Russia: The Big Squeeze
by Carlo GrazianiPreview
When the war in Ukraine began, quite a few critics of the Biden administration were quick to claim that sanctions on Russia would have no positive effect. It was ridiculous to claim to know in early March how effective sanctions might be, given the timescales of months on which one would expect to see their effects. But it is just possible now, in the tenth week of the war, to start seeing the real effects that have already taken hold, using actual economic data.That’s what I’ve been trying to do for the past week, and the results have been sobering. The bottom line is this: I see evidence that an economic cataclysm is about to enfold Russia, crippling its central nervous system much sooner than is generally appreciated. So much so that I would not be surprised if by late June, the actual battles in Ukraine are pushed below the fold of the front pages of major newspapers by a bigger story, featuring the words “collapse” and “Russia”.
That should give us pause, and perhaps even scare us a little, because of the unpredictability associated with that scenario. I want to lay out the evidence I see. The usual caveats apply: I am not an economist, a political scientist, etcetera. I just think there’s an important story that needs attention right now.
The war is still only ten weeks old as of this writing, so that it’s not easy to give definite judgments about how the economic story is going to end in Russia at this stage. A few things are clear, however, and we can expect them to be a lot clearer by June or July.
The Russian economy is like a car speeding down a mountainside over broken ground, and the very first set of sanctions—the Russian Central Bank foreign currency reserves freeze—sabotaged the car’s brakes. All the other sanctions (including an oil embargo, export controls, navigation, aviation and financial restrictions) gave the car various random accelerating shoves, so that it is now careening dangerously among trees and boulders.
From the perspective of someone wanting to see the car crash, the best thing in the analogy is that the guy at the steering wheel, who has the last chance to save the car, is Putin, and while he thinks he knows how to drive, actually he has no idea. He’s too busy shrieking incoherent threats into his cell phone and firing a weapon out of the window, while Nabiullina, his Central Banker, looks on aghast from the passenger seat.
(Below is the TL;DR version, breaking here so we can put the full post under the fold)
The Full Post
The Big Squeeze
by Carlo Graziani
When the war in Ukraine began, quite a few critics of the Biden administration were quick to claim that sanctions on Russia would have no positive effect. It was ridiculous to claim to know in early March how effective sanctions might be, given the timescales of months on which one would expect to see their effects. But it is just possible now, in the tenth week of the war, to start seeing the real effects that have already taken hold, using actual economic data.That’s what I’ve been trying to do for the past week, and the results are sobering. The bottom line is this: I see evidence that an economic cataclysm is about to enfold Russia, crippling its central nervous system much sooner than is generally appreciated. So much so that I would not be surprised if by late June, the actual battles in Ukraine are pushed below the fold of the front pages of major newspapers by a bigger story, featuring the words “collapse” and “Russia”.
That should give us pause, and perhaps even scare us a little, because of the unpredictability associated with that scenario. I want to lay out the evidence I see. The usual caveats apply: I am not an economist, a political scientist, etcetera. I just think there’s an important story that needs attention right now.
The Freezing of the Russian Central Bank’s Foreign Currency Reserves
The significance of first sanctions against Russia’s Central Bank are widely misunderstood as mere asset freezes. But they were much more than that. They constituted acts of fundamental economic sabotage, analogous to surreptitiously cutting the brake fluid lines in a car. It is essential to understand this aspect of what the Biden administration accomplished in the first three days of the war, in order to understand what is about to happen to Russia.
This New Yorker article by Ben Wallace-Wells, is well-worth a thorough read. But the TL;DR is as follows:
Under its respected Central Bank governor, Elvira Nabiullina, Russia had stockpiled $630 billion in foreign currency reserves since 2014 in order to protect itself from future Western sanctions, having been somewhat stung by sanctions in 2014. Such reserves would give the bank the ability to carry out stabilizing financial maneuvers in the event of a crisis, analogously to what the US Federal Reserve did in response to the 2009 financial crisis. Try to envision what would have happened in the US in 2009, if the US Federal Reserve had not had the legal authority to supply arbitrary amounts of liquidity to US financial institutions: banks, quasi-banks (such as Goldman Sachs), and nonbanks (such as AIG). The US, and the world, would likely have been plunged into a repeat of the 1929 Great Depression. That’s what the Russian Central Bank planned to use that stockpile for: economic stabilization.
By 27 February, under sanctions agreements between Western and Japanese governments, approximately half of those reserves—almost $300 billion, in currencies such as US dollars, pounds, euros, and yen, in ledgers held by banks under the legal authority of Western and Japanese Central Banks, were cut off from Nabiullina’s control. Of the remaining stockpile of Russian Central Bank assets, 13% are in renmimbi, 22% are in gold, and the remainder is in “International Institutions” (I believe that this means IMF, World Bank etc.). The renmimbi are useful for trade with China, but not so much for market stabilization maneuvers. The assets in International Institutions might as well be marooned, since it might take years to figure out a way to get them under Russian control again with all those hostile Western financial systems in the way. And if Russia starts dumping gold it has to do so at a discretely, at a discount, because gold transactions with Russia are also sanctioned, and at any rate dumping that much gold would reduce its value considerably.
The Russians never saw it coming. They are basically screwed. That stockpile was their big plan to sanction-proof their economy. They no longer have any tools at their disposal to protect themselves from whatever economic crisis that should arrive. Western politicians have sabotaged their car brakes.
The fact that that wealth cannot be used for industrial investment is also significant, of course, as is the international hunt for oligarch wealth (about $240 billion as of 14 April according to Forbes) which might otherwise similarly be pressed into Russian national service for industrial investment or financial stabilization. Some of that oligarch wealth is supposedly held on behalf of Putin himself, which is another reason freeze it. But believe it or not those are second-order effects. The paralysis of the Russian Central Bank is a crippling blow that was struck on the third day of the war. Whatever economic crisis the Russians experience now, they have no safety margins.
Export Controls
Western economies (and China) tend to have a lot of vertical integration, which means that there are value-adding supply chains that go from raw materials through various stages of manufacture and servicing to final high-end, often high-tech products, often within national boundaries, or at least within trading blocs such as the EU.
Russia is not like that. It is often referred to as a “petrostate”, which assimilates it to Gulf states such as Saudi Arabia, or to Venezuela. This is not totally accurate, but pretty close. The basis for Russian wealth is mineral wealth, plus agriculture. Russia has no vertical integration. They do not produce much of the industrial infrastructure that they require to mine or pump their mineral wealth (which is a very high-tech business nowadays, if it is to be done with any economic feasibility). Instead, they buy or contract that stuff, mostly from the West. They also import key inputs to all their finishing industries, including microchips, machine tools, specialty chemicals and many others. It’s pretty incompetent economic management, but hey! If you’re busy reviving an imperial nationalist program, you can’t sweat details like that…
The US, Canada, the EU, the UK, and Japan have targeted Russian military, aviation, and oil industries with export control sanctions (a summary is here). The point to understand is that “targeting” in this context is a bit of dark economist humor. Those industrial inputs are also inputs to other industrial manufacturing processes—they are what is called “dual-use”. So the lack of Russian investment in their industrial base means that the West can basically switch that industry off, as if by remote control.
Remember how in April 2020 we couldn’t get enough toilet paper (among other things) in the West as a consequence of the pandemic, and we learned to shrug and say “because supply chain”? Well, in Russia, factories that manufacture sunglasses, dishwashers, automobiles and so on are going to shut down soon, if they haven’t already, for lack of inputs showing up at their loading docks, basically “because supply chain”.
That’s a lot of laid-off workers.
Unemployment and Inflation
Here is a Reuters article containing a forecast that there may be 2 million more unemployed people in Russia by the end of the year than there were before the war began. I would emphasize that all such forecasts are wild-ass guesses—nobody has any idea what is really going to happen. Moscow’s Mayor recently asserted that his city is looking at 200,000 newly unemployed people just from foreign companies shutting down their operations and leaving the country.
Russia does pay unemployment benefits. Which is interesting, because the only way it can fund those exponentially-growing benefits despite its vanishing tax base is using its oil and gas revenues—which are themselves dropping due to increasingly effective embargoes. So while it is certainly not very nice to deliberately put millions of people on the dole (although a “compared to what” question is certainly appropriate here) there is a valid war strategy reason for doing so: Putin is thereby forced to choose between beggaring an enraged, impoverished and disillusioned populace to fund his military or appeasing the masses while starving his army. I like that choice.
Oh, and a lot of scarred combat veterans are about to come back to a nonexistent labor market. That always works out well.
Speaking of day-to-day life in Russia: the principal use of a healthy, un-crippled Central Bank’s authority is to curb inflation. So, how is that going in Russia?
Inflation is hard to measure, and even harder to forecast. I’ve seen numbers that are all over the place. The Russian economics ministry reported annual inflation rates of 17.49% as of April 8, up from 16.70% a week earlier (I love that second significant figure after the decimal point—how precise!) The World Bank apparently forecast an inflation rate of 22% for 2022.
These claims strike me as innumerate. A senior Russian minister apparently told the upper house of the Duma on 13 April that a composite index of average food items consumed by Russians (potatoes, onions, carrots, beets, etc.) increased in price by “50%-60%” since the beginning of the war. That is to say, in 6 weeks of war. If you annualize a 50%-per-6-weeks rate of inflation—compound it to 52 weeks—what you get is a 3,260% annual rate of inflation. You did not read that wrong. It means that food prices paid by average Russians should be expected to increase by a little over 33 times in a year. I assume that members of the upper house of the Duma either don’t own calculators or don’t understand exponential progressions.
If the Russian government can’t figure out how to stop this, then there is a shitstorm on the way. People are spending 40% of their vanishing incomes now on food. It will be 100% in a month or less. The government had better hose them down with more of that oil revenue, and besides feeding the problem by feeding inflation, that’s once again less for the military. Or, the Central Bank can use its one remaining tool, and raise interest rates sky-high, and crater the economy.
A Provisional Summary
The war is still only ten weeks old as of this writing, so that it’s not easy to give definite judgments about how the economic story is going to end in Russia at this stage. A few things are clear, however, and we can expect them to be a lot clearer by June or July.
The Russian economy is like a car speeding down a mountainside over broken ground, and the very first set of sanctions—the Russian Central Bank foreign currency reserves freeze—sabotaged the car’s brakes. All the other sanctions (including an oil embargo, export controls, navigation, aviation and financial restrictions) gave the car various random accelerating shoves, so that it is now careening dangerously among trees and boulders. From the perspective of someone wanting to see the car crash, the best thing in the analogy is that the guy at the steering wheel, who has the last chance to get the car under control, is Putin, and while he thinks he knows how to drive, actually he has no idea. He’s too busy shrieking incoherent threats into his cell phone and firing a weapon out of the window, while Nabiullina, his Central Banker, looks on aghast from the passenger seat.
I believe that there may be an economic crisis that is about to hit Russia that has no parallels in great power economic misery since Weimar Germany, or possibly since 1945 Germany. If that’s correct, then sometime this summer the war in Ukraine could move below the fold of major newspaper front pages, displaced by an even bigger story, believe it or not. We need to get ready.
I don’t know what the political effects of such a crisis might be. I have some hopes for regime change, founded on the notion that dictators need to show success. I do think it is possible that a lot of people’s loyalty to Putin could sour as their lives sour. A lot of those people are in the military, and in the security forces.
But that may be wrong. It doesn’t matter, really. We have to do this anyway, to contain Russia. The rules are different now. We are not going to allow Russia to do the world what Serbia tried to do to the Balkans in the late 1990s using the same type of grievance-driven irredentist pseudo-historical self-affirming bullshit narrative to justify any aggression as self-defense. We need a new containment, until Russia can move past this political psychosis. Economic isolation through sanctions will be one of the tools we use to manage that containment, and calibration of sanctions will be part of the incentives that we must learn to use manage eventual Russian emergence from that isolation.
This makes sense to me. What do you all think? ~WG
SpaceUnit
Interesting piece. I guess the billion dollar question is what Putin will do when his frustration and rage reach critical mass.
And I don’t think anyone knows.
Mike in NC
All I can say is that we spent a few days in St Petersburg while on a Baltic cruise in 2014. It looked like foreign tourism was crucial to the economy. There were several cruise ships in port, a large Customs building with a bunch of gift shops and ATMs, etc. Hard to imagine a comfortable life in the city if that disappeared. Our tour guides made it clear nobody wanted to go back to USSR times with no travel abroad allowed and empty store shelves.
debbie
Pain is the least Russia deserves. If it finally gets Russians to jettison Putin, fine, but there will be an even bigger economic crisis when Russia gets the bill for rebuilding Ukraine.
Carlo Graziani
@SpaceUnit: No. That’s right. It’s seatbelt time.
Egorelick
Over the last 9 weeks, the ruble is defying gravity more effectively than Bitcoin, dogecoin, Tesla, or GameStop in the same time period. Any idea how that has happened?
Shalimar
Russia is no longer a great power economically. Hasn’t been for a long time.
Carlo Graziani
@Egorelick: As I understand such matters, by means of draconian capital controls. For all intents and purposes, the ruble is no longer a convertible currency. I would hasten to add that I am educating myself on such matters rather quickly as I go along. I would appreciate any help I can get from people in this forum.
kalakal
If and when the EU sanctions oil imports from Russia it will be as if your runaway car went over a cliff. The payments amount to about $800,000,000 per day.
SpaceUnit
I can’t see Putin backing down. Not ever. His ego seems too inflated. He’s been the Big Man for far too long. I think he either gets ripped from power in a coup or he inflicts as much damage as possible on the world.
And I think it also might be time for a drink.
NotMax
@Mike in NC
Non-urban dweller: “Your stores have shelves?”
//
Carlo Graziani
@debbie: For what it’s worth, it seems pretty clear that Russia will never see the $300 billion of Central Bank funds again, nor the frozen oligarch wealth. Legislation is in the works in the US and in other nations where those assets are stuck to convert their status from “frozen” (i.e. must be held in trust and not damaged or allowed to decrease in value, lest legal liability for damages be created) to “seized” (i.e. summarily expropriated). The purpose of these legislative actions is to convert those funds into war reparations for Ukraine.
Roger Moore
I think a lot of this was based around the assumption Russia would win quickly, and we’d be left trying to enforce sanctions purely as a retaliatory measure. In that case, there would be a huge worry about defections, the sanctions regime would probably collapse, and the countries that enforced the strongest sanctions or held out the longest would face various forms of Russian retaliation in turn.
Instead, the Ukraine succeeded beyond expectations and the war is still dragging on. That has given the sanctions more time to bite and the countries participating more time to see how effective they are. The sanctions look like they may be a critical part of the overall war effort.
Bill Arnold
Central Bankers like their signaling. This made me laugh a bit.
‘Colossal uncertainty’: Russia surprises with bigger rate cut (29 Apr 2022)
I don’t know what Russian numbers to trust. Some agencies lie (e.g. COVID-19 death statistics), others do not (e.g. death statistics).
Kropacetic
See also: US in Iraq in the 2000s.
West of the Rockies
This was very interesting and edifying, Carlo. Thank you! Russia is reaping what it has sown over the Putin years. I hope their BS hacking industry is being swiftly obliterated.
Mallard Filmore
@debbie:
As much as I sympathize with your desire, stomping Russia into the ground for a generation will not work out for the world. I fear that would end up similarly to the rise of Nazi Germany. Different labels on the politics, for sure, but a violent, aggressive, “it’s all YOUR fault” mindset … with nukes.
Besides, I don’t see China allowing Russia to crash so hard that it becomes a pet of the west, or becomes a failed state.
The west will have to come to terms with giving Ukraine a lot of our own help to rebuild.
Carlo Graziani
@Bill Arnold: Yeah, that was a good one. “Russia’s benchmark rate plunges, to 14%.” Alternate-Universe TV.
lee
The news stories about the Russian troops stealing grain from Ukraine makes a lot of sense with the news that Russians are now having to spend 40% of the income on food (so far).
There is talk of how if the sanctions go on Russia will turn into another hermit kingdom.
Urza
@West of the Rockies: That alone would be worth the sanctions and all the weapons we’ve sent.
lee
@Mallard Filmore: China will turn Russia into a vassal state before they let them crash. They want access to the resources in Russia’s east.
Mallard Filmore
@West of the Rockies:
Since you mention this, just today I saw a YouTube video claiming that the contract hackers Russia rounded up, many times from other countries, are turning their attention to targets in Russia.
“Loot while the looting is good.”
WaterGirl
@lee:
i am not familiar with that term.
Carlo Graziani
@Kropacetic: I certainly have no brief for W, or for the neocons. But I do think that it was a rather different pathology. Self-destructive, imbecilic, driven by an utterly confused view of who all the angry arabs are. But coming from an utterly different place from where Putin is coming from.
Urza
@Mallard Filmore: I’d be interested to see that if you have a link.
Ruckus ??
@SpaceUnit:
There is a lot he could do but much of would only make things worse even in the short run. Few countries can make a go of it on their own, even one rich in oil and agriculture. Remember a lot of Russia doesn’t grow a whole lot in winter and that if the military comes back, they aren’t likely to be overwhelmed with pride after finding out how vova screwed them. I’m predicting a coup, possibly an assassination within the next 12 months. Maybe less. In most countries with a system such as runs Russia there is one man to blame, with maybe a few supporters and that means an overthrow can be easier, especially if the military and the protective force are in on it, which often become part of the new government, especially if they help. Given the modern world, which even Russia is part of, many people will know they’ve been lied to, and many already do. I understand vova is going under the knife for some medical reason, I wonder if he comes out of it. Or dies because he didn’t take the risk.
lee
@WaterGirl: North Korea is often referred to as ‘the hermit kingdom’
debbie
I didn’t listen, but today’s Fresh Air dealt with oligarchs stashing their stuff in England.
sdhays
@WaterGirl: That’s how people sometimes describe North Korea.
Mallard Filmore
@lee: China + Russia should be able to farm enough to feed their combined population. I don’t know enough about world trade to see how either East or West can screw the other side into submission.
China needs technology, most of Africa and south Asia needs food. This planet has gone past it’s carrying capacity without industrial (e.g. fertilizer) inputs, and global transportation.
WaterGirl
@Carlo Graziani: You don’t think W. and company were there for the oil?
I don’t think they were clueless. I think they had an agenda, and it was an ugly one.
lee
@Mallard Filmore: Another news story today today was Russia going to prisons looking for IT support since a lot have left the country.
WaterGirl
@lee: Ah, i wondered if they were referring to N. Korea but I hadn’t heard the term before.
Mallard Filmore
@Urza: I will go fish for it, and post it in Adams’ post if I find it.
Amir Khalid
@Carlo Graziani:
It sounds like Russia will, at some point, simply run out of funds to conduct the war in Ukraine. I can’t imagine Putin retreating or suing for peace. What do you suppose he’ll do then?
lee
@debbie: Part of Brexit was preventing the UK from adopting the EU’s reporting requirements which would have hurt those oligarchs
West of the Rockies
@Mallard Filmore:
Excellent, Smithers!
Ruckus ??
@Carlo Graziani:
I’m no monetary expert but I’d bet that it’s because at the moment the only place a ruble note is really usable is the bathroom. With the level of sanctions there won’t be a lot for citizens to purchase, there won’t be much value in the ruble outside of Russia and all the accounts of the top supporters of vova will likely be frozen if they haven’t already. We all live in the world, as much as some would rather not and the world economy can have an over ridding effect upon a countries currency if it so desires. The middle eastern oil producers are unlikely to want to help vova, he’s been direct competition for them. That doesn’t leave him much economic power, his military power will soon be only nuclear and that will kill him and his country as fast as every other country if he decides to play around. And given his overwhelming concern for the health and uptime status of his military, I doubt he gets a lot of help from them if he’s on the outs. Sure he’ll have some friends, suck ups and such but that only goes so far.
Medicine Man
Thank you for “using grievance-driven irredentist pseudo-historical self-affirming bullshit narrative to justify any aggression as self-defense.” A nice, colourful summary I plan to use myself; I will provide attribution and may even explain who “Carlo” is.
SpaceUnit
@Ruckus ??:
I hope you are right.
Still having that drink tho.
Mallard Filmore
@Urza: Here it is.
https://youtu.be/dDao99NOgQk
A nice quote:
“Hacking Russia was off-limits. The Ukraine war made it a free-for-all.”
Carlo Graziani
@WaterGirl: At the risk of diverting this conversation onto a side-track, no. I think that was a secondary benefit. I think the neocons world-view was unhinged by the end of the Soviet Union. They were the old advocates of “rollback” in the Cold War days — extremists, but not lunatics. They lost their minds when the Soviets collapsed.
They needed a Main Enemy, and the Soviets had the extreme bad taste to deprive them of one by bowing out of the Cold War. So they bodged a new Main Enemy together out of various angry Arab antagonists, since they also viewed Israel’s interests as identical to the US’s, and largely identified with Likud. They came to view Bush pere‘s limitation of the first Gulf war before toppling Hussein as a kind of betrayal of Israel’s–and hence the US’s–interests.
Eventually this idiocy became a kind of intellectual obsession that replaced the Soviet Union as the central organizing principle of their World View. Which explains how it came about that when an Islamist lunatic like Osama Bin Laden attacked the United States, the Bush Administration felt it was perfectly natural to retaliate against an Arab Nationalist state. It wasn’t oil, it was derangement.
But we digress.
El-Man
Rock–>Putin<–Hard Place
And it's entirely of his own making.
Interstadial
What happens if Putin starts selling spare nukes on the black market in desperation? Or if Russia collapses into a mess of failed states in turmoil, and whoever has the means decides to sell nukes on the black market?
WaterGirl
@Carlo Graziani:
<digress> I will put up a post sometime where we can all argue about this, because I think W’s guys were just looking for an excuse to invade, and Sept 11 gave it to them. </digress>
Until that post, I will now let this drop. :-)
Carlo Graziani
@Amir Khalid: I wouldn’t trust what I see in a crystal ball if I had one. If what I’m saying is correct (and note the caveat) then there is chaos coming. Political forecasts are the sorts of things that one can hazard when one or two small things are likely to change a little, in linear ways. “What Putin is going to do” is a question that implies as subtext that at that point Putin still has the kind of control to impose his will on the system. It is worth remembering that within our own lifetime, Russia has experienced crises in which the center has lost that kind of control.
kalakal
@WaterGirl: A country that isolates itself from the rest of the world. At various times its been applied to Korea, Tibet, North Korea, Myanmar and Japan amongst other peoples taking being reclusive a tad too far.
Australia & New Zealand were half jokingly called Hermit Kingdoms with their Covid policies
SpaceUnit
I can also see Putin threatening to harm all the hostages they’ve taken in order to force the world to drop sanctions and release its assets.
I think the man is just a common psychopath.
Lyrebird
@Mallard Filmore: Agreed on all counts on this one. even if it seems wrong to have EUR. and US pay to rebuild Ukr., we should for all the reasons you list. Also because we owe Ukrainians imnsho. Putin effed up our election proces, persuaded enough Britons to screw up all sorts of things in the U.K. … he won on those. What setbacks has he had? We elected Joey O’Biden tyvm and Ukrainian people have put everything on the line to kick the RF in the teeth.
When Ukr territorial integrity is safe again, I hope the Western world remembers its promises. I am sure Italy’s not gonna forget their promise to build that theater.
I suspect that one of these days we will be helping rebuild Russa too, but not yet.
HinTN
@debbie: It’s in New York real estate, too.
Amir Khalid
@Interstadial:
I suspect he’ll have some unhappy customers to deal with when the nukes they took delivery of turn out to be insufficiently maintained duds.
kalakal
@SpaceUnit:
“I am an exceptional
thiefpsychopath”There was a character that should have stayed away from windows. Putin may not be able to
rachel
@sdhays:
Back in the 1800s, it was all of Korea.
HinTN
@Carlo Graziani: We always need an enemy. When Prohibition ended the liquor nazis immediately focused on marijuana, which “those” musicians were so guilty of enjoying.
NotMax
@Carlo Graziani
Iraq is many things, but Arab ain’t one of them.
EZSmirkzz
Well Carlo I would also be thinking about what happens when the loose nut on the steering wheel of the car runs in to the law of unintended consequences.
The only sure bet in our economic analysis is economic self interests will rule the day until the economic collapse shatters the illusions of the world, including America. We saw that in 2008 when very few saw the housing/credit bubble was about to burst, or even 1999 with the dot com bust.
We may have passed the line when “fools rush in where angels dare to tread” is anything other than 20-20 hindsight. In which case, we won’t hear the nuke that fried us. A Pyrric victory of historic proportions.
If Vladimir Putin and Joe Biden wish to be leaders they should lead their peoples to peace. PS 146:3,4
Bupalos
@Kropacetic: That’s glib to the point of being silly. Did you even read what you quoted and are supposedly responding to?
The Iraq war was monumentally stupid, and immoral in its stupidity. It had false justifications. Sure.
It had zero to do with this kind of concocted history.
Words mean stuff. Those were some very apt and well crafted words you quoted and totally read past in your haste to do your “durr yeah, like Iraq.” Almost made me do a spit take.
@Kropacetic:
zhena gogolia
@NotMax: What do you mean? It is, except for the Kurds, isn’t it?
SpaceUnit
@kalakal:
My guess is that he’s more cautious and paranoid than ever.
But still he’s under a lot of stress, and that can lead a person to make critical mistakes.
SpaceUnit
@EZSmirkzz:
I could have done without that camping trip visual.
Bupalos
@EZSmirkzz: put thy trust only in thy cowardice, for running away and hiding thy head is surely thy salvation. Yea and bow before thy Putin, he of the nuclear sabre, for what benefiteth it a man to be a man for a day, if he may rather hide and be a worm, and wriggle like a worm for a day plus an hour?
EZSmirkzz
@SpaceUnit:
Fixed that for us all.
Lyrebird
@zhena gogolia: I’m wondering if
@NotMax: (hi!) was thinking of Iran instead, where they are all into their starchy not Arab identity. The true Caucasians or whatever.
I wonder if your Eastern European novel classes are gonna be a bit fuller this coming year.
EZSmirkzz
@Bupalos: Yawn
The Pale Scot
Over at LGM folks were talking about attacking the May 9 victory celebration,
And………. me saying
Just like the Red Storm Rising false flag bombing children Young Pioneers plot. The guy who bombed apt complexes to gain power isn’t beyond being this sick. Killing Moscow area Caucasian locals instead of ethnic population he did in before isn’t that big of a step
Betty
@zhena gogolia: Maybe he meant Iran which bristles at being lumped in with Arabs. They are Persians.
SpaceUnit
@EZSmirkzz:
Thanks, but you still made it sound as though Putin and Biden are somehow equally complicit in this shit-show.
I could do without that visual as well.
Urza
@Mallard Filmore: Thanks
Bill Arnold
@EZSmirkzz:
If nice Mister Putin orders his forces to withdraw from Ukraine (maybe excepting Crimea), then his war is over. There would be continued consequences due to gross breaches of trust and Russian war crimes and the economic/infrastructure/human damage that Russia caused to Ukraine and the economic damage that Russia has done to the world and the clear (cultural) genocidal nature of the invasion, but the sanctions would be eased a bit in exchange.
I’m fairly sure that Zelenskyy and the rest of the Ukrainians would concur, but it would be their choice, not the USA’s choice.
PeakVT
@debbie: I did listen, and it is pretty good. Bullough talks about how it came about and, importantly, how it has corrupted so many people in London.
Bullough also argues that Putin probably does not have much money overseas in his name because he doesn’t really need to. He can just call up the oligarchs and have them build a gigantic palace in Sochi or buy a superyacht for him whenever he wants. The entire Russian economy is basically at his disposal in real time.
EZSmirkzz
@SpaceUnit:
They aren’t equally responsible for starting the war, but if they don’t start the peace who will?
Lead, follow or get the hell out of the way.
Urza
@WaterGirl: He said something in 1999 just as he was starting to campaign that made me absolutely certain he wanted to invade Iraq.
NotMax
@zhena gogolia
The demographically more numerous Shi’a would take exception to being lumped in with the Sunni majority Arab states.
Rocks
This war isn’t over until the Ukrainians who have been forceably shipped all over Russia are found and restored to their homes and loved ones.
EZSmirkzz
@Bill Arnold: So you’re willing to give up the Crimea for Zelenskyy?
SpaceUnit
@EZSmirkzz:
Enough. Please suggest your peace strategy.
Chacal Charles Caltrop
@WaterGirl: it originated with Korea:http://www.koreanlii.or.kr/w/index.php/Hermit_Kingdom?ckattempt=1
but for now it applies just to North Korea.
as noted above, this appears to be changing….
Carlo Graziani
@NotMax: Without wanting to goose this thread too much, I’d point out that the Iraqi Shi’a are, I believe, ethnically Arab, although by faith part of the same schism within Islam that unites them with largely Persian Iran.
The Pale Scot
@Urza: C+ Augustus was pissed that Saddam tried a ridiculously inept assassination attempt on his father. Which neocon goobers like Rumsfeld and Wolfowitz played into Iraq and Iran are the real enemy. Not Saudi Arabia which we should have seized their oil fields and Royals and handed everything over to the Wahhabi hillbillies and let them fuck up like the Taliban is trying to run a country
The Pale Scot
Fuck yea!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
EZSmirkzz
@SpaceUnit:
Putin, Biden have a summit,
Biden Putin Zelenskyy have a summit.
Mutually agreeable outcome is discussed by adults.
Everyone puts their peckers back in their pants and starts acting like adults.
Interstadial
@Amir Khalid: Some will be, some won’t. In any case, even if the tritium has not been replenished, the fission trigger is still likely to work.
SpaceUnit
@EZSmirkzz:
You’re six years old!
Sorry, I didn’t realize. It’s mostly adults at this blog. Also it’s way past bedtime Sweetie.
David Anderson
@EZSmirkzz: you are making a strong assumption that there is an agreement zone between a nation and a people trying to survive and a nation whose primary ideology and nationalistic concept assumed that first nation has no fundamental right to exist….
Bill Arnold
@EZSmirkzz:
No. It is Ukraine’s choice. And Russia’s, because it is their war.
EZSmirkzz
@SpaceUnit: Having nothing to say you have nothing to add?
Anonymous At Work
No clue on whether this fits together and will work (looking at you, China!) but I did love the idea the idea that the better your economy is, the fewer significant digits you can attribute to growth and inflation. I.e. something as large and dynamic as the US or EU, it’s just too hard to measure GDP growth or inflation with any precision, so you say “About 5%”. Russia’s in such bad shape that it can say, “Inflation is at 17.49%”.
Bill Arnold
@Interstadial:
That’s easy. He dies.
NotMax
@Carlo Graziani
Also no desire to derail things. But I’d have been a lot more comfortable had you said Arabist nationalist state rather than Arab nationalist.
And that’s without getting so much as one step into the convoluted pathways of Ba’athism.
SpaceUnit
@EZSmirkzz:
Bullshit.
Please describe for us this “mutually agreeable outcome.”
ETA: Russia and Ukraine had endless diplomatics talks since this nightmare began. Putin only used them as a distraction and as a gambit to buy time for his invasion to get more traction.
Carlo Graziani
@EZSmirkzz: I believe that you and I agree on very little, but I want to attempt to answer this seriously.
I wrote a piece on Realism a while back in which I argued that there is simply not enough shared world-view between Russia and the West for any kind of negotiated settlement to be possible. The thrust of that piece was that you need some kind of agreed basis between the parties on what each others’ interests are, in order to come to some “reasonable” agreement.
The trouble that I see with arguments like yours is that thet presuppose that a “reasonable” agreement necessarily always exists, and it is always the “unreasonableness” of (usually warmongering) leaders that prevents that agreement from being located. I believe that view to be without any basis in historical or political reality. In the specific situation that currently exists there is no possible negotiated agreement between the West and Russia that does not either betray Ukraine (and, not incidentally, our own democratic values, which I believe are worth defending every bit as much as Ukraine is) or result in Russia surrendering its war aims.
Economic warfare seems to me, under the circumstances, an extremely defensible approach to the problem. Your mileage may vary.
EZSmirkzz
@David Anderson:
I am making the assumption that peace is better than war, and that leaders should lead their peoples to the best outcomes.
No one here or anywhere else on social media sites has a clue to what the situation and disposition of the war efforts are. We hold strong opinions based on rumors, binary opinions at that.
EZSmirkzz
@SpaceUnit:
Peace
SpaceUnit
@EZSmirkzz:
And peace to you. I don’t come here to fight.
ian
@NotMax:
There are most certainly Shia Arabs. I am not Iraqi, so I cannot speak with any certainty if they claim to be Arabic or not, though I do believe they use that language.
WaterGirl
@EZSmirkzz:
This from is either totally disingenuous bullshit propaganda or an absolutely absurd belief.
Should a woman sit down and have a nice little talk with the husband or partner who repeatedly tries to kill her, regularly threatens her life, rapes her when he feels like it, attempts to gaslight her at every turn, and abuses her on a daily basis?
Surely if they sit down and talk about it, two adults can work things out?
I THINK NOT.
EZSmirkzz
@Carlo Graziani: We could start with a shared religious background, which certainly puts us all on level ground. We have to work from what we have in common. You wish to use democracy. Fine entertain Putin and Zelenskyy with that commonality.
It is about interest. period. What are Ukraine’s interests, what are Russia’s interest, what will it take to accommodate both of their interests?
Can’t means don’t want to.
I think we probably agree on more than you imagine.
Medicine Man
@EZSmirkzz: Dunning Kruger on display.
EZSmirkzz
@WaterGirl:
If they both have loaded shotguns pointed at each others heads maybe they could see the value in talking things through.
My form is it has to start somewhere. Why not here, why not now?
WaterGirl
I suggest that we move on from engaging in the ridiculous argument that you can reason with someone who is daily trying to destroy you and the right of your entire people to exist.
This had been an interesting thread; let’s leave the absurdity behind and get back to the previous discussion
It’s a shame to see a good thread derailed.
EZSmirkzz
@Medicine Man:
I am reminded that pointing my finger at someone leaves three pointing back at myself.
Carlo Graziani
@EZSmirkzz: I linked the article on Realism for a reason. Before telling me what you believe about “interests”, please go read it. There’s a very detailed argument there that addresses that very point.
The other thing is, I don’t really have any religious beliefs. Never saw the point, really. Gives me less to argue about with people who do.
Nettoyeur
@debbie: I suspect those reparations are likely prepaid with the 300B $ of Russian wealth that is now frozen and will then be confiscated.
EZSmirkzz
@WaterGirl:
There is nothing riduculous about mutually assured destruction.
People disagree.
Urza
@EZSmirkzz: I’m sure there’s several replies to this already. But what in the F….. HELL do you actually think is a realistic outcome of that. If Biden and Zelensky don’t come away with polonium poisoning it would be a miracle.
If you’ve bothered to pay attention here, and some of the links that have been put up to long threads elsewhere you would realize that at no point has Putin ever negotiated in good faith. He only negotiates as a tactic to either get what he wants without cost, or to stall so he can be ready to do more damage later.
EZSmirkzz
@Carlo Graziani: The point I was making is that Putin, Zelenskyy and Biden have all stated that they do have religious beliefs.
We all entitled to our opinions on religion. As Voltaire said, if God didn’t exist we would have to invent him. Now would be a good time.
terry chay
@Egorelick: It’s partly fake and the rest is due to capital controls which are an effective “tax” on everyone who is controlled this way.
The “fake” part is that the black market price of the ruble is not as recovered as the ruble is. Since capital is controlled, the ruble is not floating so the value of the ruble is fake in that nobody would trade their currency for rubles for that price if they had the option, they could (which they can’t or are forced to in the case of exporters).
The “tax” part is that the value of money is a function of its liquidity. A simple example is in the article above. A lot of Russia’s reserves are in gold, but they have no way of turning that gold into dollars or euros so it is not as liquid as normal. This it’s value is less. For them to turn it into currency they have to do it on the sly and at a loss. By executing capital controls on their own currency (and forcing exporters to turn 80% of their income into rubles at this terrible exchange rate, which is effectively an export tax when you math it out), it makes the rubles illiquid so it’s value is less, even less than the 90 to $1 black market rates.
All this is a reckoning on a massive scale. No sane country would do this, but Putin doesn’t care and his central banker just is doing what is asked.
It only makes sense if you think the sanctions are temporary. I am not so optimistic that things will come to a head in as early as June, but the sanctions are permanent and the financial reckoning will happen. No way China or India would or could bail them out of this one, and on the scale of the years they plan on cutting Russia off, you can write this country off. By their sanctions, the West has already done so.
Urza
@EZSmirkzz: You make that assumption. To Russia, peace is not necessarily better than war. For them war is perfectly acceptable given the propaganda they swallow daily. Not doing war is actually a problem for them when they say there’s nazis on the border and nazi NATO is coming for them. When you have what to them is a literal Devil on the other side, surrender, or even negotiation is not an option.
Perhaps at some point as people starve enough they’ll get there. Or if Putin chooses to change the propaganda inputs. But, much like here, its probably more along the lines of Trump telling people to get vaccinated after he told them not to. They start booing and stick to the original lie.
Urza
@EZSmirkzz: Its not a shared religious background. Thats like saying Catholics and Protestants have always gotten along throughout all of history. Or Jews and Christians and Muslims love each other because they share the Old Testament in common.
And apologies to WaterGirl, I had not reached her comment by the time I posted these.
EZSmirkzz
@Urza: If we assume failure we will achieve it.
We seem to forget our own records on agreements as well. That’s realism that needs no link.
EZSmirkzz
@Urza: I never said they got along, I said they shared a religious commonality. They have all used their religions to make war, they should use their religions to make peace.
Emma from Miami
@EZSmirkzz: ok, I didn’t want to get into it but the only thing “we” have in common is a man/God named Jesus of Nazareth. After that all bets are off. Ecumenical efforts over the years have been at best superficial and at worst failures. Especially if you consider the current head of the Russian Orthodox church.
Another Scott
Interesting piece, as always.
DW says that Germany will support a “gradual” oil embargo in the EU – meaning Germany and others will keep sending millions to Putin every day until then. (And apparently Putin has found a way to use that money to do things like pay foreign loans and not default.)
It’s really, really hard to say how all of this will shake out, except it’s impossible to think of a scenario where Russia is stronger on the world stage. I thought that Assad was doomed, but he’s still there. Putin may find a way to survive as well, or maybe some potentate will let him take a trip there for “medical treatments” or something.
I’m certainly glad that Biden is POTUS now!!
Cheers,
Scott.
Carlo Graziani
@terry chay: This is very valuable.
Ruckus ??
@SpaceUnit:
No drinkie for me.
I am wild ass guessing here with a bit of help from history of nations like Russia and how they fit into the rest of the world. In a modern world we are all interconnected to some degree and it gets more and more difficult to play on the world stage by one’s self. Sure he might be OK for a bit, but how long can that bit be? Once his monied supporters start seeing the cracks and being ostracized from the money they have stolen from being his pals (and remember the long table) it can fall apart rather quickly. It’s a house of coins built on a field of quicksand and while he and his buddies have done a fantastic job of stealing most everything not tied down and a lot of that is, it is now or will be seized. I think it really doesn’t have to be armed conflict now, asset seizure is easier, faster and possibly less deadly.
Medicine Man
@EZSmirkzz: No. You’re just being shallow and stupid and everyone can see it but you.
EZSmirkzz
@Emma from Miami: I don’t blame you. The point is that it is common ground for all three leaders, at least publicly. It is a starting point.
It has nothing to do with history.
John Lennon sang God is a concept by which we measure our own pain. If Putin, Zelenskyy and Biden listen to his music that’s another starting point, not an endorsement of the thrust of his song “God”.
terry chay
I agree with the overall concept of the article, but some differences in detail:
What happens when reality that this stuff is (for all intents and purposes) permanent hits? Everyone there is acting like this is like 2014, or, at worst, a temporary 1998. I have no idea. But the sanctions are designed to set Russia’s clock back to 1988
In any case, my criticisms are, at best, one of style. You bring up some interesting food for thought with your overall picture/analogy.
EZSmirkzz
@Medicine Man:
You serve cheese with your whine?
dnfree
@EZSmirkzz: if peace is better than war, Putin could have refrained from invading. It’s that simple.
it takes two parties (or more) to make peace. It only takes one party to make war.
Captain C
@EZSmirkzz:
OK, I think I see the problem here. Putin and Democracy don’t really belong in the same thought unless “hates” is between them.
I’m interested, though, what specifically do you think Putin would accept right now that would also be acceptable to Ukraine?
rachel
I have a great lemon meringue pie recipe.
terry chay
@Another Scott:
I don’t know if it’s clear but the article states it is not clear where the money came from (e.g. Germany), but that it was not procured illegally (e.g. from frozen assets). I think the implication is, whatever avenues it was is in finite and thus directly impinges on what they’d like to spend that money on (e.g. their war).
If it isn’t clear, there was no way they were not paying those debuts in dollars. It was also clear that Russia has the ability to pay their loans.
Basically Russia played a game (“hey these contracts that are denominated in $ and €, how bout we pay them in our worthless rubles instead”), the Western banks said no, there is a 30 day grace period, so before that 30 days expired and Russia would default, they “blinked.” The cost for them blinking is it’s gotten more expensive for them to borrow, which they must do, as, like with all countries, these are interest payments on debt — it doesn’t matter how big a trade surplus you run, that aint going to service the principal.
I’m not sure that the money can be directly attributable to the $1billion/day that Europe (mostly Germany) pays for Russian oil and gas. That money has mouths to feed (literally), so I get the impression it is not as simple as take half days of european oil € and convert to $ to service their debt. If we wanted to, since it is denominated in $, we could have prevented it from happening, but it sounds like our government, after auditing where the $ came from, said basically, “Oh you got the money from those sources, well we’re okay with it coming from those parts of your economy” which really isn’t so good for Russia.
TEL
@rachel: My thoughts exactly! Just pie the troll once it shows itself.
Carlo Graziani
@terry chay: I’ll take the critique. It’s valid.
The number that stopped me in my tracks was the inflation number, and the crazy discrepancy with the “estimates” coming from the Russian Economics ministry, together with the stodgy linear forecasts out of the World Bank that seem to have no bearing on reality. Between that and the fact that export controls are effectively switching off Russian manufacturing, Western employers are leaving Russian cities, and the Central Bank cannot perform any stabilization operations of any kind, there’s now a core instability that seems to me already extremely large, and growing, and not generally remarked upon. That’s why I decided to call attention to it.
I’m perfectly prepared to be wrong. But the picture I have in mind is “runaway instability”. There comes a point where the details cease to matter, because the amplitude of the random fluctuating phenomenon has become too big. When I say “Late June”, what I’m saying is that I think the loss of control—over inflation, at a very minimum, or over everything else if they pull our all the stops to run up the benchmark rate to crazy-high levels so as to stop it—seems timed about right for about then. But I can’t really claim anything except intuition to justify that.
The Thin Black Duke
This is a fascinating thread. Please don’t let the troll derail it. Thank you.
EZSmirkzz
@Captain C: I’m working on the presumption that everyone is lying, or catapulting the propaganda to quote a fmr fmr guy. So I have no idea what they are thinking.
If all they have in common is their girlfriend then I would use that as the basis for beginning negotiations. It ain’t gonna be a blog comment that gets the ball rolling, it’s going to take leaders acting like leaders. All this chatter on American social media doesn’t mean a f*cking thing, if we box Putin into a corner. We know the outcome,
terry chay
@Carlo Graziani: Again, thank you for your article (and I’m sort of rooting that you are right and it happens in June since every day means the death of so many innocents in Ukraine). You are not wrong that all signs point to a big crash of their economy as there are just so many things going wrong and we are in uncharted territory (no economy so large and so connected to the West has ever faced anything like this, no sanctions have been leveled ever done it. It’s scaring the bejesus out of China right now and I’m sure Beijing is changing their plans of what to do going forward as we speak).
I think it’s too difficult to measure what their inflation is, let alone what it will be by the end of the year. Right now it’s hard to separate out the panic buying (temporary inflation) from the fundamental market contraction (permanent inflation). We’ll see. What nobody, not even Russia’s Central Bank, disagrees with, is that Russia’s economy will contract this year and that the games they’ve done to sustain it has rolled that contraction into next year also.
I personally don’t see hyperinflation as being in the cards. Russians have historically had a weird relationship with the value of their currency and try to prop it up even when the sensible thing is to devalue it (for instance, if Greece were on the drachma instead of the euro, the easiest way to get out of their crisis in 2008 would be to inflate it thus effectively giving a haircut to everyone. They couldn’t so they had to implement austerity which kicked everything off). That is what they’re doing right now. When you prop it up like they have, you’re delaying a reckoning that is much worse — it’s like inflating a bubble that you know is going to pop — far better to have to deal with it now than later.
Omnes Omnibus
Who is this “we” of which you speak?
Carlo Graziani
@terry chay: I certainly plan to keep an eye on the Borscht Basket if the Economics Ministry keeps publishing that number. I think they’ll stop, but on the other hand if they really do get hyperinflation it’s not the kind of thing that is easy to hide.
The other thing it occurred to me that might be worth looking for, if there were a way, is broken contracts and the consequent bad debt. Which you would expect quite a bit of with all that frozen wealth. A lot of bad debt would be another necktie anvil…
terry chay
@Roger Moore:
This is an excellent point!
terry chay
@Mallard Filmore:
Russia is more likely to become a pet of China than the West. Beyond that, China doesn’t have the option to flout the sanction regime because their economy is even more susceptible to it than Russia is. (I believe this is a happy accident, not on purpose. If it was on purpose you’d want to hold this weapon close to the vest.)
The West is already giving a lot of their own to help Ukraine, and that is beyond the “entire Russian military yearly expenditure of arms in just two months” worth of military aid. That money will not be coming back here directly or anytime soon. Indirectly and a generation down the road, it will pay us in droves just as the Marshall Plan and the Occupation and Reconstruction of Japan did. The biggest allies of the West and much of the wealth of the United States is attributable to doing that. Coming to your aid with intelligence, war material and economic aid in their time of greatest need will likely be remembered for many generations when Ukraine becomes a beacon of defense against authoritarian tyranny and modern day Hitlerism. This sort of thing makes China’s “vaccine diplomacy” look like a joke.
BTW, sanctions cost the countries doing the sanctioning a lot — often more than the country being sanctioned. It’s why it’s often so hard to maintain them. You act like we can wield this tool with impunity. We cannot and are not. It’s just unimaginable how much bigger the Western economies are vs. Russia’s which is why it doesn’t seem like a fair fight (it isn’t).
@Mallard Filmore. @Urza: This article is the one you are thinking about/want.
the pollyanna from hell
“I demand that leaders act like leaders.” Let’s say Biden has three trillion to pay off the two combatants. Will Putin accept two trillion to withdraw all troops, return the hostages, and accept a massive expansion of NATO? Will Zelenskyy accept one trillion to forgive all war crimes and rebuild? Is congress willing to pay that much ransom?
Maybe not. Any talks with much less on the table won’t start, until some collective pains reach a similar order of magnitude.
EZSmirkzz
@Omnes Omnibus:
My bad.
terry chay
@lee: Technically Korea (pre-1905?) was “the Hermit Kingdom”, not North Korea (post 1945).
terry chay
@Interstadial: Not going to happen. Nuclear power is their trump card. Why the hell would they give it to someone else? It’s worth far more than money as it’s the only thing that doesn’t cause the West to decide the War in Ukraine on conventional terms right now and instantly. It also is their source of (albeit ineffective) saber rattling wrt to Norway and Sweden joining NATO.
Heck, at one time, Ukraine had more nukes than the U.S.. They gave them up, and it got them invaded by Russia two decades later. The last thing you want is a country you basically plan on invading having nukes because you needed a few bucks to prop up your joke of a petrostate.
Carlo Graziani
@terry chay:
Yeah, that is a key point. The “Borscht Basket” is a lot of root vegetables. In principle they could be panic-bought. Or, there could be a supply dislocation. But if it had been panic buying, people’s root cellars would presumably be full by now, demand would be back in equilibrium with supply, and the store shelves would be stocked again. That doesn’t seem to be the case. So the evidence would seem to point more to supply dislocation.
terry chay
@Carlo Graziani: Russia is complex and I can’t say, but it is possible there is hoarding going on at the province/state level that is messing with the supply chain there or who knows what. Ours is a more delicate supply chain for sure, but we were making enough TP throughout the pandemic, but a brief panic buying at the start was enough to cause that shit to go cray-cray. In Russia’s case, it’s not exactly beets that are flying off the shelves, but things like sugar (which they import and, ironically is not restricted by sanctions).
It’s one of the Captain Obvious moments of the world that our economic principals fundamentally presuppose we are rational actors when we are clearly not. Trying to measure this stuff (like inflation) when it is in such a state of disequilibrium is like trying to talk about “temperature” of a cavitation: system is not close to equilibrium but temperature is a thermodynamic (equilibrium-based) concept.
Sally
@the pollyanna from hell: Well, Zelenskiy and Putin sit down together and Zelenskiy says “Vlad, just pull your forces back to mother Russia”, and Putin says “Sure thing, Volodymyr”. Then Putin says, “Vlod, just give up Crimea and its associated oil and gas fields and those in the Black Sea – Azof Sea basins”. And Volodymir says “okey dokey, Vlad”. Then Zelenskiy says “also, just send back those approximately million people you have kidnapped, raped, tortured and sent to remote parts of eastern Russia”. And Putin says, “If you insist, Vlod”. And Putin says “Now you must promise never to join NATO or the EU or allow Ukraine to have any agency as an independent, sovereign country”. And Zelenskiy says, “Of course, Vlad, we promise on our mothers’, sisters’, brothers’, sons’ and daughters’ many, many, many graves, never to join the free world”. Then Zelenskiy says “and by the way, just send us a trillion dollars to help rebuild our country shattered by your war machine”, to which Putin of course replies “Sure thing, cheque’s in the mail”. Putin finishes off these adult negotiations with the fully reasonable request that Zelenskiy agrees to give Russia a land corridor to Crimea, and the Sea of Azof ports. To which Zelenskiy heartily agrees because peace is surely worth it. Though he would really appreciate a tiny apology for all the tens of thousands of unarmed Ukrainians who have been raped, tortured, mutilated and murdered in their homes and streets, whilst living their peaceful lives in their own damn country. And perhaps Vlad could throw in (just ’cause he is that kinda guy) a few Russian bomb techs to demine some of the cities, towns and villages, the wheat fields and roads that are littered with illegal anti personnel mines.
Then they all lived happily ever after …
// (- in case it wasn’t obvious)
Sally
@Sally: I know, I know, I shouldn’t have posted this. But hopefully everyone has gone to bed and no one will read it.
the pollyanna from hell
@Sally: ezsmirkzz made me crazy enough to give him a serious reply, and then my crazy drove you crazy, and on it goes.
Sally
@the pollyanna from hell: Yes, what is it that Popehat says? Something like stop pretending that bad faith arguments are good faith for the purposes of dialogue. Sentient beings understand that Putin is and would only “negotiate” in bad faith. Putin is never about compromise (though what the hell would that look like anyway? “Only” half the country?), he is only about capitulation. Give me everything I want or I’ll keep smashing your country to smithereens. It’s a binary choice. Sadly. For everyone.
YY_Sima Qian
Decades of stringent sanctions have not collapsed the regimes in North Korea, Iran, Venezuela or Cuba. China, India & other countries on the Global South will set up separate entities w/o exposure to Western markets to interact w/ sanctioned Russia, if only to take advantage of the cheap offerings, to diversify risk/vulnerability away from economic coercion by the US, & to maintain their own policy independence. There will not be any kind of western consensus to extend the sanctions regime to including most/all entities of nations that continue to do business w/ Russia, if the entities themselves are not involved in such transactions. That will lead to a global depression. None of this will prevent a dramatic weakening of Russia’s position, but may allow Putin’s regime to limp on for quite a while, & possibly even to stabilize in a stunted state.
There are also long term unintended consequences of extensive use sanctions, however powerful & impactful in the short to medium terms. Seizing another country’s central bank assets (after the earlier precedent of repurposing a portion of Afghanistan’s central bank reserves to compensate 9/11 victims, instead of turning it over to the Taliban government) will simply create more doubt in the minds of all of the governments that are not closely aligned w/ the US to to start reducing their exposures to US economic coercion, to reduce their holdings of USD, stop parking their money in the US, & reduce their transactions in USD & on platforms where US has decisive influence (such as SWIFT). These sentiments will not challenge the dollar hegemony in the short term, but will weaken its position, & what ultimately comes after may not be a hegemony by a single currency. When US weaponized financial sanctions to go after drug/human trafficking, there were no objections around the world. When the US used financial sanctions to go after what it defined as terrorist networks, there were no objections. When the US went after NK, there were few objections, because the Kim regime has been so objectionable. When the US weaponized financial sanctions to go after Cuba, Iran & Venezuela, there were a lot of noisy objections, but the world largely swallowed it, because these countries do not carry that much economic weight. Going after Russia has caused considerable resentment in the Global South, not because they support the Russian invasion, but because they are becoming collateral damage in yet another Global North conflict, yet again w/o their interests ever being taken into account.
IMO the dollar hegemony is coasting on momentum, due to lack of alternatives in the short to medium term.
Similarly, I think the ever more aggressive sanctions imposed against Chinese technology companies will ultimately prove counterproductive, because they have the effect of reducing the revenue streams of US companies (that they need to fund their R&D to stay at the cutting edge), divert revenues to the Japanese/South Korean/European competition in the short term, & create a captive market for Chinese alternatives to grow & eventually thrive in the medium to long term.
Then there is the matter of how future GOP presidents & Congresses will use such weapons, once the precedents have been set & the weapons have been legislated. The next GOP president may not hesitate to employ such weapons against erstwhile allies, just like Trump & his trade wars. During both Obama & Biden years, Ds have had an understandable tendency to try to maximize freedom in executive action in face of GOP obstruction in the legislature, w/o considering the long term consequences of handing R presidents such tools.
A woman from anywhere (formerly Mohagan)
Removed!
J R in WV
@WaterGirl:
North Korea still today, along with Albania back in the Cold War days are a couple of examples of hermit kingdoms.
s
J R in WV
Deleted
bjacques
@YY_Sima Qian: dead thread, probably.
I agree with most of your points. As I remember in the 1980s and 1990s, Washington did a lot of economic zapping, through the World Bank and with the assistance of the IMF, of other “recalcitrant” countries down south, for simply trying to rein in feudalistic capitalism. Didn’t they do that to Chile under Allende around 1970? For what it’s worth, the US belatedly sanctioned apartheid South Africa too.
But, harsh as western sanctions on Russia are on the Global South countries, they are not the target. I expect, however, that were Russia to conquer Ukraine, they would certainly dictate terms to the South via their control over 30% of the world’s grain and the rest of Ukraine’s looted wealth. I’m glad your objections are thoughtful and measured, because the “only a Northern war” idea has cropped up every so often, and I have a couple of British Asian friends who sneer that this has nowt to do with them (one is a DevOps manager for a large bank!). But I think it is ultimately their war too. It remains to be seen whether Global North learns any good lessons of its own from this and accordingly adjusts its behavior towards the South, and admittedly, the outlook is sketchy. However, the US through Blinken has been to Venezuela and Algeria, so *someone* is paying attention. But if Russia triumphs, the outlook for the people of the South is bleak, because it’s a green light for the world’s autocrats and entrenched looters.
China’s Belt And Road foreign policy is great compared to Russia’s and even that of the US and much of Europe toward their former colonies, but China’s indifference toward how those countries of the South are run leaves me cold and can’t be very popular on the street. For all I know, maybe China contributes to the development of those countries’ professional classes, but mostly I see Chinese engineers and executives in charge of all the infrastructure there, and little or no local participation. If so, that may cost them one day.
YY_Sima Qian
@bjacques:
Given Soviet shenanigans in the Global South during the Cold War, & the Wagner Group’s involvement in African conflict zones, I don’t think the Global South nations have any illusion about the nature of the Putin regime. What you emphasized about the pernicious impact of a successful Russian conquest of Ukraine will have on the world, including the Global South, is certainly correct. However, the US & the EU have to make that case to the Global South countries that speak to their interests & aspirations, not in a sanctimonious sermonizing manner that says:”do as we preach (& not as we do) because we know your interests better than you, your interests are what we say that are.”
There are many ways in which China’s BRI is problematic, but generally not in ways commonly described in western press or political discourse. Percentage of local labor content in Chinese projects vary greatly across countries & across time. Countries w/ stronger labor laws (such as South Africa) have higher local labor than those w/o (Angola & the DRC being the worst). Chinese entities have also been increasing local labor content across the board over the past decade, sensitive to local criticism. A lot of Chinese financed & built infrastructures also follow the BOT model, so the Chinese entities are on the hook to train locals so they can eventually operate them. Transparency of Chinese loan contracts also vary across countries based on their local governance standards. Chinese contracts are published in Nigeria & Cameroon due to local laws (even if there are secrecy clauses, they do not supersede local laws), but are notoriously opaque in Kenya. The loan contracts terms from China Development Bank & China Exim Bank are pretty tough, by no means can be construed as economic aid, but are pretty standard for commercial loans to high risk countries. The purpose of the BRI is ultimately to benefit China. Whether & the extent to which it benefits the Global South counterparts depend entirely on the counterparts. Chinese entities can afford the best lawyers in New York, London, Paris & Hong Kong, Zambia cannot. However, China is becoming aware of the problems that poor governance can bring to lenders, & are changing its behavior accordingly.
There is a wealth of high quality research in Western academia concerning the BRI (the goods, the bass & the uglies), but somehow they have failed to filter up to western press & policymakers. Instead, we still hear about decade+ old tropes about “debt traps”, which were never true.
bjacques
@YY_Sima Qian: extremely dead thread, but thanks very much for your informative responses!
debbie
@WaterGirl:
Reading through responses this morning, I can’t help but notice all those Zs in the nym…
evodevo
@WaterGirl:
You’re right…they WERE there for the oil, Cheney especially. As CEO of Halliburton, he envisioned taking over the oil field contracts and enriching his company and associates…the more naive GOPers saw a main chance in taking over the Iraqi economy via shadow companies contracting with the US (See: the first thing the US govt advisors did was to attempt to set up an Iraqi version of Wall St. in Baghdad lol). Literally NO one in Bush’s admin had any local knowledge of the culture/religious systems, and no interest in learning. Bush himself had no idea that Sunnis and Shiites even existed. And thereby lies the tale…
evodevo
@WaterGirl: Right again…See: PNAC – Cheney wanted Saddam gone and his oil equipment company in there for YEARS before 2001. http://www.antiwar.com/orig/weiner6.html
evodevo
@Carlo Graziani: YES it’s like watching that pickup on the interstate pulling the badly loaded trailer but going 70 mph anyway, just starting to seesaw….you know from experience that it’s NOT going to end well, and after a point there’s nothing the driver can do to stop it.
YY_Sima Qian
@bjacques: You are most kind! If you are really interested in diving deeper into Chinese engagements w/ the global south, I highly recommend the free China in Africa Podcast. It has been running for more than 10 years, the analysis & discussion in the early years might be a bit superficial, but the past 5 have really become outstanding. It started by focusing on Chinese engagement in Africa, but in recent years have expanded to the Global South more broadly. They do attempt to see the world through African perspectives (w/ all of its diversity), but also bringing in valuable Chinese & Western ones.
There is also a website & newsletter that painstakingly collect & compile information on Chinese activities on a daily basis, but it’s behind a paywall.
Carlo Graziani
@YY_Sima Qian: Hey there.
I think that generalizing from the Ukraine War Sanctions experience, however it turns out in the end, is going to turn out to be nearly impossible. Russia is not assimilable to China or to Venezuela, North Korea, Aghanistan, or Iran. It is sui generis. Expecting export controls to have the same effect on China as on Russia would be ridiculous, for example. It would be like comparing a headache to brain cancer.
And in any event, as I wrote, this is not a normal situation. This is not policy pressure in “normal” politics designed for long-term management of a set of international relations. This is an actual bona-fide war crisis that is being kept below the threshold of direct military engagement between NATO and Russia by extremely careful management, while at the same time clear irreducible conflicting actual war aims exist between those parties. Reaching for an economic weapon that has the potential to suddenly deprive Russia of most of its power without resorting to direct military means strikes me as an entirely unproblematic decision, under the circumstances.
I am aware of China’s absolutist policy views on inviolability of sovereignty, and on the inherent “wrongness” of sanctions as a means of inter-state pressure. As is always the case with every nation’s policy justifications — the US is certainly no exception — there is a healthy measure of self-interest in those formulations. The main point here, however, is that this is a completely different (and more complicated, in my opinion) discussion, having to do with how the US and China will—must—eventually come to some kind of equilibrium and understanding, a process that may take a decade or more. Coupling that discussion to the current crisis management makes no sense to me.
YY_Sima Qian
@Carlo Graziani: I am actually quite supportive of the economic sanctions placed on Russia to punish its aggression, though seizing central bank assets (which the Russian people may not see as belonging to Putin & his clique) is treading on very dangerous territory. I just want to highlight that the costs of these actions on Global South support in the future for Western initiatives, which will long outlast the war in Ukraine, on top of all the other historical baggage. There is every indication that the policymakers & commentariat in the West have not at all considered these unintended side effects. Rarely have in the past, & unlikely to in the future, until they are yet again frustrated w/ Africa voting as a block supporting the Chinese position in various UN bodies, or refusing to foreswear telecom gear from Huawei/ZTE, or refuse Chinese infrastructure deals. The ignorance/negligence have cost the US/EU in foreign policy in the past, & will continue to in the future.
I also have zero confidence that the sanctions regime against Russia will truly prove sui generis. Once a weapon has been used, to perceived great effect, the pressure/temptation to use them again to achieve geopolitical gain becomes overwhelming, until it backfires in a spectacular way. After all, if naked aggression justify such economic warfare (which is what sanction is), then why not genocide, or even alleged genocide?
The EU might be more circumspect, as they have in the past, but the bipartisan foreign policy “blob” in DC much less so. Heaven help us when (not if) the GOP regains Congress & the White House.
Barry
@Mallard Filmore: “Besides, I don’t see China allowing Russia to crash so hard that it becomes a pet of the west, or becomes a failed state.”
IMHO, China is laughing, because they have Russia over a barrel.
debbie
@Barry:
One would hate to see Xi pull a Putin on Putin. //
Barry
@Barry: Xi doesn’t have Russia has lost customers, suppliers and funding.
Dee Lurker
This was such a good thread that it brought in a high quality troll. I really enjoyed the contribution!
Carlo Graziani
@Dee Lurker: The highest praise of all!
Thanks to all of you who participated in this discussion.