Although the Euros wring their hands at the costs they would bear if serious economic sanctions were imposed on Russia, as I’ve said, there is a huge asymmetry in vulnerability: Russia is substantially more vulnerable to a cutoff in trade, especially the energy trade. Take gas. Germany imports about 12b Euros of gas annually. Its GDP is about 2.5t Euros. So natural gas expenditures are about .5 percent of GDP, and even a substantial price increase would represent a relatively small burden on German expenditures. In contrast, Russian energy exports (63 percent of which are to Europe) account for 50 percent of the country’s budget. So trade restrictions would be an inconvenience for Europe, and pose an existential challenge for Russia.
Such are the wages of being a petrostate. Using the energy weapon is national economic suicide.
One quibble, related to this:
In response to Iran-style sanctions, Russia could muster one unprecedented measure. It and its allies could stop buying euros, dollars, and Western government debt. However, Western governments should be able to brush this manoeuvre aside.
If it comes to a trade and finance showdown, it won’t have the money to be buying anything. So a cutoff of purchases of dollars, euros, etc., is not something that Russia could threaten: it would be an inevitable consequence of a trade and finance war. And Russia is not such a big buyer that it would make all that much of a difference anyways.
The FTA piece also dispatches the fantasy Russians and their fellow travelers are peddling: that China will assist Russia by waging economic combat against the West. China is a huge dollar and UST long, so it would be an incredible act of economic masochism to dump dollars or Treasuries. And Russian fantasies aside, China is not that into them.
The asymmetry of power, especially economic power, couldn’t be more obvious. But that is counterbalanced by an asymmetry in will, and heretofore that has proved the decisive difference. Putin has wagered that Europe is unwilling to suffer any discomfort to counterattack against Putin’s anschluss. So far, he has been right.