Monitoring Risks by Dr. Ziva Rozen-Bakher

Analysing in-Depth Security & Political Risks and Economic & Strategic Risks

Monitoring Risks https://www.rozen-bakher.com/monitoring-risks-1

**Dr. Ziva Rozen-Bakher**

**A Researcher in International Relations and International Business with a Focus on Security and Political Risks & Economic and Strategic Risks** **Related to Foreign Direct Investment (FDI), International Trade and Mergers and Acquisitions (M&As)**

CV

Sanctions against Russia: USA Coalition vs. Russian Coalition, 14 March 2022

Sanctions against Russia: USA Coalition versus Russian Coalition

Since the start of the Ukraine War, countries worldwide split into two groups namely, the USA Coalition that includes countries who joined the sanctions against Russia and Russian Coalition that includes countries who not joined the sanctions against Russia, yet the reasons to join or not to join a specific coalition differ between countries. Nevertheless, there are countries like Turkey that sit on the fence between the USA Coalition and Russian Coalition, yet at the end of the day, what’s count to which coalition the country had decided to join, namely if the country decided or not to join the sanctions against Russia, despite the pressure from the other side.

Grounds for Joining a Certain Coalition

The decision of each country to join or not to join the sanctions against Russia is influenced by various factors, as follows:

Alliances - USA and Russia have different alliances that de-facto create the stronghold of each coalition, so one of the most important factors to join a certain coalition is the alliances that each country belongs to. Nevertheless, some countries like Turkey belongs to USA alliances, as well as to Russian alliances, which leads Turkey to sit on the fence in terms of not imposing sanctions against Russia, despite that Turkey is a member of NATO, still, the NATO membership leads Turkey to corporate at minor level with NATO against Russia. Importantly, Russia is more engaged in multilateral alliances, while the USA is more engaged in bilateral alliances. Multilateral alliances have more power to create global political power compared to bilateral alliances (See my paper on this topic: Rozen-Bakher, Z. The Chess Game of Forming International Trade Agreements: Shaping Global Economic and Political Power. Research Paper, PD10. https://www.rozen-bakher.com/research-papers/pd10
Favour one Superpower over the Second one. Many countries oppose the Russian invasion of Ukraine, still, when they need to choose a side between Russia and USA, then many countries decided to not impose sanctions against Russia. It could be because they are dependent on Russia in some way (see below) or because they less prefer the USA over Russia, such as some Arab countries. In opposite, other countries joined the sanctions against Russia because they more favour the USA over Russia, such as the case of Taiwan that imposed 'symbolic’ sanctions against Russia, despite that the country has no trade with Russia.
Dependency. The level of dependency in one of the superpowers impact significantly the decision of a country to join or not to join the sanctions against Russia, yet there are four main types of dependency that influence the decision, as follows:
- Economic Dependency - The level of trade (export/import) and FDI with each superpower impacts, in general, the decision of each country if to join or not the sanctions against Russia, such as the examples below of Turkey, Vietnam and India that are included in the 20 top of exporters to Russia.

Energy Dependency. Russia is considered as one of the most important energy providers worldwide, particularly to European countries. Hungary, for example, is ranked as 1th in natural gas dependency in Russia among the European countries, so likely it explains the refusal of Hungary to let lethal weapons pass via its territory to Ukraine, despite that the country is a NATO-EU member. Nevertheless, the EU bloc decided to join the sanctions against Russia, despite that many EU countries have energy dependency in Russia, yet it could severely backfire these EU countries if Russia will impose counter-sanctions regarding its energy to EU countries, still, Russia may exempt Hungary from these sanctions because of the decision of Hungary to block transferring of lethal weapons to Ukraine via its territory. Russian gas edging toward extinction in Europe | Business | Economy and finance news from a German perspective | DW | 11.03.2022
Defence Dependency. Some countries join the USA Coalition or Russia Coalition because of the significant defence dependency on one of the superpowers, such as South Korea and Japan that imposed sanctions against Russia, despite they have significant trade with Russia, while they are not members of NATO and their geographic location is far from the Ukraine conflict, so the only reason to join the sanctions against Russia is the significant defence dependency in the USA because of North Korea.

Strategic Dependency. The decision to impose or not sanctions against Russia is also influenced by strategic dependency on one of the superpowers. Israel is a good example of Strategic Dependency in Russia, despite that Israel is considered a loyal ally of the USA. Israel has a strategic dependency on Russia because of three main reasons: i) Russia is an important actor in resuming the Iran Nuclear Deal. ii) Russia has an important role in defusing the escalation of the conflict between Israel and Syria. iii) Israel has 1M Israeli jews citizens that immigrated from Russia (Aliyah), while Russia has 0.6M Russian citizens jews that still live in Russia. Regardless of the above, the Red Army released most of the Nazis' extermination and concentration camps.

Establishment of Each Coalition

Since the start of the Russian invasion of Ukraine, the establishment of each coalition occurred via three mechanisms:

Country Declaration about the Sanctions against Russia. Since the start of the Russian invasion of Ukraine, each country worldwide was pushed by USA and Russia to declare its position about the sanctions, namely if the country is going to join the sanctions or not. Indeed, some countries declared their positions, yet many countries, especially from Africa, the Pacific, South America and South Asia avoided declaration about their position, but at the same time, did not join the sanctions against Russia. Hence, if a country did not join the USA in the sanctions against Russia, then it refers to a country that de-facto joined Russian Coalition, yet the reason for that could be favour Russia over USA or dependency on Russia.
List of Russian Unfriendely Countries/Territories. Any country that declared about joining the sanction against Russia was added by Russia to the list of Russian Unfriendely Countries/Territories. Likely, that Russia will target these countries in some way with counter-sanctions. (Russia releases list of unfriendly countries and territories: Check Full List here (jagranjosh.com))
United Nations (UN) Vote on Ukraine
Since the start of the war between Russia and Ukraine, two significant votes took place in the UN regarding the Russian invasion of Ukraine, namely at the UN security council and at the UN General Assembly. These votes ‘forced’ countries worldwide to declare their positions about the Russian invasion per se, but not about their positions about the sanctions against Russia. Hence, many countries voted in favour to stop the Russian invasion of Ukraine, yet without joining the sanctions against Russia, likely, because they favour Russia over the USA or they have some kind of dependency on Russia. Besides, if we look in-depth at the result of the UN General Assembly Vote, then it revealed that only 5 countries voted against the resolution to stop the Russian invasion, while 35 countries abstained, and importantly, 12 countries that most of them are loyal allies of Russia did not participate in the vote. Given that, it will be more accurate to see the results as ‘Not Favour-52’ vs. ‘Favour-141’.

War Sanctions: Types of Sanctions/Counter-Sanctions

Since the start of the Russian invasion of Ukraine, the USA coalition has started with sanctions against Russia that includes several types of sanctions, yet each type of sanctions could be targeted by Russia with counter-sanctions or even with different types of counter-sanctions. Importantly, currently, only the USA coalition as a group of countries imposed sanctions against Russia, while only Russia has started to impose counter-sanctions against the list of Russian Unfriendly Countries/Territories. However, the war sanctions between the USA coalition and the Russian coalition could expand in two ways: i) Countries from the Russian coalition will back Russia to allocate Russian export/import from the USA coalition to the Russian coalition. Likely, Russia has started to engage in this process even before the invasion. For example, Iran has neutralized the West sanctions against her by reducing its export/import with West Countries over increasing it with non-West countries, which are de-facto Russia-China Coalition. Thus, if we look at the case of Iran and previous West sanctions that imposed against Russia in 2014 due to Crimea, then we may assume that after the short-term shock of the West sanctions, the economic situation of Russia will improve progressively until Russia will finalize the trade transformation from USA coalition to Russian coalition. ii) It is even possible that will start war sanctions between the USA coalition and the Russian coalition in a way that some countries from the Russian coalition may join Russia with the counter-sanctions against the West. Hence, in this option, we will get global war sanctions that likely will be occurred if a military confrontation will take place between Russia and NATO, which may trigger the activation of Russian military alliances. Hence, here are the main types of sanctions that could be involved in war sanctions between the USA coalition and Russia:

Individuals Sanctions. Individual sanctions mainly refer to the freezing of assets of individuals. The USA coalition mainly targets Russian government officers and Russian Oligarchs, while Russia imposed counter-sanctions against West individuals that have assets in Russia. (The 25 richest Russian oligarchs on the 'Putin list' that the US just released (businessinsider.nl))
Financial Sanctions. The aim of the financial sanctions is to create chaos for the economy in terms of increasing debt, rising inflation, volatility in the exchange rate, hindering the creation of new business, decreasing the value of stock exchange firms, preventing access to money transactions to obstruct the money flow of firms, and more. Currently, the financial sanctions are mainly imposed by the USA coalition against the Russian finance sector, such as restrictions against Russian banks, blocking access to Swift, and more. (A SWIFT ban for Russia may sound important but there are many ways the country can get around it, according to experts (yahoo.com))
Strategic Sanctions. Strategic sanctions refer mainly to a ban on export of goods and technologies that are related mainly to defence and oil sectors, yet keep in mind that it does not include a ban on energy but on its related strategic items. (What the EU sanctions against Russia include (belsat.eu))
Energy Sanctions. Energy sanctions refer to a ban on the export or import of gas and oil. Currently, only USA imposed a ban on Russian oil imports, while the energy ban in the UK is supposed to start at the end of 2022. Russia could cut the gas export to EU as part of its counter-sanctions against the West. (Biden announces ban on all Russian energy imports over Ukraine invasion; experts expect gas price spike (yahoo.com))
Full Ban on Trade and FDI. Trade and FDI are not taking place between enemies that have a war without diplomatic relations, so likely that a full ban on trade and FDI will occur only if will start a war between NATO and Russia.