TODAY’S CURRENCY AND FINANCIAL WARS 133heavy weapons, was seen as completely unacceptable. It was a
blatant breach of international law and territorial integrity that
could not be rationalized in the way that Crimea could.
Despite the egregious nature of Russia involvement in
Eastern Ukraine, there was no consensus that a NATO military
response should result. That battle would be up to the main
Ukrainian forces directed by Kiev. But the U.S. and its Western
allies did agree to impose economic sanctions. These were mild
at first, involving travel bans and asset freezes on certain Russian
oligarchs and officials. When these sanctions failed to modify
Russian behavior, they were enhanced to prohibit financing ac-
tivity of many important Russian companies by Western banks.
The economic impact of the sanctions was severe and unde-
niable. Russia’s GDP dropped precipitously and the exchange
value of the Russian ruble collapsed. There was a drain on
Russia’s foreign reserves. These were used to prop up Russian
companies that could no longer access dollar markets to refi-
nance their debts. Of course, these sanctions came at the same
time that global oil prices crashed in late 2014, which made
the Russian dilemma even worse. It was in response to these
developments that President Obama claimed that the sanc-
tions were “working.”
Importantly, there was good evidence that the business in-
terests of Russian oligarchs had been severely impacted. Their
revenues were drying up, their stock valuations were down, and
ultimately their companies could fail if they could not refinance
their dollar denominated debts. This was important because it
was believed that desperate oligarchs would put pressure on
Putin to force him to seek a reasonable accommodation with
the West.
But the sanctions were only working in terms of their eco-
nomic impact; they were not working to alter Russia behavior.
The conflict in Eastern Ukraine actually intensified in late 2014,
and early 2015 with significant rebel gains against Ukrainian