The following editorial appears on Bloomberg View:
For the first time since Russian President Vladimir Putin began his adventure in Crimea, the West has given him something to think about: The United States has put strong sanctions on some of his closest aides, friends and business partners. Would that the same could be said of the European Union.
The EU has more power to threaten Russia’s economy and the wealth of its leaders, but Friday failed to follow the U.S. lead. EU-wide sanctions require unanimity among 28 countries. The lowest common denominator at the bloc’s summit in Brussels was inadequate to the gravity of Putin’s action: the first annexation of territory in Europe since 1945.
The additions that President Barack Obama made to the U.S. sanctions list Thursday won’t push Putin to hand back Crimea – nothing short of brute force could achieve that now. But by sanctioning Putin’s business allies and Bank Rossiya, which many Russians see as a savings bank for the president and his friends, Obama is extracting a price that Russia can’t easily shrug off. The move lends credibility, as well, to his threat that if Putin goes further, the U.S. is willing to hit Russia’s economy harder.
The new list isn’t just about threatening the wealth of Kremlin allies, such as Gennady Timchenko, the 45 percent owner of the world’s fourth largest oil trading group, Gunvor Group Ltd. The Treasury document also implicates Putin in corruption, alleging that he “has investments in Gunvor and may have access to Gunvor funds.” The warning that the U.S. can release more damaging information on Putin’s finances is clear.
EU leaders added a further 12 names to their sanctions list, but these don’t include the Kremlin’s bankers and business fronts. The summit also promised to reduce energy dependency on Russia – a good idea – but the plan it announced is too vague to make a difference.
Europe’s threat of further and more punitive sanctions still lacks credibility. This matters because Putin’s recent assurances that he has no designs on the rest of Ukraine so long as Russian speakers are left in peace should be discounted. Russian forces continue to conduct exercises on Ukraine’s eastern border; pro-Russian self-defense forces are blocking Ukraine’s military from taking up defensive positions on the other side; and activists in Donetsk and other cities have kept their tents on the central squares, waiting for what comes next.
Willing European governments should act in concert with others, without striving for unanimity. France should cancel its $1.9 billion contract to sell two helicopter ships to Russia. Allies in the North Atlantic Treaty Organization should buy them instead. Ukraine has asked for defense and communications equipment; Europe should supply it. And Europe should kill Russia’s proposed South Stream natural gas pipeline project, whose purpose was to bypass Ukraine and increase EU dependence on Russian gas.
Britain has a particular responsibility. Its financial regulators should look closely at Russian assets in London. Much of the Russian money flowing through the City is legitimate, but some of it is money laundering. Sanctions aren’t required, just zeal to enforce existing law.
The point is to make Putin understand that his seizure of Crimea has wrecked Russia’s relationship with its most important trading partners – not just to his country’s cost, but also to his own and that of his cronies. And the corollary must be made equally clear: If he goes further, so will the West.