The payment networks in the developed world represent a significant and influential policy tool. They represent behavior of participants in a market, whether in Washington or Moscow. Payment networks represent an economic base, from tourism to trading of commodities and natural resources, the networks process transactions efficiently. The monies generated by the networks are real, the participants using the networks are rational and facilitation of the market system is an integral piece of the infrastructure that exists. The connection of buyers and sellers to the network creates a market system governed by the laws of the country which the transactions take place.
Eastern Europe is notorious for their utilization of the black market. This is analogous to "by any means necessary" as black markets represent an efficient form of a functioning economy and fill the void left by governments, institutions and infrastructure. The efficient use of the black market may trump legitimate corporations and crowd out market participants. The laws in much of the undeveloped world are local, the rules are local and appropriate obedience must be followed to gain access to these markets. If the costs of obtaining access are prohibitively expensive and returns not high enough to justify taking risk, the market entrenches locally, cutting off access to the global economy.
The extent which the US and EU control this infrastructure can have important influence over decisions made by countries such as Russia. The Russian elite are widely known to utilize the bailed out banking system in Cyprus. The Treasury has limited influence if the transaction payment networks are held outside of US corporations.
Mr. Putin may have already grabbed the natural resources he needed and expanded his market. One could argue that the risk-reward decision was tilted in favor of Mr. Putin and that he acted completely rational in terms of maximizing return on political capital. The opportunity cost was huge and deterrence by the international community was weak. Mr. Putin simply repeats the pattern of Georgia in 2008, albeit without the precursor of a cyber attack and with a different US President.
Eastern Europe is notorious for their utilization of the black market. This is analogous to "by any means necessary" as black markets represent an efficient form of a functioning economy and fill the void left by governments, institutions and infrastructure. The efficient use of the black market may trump legitimate corporations and crowd out market participants. The laws in much of the undeveloped world are local, the rules are local and appropriate obedience must be followed to gain access to these markets. If the costs of obtaining access are prohibitively expensive and returns not high enough to justify taking risk, the market entrenches locally, cutting off access to the global economy.
The extent which the US and EU control this infrastructure can have important influence over decisions made by countries such as Russia. The Russian elite are widely known to utilize the bailed out banking system in Cyprus. The Treasury has limited influence if the transaction payment networks are held outside of US corporations.
Mr. Putin may have already grabbed the natural resources he needed and expanded his market. One could argue that the risk-reward decision was tilted in favor of Mr. Putin and that he acted completely rational in terms of maximizing return on political capital. The opportunity cost was huge and deterrence by the international community was weak. Mr. Putin simply repeats the pattern of Georgia in 2008, albeit without the precursor of a cyber attack and with a different US President.
