Western threats of sanctions: Putin's trump cards

Will Russia still be impressed by sanctions?

The Kremlin is trying to give the opposite impression.

When America's president speaks of "disastrous" measures for Russia's economy should Putin attack Ukraine, his bored spokesman replies that such threats are heard every day.

The finance minister calls new restrictions "uncomfortable" but "doable" and the foreign minister sees his country "ready for anything".

Of course, such statements are part of the game to bring Moscow on an equal footing with Washington, which includes bluffing.

But there is more to it: the Kremlin believes it is safe from overly harsh punitive measures, such as a ban on all transactions in dollars or an exclusion from the Swift payment system, which could actually have devastating consequences for Russia,

Putin believes he has two trump cards in his hand.

One is Europe's dependence on Russian gas.

It's a real bargaining chip, probably Putin's best card at the moment.

It should ensure that some EU member states, including Germany, refuse to take the toughest measures.

So far, the EU has only hesitantly imposed sanctions on Russia.

Many of Putin's companions can continue to invest their assets in the EU without hindrance.

At least since 2014, when Russia began its military aggression against Ukraine, European countries should have done everything they could to reorganize their gas supply.

This winter, in which Moscow deliberately keeps its western customers short for the purpose of demonstrating power, shows that once again in all clarity.

Putin has no long-term concept for the economy

The loss of what has been its biggest export market to date could put Russia in serious trouble.

Because monopolist Gazprom does not think much of liquid gas technology and continues to rely on pipeline transport.

Only China would remain as a substitute for Europe.

For a long time, Russia has been trying to persuade its powerful neighbor to build a second new pipeline together so that the gas intended for Europe could also flow to China – then Moscow would have more leverage again.

But Beijing doesn't seem very interested in that.

And even with two pipelines, Russia could not deliver as much to China as it has been selling to its European customers.

The second trump card on which the Kremlin staff's self-confidence is based is the restructuring of the Russian economy since 2014. At that time, the punitive measures and a sharp drop in oil prices caught the country unprepared and triggered a serious crisis. In the meantime, the economy is better prepared: Russia has filled up its gold and currency reserves, while reducing the dollar's share. The national debt is low; many Russian companies are no longer financed in the West but in their own country. Russia has even become more self-sufficient in food supply – parts of the agricultural sector are thriving thanks to a ban on imports of fruit, vegetables and dairy products from Western countries.

But this trump card is actually not one. Because the protective cushion against new sanctions has an enormous price that the population pays: Because of the import bans, the Russians now have to spend more on mostly poor-quality food. Inflation is high. And because Russia is cutting corners even during the pandemic, the economy has barely grown since 2014; real disposable incomes are still well below the 2013 level. Only a few Asian investors have taken the place of the missing Western lenders; the planned “turn to the East” has so far not been a success. Putin has no concept for how the economy should grow, no idea for Russia's role in the energy transition, no prospects for the many talented IT specialists.

All of this has nothing to do with the sanctions – corruption, the encroaching state and the entrepreneurs' legitimate fear of criminal prosecution also play a role.

But the sanctions are helping to paralyze the economy.

This is fueling dissatisfaction, including with the regime: Putin's poll numbers are far removed from the national frenzy of the annexation of Crimea.

Should he now send his soldiers into a costly and costly war, while many Russians are already having to save on food, frustration in the country is likely to increase significantly.