With European leaders having agreed in principle to impose tougher “Tier 3” sanctions on Russia in a conference call with President Obama last night (the details of which are being hammered out today), another shoe dropped for the Kremlin. An international tribunal of three judges, one of whom was appointed by Russia, ruled that Russia should pay a $50 billion in damages to former shareholders of Yukos, the oil company of oligarch Mikhail Khodorkovsky dismembered by Putin more than a decade ago.The penalty is significant—almost 2.5% of Russia’s economic output—and according to the FT, any appeals are not likely to succeed. Nevertheless, experts think Putin will choose to default:
“If one were to be quite cynical, I think the reputational consequences for Russia [of not paying] will be very limited indeed, because they have already been through a lot of things,” said Loukas Mistelis, director of the School of International Arbitration at Queen Mary University of London. “I think they would be prepared to take quite a bit of risk.”
The FT reporting ends with this chilling nugget:
One person close to Mr Putin said the Yukos ruling was insignificant in light of the bigger geopolitical stand-off over Ukraine. “There is a war coming in Europe,” he said. “Do you really think this matters?”
The noose is tightening around Russia’s neck, but Putin is still very much not looking for an off ramp. The West now faces a drastically changed environment, with the Middle East in flames and with Russia moving toward all-out confrontation. One wonders whether today’s leaders and their publics are ready for the brave new world.