Will Economic Sanctions Impact Russia?
RENEE MONTAGNE, HOST:
The U.S. has reacted by putting sanctions on certain Russian and Ukrainian officials. Russia says it's planning to counter with its own set of sanctions, tit-for-tat.
As NPR's Zoe Chace reports for our Planet Money Team, there's an art of sorts to economic sanctions. What we're seeing now is just the opening moves.
ZOE CHACE, BYLINE: Sanctions, they're like the game of chess. The first few moves are pretty standard and the game is won or lost down the line. So, let's look at the Obama open, it's a classic. Step one: punish the people who actually did the thing you're mad about. On Monday, the U.S. put 11 people on a list who can't do business with the United States. For instance, Sergei Aksyonov, alias, Goblin, former boxer and reported wrestling enthusiast, also the new prime minister of Crimea.
SERGEI AKSYONOV: (Foreign language spoken)
(SOUNDBITE OF CHEERING)
CHACE: We are going back home to Russia my comrades, he says.
Now, Aksyonov gets up the next morning. Can he use a Crimean ATM?
TREVOR HOUSER: If he was to go to a Crimean ATM that had a Visa logo on it and try to access cash that was held in a American bank, it would say access denied.
CHACE: This is Trevor Houser, energy analyst. Aksyonov is also a business man, auto parts, according to one report. But this opening round of sanctions isn't about that, it's about his personal accounts.
HOUSER: I think by the letter of the law, you probably could still buy Sergei's auto parts.
CHACE: This may seem small, just 11 people. The thing about sanctions is, there is always another move, an escalation. You have to first do what Obama did this week in order to get to step two.
HOUSER: Yeah, this is what puts people on notice. The second step is to expand the list, and to expand it either to include more individuals or to include companies.
CHACE: This could come soon. It's harder to hide a business than it is a secret bank account and a business can also be complicit here, say a Russian company that's making military equipment used in Crimea. And this is where the special role that the United States plays in the financial system comes in. The majority of international trade is conducted in dollars.
Isolating Russian business from anyone who wants to do business in dollars, that is powerful.
HOUSER: So let's say I'm a Russian nickel manufacturer and I'm exporting some nickel to a consumer in Latin America. It's entirely possible that I'm going to do that trade in dollars and I'm going to settle that trade through a U.S. bank, right? Now, even though there's not an American consumer on the other end of that deal, the bank facilitating that trade is not going to be willing to do it if one of the entities involved is on the sanctions list.
CHACE: Because they're not supposed to handle any dollars.
CHACE: You can see this becoming a pretty big deal. It depends on if the U.S. sanctions only a handful of Russian companies or an entire sector of the economy. The last option in the sanctions game is no more trade. No American investment in Russia. No more buying Russian things. This would be a big deal for major companies like Exxon, which has expansion plans in Russia. Also for this guy.
JEFF GRANNUM: This is our wild king crab, a product of Russia, that we have on display here in our booth at the Boston Seafood Show.
CHACE: This is Jeff Grannum(ph) introducing us to one of the most popular Russian items in America, the Russian crab leg.
(SOUNDBITE OF POUNDING)
CHACE: That's the sound of frozen Russian crab claws clapping. The U.S. buys a lot of Russian king crab. About 90 percent of the seafood here is imported and without the Russia supply, prices for crab legs would jump.
GRANNUM: The Russians satisfy a great deal of the demand.
CHACE: We are a long way from this last step. It's not just the crab business, of course. Not buying Russian things could cripple Europe. Europe gets a sizable percentage of its energy supply from Russia. Before this end game, there would be lots of warnings, the way it was when the world put sanctions on Iran because of its nuclear program.
HOUSER: Countries were given time, years to wind down their purchases of Iranian oil to avoid a global price spike.
CHACE: The idea with financial sanctions, of course, is you hope not to get to the last step. That last one, cutting off trade, it might be the most effective, but it also hurts the most people. Zoe Chace, NPR News.
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