Over the past few days, as Russia has proved unwilling to live up to the terms of the April 17 Geneva agreement on Ukraine, Western nations have ramped up their condemnation of the country. U.S. Secretary of State John Kerry accused Moscow of “distraction, deception, and destabilization” for backing ethnic Russian separatists in eastern Ukraine. Meanwhile, the G-7 (formerly the G-8, before Russia was ousted earlier this year) rebuked the country for taking “no concrete actions in support of the Geneva accord” and threatened to impose additional sanctions, which, according to British Foreign Secretary William Hague, would be “more far reaching” than any before.
In the event, those far-reaching sanctions fell short. To be sure, a few powerful and well-connected individuals have recently been added to the West’s economic blacklist, but there is little chance that this latest round will do much damage. The West has the weapons for meaningful financial warfare, so why is it being so shy about using them?
As has been widely reported, the Russian economy is in dire straits. In 2013, Russian GDP growth slowed for a fourth consecutive year to a mere 1.3 percent. Now, as capital flees the country -- in the first part of the year, withdrawals have been as high as $60 billion, equal to the total in 2013 -- the economy is likely flatlining. S&P has downgraded Russia’s sovereign foreign currency rating to just one notch above junk, Russia has cancelled government bond sales, its Central Bank has imposed two unexpected rate hikes to stabilize the ruble, and international banks are increasingly declining to provide loans to Russian state banks and businesses.
Nevertheless, Russian President Vladimir Putin remains defiant, with his public approval ratings still high and his unwillingness to talk down the actions of pro-Russians inside Ukraine steadfast. To change that, sanctions would have to impose a meaningful cost. The fact that the West hasn’t opted to exact a real price for Putin’s behavior reveals that, perhaps, interests other