Contributors

Monday, March 03, 2014

Ukraine and Private Sector Foreign Policy

There are a lot of histrionics over Ukraine now, as Russia's invasion is complete. A couple of points to put the situation into perspective.

The Crimea, which is the focal point of Russian action, has long been a flashpoint. The Crimean War was fought by Russia on the pretext of saving Orthodox Christians. Famous for Florence Nightingale and the Charge of the Light Brigade, the Crimean War pitted Russia against an alliance composed of the Ottoman Empire, Britain, France and Sardinia. The war ran from 1853 to 1856.

After the Russian Revolution and the bloody Civil War that followed in which White Army fighters were massacred after they surrendered, the Crimea was made an autonomous republic and part of Russia. Stalin deported the indigenous Crimean Tatars in 1944 to central Asia for supposedly collaborating with the Nazis, along with Armenians, Bulgarians and Greeks.

In 1954 the Supreme Soviet transferred the Crimean Oblast (area) from the Russian Soviet Federated Socialist Republic (RSFSR) to the Ukrainian SSR. This was  a symbolic gesture on the 300th anniversary of Ukraine becoming part of Russia. Ukraine is viewed the birthplace of Russia, Rurik's Kievan Rus'.

Today Russia's Black Sea fleet is based in Sevastopol. This warm-water port has long been coveted by Russia, with Peter the Great (Putin's idol) failing twice to seize it. In 2010 Russia extended its lease on the port with Ukraine until 2042.  The population of Crimea is dominated by Russians, with many retired military officers living there, and many holding dual passports. It's warmer there, and a lot of regular Russians also retire there; if Sochi is the Russian Miami, the Crimea is the Russian version of the Florida panhandle.

With its own autonomous parliament, Crimea is for all intents and purposes a separate Russian enclave. Probably all the Russians in Crimea are in favor Russian troops coming in. They have swallowed Putin's line that western Ukraine is a puppet of Europe and America.

Putin's justification for acting in Crimea is the protection of Russian Christians. This plays into the historical context leading back for centuries. If he were to cite an American analog to justify his actions, he would point to Ronald Reagan's invasion of Grenada in 1983, when Reagan claimed that American students were in danger.

The recently deposed president of Ukraine, Viktor Yanukovich, is an authoritarian tyrant who was stealing the country blind. In addition to his gigantic mansion near Kiev, where reporters have found incredible opulence and many incriminating documents, he was building a huge palace on the Black Sea. Yanukovich has been "privatizing" state assets and selling them to himself, his family and his cronies.

Some of the people who tossed Yanukovich out are louts just like him, only they're Ukranian rather than Russian, and they're only slightly less corrupt. The people who were protesting in the streets aren't happy to see those clowns come into power, but then anyone is better than Putin.

Putin could well be biting off more than he can chew. He already has a problem with Muslim terrorists. Now he's antagonizing Ukranians, many of whom live in Russia. Russia's anti-gay laws are just one symptom of his increasing intolerance and arrogance. He seems to think he's the second coming of Peter the Great.

Given these facts, castigating President Obama for "doing nothing" is short-sighted. There's nothing to do, militarily. Crimea has been a Russian colony for a century, part of Ukraine in name only. There's absolutely no justification for us to take any kind of military action, if Crimea is the end.

However, if Russia moves on the rest of Ukraine, that's a different story. At that point it will become extremely serious. To prevent that, the international community needs to show the Russians that they aren't going to sit idly by. We have to hit the Russians where it hurts: the wallet.

Western governments should immediately put economic sanctions on Russian accounts, and not let up until Russia leaves Crimea. At the same time we should also act as guarantors for the safety of Russians in Crimea and affirm Russia's right to the Sevastopol lease.

Why are economic sanctions any kind of threat?

Since Putin's ascension, corrupt oligarchs who have profited by sweet-heart oil and gas contracts and  "privatization" of state assets have been sending billions of dollars into western banks and offshore tax havens. They've bought hundreds of billions of dollars worth of real estate and businesses in London, Paris and New York. American and British bankers have been kowtowing to Russian tycoons for years; many New Yorkers have come to hate the rich Russians who have bought up apartments and condos and driven real estate prices into the stratosphere.

As much as two-thirds of the money leaving Russia is derived from criminal enterprises, by the Kremlin's own analysis. American hawks complain that economic sanctions are toothless against Iran and North Korea, but those countries have relatively weak ties to western economies. The Russian oligarchs have sunk all their ill-gotten gains in the west because they don't trust that Putin will let them keep it: if they look at him sideways he'll throw them into jail and take all their money -- which has already happened to a couple of tycoons who crossed him.

Western countries thus have the capability to destroy the oligarchs who prop up Putin. Instead of carping about what the president should do, American and British business communities should start applying some moral judgments about who they do business with.

Since two out of every three dollars coming out of Russia is from a criminal enterprise, American bankers with Russian customers have to know they're dealing with crooks. Now is the time for them to practice a little private sector foreign policy and and let regulatory agencies know of any suspicious activities they might have noticed.

If Putin's pals start hemorrhaging cash they may not be so sanguine about military adventures in Ukraine.

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