Just thinking aloud:
What would be the most potent diplomatic and economic sanction to be slammed on Russia that would cause so much damage that Russia would capitulate and move out of Crimea with its tail between the legs?
Economic Isolation, asset seizure, economic sabotage and diplomatic isolation? Well these are so predictable and the prize (the Black Sea, Crimea and possibly Easter Ukraine) so high that Putin, a KGB brass and most experienced in international geopolitics than any of the Western Leaders, would have already predicated this move and taken it into full account in his game model.
But then what would be his response to this “N-bomb”? Not easily predictable. So let’s just explore one evolution path:
The West moves with Economic Isolation, asset seizure, economic sabotage and diplomatic isolation.
1) Russia escalates the ground assault by cornering the whole of Eastern Ukraine and declares independence.
2) Russians moves resets international geopolitical order that ensures respect the principle of “sphere of influence” by:
a. Entering into a strategic economic agreement with China and India that will make the China’s Renminbi a reserve currency in exchange for currency swap agreements amongst China, India and Russia, and China agreeing to pump enough of its about US$3trillion dollar reserve to support US$ investment in Russia to fill the gap left by Western investors. Russia further dumbs the dollar equivalent of this investment in the market, replaced with the Renminbi (that would be about U$300billion).
b. Entering into agreement with China, India and Russia denominated by a basket of currencies which includes the Renminbi, Rubble and the Rupee, a market with over 2.5billion people. These countries all have “sphere of influence” ambition and issues and with the West.
c. Retaliating by seizing all western investments and assets in Russia. And then defaults on over US$200billion debt owed Western investors and dumbs its US Dollar reserves in exchange for the Renminbi.
d. Cutting off gas supply to Europe and exporting it via LNG tankers to India and China (not easy in immediate-short term)
The cumulative effect of this response alone will have over $700billion dumped in the market. The impact of this on the US Dollar could trigger a number of not-so-western-friendly countries to rally around the Renminbi as reserve currency.
Now, China, on the one hand may not want to see the value of its over US$3trillion reserves go down, but on the other hand it might be pleased to see the world finally coming around the Renminbi, which it has sought for long now.
If the Chinese, the North Koreans, the Iranians, the Indians and the Russians pick up non-US$ reserve currency and free trade amongst them, it will be interesting to see what goods and services they will not be able to provide in this more-than-2.5billion people strong market. And the money to invest? Ask China and any one else who will like to make money off 2.5billion people.
In a fantasy world, it is interesting to see how this Roulette evolves, with pains and gains on both sides.
Just pondering aloud………
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