We are now in completely uncharted waters

zerohedge.com
March 17, 2014

It now appears that Putin's personal retaliation has been leaked in advance. Photo: Economic Forum
It now appears that Putin’s personal retaliation has been leaked in advance. Photo: Economic Forum

Ever since the theatrical announcement of asset freezes and other related sanctions of various Putin aides, Russian military and pro-Russia Ukrainian leaders earlier today by both the US president and the EU, the nagging question was when and how would Vladimir Vladimirovich retaliate, with tomorrow’s Putin address to the joint session of Parliament seeming as a probable time and place. It now appears that Putin’s personal retaliation has been leaked in advance, and according to the Daily Beast’s Josh Rogin, it will involve an in kind response where various US senators and highly placed officials will be banned from visiting Russia, and likely also see their particular assets — if any — in Russian custody promptly frozen.

From the Beast:

U.S. senators, congressmen and top Obama administration officials are sure to be on Vladimir Putin’s sanctions list; a response to the Obama Administration’s announcement on Monday that 7 Russian officials and 4 Ukrainian officials would be barred from holding assets or traveling to the United States.

Putin is expected to release his retaliation list as early as Tuesday and while the final list is still being crafted, it will include top Obama administration officials and high profile U.S. senators, in an effort to roughly mirror the U.S. sanctions against Russian officials and lawmakers, according to diplomatic sources. At the top of the list in Congress is Senate Majority Whip Dick Durbin, who recently co-authored a resolution criticizing Russia’s invasion of Crimea.

Durbin’s inclusion on Putin’s list would mirror Obama’s naming of Valentina Matvienko, the head of the upper chamber of the Russian Duma. Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell are not expected to be on the Russian sanctions list.

Another person who will most certainly appears on the list is perpetual war hawk, and the person who responded to Putin’s own Syrian near-war Op-Ed, John McCain.

“You think I’m not going to be on it?” McCain said. “I would be honored to be on that list.” McCain said he would not be impacted financially by being subject to a visa ban and asset freeze in the Russian Federation. “I guess I’m going to have to try to withdraw my money from my secret account in St. Petersburg,” he joked.

His sentiment mirrors that of Putin aide Surkov who earlier claimed to “being proud to be on U.S. black list” according to Interfax. Paradoxically, it is rapidly becoming a badge of honor to be named on the opposing nation’s sanctions list, which instead of hurting those politicians – and as McCain said he hardly has a St. Petersburg account — it will raise their status in the eyes of the general public.

Of course, if and when the sanctions expand to include various oligarchs and/or mega corporations on either side of the border, the fallout would be far more dramatic should Russian billionaire owners of New York City penthouses or Los Angeles mansions be forced to liquidate their holdings, or if E&P companies in Russia suddenly find their assets partially nationalized. It certainly wouldn’t be the first time.

Who else.

Other names that could be on the Russian sanctions list, although not confirmed, include Sens. Robert Menendez (D-NJ) and Bob Corker (R-TN), the leaders of the Senate Foreign Relations Committee who are leading the sanctions drive in the Senate, and Victoria Nuland, the Assistant Secretary of State for Europe, who has been heavily involved in working with the Ukrainian opposition that ousted the Yanokovich government.

Where it gets far more surreal is that the Beast reports that “one U.S. official who can rest easy is White House Press Secretary Jay Carney, who will not be on Putin’s sanctions list. It’s been an ongoing rumor in administration circles that Carney is quietly lobbying to replace former Ambassador Mike McFaul as the next U.S. Ambassador to Moscow, who will also not be on the list.” Well if the US really wants to accelerate WWIII, it would indeed be best served by sending Carney to Bolshoy Deviatinsky Pereulok No. 8.

To be sure, the initial round of escalations achieves nothing besides merely antagonizing the two sides further. In this case the Beast is correct when it says that “the tit for tat sanctions are not likely to convince either side to back down from their position over the Russian invasion of Crimea, McCain said.“If we acquiesced to that, that would be a green light for him to go for Moldova, where there are also Russian troops,” said McCain. “That’s the problem with this appeasement policy.”

So what could next steps look like?

McCain is advocating for a series of more serious steps, which include the immediate arming of the Ukrainian military, which the administration has rejected for now, promising to help the Ukrainian military develop over the long term, rethinking U.S. approaches to Putin, and restarting U.S. missile defense projects in Eastern Europe.

There are signs that Putin is preparing a scenario ahead of a possible invasion of Eastern Ukraine, including sending Russian intelligence agents inside Ukraine to stir up unrest as a pretext for a possible expansion of the invasion.

“I’m not sure about Eastern Ukraine, but Putin has put everything in place for a de facto partition of Eastern Ukraine,” he said. “Will he do it? I don’t know. But I don’t think he can be discouraged from that by these limited actions by the United States… We must commit to the ultimate return of Crimea to Ukraine, just as we promised to the so called captive that they would eventually be free of Soviet domination.”

Short of the nuclear option, literally, which would be to plant more anti-ballistic missiles in NATO countries bordering the former USSR states, there is one almost as serious alternative:

“Our actions today demonstrate our firm commitment to holding those responsible accountable for undermining the sovereignty and territorial integrity of Ukraine,” Treasury Secretary Jack Lew said in a statement. “We are thoroughly prepared to take increasing and responsive steps that would impose further political and economic costs.  At the same time, we want to be clear that a path of de-escalation remains available to the Russians, should they choose to use it.”

And just as likely is Russia willing to take steps which would result in the complete liquidation of its $130 or so billion in US Treasurys and announcing it would transact in all currencies but the dollar going forward. Up to and including gold of course.

One thing is certain: while the Crimea referendum’s outcome was priced in well in advance, we are now in completely uncharted waters, and the only question is which side will push the other just that extra inch too far, forcing disproportionate retaliation. Because if one thing has been made clear by now, it is that a crash in foreigner-owned Russian stocks, and not to mention the S&P, will hurt Obama far more than his Russian opponent.


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