The ruble plunged to 80 a dollar for the first time as investors speculated Russia will announce capital controls after the largest interest-rate increase in 16 years failed to revive confidence in the currency.
The ruble sank as much as 19 percent to 80.10, before trading at 78 at 3:14 p.m. in Moscow. That was the biggest drop since 1998, the year Russia defaulted on its local debt. The currency erased a gain of 11 percent as investors shrugged off a surprise Bank of Russia decision to take its key interest rate to 17 percent from 10.5 percent. Ten-year government-bond yields jumped 317 basis points to a record 16.4 percent.
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Republican Congress to Push Harder Russia Line
On November 4 the Republican Party won control of the U.S. Senate, gaining the majority in both houses of Congress. According to Donald Jensen, resident fellow at the Center for Transatlantic Relations, Republican leaders are now likely to apply greater pressure to president Barack Obama to take a tougher stance on Russia and provide weapons to Ukraine.
The United States’ recent midterm elections tipped the balance of power away from president Barack Obama and will greatly complicate his remaining two years in office, not just in terms of domestic policy, but foreign policy as well. Riding a wave of popular discontent, the Republican Party gained eight seats (which could increase by one after Louisiana holds a runoff in December). The GOP also increased its majority in the House of Representatives and performed well in state races.
The Republican capture of the Senate will force Obama to scale back his legislative agenda and limit his ambitions to either executive actions that do not require legislative approval, or issues that have bipartisan support. But the Republicans, hoping to win the White House in 2016, will also be under pressure to show the electorate that they are capable of governing after drawing scorn for shutting down the government last year and allegedly demonizing the president. The president’s supporters and the national media, in turn, are also guilty of exaggeration: they are fond of caricaturing the GOP as being held hostage to an “extremist” Tea Party base. Many of these critics expect (and hope) that Republican unity will be difficult to achieve. The day after the midterm elections, President Obama promised to work with Republicans, but warned that he was also prepared to make more use of his executive powers.
Foreign policy is rarely a primary concern of U.S. voters. Indeed, surveys suggest that those who went to the polls this November were primarily concerned with the state of the economy, partisan gridlock in Washington, and Obama’s leadership.
In September, according to a Pew Research Center poll, 64 percent of respondents said foreign policy would be an important factor in their midterm election vote. In an October poll, by a margin of 43 to 37 percent, voters believed Republicans would do a better job of handing foreign affairs than Democrats. It appears such sentiments have much to do with the public’s view that Obama has demonstrated poor leadership on international issues. “Setting aside individual debates about individual policy choices,” David Rothkopf recently wrote for Foreign Policy, “the public wants America and its leaders to appear strong.”
In recent weeks, the opinions of the Washington elite on how to deal with Russia, like public sentiment more generally, have been marked by an uneasy balance. Earlier this year, views were divided. One point of view maintained that Russia’s meddling in Ukraine was mostly a defensive action against the threat of NATO enlargement and Ukraine’s disintegration; the other accused Russian president Vladimir Putin of directly challenging Europe’s political and security structures and Western values, and argued that he needed to be countered. The shoot-down of Malaysian Flight MH17 in July and subsequent abundant evidence of Russia’s extensive military involvement in the incident yielded a consensus behind the latter view.
Yet there remained disagreements over how far Putin would go and how the U.S. should push back. The Obama Administration expressed warm words of support for Ukraine, but was strongly against arming Kiev. It argued that doing so would provoke Russia into greater intervention; that Ukraine’s armed forces could not “absorb” high-tech equipment; that there exists no military solution to the crisis; and that Ukraine would be better able to withstand Russian aggression if it focused on political and economic reform.
In Congress, however, where sympathy for Ukraine was strong (and bipartisan), there was firm support for providing arms. This debate took place, as Standard Bank analyst Tim Ash wrote in October, amid widespread uncertainty about what Putin would do next and general agreement that Western sanctions on Russia are working. Although they may have done little to directly discourage Russian military activity, sanctions have extracted a heavy price from Russia and the elites around Putin.
Two bills that would provide Ukraine with defensive but lethal weapons are likely to be taken up by the new Republican Senate majority, despite the president’s wishes.
With a GOP majority in both houses of Congress—including in the crucial Senate Armed Services and Foreign Affairs Committees—Republican leaders are now likely to step up the pressure on the weakened president, already a lame duck, to be tougher on Russia and provide weapons to Ukraine. Senator John McCain, the incoming chairman of the Senate Armed Service Committee, said in an interview on November 5 that he has already discussed a new national security agenda with fellow Republicans Bob Corker and Richard Burr, who are likely to be chairmen of the Senate Foreign Relations Committee and Senate Select Committee on Intelligence, respectively. McCain promised to raise the issue of military assistance.
Two bills that would provide Ukraine with defensive but lethal weapons are likely to be taken up by the new Republican Senate majority, despite the president’s wishes.
The first of these bills, the Ukraine Security Assistance Act of 2014, would help Ukraine “neutralize the military-support advantage that separatist rebels are using to target civilian and military aircraft in in eastern Ukraine” and would authorize President Obama to “provide adequate and necessary assistance to protect Ukrainian democracy and sovereignty.”
The second, the Ukraine Freedom Support Act of 2014, calls for military and security assistance to Ukraine, designates it as a “major non-NATO ally” (MNNA), and imposes further sanctions on the Russian Federation. MNNA is a designation given by the United States government to close allies (including Australia, Egypt, Israel, Japan, and South Korea) who have strategic working relationships with U.S. armed forces but are not members of NATO. While the MNNA status does not automatically establish a mutual defense pact with the United States, it does confer a variety of military and financial advantages that otherwise are not obtainable by non-NATO countries.
Moreover, codifying U.S. sanctions against Russia into legislation would make it far more difficult to end them than is currently the case, thereby immunizing the sanctions against actions by the White House.
It is unclear whether Obama will veto either bill should they pass. The White House’s rationale that arming Kiev would provoke Moscow grows ever weaker, as Russia has stepped up its military support of the eastern breakaway republics in recent days. An Obama veto would also put him at odds with powerful congressional leaders in both parties, now emboldened by the elections to take a tougher line on an issue that appears secondary to the rest of the president’s agenda. In the past, Obama has stood his ground in the face of congressional opposition when he believed he was right, but according to sources in Congress, he has not yet indicated what he would do if a Ukraine bill were to reach his desk.
Putin’s intentions, as ever, remain uncertain. On the one hand, the Kremlin has little incentive to escalate its military presence in Ukraine, regardless of any military assistance the U.S. might provide Ukraine (though such aid would certainly give Putin pause). Russian public opinion does not support an invasion: Kremlin authorities made great efforts during the fighting of August and September to restrict media coverage of Russian military casualties. The economic costs of rebuilding the Ukrainian east or funding additional sustained major military operations are likely prohibitive, given the downturn in the Russian economy.
On the other hand, Putin’s current stepped-up support for separatist forces, in violation of the Minsk agreement and despite Western threats, suggests that he could go further no matter the economic cost or Western reaction. For example, he could carry out a quick strike to establish a land bridge to Crimea. The Obama Administration also continues to seek Russian cooperation on Iran and the Middle East, showing Putin there are limits to Washington’s willingness to push back over Ukraine.
In the end, therefore, the dispute in Washington over military assistance to Ukraine may have more to do with the power struggle between Congress and the administration than the realities of the military situation on the ground.
Massacred in their classroom: More than 100 children killed as Taliban gunmen storm Pakistani school and detonate suicide bomb in room full of pupils before shooting survivors dead
ReplyDeleteTaliban storm Pakistani school, killing 126
DeleteThey eat their children and no mighty Zeus will recover them.
Allahu Akbar
Russia's fast track to ruin
ReplyDeleteJeez, they're going to break every fracker in America.
ReplyDeleteIf a guy could stand a few margin calls, now would be a good time to start dabbling in oil.
America: Australia's Dangerous Ally
ReplyDelete.
ReplyDeleteNormally, I would think the GOP's natural constituents would put a stop to these actions due to the potential results to the world economy. However, given the 'moral clarity' of the neocons, who knows.
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