Over the weekend, insolvent, debt-dependent Europe thought long and hard how to best punish Russia and moments ago reached yet another milestone in deep projective thought: as Reuters reports, Europeans could be barred from buying new Russian government bonds "under a package of extra sanctions over Moscow's military role in Ukraine that European Union ambassadors were to start discussing on Monday, three EU sources said." This will be in addition to the ban on the debt funding of most Russian corporations. So as Europe's 7-day ultimatum for the Kremlin to "de-escalate" counts down, Putin has a choice: continue operating under a budget surplus and ignore Europe's latest and most amusing hollow threat which is merely a projection of Europe's biggest fears, or spend himself into oblivion as Europe has done over the past decade and become a vassal state of the Frankfurt central bank.. Somehow we doubt Putin will lose too much sleep over this latest "escalation"...
Some more details on today's latest threat by Europe, which if nothing else has sent the ruble to a fresh record low against the dollar, leaving Europe green with envy at such currency debasement, and boosting Russian exports even more:
German Chancellor Angela Merkel, who led the drive for a tougher EU response, said on Monday that Moscow's behaviour in Ukraine must not go unanswered, even if sanctions hurt the German economy, heavily dependent on imported Russian gas.
"I have said that (sanctions) can have an impact, also for German companies," Merkel told a news conference in Berlin. "But I have to say there is also an impact when you are allowed to move borders in Europe and attack other countries with your troops," she said. "Accepting Russia's behaviour is not an option. And therefore it was necessary to prepare further sanctions."
It remains to be seen just how much more loss-generating populism German companies are willing to take. After all, every now and then even Europe requires a reminder that it is corporations who pull the political strings. And if German corporations want Merkel gone, that just may be what they will get. For now however, all Europe gets is more "draconian" populism.
The leaders asked the executive European Commission to prepare further measures within a week, building on steps taken at the end of July, which targeted the energy, banking and defense sectors.
"I'm hearing that a ban on buying Russian government bonds could be in the next package," an EU official familiar with the preparations said.
Tighter restrictions on dual use technologies with military as well as civilian applications could also figure, along with some more curbs on advance energy exploration equipment, the official said.
To be sure, nothing was decided: it is, after all, Europe, and decisions is what well-catered parties in the future are for.
An EU diplomat said ambassadors of the 28 member states would hold an emergency meeting on Monday at 1300 GMT to start work on a "significant" package of further measures although no immediate decisions were expected. A further meeting is set for Wednesday.
The leaders said the Commission should include in the sanctions "every person and institution dealing with the separatist groups in the Donbass", potentially leaving a very broad area that could be targeted.
And just to add to the European flavor, and humor, the key countries in central Europe have already opined against further Russian sanctions, thus further jamming the wedge discussed previously whereby Russia has succeeded in converting that all-important safehaven, Austria, to its side.
However several EU countries heavily dependent on Russian gas, including the Czech Republic, Slovakia and Austria, are opposed to new sanctions, which require unanimous agreement.
"I consider sanctions meaningless and counterproductive," Slovak Prime Minister Robert Fico said on Sunday.
"Until we know what is the impact of the already imposed sanctions, it makes no sense to impose new ones," Fico said. "I reserve a right to veto sanctions harming national interests of Slovakia."
But back to the stupidity of Eurocrats, who instead of focusing on fixing their own imploding economies, are hell bent on making Russian life a living hell, in the process accelerating Europe's mere "triple-dip" into an outright depression:
EU diplomats said the main thrust of new steps could be financial because that would hit the Russian government rather than citizens. It could be coordinated with the United States, whose measures were also focusing on the financial sector.
Two diplomats said they did not rule out a ban on the purchases of Russian sovereign bonds to make it more difficult for the Russian government to finance itself on markets. In July, the EU banned Russian state-owned banks from raising capital or from borrowing in EU markets.
And of course, since Putin knows he hold all the trump, or rather Gazprom, cards from day one, all Europe will achieve with further sanctions is even more retaliation:
Moscow has retaliated against sanctions by banning most agricultural imports from Europe and the United States. The risk of a ban on buying Russian sovereign bonds is that the Kremlin could hit back by dumping European government bonds, of which Russian state institutions have significant holdings.
Which bring us to the dumbest idea from last week: the UK's push to exclude Russia from SWIFT... and in the process accelerate the demise of the dollar as the world's reserve currency.
Asked about the idea that Russia could be cut off from the international money transfer system known as SWIFT, one diplomat said the idea had been floated several months ago, but that there was opposition to it among several EU countries.
"The problem is that while it would probably work well in the short-term, as in the case of Iran, in the long-term it would trigger the creation of an alternative system to SWIFT and the setting up of two alternative world transaciotn systems and nobody wants that," the diplomat said.
It appears not everyone in Europe is an idiot.
But the punchline, and why once again anyone with half a brain knows it is all for show, is that as usual, Russia's gas sector, which powers European industry and lights its cities, has been spared so far and will continue to be spared.
By now even 5 year olds realize that if Europe really wanted to hurt Russia, it would cut off the gas imports.
Only one problem: it can't, as that would be economic and political suicide for Europe, and for the "infinite" political capital behind its unraveling monetary union. Everything else is noise.