Economic Sanctions

Since the Russians have entered Crimea to “liberate” its citizens from Ukrainian rule, Western leaders in the United States and in Europe have decried the injustice of Russian aggression. President Obama, in Europe for the now “G7” meetings has threatened widening “economic sanctions” against Russia, while at the same time complimenting the Europeans on their cooperation.

Just what are economic sanctions and how do they help? Who is cooperating and who is not? Who will be the most damaged by economic sanctions targeted toward the Soviet Union?

Basically economic sanctions occur when a government like the United States prohibits American businessmen from trading with Russia in certain goods and services. Theoretically the Russians will need our commerce and an absence of this business with US firms will cause great harm to the Russian economy, causing the Russians to change their ways.

For economic sanctions to work, virtually every country that trades with Russia would have to deprive them of business. This is precisely why sanctions never work. As American firms are forced by our government to quit doing business with the Russians, business firms from other countries are more than happy to fill the business void, leaving the Russians as well off as ever. Meanwhile, American firms watch their sales and profits plummet and must lay off their workers.

Ironically Europeans are the prime beneficiaries of US sanctions against Russia. Germans in particular do a lot of business in Russia and they aren’t going to give up a scrap of it to punish Vladimir Putin. In fact, Europeans seldom cooperate in sanction schemes against any country. For example, Europeans do a ton of business in Iran, even to the point of assisting in their nuclear capabilities. Business is business. Money is Money. When the US declares economic sanctions, executives in Berlin boardrooms have every reason to celebrate.

While Europeans and other countries feed off of the lost business of American companies, regimes that benefit from their commerce may stir up violence, even in Europe. If it gets bad enough for a War to break out the Europeans call on the United States to bring its military might to settle the problem. This pattern started 100 years ago when we sent our doughboys to World War I. So we pay on both ends. The sanctions starve our businesses and then we end up spending our treasure to bail out the very Europeans who have prospered at our expense.

It’s hard to blame the Europeans; they’re just taking advantage of the opportunities that we have provided them. Opportunistic beats stupid every time.

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