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Thursday May 1, 2014 MYT 12:30:03 AM
Thursday May 1, 2014 MYT 12:31:23 AM
by timothy heritage
MOSCOW (Reuters) - Vladimir Putin has "walked the walk" since the West imposed new sanctions on Russia over the Ukraine crisis, but not in the way Barack Obama intended.
Announcing sanctions against Russian companies and individuals this week, the U.S. president used the phrase in urging the Kremlin leader to do more than just "talk the talk" when it comes to finding a diplomatic solution to the standoff.
In a move that seemed designed to mock Obama's choice of words, state television lingered on Putin striding with knowing confidence across a vast hall to deliver his verdict on the sanctions to reporters during a visit to neighbouring Belarus.
Completely unruffled, Putin denied U.S. charges that Russian troops are in Ukraine, blamed the crisis on the West and ratcheted up the war of words by warning that Moscow could bar some Western companies from involvement in Russia's economy.
"It was handing out those pies on the Maidan that paved the way to the crisis," he said, referring to a visit in which U.S. Assistant Secretary of State Victoria Nuland offered food to anti-government protesters on Kiev's main square in December.
There is no overt sign that the asset freezes and travel bans imposed by the United States and European Union, reinforced by moves by Japan and Canada, are having any effect on Putin.
And Western Kremlin watchers remain deeply uneasy about forecasting just what the president might do next in Ukraine.
He may think he has little reason to be the one to "blink" first; although the annexation of the Crimea peninsula and the massing of Russian troops on the border with Ukraine have left East-West relations more tense than at any time since the Cold War, Putin's popularity has soared in Russia.
A poll on Wednesday showed 82 percent of Russians support the former KGB spy's actions, his highest rating since 2010.
The sanctions were considered so mild in Russia that share prices rose in Moscow when they were announced. Moscow also regards the European Union and the United States as divided over how to handle the crisis, largely because the EU is heavily dependent on Russian oil and gas and has more trade with Moscow.
SANCTIONS COULD BACKFIRE?
Some Russians say Putin's position may even be hardening.
"The sanctions have an impact on Putin but not necessarily the impact intended. The West wants to deter him, make him back down, split him from his entourage, set the 'oligarchs' against him, make the Russian people mistrust and topple him," said Dmitry Trenin, head of the Moscow Carnegie Center think-tank.
"In my view it will not work. Sanctions could contribute to Russia being more of an adversary to the U.S. - poorer, less connected to the world and less predictable."
The West's immediate aim is to ensure Russia does not invade eastern Ukraine to annex mainly Russian-speaking parts of the country where pro-Moscow separatists have seized control of administrative buildings.
Putin denies he has any intention of sending in troops, but the West says Russian forces are already operating in eastern Ukraine incognito and he has reserved the right to invade if Russian speakers or compatriots are under threat.
Putin's aims appear be to maintain Russia's influence in the former Soviet republic of 46 million and, analysts say, to destabilise the new rulers in Ukraine who ousted pro-Moscow President Viktor Yanukovich and are now turning to the EU.
One risk for Putin is that events on the ground force his hand. If the Ukrainian army used force and this resulted in a high death toll, Putin would face fierce public pressure to respond militarily, even against his better judgment.
Another risk for his strategy is that the sanctions push the already stuttering economy deep into recession, stirring public anger against him.
The International Monetary Fund sounded a warning about this on Wednesday as it revised its 2014 growth forecast for Russia down to just 0.2 percent and said capital flight could reach $100 billion this year.
"What we have noticed is that the fear of sanctions could be even more powerful than the sanctions themselves, the fear of escalation of sanctions," said Antonio Spilimbergo, head of the IMF's mission to Moscow.
"Economically it's very difficult to estimate costs from individual sanctions. But the fear of uncertainty, especially among investors, is having a large effect."
Political analysts and sociologists also say that once the euphoria of annexing Crimea wears off, a "hangover" will set in where wealthy tycoons, the "oligarchs", resent not being able to travel abroad or visit children being educated in the West.
For now, Russian businessmen say that anyone who opposes Putin's policy in Ukraine, and rejects the barrage of pro-Putin coverage on state television, is keeping a low profile - but they say there are some who have misgivings.
Some observers say Putin is aware of this and has started to tone down his anti-Western rhetoric - not so much because of the sanctions but because he sees the possible dangers ahead.
"He's doing a lot of what he is doing because of his domestic agenda and audience but his comments are clearly less radical than the views expressed on Russian television," said Boris Makarenko of the Centre for Political Technologies.
"At the moment the Russian people are not feeling the impact of sanctions, but Putin knows he cannot allow the economic or political situation to deteriorate beyond a certain point."
Some Western diplomats say they, too, have detected signs that Putin is being increasingly cautious and does not want to take the risk of a military conflict in Ukraine.
"There have been some seriously intense moments in the past two months. There were a couple of moments when we feared the worst, when we thought, that's it, we're going to war," one envoy said. "It seems though now that the worst is over."
Putin, however, remains an enigma for most people and his intentions are hard to predict, meaning East-West tensions are likely to stay high at least until Russia pulls back troops from the border with Ukraine.
"We know - and we have been told by people very close to him - that he can go to bed promising one thing only to wake up in the morning and do the opposite," said the Western diplomat.
"We fear it is the devil inside him who is the final decision-maker, and no one else."
(Additional reporting by Lidia Kelly; Editing by Alastair Macdonald)
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