The war against Russia is one western countries want to fight with only economic sanctions, not guns.
Russia’s conflict with Ukraine, despite its long gestation and planning by Vladimir Putin and his supporters in the Kremlin, was supposed to end quickly once financial retaliation began. Yes, there would be military skirmishes on the ground, but little more than a few casualties were expected once a range of penalties began to bite.
The western powers have quickly realised that unless they are willing to fire the financial equivalent of a nuclear arsenal, Putin has made sure Russia is largely immune, at least in the short term.
Over a decade, Kremlin policy has carefully reduced domestic public and private sector debt and allowed the central bank time to build a war chest of foreign assets large enough to shore up the countries finances for months, if not years.
This means that the sanctions put in place over the last couple of days by the EU, US, UK, Japan and Canada are unlikely to have any significant effect on the Russian economy or its financial stability.
Only the full package of measures used against Iran – shutting Russia out of the international payments system, Swift, while also banning purchases of Russian oil and gas – will do the trick.
As Hosuk Lee-Makiyama, the head of the European Centre for International Political Economy, said, Europe has allowed itself to become more integrated with Russia, while Russia has separated itself from Europe.
He says EU countries own a combined €300bn of Russian assets that would be vulnerable to confiscation if a full-blooded financial war broke out. The UK owns billions more via firms such as BP, which has a near 20% stake in the Russian oil company Rosneft.
“Sanctions are one of the few options that European countries have in a conflict situation like this.
“If you disconnect North Korea or Iran from the international financial system, you do not expose yourself to that much damage.”
Speaking on BBC News, he…