After the June 16 summit with U.S. President Joe Biden, things have not gone so well for Vladimir Putin:
Belarus: The European indicated on June 18 that a new package of sanctions will be rolled out this week. EU foreign ministers are expected to agree later today sanctions on 86 Belarus’ officials, and the EU Council is expected to decide Thursday/Friday this week on a raft of fairly extensive sectoral sanctions ranging from sanctions on key exports such as potash but also the financial sector with indications of primary and secondary sovereign debt sanctions (akin to those on Venezuela). While this will put the stranglehold on Alexander Lukashenko, it also increases the financial cost to his puppetmaster, Putin. If the annual bill to Russia for backing Lukashenko had been $2-3 billion, I would imagine this will at least double, if not more, depending on how the balance of payments and exchange rate story plays out. It would not surprise me if the bill heads more to the $10 billion mark. While this is small in the context of Russia’s now close to $600 billion FX reserve cover, but Russia is writing big cheques now for a raft of proxies, including Belarus, Ukrainian Donbas proxies, Crimea (floods there will add to the costs to Moscow) Abkhazia, South Ossetia, Trans-Dniester, and Syria. With Russians suffering crimped living standards foreign adventures might not be as popular as some would suggest, and especially in the run-up to the Duma elections in September.
Ukraine: The Volodymyr Zelensky administration continues to roll out sanctions and asset freezes against pro-Russian oligarchs – with Dmytro Firtash sanctioned on June 16 and half a dozen others, adding to existing sanctions on Viktor Medvedchuk. Firtash was a former partner of Gazprom in RosUkrEnergo, so has “form.”
Russia sanctions – National Security Council head Jake Sullivan confirmed over the weekend that further sanctions will be rolled out against Russia as per the Alexei Navalny poisoning and imprisonment. This seemed to be related to the 90-day deadline on the 1991 CBW Act, which actually lapsed earlier in June. Biden has got a bit of a kicking at home, post the Geneva summit, with even Democrat allies calling for more hawkish action against Russia. It did seem a bit like Sullivan was seeking to deflect a question and buy time – talking about preparations still ongoing to make sure the right people were targeted by new sanctions. The question then is why it is taking Office of Foreign Assets Control so long. The danger for Biden is that the longer he leaves all this, the more it is likely that Congress will step in to the void as happened under Donald Trump.
Armenia: It looks like incumbent Prime Minister Nikol Pashinyan got re-elected in the early elections called following the defeat in the war with Azerbaijan over Nagorno-Karabakh. Putin is no fan of Pashinyan, who is deemed too independent and disliked by Putin as he had been previously swept to power in a colored revolution which Putin hates with vengeance. Events in Nagorno-Karabakh suggest Moscow positioned to undermine Pashinyan and force him from office. This strategy seems to have failed, so let’s see how it now seeks to play things. Stability looks very fragile, and Moscow will likely seek to fan and exploit this. I would be worried about how the Armenian military will react given their close ties to Moscow, and they were very critical of Pashinyan’s leadership in the Nagorno-Karabakh war.
It’s interesting that both the Biden and Putin teams bigged up Geneva as being worthwhile and helping promote some kind of strategic stability between the US and Russia, but all the events above will likely further stress this relationship.
Remember, in particular, that Putin drew a big red line over Belarus, but the EU and West likely are sending a message back that if you want to draw a red line, then you have to pay for it fully. The ball, or rather bill, has been placed back squarely in Russia’s court.
