the centerpiece is this. a 40-yard ship. it is the longest ship that has ever been excavated. i'm del walters in new york, and "inside story" is next. >> if you want to put the economic squeeze on another country in an international dispute, what are the tools of the trade or lack of trade? u.s., russia and you were union on this "inside story." >> hello, i'm ray suarez.

in the bad old days of the soviet union, the country was known for the shoddynance of its manufactured goods. nobody wanted the second rate autos, appliances, ball point pens or shoes, but now the ussr and russia is stuffed with things that the world does want. aluminum, coal, copper, timber, and especially oil and natural gas. in wednesday's new york times, columnist, tom freedman alleged that rather than following a competitive industrial strategy, vladimir putin has turned his country in a "mafia-run petro state." insteadly more relying on natural resources than human ones. and why? because the russian president has decided to pick a fight with ukraine and it's supporters around the world. and how those supporters express their displeasure may focus on

the russian economy with risks for russia's neighbors. crimea remained tense thursday as global powers to the east and west discussed ways the escalation after the weekend take over. russia says it's not their military. in paris, you said secretary of state, john kerry, met with the u.n. foreign minister, in a discussion that was intended to be about lebanon. >> steps are suspending bilateral investment. and suspending engagement and preparations for the g-8 summit in sochi. russia made a choice, and we have clearly stated that we believe it's the wrong choice, and that is the choice to move troops into crimea. >> reporter: on wednesday, the european union offered ukraine $15 billion in aid. the same amount russia offered the country before former

ukraine an president, victor yanokovych's ouster. >> it is a package designed to assist in reforms of the ukraine government. >> reporter: the eu man's to meet thursday about possible sanctions but so far the group has treaded lightly. >> interpreter: crisis diplomacy is not a weakness, but it's more important than ever not to fall into the abyss of military deescalation, not to fall into the abyss. >> reporter: it could be one reason why vladimir putin appears unphased by the u.s.' stern words. u.s. really has little economic leverage compared to its european allies. for example, russia and germany had strong economic ties. germany is the biggest importer of russian gas and oil. some of it comes from pipelines across the ukraine.

russian supplies account for 36% of all german gas consumption. german leader, angela merkel has taken on a similar approach in moscow. in washington, president obama's actions are limited by congress. speaker of the house of representatives, john boehner, spoke with the standoff with russia wednesday. >> the majority is working on a bailout package, and working with them on a possible bill dealing with sanctions. they can strengthen the president's hand. >> reporter: the u.s. pledged $1 billion in energy subsidies to cash-strapped ukraine on tuesday, as it's economic situation worsened. >> the state treasury is empty, and due to unbelievable corruption in my country. we cannot collect the revenues in order to execute our social obligations. >> reporter: ukraine has

issued short-term debt and interest rates as high as 15%. new government estimates it needs $35 billion in rescue loans over the next two years. >> with the first efforts of a diplomatic solution failing in paris yesterday, what are the tools of disposal if it decides to pressure russia over the occupation of the ukraine? joining us with the look at the russian, ukrainian, american economies, are jake, a senior fellow at the peterson institute for international he international economics. from kiev, larry pickar, an analyst at the think tank and teaching at a business school, and from washington, the acting director of the atlantic council's energy and environment

program. jacob, there much in the way of economic leverage that the u.s. holds in russia? >> compared to the eu, in my opinion, no. bilateral trade is too small, unlike in europe, and unlike in europe, where you have nuclear option, for instance, you could look to tart asset freezes and things like that, because if you had the money, similar to what the former ukraine an leadership had in europe, they had money inside of the eu and that could be frozen. they don't have, as far as i know, as much money in the u.s., so no. there isn't, quite frankly, that much that the u.s. can do on the bilateral economic front. >> larry peckar, how is russia emeshed in the economy of the eu

and europe more broadly? >> indeed, russia is fully integrated in the global economy, and has close ties into the global economies and so on. but the point is that the current situation is not purely economic. when speaking about just the economy, western countries, european countries, are interested in keeping close ties to russia. in deporting russian gas, and exporting technology, and investing in huge russian potential, but as for the moment, it's not purely an economic situation. since last week, we have rather geo political military situation, and the military aspect prevails on economic. and that is why european leaders

changed their minds and their statements become more and more strict and more and more firm against russian invasion into ukraine. >> certainly, as valerri suggests, there's a minimal suggestion to this. but coming back to economics, we kept hearing over the past days how dependent europe is over russian gas, and isn't russia also dependent on european money. >> let's put it this way, it's a codependent see. russia is the third largest trading partner for europe. and russia by itself is the largest supplier of energy, beyond just gas, to europe. and the gas discussion is the elephant in the room pretty.

pretty much. but we have to remember there's far more than that. there are crude exports to russia, and at a time when the european refineries are falling apart. so the relationship is enormous, and they cannot be without each other. >> does that make russia just as reluctant to shut the taps as as europe to say that they don't want it. >> it's $100 million a day in revenue that comes just from gas exports. >> valery, how has the russian economy been performing lately? it's not like the russian economy is setting the world on fire, is it? >> indeed, the last years of

the rule of yanokovych puts the ukrainian economy into a tough time. and we have a shortage of money in our state budget. we have because of corruption and state pressure, but in general, the ukrainian economy is healthy, and it has been resurrected with money from west. i think that we should speak about something like russia -- for ukraine, it would be an economy with good performance. >> so jacob, as he suggests, ukraine is clearly vulnerable. but is russia operating from a position of strength? >> oh, certainly not. and i would go so far as to say that part of the reason for this military action by vladimir

putin particularly reflects the fact that the russian economy isn't growing at 5, 6, 7% a year anymore, so he needs to shore up legitimacy in other ways. because the reality is that the russian economy was scheduled to grow less than 2% before this happened. and i wouldn't be surprised if what has already happened has tipped russia into a recession in 2014, which clearly puts the performance legitimacy of vladimir putin, who has really enjoyed these big rents in terms of trade benefits in more than a decade in power, well, those days are over. >> and if the world price for refined product or crude product goes down, russian receipts immediately go down, right. >> yes, absolutely, this is in the economy, this is a petro state but more importantly, it's

also critical to recognize that the sort of rents of the russian elites, putin himself, and the political leadership in the kremlin, are very directly linked to several of these energy, state-owned enterprises. and that's where they basically derive a lot of their personal wealth from as well. so they are personally affected by this as well. >> we're going to take a break, and when we come back, we'll talk more about what's at stake in europe, but who is holding the whip hand in this confrontation. this is "inside story."

>> it was economics that led to the political crisis in ukraine, and economics are in play right now as the eu and the u.s. respond to the russian troop movements. we're talking about the deep

economic ties between russia and europe and how those ties impact american efforts to appreciate vladimir putin. is some of this dependent on the calendar? it's still pretty cold in a lot of europe, and is this a different confrontation as we go to april and may some. >> actually, it's a pretty mild winter. most european winters are harsh, but you find them with plenty of goss reserves, so if the taps were turned off tomorrow, most have enough to make it through 80 days, and in some cases, 90 days of consumption. >> does this weaken russia? >> it certainly does, and europeans, not just for their energy sourcers, but where the energy is coming from, so europe finds itself in a much different situation than 2009.

>> reporter: valerri, the eu announced emergency aid that replaces the aid that was supposed to come from russia. is that enough to get ukraine through the next several months? >> i'm sure that that's enough. and indeed, we should also include some specific packages from inside. i think that i think that what has been discussed by the community and the government in ukraine to ask ukraine and business to put some money, invest some money into the economy for stabilizing the situation, will increase trust of international creditors to the economy as well, and indeed, we need some type of budget

costs, because budget was prepared by putin's government with a lot of spends, which are much more than the country can spend now, but definitely, this aid will be enough to get the loans to stabilize the economy. >> over the past several years, jacob, russia has not hesitated to squeeze ukraine economically when it has wanted to. does this aid from the eu put a little resilience into the situation, making it less vulnerable? >> no doubt about that. in fact, the european commission was explicit when it announced that it intended to offset potential increases in the gas, that they charged ukrainian customers, and i think this is, in my opinion, by and large, a

bridge financing loan. basically, it takes ukraine over to a longer term imf program that could last for several years and reach considerably higher amounts of money to be put into place. >> the gas lines, if you look at a map of europe, and where the gas runs from where to where, that's a reality that's hard to get around, and it's the product of years of experience and relationships between sellers and buyers. if europe wants to move away from that heavy dependence, can it do it? >> it definitely can. there are a few options. there are new routes to bring existing gas supplies to europe. russia is actually proposing one of those, which i doubt we'll see happen. but also, there's new supplies in europe, such as eastern mediterranean area, as well as

bringing l and g supplies to europe. in the u.s., we know we have approved l and g exports, and when we'll see those l and g ships go to europe, that's going to lessen their dependence on russia. >> so the balkin fields, and the northern midwest could end up getting burned in cookers, in central europe? >> yes, maybe. if the market demands it. >> and valerii, how would you describe the move right now in kiev? this was a government that was in control for a matter of hours, when already russian flags were flying over town has in crimea. are they consolidating their grip on power? are they acting with more command, solidifying their rift

in the nation? >> now the government and the parliament control the whole country, where we have russian troops. it's true that the russian troops have no specific signs of arms, just people in -- let's say people in military uniform without any specific signs. and president putin will say that there are no russian troops there, but today, many russian people, who are members of these -- which are these troops which are located in crimea, they told the ukrainian soldiers that they're russians and told about their specific regiments and brigades, and now

international investigators from osce and from united nations, they know much more than yesterday about specific people who are now without any signs of reduction army, but soldiers of russian army in crimea. but all other parts of the country are controlled by ukrainian parliament and government. and the country is really unified it's will to stop invasion and stop aggression, and we're very thank. and appreciate very much the western diplomacy. because of the western diplomacy and the tendency of the ukrainian army to stop this invasion. >> we're going to take a break, and when we come back, we'll talk more about the economic pressure on all of the players

in this economic crisis. this is "inside story", and stay with us.

>> welcome back, i'm ray suarez. while the world waits to see the ukraine situation, the markets have already reacted. the value of russian assets, the ruble, stocks and bonds, plunged this week, and russia's central bank has had to hike interest rates. on this section of the program, we're talking about the high stakes economic gain making out with the diplomacy over the ukrainian crisis. it's said in the hours after the markets opened on monday, some of the biggest names in russian finance lost billions in their portfolio just because of market plunges. is this the kind of thing that

puts a less predictable kind of pressure on president putin? that he'll have his own rich guys around his neck saying, you're killing me here? >> oh, absolutely. i think in fact that the sort of rapidness which the financial markets always respond to these kinds of uncertainties means that even if you have the european sort of sanctions ratcheted up gradually, the financial markets are going to respond to the threat of such situations immediately. so if there's a threat, that for instance a russian state bank going to be shut out of the european football market, something like that in the future, you're going to sell that stock right away. and you're going to want to get out of that stock, and that's why you can have much fiercer financial reactions, much more rapidly than diplomacy works. and this is where this hits the russian elite where it hurts. because the majority of russian

leaders, including, i would argue vladimir putin himself, they're in it for the money more than anything else. >> hihaela, when you use energy as this mustn't instrument, do you also take a risk that your customers look elsewhere so they are not pressured in that way? is this a weapon that you can only use once or twice is then it's not useful? >> talking about an expression when i was learning english, this is the third strike. we have already talked about diversification and security of building more interconnectors within europe. so this would be the third time. and i wonder if the repercussions are going to be even harsher on russia because they don't have a large market yet. >> are there europeans that are

not willing to pick this fight because they successfully sell goods into the russian economy, which has not been able to provide a good, reliable consumer product to its own people? >> there's no doubt that particularly in germany, this is a major concern, because the russian export market is huge for german automobiles, and also capital goods, and they have a lot of investment already on the ground in russia that will be vulnerable to potential nationalization for counter reactions by the russian authorities to potentially ease sanctions. >> and valerii, we don't talk about them of, but there are very rich guys that are powerful there, and probably won't want this fight either. >> indeed, indeed, but it is port to emphasize that all of

the most rich guys of ukraine, they are interested in unification and be stability, and serenity of the country. they don't want to be just small people in a far distant russian province. they would like to be rich guys in independent ukraine. and they know that here in ukraine, which is not a totalitarian state with a liberal policy, they can be free, and they know the story of the very rich guy of russia, you know the story, who was released just a few months ago. and so what is important that the control crimeaian nation, from poor people in far villages, to the most rich people, they have the same

opinion towards russian invasion, towards ukrainian serenity and the stup of the country. that's important that the most rich people of ukraine now play role in recovery of the country after events of last month. you know probably that two very rich businessmen of . >> valeri, that puts us in mind of an old american saying about people preferring to be big fish in small ponds rather than small fish in big ponds. if you're an ologart in the ukraine you're probably looking at wanting to remain a big shot in that country rather than a remote province. that brings us to the end of this edition of inside story.

thanks for being with us. in washington, i'm ray suarez. welcome to al jazeera america. i'm del walters. these are the stories we are following for you. a call to secede, crimea parliament voting to join russia. all of this on a day when the u.s. imposes sanctions against russia as diplomats try to talk it out and find a peaceful solution. and the farming technique that is giving hope t