Mar 03 - The U.S. is working on economic sanctions against Russia, but experts say sanctions must be more than just a slap on the wrist, but others warn severe sanctions could threaten the global economy. Conway G. Gittens reports.
PLEASE NOTE: THIS EDIT CONTAINS CONVERTED 4:3 MATERIAL As the possibility of war between Russian and Ukraine escalates - Washington may apply financial pressure to get Russia to back off. The State Department is preparing potential sanctions against Moscow, according to a spokesperson. No other details were provided except "we have a broad range of options available." Holding back travel visas is one idea believed to be floating around, along with removing Russia from the Group of 8 leading economies. No matter what the tactic - the end result has to hit Russians hard in the wallets to work says Atlantic Council Executive Vice President Damon Wilson. SOUNDBITE: DAMON WILSON, EXECUTIVE VICE PRESIDENT, ATLANTIC COUNCIL (ENGLISH) SAYING: "Russia today is integrated in the global economy in a way that the Soviet Union was not and so there are some serious conversations now about more broad-based economic sanctions that would target Russia and Russian company's roles in the international financial sector, international banking sector that the Kremlin has to think twice about." But getting the Kremlin's attention may have unintended economic consequences for the global and U.S. economy specifically if a drawn-out international conflict impacts energy costs, warns Michael Gapen of Barclays. SOUNDBITE: MICHAEL GAPEN, DIRECTOR OF U.S. ECONOMIC RESEARCH AND GLOBAL ASSET ALLOCATION, BARCLAYS CAPITAL (ENGLISH) SAYING: "The thing to watch longer term, I think the key to at least the U.S. economic output is that what happens to energy prices. The U.S. consumer is the most energy sensitive consumers globally, for the consumer in the rest of the world it tends to be food prices. So the U.S. has a pretty good outlook for 2014 and 2015 and that's been supporting equity market valuations and risk sentiment but higher oil prices would be something that would feed back as a drag on consumption." How much of drag depends on how far Washington is willing to go with sanctions, and if it can even get European allies on board. SOUNDBITE: MICHAEL GAPEN, DIRECTOR OF U.S. ECONOMIC RESEARCH AND GLOBAL ASSET ALLOCATION, BARCLAYS CAPITAL (ENGLISH) SAYING: "If it is something that goes just to the point of freezing certain assets and capabilities and travel of Russian citizens, you might expect the impact to be relatively muted, but if it goes further - if we're talking about something that restricts trade flows or something that would lead, as a I just mentioned, to higher oil prices for the U.S. or higher natural gas prices for Europe - as we know the Ukraine is the natural supply for Europe energy products - then you have a different story." Investors are not waiting for that next chapter to be written - fretting this could slow a Wall Street that's just getting over an emerging markets flu.