Almost everyone in the American establishment seems to support President Obama’s new round of sanctions against Russia. Almost everyone, that is, except U.S. exporters.
Although they have been quiet on the crisis, U.S. exporters are hardly happy. They are censoring themselves because to speak openly would risk accusations of disloyalty. But they know in their heart of hearts that Obama’s sanctions will prove a double whammy for the American economy.
For a start America will be deprived of badly needed immediate export opportunities. But a much more troubling problem is that in the long run East Asian and European rivals will take over from corporate America in key areas of the Russian market.
For the Chinese particularly the crisis is an opportunity, because they strongly support Moscow. They can expect not only to export even more to Russia but to earn special brownie points with Vladimir Putin for dissing Obama. Meanwhile South Korea, supposedly one of America’s closest allies, has openly stated it won’t support Obama’s sanctions.
That said, most of America’s allies are officially supportive. Such nations include Japan and Germany, as well as France, Italy, and the UK.
The problem is that, with the possible exception of the UK, none of these nations is nearly as committed to punishing Russia as the United States is. This applies in spades to Japan, which happens to be by far America’s most formidable rival in high-technology goods.
For these nations, moreover, it is easy to have it both ways: while in public they can profess support for sanctions, they can privately turn a blind eye to their own corporations’ evasions of sanctions. Again Japan is the classic example: there is often a remarkably wide gap between official policy in Japan and what in practice the regulators permit.
Largely overlooked by the American press, Japanese officials could hardly be less sympathetic to the Obama administration’s Russia policy. This is in part because the current crisis catches Japan at a particularly awkward moment. The fact is that Japan’s single most important territorial dispute – far more important that its dispute with China over the Senkaku Islands – is a dispute with Russia over the Kuril Islands. Two of these, with an estimated combined population of about 15,000, were previously part of Japan but were captured by the Soviet Union in 1945. All the evidence is that Japanese officials have been quietly building good relations with Moscow for nearly a generation and, before the Ukraine crisis intruded, had come close to a deal for the islands’ return to Japanese sovereignty. (The Kuril Islands’ special significance is that they have a long history of ethnic Japanese habitation. This contrasts sharply with the Senkaku Islands, which are tiny rock outcrops which neither the Japanese nor any other people have ever inhabited.)
As it is, Tokyo has hitherto expressed only the most equivocal support for Obama’s sanctions. Its most notable contribution seems to have been to impose an entry visa ban on 23 Russian nationals. Who are these individuals who are now debarred from entry to Great Nippon? Amazingly, Tokyo refuses to identify them. It is perhaps overly cynical to suggest that the Tokyo Foreign Affairs Ministry has compiled a list of 23 Russian shoplifters, drug dealers, and other insignificant ne’er do wells. But who says the Japanese don’t have a sense of humor?
Basically Japan sees no reason to offend Putin. Not only does Tokyo have no dog in the Ukraine fight but Ukraine seems almost as remote to the Japanese as say Ethiopia or Somalia does to Americans. Tokyo’s attitude to Washington these days is broadly similar to that of Oliver Hardy in the Laurel and Hardy movies: “Here’s another nice mess you’ve gotten me into.”
Already IBM IBM -1.67% and Hewlett-Packard HPQ +0.36% have been identified as big losers from Obama’s sanctions. Thanks to America’s cultural commitment to the rule of law, such corporations will have little choice but to toe Obama’s line. The question is whether Japanese regulators will expect a similarly conscientious level of compliance from corporations like Hitachi , Toshiba, and NEC. The betting is that far from honoring U.S. sanctions, these latter corporations will have a field day taking their American rivals’ place.
The crisis also poses serious problems for U.S.-based oil majors. Exxon’s chief executive, Rex W. Tillerson, has so far been one of the few U.S. chief executives publicly to object to further sanctions. He has plenty to worry about. If Exxon is required to back away from its efforts to penetrate the Russian oil industry, there are plenty of other oil companies — based outside the United States — that will be happy to take its place. These notably include Statoil of Norway and Total of France.
Postscript: Posted less than six hours ago, this commentary has already attracted several notably intemperate comments. Dissenters need to be reminded that many of the facts are still highly debatable. One key fact, however, seems obvious: America does not have the power any more to inflict serious economic pain on Russia and will shoot itself in the foot if it tries. Obama’s problem is that the world is now a big place and nations like Japan and Germany no longer take their cue from Washington.
Anyone who thinks there is general agreement on the facts should look beyond Fox News, the Economist, and the Wall Street Journal. One of the fairest and most reasonable commentaries I have read is by Patrick Buchanan. It can be accessed here. As for the suggestion that the Russian separatists have behaved particularly badly, they have their defenders. A thought-provoking account, by the British defense analyst Brian Cloughley, can be read here.
Eamonn Fingleton is the author of In Praise of Hard Industries: Why Manufacturing, Not the Information Economy, Is the Key To Future Prosperity (Boston: Houghton Mifflin, 1999).