President Obama is not the first American president to be confronted by provocations and military actions from Moscow. All 12 presidents since World War II have faced such challenges. But Obama is one of the first to have a broad range of potentially biting nonmilitary responses to employ—a measure of how much Russia has been integrated into the world's financial system since the fall of the Berlin Wall and the end of the Cold War.
It is why American policymakers are so convinced that Russian President Vladimir Putin has miscalculated by dispatching troops to Crimea. And why you hear over and over again from the White House and State Department that Putin does not seem to understand the interconnectedness of the 21st-century world.
"What we see here are distinctly 19th- and 20th-century decisions made by President Putin to address problems, deploying military forces rather than negotiating," says a senior administration official, speaking on background. "But what he needs to understand is that in terms of his economy, he lives in the 21st-century world, an interdependent world."
The official added pointedly: "You may have noticed his economy is not in the greatest of shape. The ruble has taken a significant hit.... He depends on good trade relations with all of us, notably with Europe. And it is going to be very difficult for him to maintain those good relations with the outside world while he is using his military forces to threaten and intimidate a neighbor." Another senior administration official, noting that the ruble has fallen 8.3 percent so far this year, calls the Russian economy "really quite vulnerable" because of its integration in global markets.
That vulnerability is a relatively new state of affairs for Moscow. "The Soviet Union was economically isolated. It did not participate in global trade to any significant degree," says Jeffrey Mankoff, a former adviser to the State Department on Russia and now deputy director of the Russia and Eurasia Program at the Center for Strategic and International Studies. "It had an unconvertible currency. And certainly the level of trade and investment flows between the Soviet Union and the West was extremely limited. Today, that is obviously different."
Indeed, it was a matter of great frustration to many Cold War presidents that their nonmilitary options for addressing Soviet aggression were so few. When the USSR invaded Hungary in 1956, Dwight Eisenhower did little more than complain to the United Nations. When Soviet troops crushed the Prague Spring in Czechoslovakia in 1968, Lyndon Johnson, similarly, went to the U.N. Neither was willing to risk a broader war to halt the Soviet invasions. John Kennedy made the same calculation when the Berlin Wall went up in 1961. As did Ronald Reagan in September 1983, when the Soviets shot down an unarmed South Korean civilian plane that had veered into their airspace. Reagan proclaimed it a "crime against humanity" and an "act of barbarism." But his actions were weak when contrasted with his words. All Reagan did was cancel an agreement on cooperation on transportation and reaffirm an existing ban on any landings in the United States by the Soviet airline Aeroflot.
The dynamic began to change when the Cold War ended and Russia could no longer keep its trading within the former Comintern countries of the Eastern Bloc. Starting in 1989, Moscow desperately wanted to turn the G-7 into the G-8, and the message from the West was that the price of admission included shifts toward genuine democracy and economic integration. Reforms began. And by 1991, the annual allied summits were being called "G-7 Plus One." At the Denver summit in 1997, Russia was rewarded for joining the Paris Club of creditor nations with full membership in what then became the G-8.
That gave George W. Bush new options in 2008, when Russia invaded parts of Georgia. He chose not to use any that would hurt Moscow, instead sending humanitarian aid to Georgia and suspending NATO military contacts with Russia and a pending civilian nuclear agreement. But even with this restrained response, the Russian economy shrank by 8 percent between 2008 and 2009, taking a hit far worse than the rest of the world suffered that year. "A lot of Russian officials and members of the elite were caught off guard by just how vulnerable to global financial pressures they actually were," Mankoff told National Journal.
Six years later, Obama has even more options. Because most of the Russian elite and the oligarchs shelter their money in European banks, sanctions could target them, including freezing their assets and blocking their travel. Indeed, the first sanctions announced Thursday affected visas. Trade, energy, and military cooperation also could be curtailed. And, after all their struggles to join the G-8, the Russians may be pretty lonely at this year's summit in June if Obama and other Western allies boycott the meetings in Sochi.
But U.S. policymakers may find that some things haven't changed since the 19th century. Although Moscow may be more conscious of its economic vulnerability than it once was, it is still driven primarily by what it views as Russia's national interests. Historically, Russians have seen Ukraine as far more important than Georgia—and they were willing to take the economic hit for their incursion there. Additionally, they can usually count on European leaders being reluctant to follow Washington's lead on sanctions, because European countries are more vulnerable than the United States to Russian sanctions against them.
So, for now, American officials are advising patience, insisting that time is not on Russia's side. "With time, they will find themselves further isolated from the international institutions, [and] there will be a further impact on their economy," says one senior administration official. But, he adds, "that is going to take a little while for them to see."
We Can See Russian Soldiers From Our House
This article appears in the March 8, 2014 edition of National Journal Magazine as Obama’s Options.