Clarissa's Blog

John Kerry made some pretty harsh statements about Russia’s invasion of the Crimea:

U.S. Secretary of State John Kerry on Sunday condemned Russia’s “incredible act of aggression” in Ukraine and threatened economic sanctions by the United States and allies to isolate Moscow, but called for a peaceful resolution to the crisis.

“You just don’t in the 21st century behave in 19th century fashion by invading another country on completely trumped up pre-text,” Kerry told the CBS program “Face the Nation.”

Of course, the most powerful Russian news agency ITAR-TASS translated the statement in a way that makes it sound that the Obama administration understands and respects the Russia’s need to invade. (You can find the Russian information here.)

This means that Putin is choosing not to listen to anything the US might have to say on the subject of its imperialist aggression.

However, there is a glimmer of hope. A new player has appeared on the arena, and that player just might manage to convince Putin to rethink his goals in Ukraine.

This player is the market.

On Monday morning, the Moscow stock exchange plunged about 11%. The rouble plummeted to historical lows. The shares of the oil and gas corporation that owns the state (Gasprom) as well as the state bank Sberbank and the VTB bank lost between 15% and 18% of their value.

Russian economy is completely dependent on its natural resources. In the years that passed since 1991, no efforts were made to weaken this notoriously unhealthy economic model where a country doesn’t produce anything and simply lives off the proceeds from selling its (finite) natural resource:

While Russia’s biggest export is the supply of oil and gas, it imports the vast majority of its goods and experts said the combination of higher interest rates and a weak ruble would push up inflation – making life tougher for Russian consumers.

Daniel McCormack, strategist with Macquarie, said of the reaction by investors: “Clearly the market is in a risk-off mode on the back of the geopolitical developments, the most concerning for Europe since the end of the cold war.

Now Russia has finally met a force willing to castigate its corrupt owners for destabilizing the situation in Europe. Putin and his cronies are so infected with the Soviet mentality that it never occurs to them to think about the economic consequences of their actions. But if the international law means nothing to them, maybe the logic of the market will persuade them to reconsider their imperialist activities.

This is the first glimmer of hope I’ve had about the situation in Ukraine for weeks. Now if the US just nudges the market a little bit by placing a few economic sanctions on Russia, Ukraine might have a hope of not losing any more of its territory than the Crimea.