Why you should care
Because Russia’s might comes from more than just its military.
A ban on French brie. The wanton wrecking of Moldovan wine. No more Lithuanian goats. It sounds like the plot of a Monty Python skit, but it’s actually Russia ramping up its aggression — and there’s nothing funny about it.
While Russia has flexed its military muscle, the country’s real power comes from wielding its economy, specifically through economic sanctions like withholding gas and banning Western foods. In one bust alone last year, 470 tons of Parisian cheese were seized. Sure, these measures may seem petty, but they can cripple countries, especially those still emerging from post-Soviet-era influence. Even as Russia’s own $1.8 trillion economy trips over itself, and its status as a global power slips despite President Vladimir Putin’s bullying, the empire has remained relevant by holding cash — the ultimate bargaining chip — over its enemies, including Ukraine and European Union states. “Russia has an important but narrow area in which it can exert economic pressure,” says OZY columnist John McLaughlin, a former director of the CIA. “Important, because the resources it controls are necessary for many of its neighbors.”
Russia’s major economic lever is its energy reserves. After the Soviet Union dissolved in 1991, Russia and Turkey ended centuries of bickering and started ranking among each other’s largest trade partners. Russia provided natural gas and oil, while Turkish businesses cropped up in the motherland. But when Turks shot down a Russian jetliner in November, the warm fuzzies were over: Putin told Russian tourists to cancel vacation plans in Turkey, banned all food products and paused a major pipeline project that would have pumped energy directly to Turkey — which relies on Russia for 55 percent of its natural gas and 30 percent of its oil — through the Black Sea. Now, Turkey could lose as much as $3 billion in tourism dollars from the bans. (A Russian Embassy representative didn’t respond to our request for comment.)
But all of this maneuvering may come at a cost for Russia.
Some of the highest stakes are between Russia and its neighbor, Ukraine. The Eastern European country endured a cold and bitter winter, and Russia could pull the plug on its electricity at any point. After a last-ditch effort from Kiev last fall, Moscow agreed to a plan to keep the heat on. But as recently as November, the Kremlin’s energy minister threatened to turn the lights off again, if Ukraine didn’t “pay back its debts” immediately. And after half of the Ivano-Frankivsk region in western Ukraine lost power for six hours over the holidays, the Ukrainian energy minister accused Russia of cyberattacks on key power distribution companies. (Later, the Ukrainian government changed the official diagnosis to “malware.”)
Russia has done this before. When Moldova, a tiny former satellite state bordering Romania, began to lean more Western a decade ago, Putin slapped bans on all exports of Moldovan wines and brandies, citing “alleged pesticide pollution.” The ban crushed Moldova’s wine industry, which for a time was among the top 20 exporters in the world. Almost half a million Moldovans work in the industry, and its primary exports were to Russia. Now, winemakers create concoctions specifically made to meet Russia’s elevated standards — though they’re only allowed to be sold if they exclude the words “Made in Moldova.”
But all of this maneuvering may come at a cost for Russia. Outside groups have added pressure as of late; after Russia annexed Crimea two years ago, the EU unveiled a series of economic sanctions against Russia. More than half of the country’s budget relies on petroleum exports, and officials have said that the country requires oil prices to be at more than $100 a barrel to keep even, though it’s closer to a third of that price now — leaving a severe bruise on the country’s economy. “Russia’s strength is a wasting asset,” McLaughlin says.
Russia’s economic posturing on other nations has also had another negative side effect: soaring prices at home. Some have accused the Kremlin of shooting its own people in the foot, and its aggressive sanctions look even sillier when Russian police brag about busting a “major smuggling ring” of cheese. Putin is trying to strengthen ties with China and establish a foothold in Greece. But eventually, experts say, he will have to play ball with the Western heavyweights to rescue his economy. Which means adopting a softer tone – perhaps the reason why Putin said, in March, that Russia would start pulling out of Syria? – and maybe, just maybe, letting go of the economic stranglehold he has placed on neighboring states.
Then again, why should Putin change tack? He has been politically insulated from pressure at home: Despite the bad economy, he enjoyed a record 89 percent approval rating last year, according to Levada Center polls. And while the EU sanctions have hurt member nations — for instance, Italy’s farming, fashion and automobile industries, which have historically held Russian ties — they’ve done little to affect Putin’s political will abroad. “The sanctions have not, in any way, changed Russia’s policies,” says Michael Kofman, a foreign policy expert at the Woodrow Wilson Center. “As far as the elites in Russia are concerned, ‘This place could be on fire and everyone would support us.’ ”