German Chancellor Angela Merkel has warned Moscow that Europe could inflict 'massive economic and political damage' to Russia if the situation in the Ukrainian region of Crimea escalates.
Germany now appears willing to use its diplomatic and economic muscle to turn up the heat on Moscow, analysts say. And they add that Merkel, a fluent Russian speaker, has been Europe's prime interlocutor with Russian President Vladimir Putin.
Addressing lawmakers in Germany's parliament this week, Merkel issued the strongest threat yet to Moscow.
"If Russia continues on its course of the past weeks, it will not only be a catastrophe for Ukraine,” she said Thursday. “We would see it, as neighbors of Russia, as a threat. And it would not only change the European Union's relationship with Russia. No, this would also cause massive damage to Russia, economically and politically."
Merkel ruled out any military action. She dismissed Russia's claims that Crimea's bid to break away from Ukraine could be compared to Kosovo's independence from Serbia. Crimeans are set for a referendum on Sunday to decide to possibly join Russia.
"One thing has to be completely clear: The territorial integrity of Ukraine cannot be put in question," Merkel said.
Merkel's hardline stance marks a departure from her previously cautious approach to Russia, said Professor Alan Riley, an expert on EU-Russia relations at City University in London.
"What we're seeing is a grave Western concern that President Putin may be willing to go a lot further,” she said. “Would we have some form of Afghanistan-style guerilla war in Europe, in the middle of the continent?"
At stake for Berlin are deep economic and trade links with Moscow. Russia says it would retaliate to any sanctions. Germany gets 40 percent of its gas from Russia. But Europe could quickly reduce that dependence and deprive Moscow of revenue, Riley said.
"Two-thirds of (Russian gas firm) Gazprom's revenue comes from the one-third of gas it produces that it sells into the European Union,” he said. “That's about 10 percent of federal tax revenue. If you cut off the lifelines of those large state companies or state-influenced companies from the Western capital markets, that would have an impact."
Putin will be gambling that the threats from Chancellor Merkel are just rhetoric, said risk analyst Elizabeth Stephens of insurance brokers Jardine Lloyd Thompson in London.
"If we go back to 2008 when Russia was involved with the war in Georgia, the West issued strong condemnation,” she said. “The following year the Americans announced a reset in relations with Russia, everything was supposed to move forward on a positive footing. So I think Putin can rest assured any sanctions that will be imposed will be very weak."