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In the Battle for Crimea Wins... China?

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Co-authored by William Witenberg a contemporary artist focused on abstract painting

After the referendum in Crimea on Sunday, which the United States and European Union view as illegal, the United States and the European Union are announcing travel bans, asset freezes, and other sanctions on Monday against Russian government officials and Russian businesses.

German newspapers are reporting that the travel ban will include Russian Defense Minister Sergei Shoigu and other top Putin advisors. The arrest in Austria of Ukrainian Oligarch Dmitri Firtash, a supporter of the ousted Ukrainian President, based on an American arrest warrant is raising concerns among other oligarchs that America will use its criminal legal system to pressure powerful Putin supporters.

The asserted goal of sanctions, asset freezes and travel bans is to make Russia reverse its actions in Crimea. President Obama has talked about the importance of not allowing the integrity of Ukraine from being violated by Russia. Significantly illegal or not the referendum appears to be an accurate reflection of the wishes of the Crimean area of Ukraine.

The cost of sanctions to Europe may be greater than any benefit in sending a message. In 2012 alone Russia exported in excess of $160 billion of fossil fuel to the countries that are now threatening sanctions. While America received a very small percentage of the Russian export, many European countries will be hard hit if the European Union bans import of Russian oil.

One of the unintended consequences of sanctions will be the acceleration of warming of the relations between China and Russia. Despite China's long held policy that no country should interfere in another's internal affairs, it unexpectedly abstained from the United Nations draft condemning Crimea referendum. China can be expected to use any European or American sanctions against Russia as a way of increasing its economic ties with Russia.

In late 2013 Russia signed a $85 billion deal to supply China with oil and it would appear likely that any American assistance in lessening Ukraine's dependence on Russian fossil fuels would accelerate oil trade between Russia and the East. America and Europe have been long been viewed as a safe haven for money from Eastern Europe. The realization that Europe and America are not safe for Russian oligarch certainly would result in a shift to investing in Asia.

Russia is not Iran. Any aggressive sanctions that result in the freezing of Russian assets or confiscation of Russian citizens property will likely result in retaliatory actions by Russia. Major American companies such as Exxon Mobil and General Motors have large investments in Russia that could suffer the same consequences as Russian assets in Europe and America.

The question that has to be asked is whether the costs of removing a major source of oil for Europe, and freezing or seizure of the assets of many businesses in America, Europe and subsequently in Russia is worth the benefit of sending a message to Putin. A message that so far, despite threatened sanctions, has been ignored; the referendum took place and it is likely that Russia will respond to the results of referendum by accepting the area into The Russian Federation. So the message should really be not about Crimea, which in effect is a foregone conclusion, but rather about the rest of Ukraine. The likely resolution to this crisis, is for Russia to reiterate it has no interest in the rest of Ukraine and then proceed with the annexation of Crimea.