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Of Crimea and Punishment

| by Michael R. Czinkota

( August 27, 2014, London, Sri Lanka Guardian) The conflicts between Russia and Ukraine, has led to Western against Russia. Some Russian officials no longer can travel abroad, and international investment and trade are restricted. Russian President Vladimir Putin, in turn, plans retaliatory sanctions against the U.S. and Western Europe by restricting Russian food imports and energy exports.

Governments attempt to impose comparable sanction burdens on each other. However, due to cultural and historic differences, a policy based mainly on sanctions will lead to inequities and substantially therefore increase the risk in international trade.

Key differences exist between Russia and western nations regarding profit, competition, risk and reward, private property and growth, and how they affect the outcome of sanctions.

In the U.S., profit is the expected result of doing business, and low profits are usually blamed on management. By contrast, lower profits in Russia allow its government to shift the blame onto foreign culprits.

Private property is a key reward in the United States, while in Russia ‘private’ often means responsibility and risk exposure. Since growth is key in the U.S., any inhibitors of growth are seen with concern. A wide variety of economic performance in Russia, makes its growth much less of a pressure point.

Sanctions against the U.S. may burden the population and lead to new candidates and policies. In Russia, the sacrifices imposed by sanctions seem to indicate dedication and strength. Declining U.S. profits or growth cause doomsday scenarios, while time is expected to bring economic improvement.

Losing out on the very latest technology means falling behind for Americans. For Russians, pretty good technology is a pretty good achievement. Russian ownership of space ferries and satellites and their use by the U.S. makes them proud.

Russia’s size of 6.6 million square miles makes it the largest country in the world. The 300 million U.S. population more than doubles that of Russia. Still, the Russian market is of great importance for many global firms.

There are only few historical rewards for former leaders. For example, though Greece invented the Olympic Games, no points are given for that ancient super action. Going first with the Greek flag when marching into the Olympic Stadium is just about all there is. Russia may well see its existing strength and market size as an opportunity for leadership.

We all are said to understand each other so much better than in the past. Yet, much of our thinking is based on our history, culture and outlook. They define our spheres of interest, which we aim to preserve. Ukraine, for example, will tend to be closer to Russia than to the United States. The average Russian understands as much about Columbus, Ohio as the average American does about Sevastopol.

Global relationships between Russia, Asia, Europe and the United States are being re-balanced. Key changes are likely to come from outside the United States. It would be unwise to undertake transformations without dampening the key concerns of key players on all sides.

Prof. Michael R. Czinkota researches international marketing issues at Georgetown University. He served in trade policy positions in the George H.W. Bush and Ronald Reagan administrations. His International Marketing text (with I. Ronkainen) is now in its 10th edition. Kimberly Boeckmann participated in drafting this work.



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