Russia’s ‘reaction would be quite hostile’ to severe sanctions, strategist says

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Tue, Feb 22, 2022, 7:45 AM

JULIE HYMAN: Good. Let's get some analysis now and perspective on the Washington reaction. That's Greg Valliere right there, AGF Investments Chief US Policy Strategist. Greg, I thought it was really interesting there that use of the word invasion, which could pave the way for increased sanctions. The UK, speaking of paving the way, is already out with sanctions, including on individuals. Is the US going there? Does the US need to go there?

GREG VALLIERE: They have to. I think to not go there would invite the use of the word appeasement. This is something that Biden does not want to hear, especially after what happened in Afghanistan in August. So he has to consider this an invasion, and he has to unveil lots of new sanctions probably today.

BRIAN SOZZI: Greg, looking through the prism of the energy markets, how might Russia respond to any of these sanctions that could potentially be put out there by the US and other superpowers?

GREG VALLIERE: Well, I think Putin, who showed really extraordinary anger, resentment yesterday in that one-hour speech would not react well to this. I think he has to know that severe sanctions would hurt his domestic economy. I think he also has to worry about casualties. So no, I think the reaction would be quite hostile.

JULIE HYMAN: Greg, I keep trying to figure out here, what does winning look like in this scenario for Vladimir Putin? And how would that even be possible with the eyes of the West and the weapons of the West, potentially both economic and actual militaristic weapons trained on that border?

GREG VALLIERE: Well, that's the big question, isn't it? Is there an endgame in which he could declare victory? I would say, no, he does not have much of an endgame. In fact, I'd go even a little bit further, Julie.

I would say that he's already lost to the extent that he has now become a pariah in all of Europe. And I think that pariah label is going to stick with him for quite some time. I don't know what the off ramp is. What I worry about more than anything else is lots of casualties in the next week or so.

If there are, I think he probably has to probably drive even further into Ukraine.

JULIE HYMAN: You know, and in terms of what this has sort of accomplished for the West in a way, I mean, you know, already coming out of the Trump presidency into the Biden presidency, we have seen more global cooperation, of course, than was characterized by the previous presidency. This would seem to even solidify that even more. So again, sort of backfiring against Putin in yet another way.

GREG VALLIERE: I fully agree. So he wants NATO out of his life, so he's taking action that makes NATO, as you say, even more unified, even more united against him. To me, that doesn't make sense.

What also doesn't make sense is that he has to have a premise that people back home in Moscow and St. Petersburg will go along with this. I think if casualties start to arrive, if you see kids come back on stretchers, that would be devastating for him politically. So I think this could weaken him politically, and I think it certainly has already weakened him in Europe.

BRIAN SOZZI: Greg, what's the longer term impact to Russia from this?

GREG VALLIERE: Well, I think, Brian, they'll be more isolated than ever, countries not wanting to do deals with them. I think this pariah label will stick for quite a while. I mean, countries have to fear Putin.

I mean, if you're in the Baltics, I think you'd have to be a little worried. I think Belarus is already gone. They've already been folded into what used to be the old Soviet Union. But I think that much of Europe would continue to view Putin with great anxiety.

JULIE HYMAN: Greg, let's talk about your bread and butter here. That is the political implications here in the United States from all of this. You know, it's sort of become conventional wisdom now that it's super early to talk about the midterms, but we've been all been talking about the midterms already. Is it also too early to sort of extrapolate this situation and its effect on the midterms hoping and presuming that this conflict will have faded by then?

GREG VALLIERE: Yeah, you certainly hope so. Yes. But I do think that it's inevitable that gasoline prices will go even higher. That is a huge albatross for Biden and the Democrats. The one perhaps, you know, bright note here is that I can't see the Federal Reserve doing a 50 basis point rate hike in early March with this kind of instability and uncertainty around the world.

So maybe the rate hikes will come a little bit slower. But I think from a political standpoint, it's an economy that still has a big inflation rate. It's the whole issue of appeasement. I mean there's a lot that Biden has to answer for. And I would have to say right now, the issue is not will the Democrats lose the House. The issue is by how many seats. And I think the Republicans could gain the House by 25 seats or so.

JULIE HYMAN: Yeah, and as you say, this doesn't necessarily help them in that department. Thank you so much, Greg. It's always really great to get your perspective. Greg Valliere, AGF Investments, Chief US Policy Strategist. I appreciate it.

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Russia’s ‘reaction would be quite hostile’ to severe sanctions, strategist says

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