New Russia Sanctions Expected After MH17 Crash, Say Economists

Russia Sanctions Expected

According to a survey of 29 economists conducted by Bloomberg, the United States will add to its existing sanctions on Russia in the wake of last week’s tragic shoot down of Malaysia Airlines Flight 17.

“In the U.S. and Europe, the readiness to incur short-term economic costs and impose more punitive sanctions on Russia has gone up with the crash of MH17,” Hamburg-based economist Wolf-Fabian Hungerland told Bloomberg Businessweek. “Under the global spotlight, stakes are higher now.”

Businessweek says that existing sanctions have already had an effect on the Russian economy, with “sovereign ruble bonds [falling] 3.9 percent since the beginning of July, the worst performance in emerging markets.” Additional sanctions would probably target the weapons, banking and energy industries say 79 percent of the economists polled (a 17 percent increase from June’s survey).

Russian President Vladimir Putin and state media have argued that Ukraine was to blame, but it seems unlikely that Moscow will shift course even with a stepped-up sanctions effort by the West.

Opinion polls still register an approval rating of over 80 percent for Putin, according to CBC News, and state media has been eager to ignore any possibility of Russian involvement. CBC’s Moscow correspondent, Gabrielle Tetrault-Farber, spoke to several regular citizens who sounded incredulous that the pro-Russian separatists would have had any role in the shooting down of MH17.

She quotes one man, 58-year-old Vartan Olgodan of Moscow, as saying, “The Ukrainians have the weapon that was used to shoot down the plane, the folks in Eastern Ukraine don’t. There is no way they could have done it.”

The Washington Post also reported on the various conspiracy theories being put forth by Russian media, none of which point fingers at Moscow. Deeply ingrained distrust of the West along with fierce nationalism have combined to make disbelief the default position for many Russians faced with the possibility that their government could have played a role.

“We sincerely don’t trust the U.S. We absolutely think you are vicious and cowardly and nasty,” explained Ivan Zassoursky, who chairs the new media department at Moscow State University. “But then, we also really don’t know anything,” he added.

Regardless of opinion within Russia, opinion outside is coalescing around a conviction of Putin’s complicity. As we reported earlier, many critics see the Russian president as having opened a Pandora’s box. But while Putin’s status as a strategist may be faltering, as political scientist Joshua Rovner argued at the Monkey Cage Blog earlier this week, it seems that he may still have plenty of domestic support to draw on.

The Kremlin, as usual, is also sounding an unconcerned tone. Bloomberg quoted an economic aide as saying that “sanctions in today’s formats do not have macroeconomic impact – they create problems for some companies.”

But for Alastair Winter, one of the economists surveyed, “MH17 was the ultimate game changer.” And despite the PR confidence exuded by Moscow, he adds that Putin may not yet grasp “the extent of the potential economic damage” that further sanctions could have on Russia.

[PHOTO: Scrape TV]