The West’s Financial Arsenal

After Russia’s annexation of Crimea, pro-Russian militants continue efforts to occupy public buildings in Eastern Ukraine and destabilize an interim government. “Putin is attempting to boost Russia’s appeal by doubling Crimeans’ pensions, boosting the salaries of the region’s 200,000 civil servants, and constructing large, Sochi-style infrastructure,” explains history professor Harold James for Project Syndicate. Such funding is not sustainable and could ignite Russian resentment. The West has developed financial weapons including asset freezes and blocks to international finance. “When the Ukrainian revolution began, the Russian banking system was already over-extended and vulnerable,” James notes. “In a crony capitalist system, threatening the governing elite’s wealth rapidly erodes loyalty to the regime.” Yet James points out that many banks in Europe are heavily staked in Russian deposits and loans. In an interconnected world, financial pain can spread and even backfire and thus increase the likelihood of war. – YaleGlobal