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Consequences of pressure on Putin

Restrictions placed on lending in Russia by the RBS are a response to increasingly tough sanctions being imposed by the EU and the US, aimed at persuading President Vladimir Putin to change his policy on the Ukraine.

After the EU cut off financing for five major Russian banks and the US and the EU imposed a range of other sanctions, RBS has trimmed its lending in Russia by £100 million, thus reducing its own exposure.

RBS is just one of many companies likely to be indirectly affected by the sanctions. BP announced this week that despite increasing profits, the sanctions were a cloud on the horizon, not least because of its 20 per cent stake in Russian energy giant Rosneft.

There is a question about whether the sanctions will work and who they will harm most - Russia, or European businesses and economies. There is little doubt Europe will need to suffer before sanctions have an impact on Russia, the question is how much?

At least there is an honesty about the purpose of EU and US sanctions. Retaliatory trade blocks by Moscow have seen imports from countries such as Poland, Moldova and Ukraine rejected on spurious public health grounds. But it is important to recognise that many Russians see an element of hypocrisy in American and European actions. When the EU says sanctions are meant as a strong warning, adding: "Illegal annexation of territory and deliberate destabilisation of a neighbouring sovereign country cannot be accepted in 21st century Europe," they spot a glaring irony, in the context of Iraq and the reasons given for war there, or the lack of response to what is happening in the Middle East.

The sanctions are designed to rein in a perceived aggression on the part of Mr Putin, targeting a Russian economy seen as weak and putting the country's leader under pressure.

Russian aggression in Crimea has tested Western patience, as has the support for pro-Russian rebels in Ukraine. The downing of the Malaysian Airliner last month has been the final straw. However, it is important to note there has been no direct proof of Russian involvement in the shooting down of the plane.

The deeper question is how have relations with Russia soured to such an extent in a couple of decades since America and the West were held up as the ideal as Russia embraced capitalism? Is there any culpability in Europe and America for the growth of anti-Western feeling?

It is important to ask, because the toughest sanctions since the Cold War have understandably prompted concerns about a new cold war.

The response from Europe has been perceived as weak over Russia's annexing of Crimea,with sanctions late in coming, but the potential costs are high on both sides.

The expectation is that as sanctions bite, Mr Putin will be weakened. Yet the fear must be that rather than strangling the Russian economy and persuading Mr Putin to stop supporting Ukrainian separatists, they strengthen the president's hand, and reinforce resentment among Russia's people.

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