their work. I lose nothing.”

The sanctions presently placed on Russia are aimed at individuals rather than the companies that they may be managing for Russia. There was a mild rally in Russian stocks when investors saw that the sanctions were light.

The EU has also placed sanctions on individuals. They took aim at various ones who are a part of the Russian parliament and armed forces.

Professor Andrey Zubov of Moscow State University lost his position over a rather revealing article about Russia’s true intent in taking over Crimea. He notes that, “Whoever controls Crimea controls the Black Sea.”

In addition, he suspects that Russian rulers are afraid that the uprising that happened in the Ukraine could be a contagion that takes place in Russia. He further notes that it’s possible that a puppet government was installed in Crimea and that the vote to join Russia is actually fraudulent.

That fine line on which Obama may be balancing is connected to Europe’s fuel supply. Though Norway managed to overtake Russia back in June as Europe’s primary gas supplier, Russia still supplies a significant portion.

Russia is very interested in gaining control of the Ukraine’s pipelines, since this would increase their control of fuel going to Europe. This combined with their control of the Black Sea would make for some rather strategic military and economic advantages.

Next week the Senate will be voting on a bailout bill for the Ukraine. The bill calls for a 60 percent increase in what the US contributes to the IMF over and above what we already give the IMF as the biggest contributors.

So far, the total amount is $1 billion in loan guarantees, 50 million to increase democracy building in the Ukraine, and $100 million to bolster security measures for the Ukraine and some of the surrounding countries.

It also calls for an increase in voting power at the IMF for countries such as Brazil, China, India, and Russia. This is something that Putin has wanted for a long time, and if Russia were to get it, it would weaken the US while strengthening Russia.

Senator Rand Paul had an interesting take on the bailout money proposed to go to the Ukraine: “Realize that when you give money to Ukraine, you're giving it to Russia. You think you're sending one signal but I think in an unintended fashion you're sending the wrong signal.”

But looking more closely to home, if the bill passes in the full Congress, the increase in funding that’s going to be given to the IMF means that the US will be printing more money through the Fed, which in turn means that the value of the dollar will be decreased.

As the value of the dollar is decreased, American families who are already struggling to make the ends meet will struggle even more since their dollars will lose yet more buying power to provide for their needs.

Less buying power for the dollar will also impact companies in that the dollar will not go as far to meet their bottom line, which means that cuts will have to be made. Some of those cuts are going to include jobs. It could also potentially mean that they will charge more for their products and / or services, which again, impacts already struggling American families.

While the situation in the Ukraine has the potential to be a contagion for something much worse, steps need to be taken at home to strengthen the US economy and lower unemployment. A few items that lawmakers ought to consider are offering companies fresh incentives and tax breaks for hiring new employees.

The more people there are who are working, the more people there are who are paying taxes. At the same time, a tax cut to American workers, even if just a small one, means Americans will have more money to spend, which is also good for strengthening the economy.  

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