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What Sanctions ?

Robert Waldmann | February 24, 2022 12:38 am

Politics

US/Global Economics

Russia has just attacked Ukraine. US policymakers seem to agree that we should impose severe economic sanctions (but definitely have no US boots on Ukrainian ground). What can the US do without firing a shot ? I think the US can impose extreme costs on Russia (hurting Russians other than Putin who are not to blame and will be innocent victims — tough luck). In general sanctions have not achieved– well much except the defunct Iranian JCPOA. However, Russia has a lot to lose, because (in spite of a default) it’s debt and currency are taken seriously.

The US Treasury can issue unlimited amounts of Ruble denominated bonds. This isn’t even counterfeiting — they would say “payable by the US Treasury”. I think this could make the ruble roughly worthless. This doesn’t work both ways. Russia can issue dollar denominated bonds which will sell at a discount and not drive down the value of the dollar.

The key is that the US Treasury is extremely credit worthy (in spite of GOP insanity). I’m pretty sure t-bills denominated in Rubles would not sell at a discount. They wouldn’t be worth much as there is no way of knowing how much the US would issue later. However, I think this means that Russian Federation ruble deonominated bonds and banknotes would not be worth much either.

Russians follow the ruble/dollar exchange rate obsessively. I think that the USA can impose extreme costs on Russia at will (and at no cost to us).

Why not ?

8 Comments

Fred C. Dobbs says:

February 24, 2022 at 9:09 am

Here’s how the Russian attack began

NY Times – Feb 24

Early Thursday, just as President Vladimir V. Putin of Russia announced on television that he had decided “to carry out a special military operation” in Ukraine, explosions were reported across the country.

Blasts were heard in Kyiv, the capital; in Kharkiv, the second largest city; and in Kramatorsk in the region of Donetsk, one of two eastern Ukrainian territories claimed by Russia-backed separatists since 2014.

Ukraine’s Interior Ministry said that Russian troops had landed in the southern port city of Odessa and were crossing from Russia into Kharkiv. Footage captured by security cameras showed Russian military vehicles crossing into Ukraine from Crimea, the peninsula that Russia seized in 2014.

Rocket attacks targeted Ukrainian fighter jets parked at an airport outside Kyiv, and Ukraine closed its airspace to commercial flights, citing the “potential hazard to civilian aviation.”

More than 40 Ukrainian soldiers were killed and dozens were wounded in the fighting on Thursday morning, said Oleksiy Arestovich, an adviser to President Volodymyr Zelensky of Ukraine. …
- Fred C. Dobbs says:
  
  February 24, 2022 at 9:11 am
  
  As air raid sirens blared in Kyiv, the western city of Lviv and other urban areas, residents rushed to take shelter in bus and subway stations. In Kyiv, people packed up their cars and waited in long lines to fill up with gas on their way out of the city. In eastern Ukraine, early signs of panic appeared on the streets as lines formed at A.T.M.s and gas stations.
  
  With attacks across the country, it quickly became clear that Russia’s campaign, whatever Mr. Putin meant by a “special military operation,” was aimed at far more than the rebel territories in the east. Within an hour, Ukraine’s state emergency service said that attacks had been launched in 10 regions of Ukraine, primarily in the east and south, and that reports of new shelling were “coming in constantly.”
  
  Dmytro Kuleba, Ukraine’s foreign minister, called it “a full-scale invasion of Ukraine” and said his country would defend itself, while calling on the world to “stop Putin.”
  
  Russia’s Defense Ministry said that it was using “high-precision weapons” to disable military infrastructure, air defense facilities, military airfields and Ukrainian army planes, Russia’s state-run RIA Novosti news agency reported. But the ministry said it was not attacking cities, and promised that “the civilian population is not at risk.” …
Fred C. Dobbs says:

February 24, 2022 at 9:19 am

GOP’s response to Biden and Ukraine is a mess for one reason: Trump

Boston Globe – Feb 23

When it comes to the situation in Ukraine, President Biden is working with European allies to figure out how to best position themselves against Russian President Vladimir Putin. Meanwhile, Republicans trying to put together a response to this are all over the place, split between former president Donald Trump’s foreign policy and the one the GOP espoused in the year before his election as president.

Indeed, Fox News has been a particularly interesting place for often contradictory takes about what Biden is doing wrong with Ukraine.

One minute, Arkansas Senator Tom Cotton is on explaining that Biden really should have imposed all sanctions by now, or at least spelled them out, in order to deter Putin from invading. The next, a general comes on to say that if sanctions were imposed in advance of Putin taking over Ukraine, then Putin might as well do it.

Then there is the prime time contrast, with host Tucker Carlson recently telling his audience that anything that happens in Ukraine is not of concern to Americans: “It may be worth asking yourself, why do I hate Putin?” Carlson is followed by Sean Hannity who argues that Putin’s aggression is driven by American weakness, and repeats with nearly every guest that America needs to be more energy independent in order to outmaneuver Putin and help Europe.

But the real action is in Republican primaries around the country. In the Ohio Senate Republican primary, the split is especially apparent. One candidate, Jane Timken, offers a more traditional Republican response about the need for America to stand up for a sovereign nation against Putin, while her opponent, J.D. Vance, said on Twitter that he doesn’t care what happens in Ukraine.

The lack of Republican cohesion to the biggest foreign policy crisis in awhile is because of Donald Trump. His style of “America First” foreign policy was isolationist and ran in direct contrast to the Ronald Reagan model of a strong interventionist that was in vogue all the way through Mitt Romney’s 2012 presidential campaign, when he argued for firmly addressing the threat from Putin’s Russia.

But beyond theory there are, obviously, some particulars about Ukraine that really make this situation troublesome for Republicans because of Trump. …

To those who defended Trump and said this was just normal politics and the threat wasn’t real, well, look where we are at now.

Then there was Trump, just this week on a conservative radio show, actually praising Putin for the “savvy” moves he was making before what appears to be a bold attempt to remake the map in Europe in a way that threatens American allies.

Indeed, Republicans are now trying to figure out how to walk the line of being supportive of American allies while not disagreeing with Trump, the leader of their party and odds-on favorite to be the 2024 Republican presidential nominee.

As the situation continues to escalate overseas, it’s unlikely this rift will go away for Republicans. It could easily be one of the top three issues discussed in the midterm elections and be as definitive in Republican primaries as Medicare for All and the Green New Deal have been in Democratic primaries for the last four years. …
- Ron (RC) Weakley (A.K.A., Darryl For A While At EV) says:
  
  February 25, 2022 at 9:19 am
  
  Fred,
  
  Thanks. One can only hope. With some dumb luck then Putin may accomplish what the Democratic Party had been unable to do for over fifty years despite their best efforts. Then Reagan healed the Goldwater/Rockefeller wound until Trump began picking at its scab, but it may take Putin to rip off the bandage and let it bleed.
Fred C. Dobbs says:

February 24, 2022 at 9:28 am

As the E.U. weighs new sanctions on Russia, it’s considering omitting Putin for now.

NY Times – Feb 24

European Union ambassadors in Brussels moved closer to consensus on a significant package of sanctions targeting broad sectors of the Russian economy and individuals on Thursday, but were debating whether to keep President Vladimir V. Putin off their list for now, diplomats who participated in or were briefed on the talks said.

The ambassadors met on Thursday morning, just hours after the Russian invasion of Ukraine, and were scheduled to meet again in the afternoon to prepare for negotiations that E.U. leaders will hold in Brussels on Thursday evening about an overall response to the invasion. …
Fred C. Dobbs says:

February 24, 2022 at 10:09 am

Putin, warning against interference

NY Times – Feb 24

President Vladimir V. Putin has ordered Russian troops into Ukraine but made clear his target goes beyond his neighbor to America’s “empire of lies,” and he threatened “consequences you have never faced in your history” for “anyone who tries to interfere with us.”

In a rambling speech early Thursday, full of festering historical grievances and accusations of a relentless Western plot against his country, Mr. Putin reminded the world that Russia “remains one of the most powerful nuclear states” with “a certain advantage in several cutting edge weapons.”

In effect, Mr. Putin’s speech, intended to justify the invasion, seemed to come close to threatening nuclear war.

In the context of Russia’s nuclear arsenal, Mr. Putin said, “there should be no doubt that any potential aggressor will face defeat and ominous consequences should it directly attack our country.”

President Biden, who said Mr. Putin “had chosen a premeditated war that will bring a catastrophic loss of life and human suffering,” has made clear that no American troops will be sent to Ukraine. Its European allies have taken the same position.

“We have made it clear that we don’t have any plans and intention of deploying NATO troops to Ukraine,” Jens Stoltenberg, the alliance’s secretary-general, said on Thursday.

Still, history has demonstrated that European wars involving a major global power can spiral out of control. …
EMichael says:

February 24, 2022 at 10:32 am

C’mon, Fred. You’re cluttering up the topic with non-topic posts (except for one).
- Fred C. Dobbs says:
  
  February 24, 2022 at 10:43 am
  
  OK, no more cluttery ‘nuclear war threat’ posts!