Kyiv, 28 March, 2014 – Adrian Karatnycky, Senior Fellow at Atlantic Council, noted that Western sanctions against Russia have not been very impressive so far, but there is an array of robust mechanisms available to both Ukraine and the West.
According to the expert, the Ukrainian government has a basket of tools to use:
The first is war debt, which under the international practice can be subject to denunciation. Currently Ukraine and the Ukrainian companies have $30-40 bn in debt not only to Russian Federation, but also in corporate debts. Under war conditions this debt could be blocked, and this will not affect the image of Ukraine in EU and the USA.
The second is inventory of seized properties in Crimea: materials value, military equipment that has been captured by the Russian forces, cash value of 2,7 m hectares, assets of Chornomornaftogaz [Naftogaz’s Black Sea production, captured by Russia during the occupation of Crimea], future oil and gas holdings in the territory of Crimea’s shelf.
In Karatnycky’s opinion, USA have strong tools available to shut Russia off the credit market, as well as unilaterally shut down Russian banking system’s assets to the international market. He also mentioned the possibility of freezing the companies’ assets, which are passed through Russian banks.
Karatnycky stated that in the general view of the international financial community further Russian aggression will have a dramatic effect on Russian shares and currency. “Russia should take into consideration the deep consequences of further cascade of measures for the Russian economy,” he added. The expert noted that these effects have recently been broadly discussed and investigated by international experts, and privately – by Russian financial and expert community.
He also reminded that Russia can’t underestimate the importance of Ukraine for its transit needs, saying that 80% of Russian transit goes through Ukrainian railway and freight system. “It is clear that Russia can’t afford to have its transport links with Ukraine disrupted, because huge amount of trade goes over it,” said Karatnycky.
Adrian Karatnycky is a senior fellow with the Atlantic Council’s Program on Transatlantic Relations and managing partner of Myrmidon Group LLC, a New York-based consultancy that works with investors and corporations seeking entry into the complex emerging markets of Ukraine and Eastern Europe. He is also a founder and co-director of the Ukrainian-Jewish Encounter, a frequent contributor to Foreign Affairs, Newsweek, the Washington Post, the Wall Street Journal, the Financial Times, the International Herald Tribune, and many other periodicals. From 1993 to 2004, he was president and executive director of Freedom House.