(Ghost of Kyiv mural. Image posted by Illia Ponomarenko)
Tonight I want to focus on the economics around Russia’s re-invasion and Ukraine’s defense against it.
First, here is President Zelenskyy’s address from earlier today. Video below, English transcript after the jump (I’m not going to highlight anything, it’s all stuff you should pay attention to):
Dear Ukrainians! I wish you health!
Today is Aviation Day. It is traditionally celebrated in our country on the last Saturday of August. It is a professional holiday of people without whom the present cannot be imagined. And without which we cannot imagine the independence of our state.
Russia hoped to destroy our aircraft in the first hours of the full-scale invasion. And, of course, this enemy had a completely insane goal, like many other such goals. The Air Force of Ukraine was preserved, and since the first day of the invasion, it has been honorably performing combat missions.
In six months, 18 pilots were honored with the title of Hero of Ukraine. Dozens more have been given state awards. Their skills and combat results have become a true legend, and I have repeatedly heard the highest praise of our aviation from representatives of the armies and states of our partners.
Ukrainian aviation is strong. It will be among the most modern, that’s for sure. This cannot be changed. But even in the extremely difficult conditions that exist now, Ukrainian pilots show the greatest skills.
Today I thank all our pilots, everyone who services flights, prepares equipment for flights, and everyone who helps Ukrainian military aviation to be able to perform combat missions. And separately, I want to thank the parents of our soldiers, mothers and fathers of Ukrainian pilots, for such brave and intelligent sons who did and are doing a lot to bring our victory – the victory of Ukraine – closer.
Once again – Happy Aviation Day of Ukraine!
This week, for the Independence Day of our country, I signed a number of decrees on awarding representatives of various professions, various groups of our society. In general, those who really helped the defense of Ukraine, the defense of independence, our people, and who are really known at the front.
I asked the military and law enforcement officers, all authorities – central and regional, ministries and regional administrations, as well as representatives of the media – to provide me with nominations of those who deserve awards. Those in the trenches, those who support our boys and girls. Name the people they know in the army, whom they are truly grateful to on the front lines. Who support the fighting spirit of Ukrainians, our faith in ourselves, who spread the truth about the war. Who are mobilizing assistance for Ukraine abroad. Who support the displaced people… Volunteers and officials, journalists and workers of utility service enterprises, communications operators, transport workers and athletes, artists, musicians, public figures, workers of the energy industry, post office… Many different people whose candidacies were proposed. There are also those who are awarded, unfortunately, posthumously.
Of course, I also signed decrees on awarding our soldiers – in the Armed Forces, in intelligence, in the Security Service of Ukraine. In total, since February 24, 27,760 of our defenders have been given state awards of Ukraine.
Tomorrow, on Sunday, these decrees will be made public. And there will be another decree – a very important, special decree – on awarding state awards to friends of Ukraine abroad, our partners, our helpers in the struggle for freedom and life. Those whose contribution is really significant. Those to whom Ukraine will always be grateful.
Because the struggle for independence is the struggle of the entire nation, and only in this way it can be successful. It is nationwide here in Ukraine. And that is why Ukraine will win. The people always win. And the successful struggle for freedom in the world also cannot be the struggle of only individual people or individual states. It is a joint work, a common result, which is achieved thanks to the strength and solidarity of all who value freedom and who do not tolerate tyranny. Freedom always wins. We will definitely win!
Eternal glory to all our heroes!
Eternal gratitude to everyone who helps fight for freedom, for our state!
Glory to Ukraine!
Here is today’s operational update from Ukraine’s MOD:
The operational update regarding the russian invasion on 06.00, on August 27, 2022
Glory to Ukraine! The Armed Forces congratulate all Ukrainian aviators on the Aviation Day!
The one hundred eighty-fifth (185) day of the heroic resistance of the Ukrainian people to a russian military invasion continues.
In the Volyn and Polissya directions, the build-up of radio-electronic intelligence forces and means continues.
In the Siversky region, the enemy continues to hold separate units of the Western Military District in the border areas of the Bryansk and Kursk regions in order to demonstrate the presence and constrain the actions of units of the Defense Forces of Ukraine. The area of the village of Tovstodubove, Sumy oblast, was fired from barrel artillery.
In the Kharkiv direction, the enemy fired barrel and jet artillery at civil infrastructure facilities in the areas of Svitlichne, Peremoha, Protopopivka, Dementiivka, Petrivka, Cherkaski Tyshky, Odnorobivka, Zamulivka, and Tsyrkuny settlements. Used aviation for a strike near Husarivka.
It tried to advance in the direction of Dementiivka with assault actions, it was unsuccessful, and retreated.
In the Slovyansk direction, the enemy used barrel artillery and MLRS to shell Dolyna, Dibrivne, and Krasnopilla districts. Conducted aerial reconnaissance near Nova Dmytrivka. In order to disrupt the system of navigation support, the Defense Forces deployed a complex of radio-electronic warfare.
In the Kramatorsk direction, areas near Sydorove, Verkhnyokamyanske, Rozdolivka, and Kalenyky were subjected to enemy artillery fire. To clarify the position of our troops, the enemy conducted aerial reconnaissance by UAV.
The defense forces repelled an attempted enemy offensive in the direction of Hryhorivka.
In the direction of Bakhmut, the enemy fired at our troops from available weapons in the areas of the settlements of Bakhmutske, Vesela Dolyna, Zaitseve and Kodema. The areas of Zaitseve and Soledar were hit by enemy aircraft.
Separate units of the enemy made an attempt to improve the tactical position in the direction of the settlements of Soledar, Zaitseve and Mayorsk. They did not have success, they left.
In the Avdiivka direction, the enemy tried to destroy important objects of civil and military infrastructure with the fire of tanks, barrel and rocket artillery, to inflict losses on our units near Vodyane, Pervomaiske, Krasnohorivka, Zalizne and Novobakhmutivka. Maryinka and Valentynivka districts were hit by air strikes.
With offensive actions, the occupiers tried to advance in the direction of Nevelske, were repulsed and rolled back. To adjust the artillery fire, the enemy conducted aerial reconnaissance by UAV.
In the Novopavlivske direction, enemy units continued shelling the areas of Vuhledar, Novomykhailivka and Velyka Novosilka settlements with the available means of fire damage. The enemy used aviation for strikes near Volodymyrivka. He led an offensive battle in the direction of the settlement of Prechistivka, had no success, withdrew.
In the Zaporizhzhya region, fire damage was recorded in the territories near Novopole, Hulyaipilske, Charivne and Shevchenko. The districts of Novopole, Hulyaipilske, Novodanylivka and Olhivske were hit by airstrikes.
In the water areas of the Black and Azov seas, the enemy’s ship group continues to carry out reconnaissance and blockade of civilian shipping in the northwestern part of the Black Sea.
In the South Buh direction, the main efforts of the enemy are concentrated on preventing the advance of our troops.
The areas of Nikopol, Oleksandrivka, Stepova Dolyna, Kobzartsi, Ternivka, Topolyne, Andriivka, and Lozove were shelled from tanks, barrel artillery, and multiple rocket systems. It carried out airstrikes near Velike Artakovo, Pervomaiske and Olhany.
With the forces of the reconnaissance group, the occupiers tried to conduct reconnaissance in the Potyomkino area, the enemy was detected and neutralized.
We believe in the Armed Forces of Ukraine! Together we will win!
Glory to Ukraine!
Here is today’s assessment from Britain’s MOD:
Here is former NAVDEVGRU Squadron Leader Chuck Pfarrer’s most recent assessment and updated map regarding the situation in Kherson:
KHERSON /27 AUG 2022/ Ukraine is playing a long game in Kherson, preparing the battlefield carefully. By throttling Russian logistics, Ukraine has negated much of the combat effectiveness of an otherwise overwhelming force. pic.twitter.com/ldOffrmF1q
— Chuck Pfarrer (@ChuckPfarrer) August 27, 2022
And his most recent assessment of what is going on at the Zapporizhzhia Nuclear Power Plant:
ZAPORIZHZHIA NUCLEAR PLANT : RU attacks continued over the last 48 hours in the vicinity of the plant. On 27 AUG, shelling was reported on the outskirts of the adjacent town of Enerhodar. Yesterday, on 26 AUG, shelling continued the SE of the plant’s cooling basin. pic.twitter.com/pJc4CrB1JE
— Chuck Pfarrer (@ChuckPfarrer) August 27, 2022
Ooopsie!
Ukrainians hijacked a Russian drone to the surprise of its operators, live on camera 😂 Slight panic at the end as Russians realise their location is not safe anymore pic.twitter.com/eusMAXLYSv
— Dmitri (@wartranslated) August 27, 2022
Two very different articles were published this week regarding the economics of the war for Ukraine. The first, in The Economist, focuses on whether the sanctions are working:
Six months ago Russia invaded Ukraine. On the battlefield a war of attrition is taking place along a thousand-kilometre front line of death and destruction. Beyond it another struggle is raging—an economic conflict of a ferocity and scope not seen since the 1940s, as Western countries try to cripple Russia’s $1.8trn economy with a novel arsenal of sanctions. The effectiveness of this embargo is key to the outcome of the Ukraine war. But it also reveals a great deal about liberal democracies’ capacity to project power globally into the late 2020s and beyond, including against China. Worryingly, so far the sanctions war is not going as well as expected.
Since February America, Europe and their allies have unleashed an unprecedented barrage of prohibitions covering thousands of Russian firms and individuals. Half of Russia’s $580bn of currency reserves lies frozen and most of its big banks are cut off from the global payments system. America no longer buys Russian oil, and a European embargo will come fully into effect in February. Russian firms are barred from buying inputs from engines to chips. Oligarchs and officials face travel bans and asset freezes. America’s “KleptoCapture” task-force has seized a superyacht that may have had a Fabergé egg on board.
As well as satisfying Western public opinion, these measures have strategic objectives. The short-term goal, at least initially, was to trigger a liquidity and balance-of-payments crisis in Russia that would make it hard to finance the Ukraine war and thus alter the Kremlin’s incentives. In the long run the intent is to impair Russia’s productive capacity and technological sophistication so that, if Vladimir Putin aspires to invade another country, he would have fewer resources to hand. A final aim is to deter others from warmongering.
Behind such ambitious goals lies a new doctrine of Western power. The unipolar moment of the 1990s, when America’s supremacy was uncontested, is long gone, and the West’s appetite to use military force has waned since the wars in Iraq and Afghanistan. Sanctions seemed to offer an answer by allowing the West to exert power through its control of the financial and technological networks at the heart of the 21st-century economy. Over the past 20 years they have been deployed to punish human-rights abuses, isolate Iran and Venezuela and hobble firms such as Huawei. But the Russia embargo takes sanctions to a new level by aiming to cripple the world’s 11th-biggest economy, one of the biggest exporters of energy, grain and other commodities.
What are the results? On a three- to five-year horizon isolation from Western markets will cause havoc in Russia. By 2025 a fifth of civil aircraft may be grounded for want of spares. Upgrades to telecoms networks are being delayed and consumers will miss Western brands. As the state and tycoons seize Western assets, from car plants to McDonald’s outlets, more crony capitalism beckons. Russia is losing some of its most talented citizens, who recoil at the reality of dictatorship and the prospect of their country becoming a petrol station for China.
The trouble is that the knockout blow has not materialised. Russia’s gdp will shrink by 6% in 2022, reckons the imf, much less than the 15% drop many expected in March, or the slump in Venezuela. Energy sales will generate a current-account surplus of $265bn this year, the world’s second-largest after China. After a crunch, Russia’s financial system has stabilised and the country is finding new suppliers for some imports, including China. Meanwhile in Europe, an energy crisis may trigger a recession. This week natural-gas prices rose by a further 20% as Russia squeezed supplies.
It turns out the sanctions weapon has flaws. One is the time lag. Blocking access to tech the West monopolises takes years to bite, and autocracies are good at absorbing the initial blow of an embargo because they can marshal resources. Then there is the blowback. Although the West’s gdp dwarfs Russia’s, there is no wishing away Mr Putin’s chokehold on gas. The biggest flaw is that full or partial embargoes are not being enforced by over 100 countries with 40% of world gdp. Urals oil is flowing to Asia. Dubai is brimming with Russian cash and you can fly with Emirates and others to Moscow seven times a day. A globalised economy is good at adapting to shocks and opportunities, particularly as most countries have no desire to enforce Western policy.
You should therefore discard any illusions that sanctions offer the West a cheap and asymmetric way to confront China, an even bigger autocracy. In order to deter or punish an invasion of Taiwan, the West could seize China’s $3trn of reserves and cut off its banks. But, as with Russia, China’s economy would be unlikely to collapse. And the government in Beijing could retaliate by, say, starving the West of electronics, batteries and pharmaceuticals, leaving Walmart’s shelves empty and triggering chaos. Given that more countries depend on China than America as their largest trading partner, enforcing a global embargo would be even harder than with Russia.
Instead the lesson from Ukraine and Russia is that confronting aggressive autocracies requires action on several fronts. Hard power is essential. Democracies must cut their exposure to adversaries’ choke points. Sanctions play a vital role, but the West should not let them proliferate. The more that countries fear Western sanctions tomorrow, the less willing they will be to enforce embargoes on others today.
A bit more at the link.
The second, from The Financial Times, focuses on the effects of the war on Ukraine’s economy:
“This is a carefully devised plan,” says Alexander Rodnyansky, an economic adviser to Ukraine’s President Volodymyr Zelenskyy. “Ever since its blitzkrieg failed, Russia has moved to the strategy of the slow, painful death by economic means.”
It appears to be working. Ukraine’s gross domestic product will fall by as much as half this year. Its budget deficit is $5bn a month and, by the end of 2022, foreign donors will have spent at least $27bn paying the salaries of Ukrainian public sector workers and soldiers, keeping them warm this winter. The central bank has devalued the currency, the hryvnia, by 25 per cent and is printing more to buy government debt, tipping inflation to over 20 per cent.
“People don’t understand how acute this is, and that we are on the brink of a currency crisis,” says Rodnyansky. If this leads to hyperinflation, “that would be a calamity of unimaginable proportions and we won’t be able to continue the war effort”.
Putin is betting that western generosity is not infinite — especially as high gas prices damage domestic economies in the west — and that squeezing Ukraine’s economy will further stretch the limits of how long the west will buoy up Kyiv.
Much, much more at the link including maps, graphs/charts, and pictures.
As you all know, my worry has always been that the sanctions regime would not be comprehensive enough, would not be accepted by enough countries, and would not make a dent in Russia’s energy export economy to be effective fast enough to make a difference. And you all also know my concern about part of Putin’s strategy once he couldn’t quickly take Kyiv: dragging things out until donor fatigue sets in among the EU states and winter bites them as he manipulates gas flows into the EU, as well as the expectation that the Republicans will, at least, take the House in the midterms. While the politics in the US continues to change so the latter, while still a possible looks less certain than it die even a month ago, donor fatigue and his ability to jerk the Europeans around once winter arrives are still much more plausible ways to achieve his objective of cutting Ukraine off from support.
The good news is that politics in the US are not static and this midterm is likely to at least somewhat unique for a number of reasons. The good news is also that the Biden administration has managed to keep NATO united and focused and the EU largely on track in support of Ukraine, as well as our non-NATO and non-EU allies. The bad news is that this war is not going to be quick or inexpensive. So we will continue to watch and analyze the economic effects of the sanctions on Russia and the war on Ukraine.
Your daily Patron!
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PayPal: [email protected] pic.twitter.com/sXQlU1L2wN— Patron (@PatronDsns) August 27, 2022
And a new video from Patron’s official TikTok:
@patron__dsns
The caption tonight is just a weary face and the hashtags patron always posts – Glory to Ukraine, DogPatron, PatronDSNS:
Open thread!
zhena gogolia
Too bad about sanctions.
Alison Rose 💙🌻💛
The idea of donor fatigue is definitely worrisome–which is part of why I get so irritated with people (many of them probably russian bots, but not all) who were so snide about, for example, the Vogue interview and photo shoot, or about any of that type of thing that either Zelenskyy or Olena Zelenska has done. Obviously both of them have a lot on their plates, but one of those things is keeping Ukraine front and center in the minds of as many people around the world as possible, and making it so that politicians will keep their attention on it because their constituents want them to. Making sure people understand this isn’t “give a single $20 donation and that’s it” and that support has to be consistent and unflagging, is crucial. And if it takes a few photos in Vogue to help that effort, then so be it.
It continues to amuse and yet also somewhat horrify me just what dim bulbs a lot of the russian soldiers appear to be. If this is putin sending his best…good Lord.
Thank you as always, Adam.
Quiltingfool
I have a question about an Ukrainian word. I want to make sure it is correct, I don’t entirely trust Google translate!
Is “vinok” the correct word for the flower headdresses worn by Ukrainian women? If so, how is it spelled in Cyrillic?
Thanks!
Adam L Silverman
Ninedragonspot
@Quiltingfool: вiнок
Gin & Tonic
@Quiltingfool: It is the correct word. In Cyrillic: Вінок.
Lyrebird
@Quiltingfool:
BiHOK
Better to get it from Wikipedia though.
ETA: or above, faster typers!
Your work is so beautiful!
Anonymous At Work
The sanctions regime has a central flaw in that Western democracies operating under “capitalist principles first, democratic principles second.” Money is assumed to be valid until proven otherwise. All buildings in NYC or Londongrad or Nice, France by Russian nationals are assumed valid. Superyachts in The Maldives are assumed valid. That assumption forces considerable time and effort to overcome, often with Russian “cooperation.”
A functioning sanctions regime would require flipping the assumption: high-end real estate, cars, boats, planes and other items should be frozen until their legitimacy established.
That would be difficult to pull off. Here, NYC companies would freak out. In London, many Russian nationals have relocated, donate tons of money to BoJo, and some are even MPs. All over, Russian firms are partners, owners, or significant shareholders in major corporations. And that’s not invoking “sovereign wealth funds” and how they would react to such a sanctions regime (Saudis and Chinese in particular) that froze nations on the wrong side of a regime.
However, it’s probably the only way to generate the right type of pressure within Russia. Too many of their kleptocrats currently believe they can wait things out, say nice things about Putin on TV, and get back to “normal” at the end of the war whether Putin is in power or if he’s removed. Their soft-laundering efforts over the years and on Putin’s behalf have render them immune from consequences.
Finally, in total contradiction to the above, isn’t the incredibly rapid degradation of Russian military capacity enough to justify sanctions as a tool? High-end military forces need high-tech equipment and parts to sustain a military effort. Technology is the second-oldest force multiplier after terrain.
Anonymous At Work
@Adam L Silverman: Depends on margins. Pelosi is an amazing whip and a discharge petition is exactly the sort of emasculating nightmare that a Speaker McCarthy would need to avoid.
ian
@Anonymous At Work:
A guilty until proven innocent approach. Imagine if a Republican president came to power and could use this approach to target broad swaths of the Muslim international community/wealthy individuals aimed at cutting off funding for terrorism.
Also related: getting the rest of the international community on board. I’m skeptical this would help.
zhena gogolia
@Adam L Silverman: I wish he could be shipped to somewhere in the vicinity of Aleksey Navalny.
Chetan Murthy
@ian: If the US and other Western nations insisted that all assets had registered real-human beneficlal owners, that would make this a non-problem, right? But then, that would get in the way of tax-cheating and other crimes by Western elites. Can’t do that, then.
Bill Arnold
@ian:
I’d define “legitimacy” as establishment of ownership. Where “ownership” is in the modern sense of “control”; many extremely wealthy people do not “own” most of their assets; they control. them, though on paper they are owned by a large collection of chains of shell corporations and trusts.
NutmegAgain
Historian Tim Snyder elaborates on the idea that many of the *ssrs that were not Moscow-centric Russia were brought into the fold one way or another as a form of internal colonization. Following WWI, Ukraine briefly had a independent statehood — soon superseded by the Ukrainian SSR. Loss of direct control of those assets for the last 30 years has been a gigantic sore point in the Kremlin.
I keep trying to think of some kind of parallel with the US and its imperial adventures. War in the Philippines is pretty close (obvs the war with Mexico, but that was back a while). Are there countries that we have actually overrun in order to take their natural resources? Of course the Middle East pops right up, but I’m fuzzy on exactly how US interests grabbed petro-products. I’d guess the question of comparing hegemonic interests between US & Russia has lots & lots of opinions.
Gin & Tonic
@NutmegAgain: If you’re on Twitter, @maksymeristavi has been doing yeoman’s work documenting russian colonialism.
Chetan Murthy
@NutmegAgain: Alta California, Tejas, etc from Mexico. And of course, all the land we stole from Native Americans. Directly comparable to Russia’s wars of conquest of their East. And it turns out, there are comparable legends and stories, to match ours of cowboys and all the other heroic narratives of Western settlement.
Adam L Silverman
@Anonymous At Work: McCarthy will never be speaker if the GOP retake the House. He won’t even be in the leadership.
Gin & Tonic
@zhena gogolia: Not sure you saw, I wrote a long comment about “Слава Україні” in Wednesday’s Ukraine thread.
Bill Arnold
I would not be surprised to see ruthlessness vs Mr M. Gaetz. He certainly deserves it.
Eight Sources Say Feds Are Not Done With Matt Gaetz – CALM BEFORE THE STORM? – It’s been a quiet few months in the probe into allegations that the Florida congressman was involved in underage sex trafficking. But few involved think it’s over. (Jose Pagliery, Roger Sollenberger, Asta Hemenway, Aug. 25, 2022)
After the election though, if it happens:
Parfigliano
@Anonymous At Work: The only thing oligarchs understand is money…and death. Give them one
Anonymous At Work
@Adam L Silverman: Depends on margins because: Who’s the alternative? The GOP has a deep bench of bed-shitters and grifters, but the latter won’t take a leadership position and the former will get knifed in the back so hard, it’ll seem like Caesar just got acupuncture. A 218-217 margin that nominated Matt Gaetz? If McCarthy gets a 230-205 margin, the entire margin will be candidates that would prefer Gaetz gone to avoid the headache.
But the underlying concept is the same, I think: Discharge Petition. I can imagine horror stories (even worse ones) coming out of Ukraine, with video, and keeping sentiment on Ukraine’s side enough that any GOP House member whose district is <+5 will need to signal solidarity.
Carlo Graziani
I’m still going to register a dissent on the Economist’s outlook on the effectiveness of sanctions. In my opinion they are looking at linear-type models and effects, and neglecting the possibility that when things go bad many things go catastrophically badly all at once. It’s the same kind of forecasting error that led economists to miss the 2009 crash. When it comes, everything goes south, and no model saw it coming.
Anonymous At Work
@ian: Largely what people said below. Human ownership, requiring a human enter court, present paperwork “in personam” attesting to ownership and showing it didn’t come second- or third-hand from sanctioned persons or their companies.
The secondary effect is that Putin’s laundry system depends on hostages back in Russia. Requiring the network make regular trips abroad under hostile conditions would provide additional strain.
Chetan Murthy
@Carlo Graziani: I really do hope you’re right. But I read the articles about sanctions-avoidance via China, Turkey, India, and now Iran, and I wonder whether all these holes will just vitiate the effort. It’s not like we can demand that Iran cease to trade with Russia, as a condition of restoring the JCPOA, after all — there’s simply no way to enforce that. None at all.
Quiltingfool
@Lyrebird: Thank you! I’ve got a bunch of blocks for Ukrainian donations ready for the quilting machine! I have made a block that wasn’t in the quilt that is turning out quite nicely. It features a cat and sunflowers…a recurring theme, lol!
As I’m typing this, I just got an idea for a new Patron block! He needs to be surrounded by sunflowers!
So many ideas, so little time. It’s a shame I have to stop working to cook food, do laundry, shop, etc. Notice I didn’t mention cleaning the house…
Adam L Silverman
@Anonymous At Work: No, the bulk of that majority will be the full on trump supporters. The speaker will either be Jordan or Stefanik. As for Gaetz, if indicted he won’t resign.
Gvg
I always thought some of the reason to go for sanctions was as a beginning of an effort to unwind Russian criminal networks from our financial and political systems. It has needed doing for awhile obviously and all the cyber crime and attacks we have noted plus tax avoidance and money laundering that our own rich people do meant we really needed to shut down those networks even if they never attacked Ukraine and we also needed a lot of other countries to do the same things. So I looked on this as a double reason to do these sanctions. I also have the impression that Britain had even more Russian crime spy money going into their economy and politics than we do and I have been kind of surprised Johnson has been so firmly pro Ukrainian.
Getting ready for any conflict with China will be a lot harder than Russia. They aren’t as stupid. They are also entirely different. I don’t think studying Russia helps figure out What will happen with China.
Adam L Silverman
@Carlo Graziani: Actually several people saw 2009 coming. And they used several different, but accurate models. They were just ridiculed and ignored. There is no such thing as a black swan event.
Adam L Silverman
@Chetan Murthy: There’s about 40 other countries that are just ignoring the sanctions regime too.
Adam L Silverman
@Gvg: Unfortunately cracking down on the white collar crime overlap with organized crime that needed to accompany the sanctions is not being done. And there’s no indication it is going to be done. Which is another major reason the sanctions aren’t providing the desired effects.
Bill Arnold
@Chetan Murthy:
The US lost most of what (soft) leverage it had with Iran when the Trump administration withdrew the US from the JCPOA. The Trump administration empowered Iranian hardcore anti-American nationalists, rather than encouraging Iran back into relationships/entanglements with the rest of the world.
A US return to the JCPOA would be helpful. (The withdrawal was in part a (stupid, anti-Israel in effect) favor to Netanyahu and the Israeli right.)
Bill Arnold
@Adam L Silverman:
SARS-CoV-2 – pandemics have been expected. The details and timing matter though.
In the hasn’t happened list:
– A deadlier pandemic (or otherwise more damaging).
– A focused engineered global economic collapse. (e.g. targeted(/carefully modeled) supply chain disruptions, market manipulation to induce instabilities, etc.)
– Carrington-class CME event (observatories at L1 would provide some warning)
– Thermonuclear war (regional)
– Etc.
– Combinations
SiubhanDuinne
Question for anyone here who knows Russian and/or Ukrainian: Is there are word that sounds something like SORBLECHY or TSARBLICHNY or something like that?
I know those are terrible transliterations, and in truth I’m not at all sure it’s even a word. But in the quiet of the night I’ve been hearing it over and over. Yeah, I know, I’m hearing voices in my head. Alert the funny farm. But it’s possible I actually did hear it somewhere and that it might have some meaning.
As ever, beyond grateful for any help.
SiubhanDuinne
Question for anyone here who knows Russian and/or Ukrainian: Is there a word that sounds something like SORBLECHY or TSARBLICHNY or something like that?
I know those are terrible transliterations, and in truth I’m not at all sure it’s even a word. But in the quiet of the night I’ve been hearing it over and over. Yeah, I know, I’m hearing voices in my head. Alert the funny farm.
But it’s possible I actually did hear it somewhere and that it might have some meaning.
As ever, beyond grateful for any help.
SORRY ABOUT DUPLICATE POSTS! Things seem to be a bit weird on the internets and tubes at the moment!
Sally
@Adam L Silverman: Yes, we were there in the materials industries. We saw it coming. We attended a conference in Dec 2007, at which Gov Brown was a speaker, he also saw it coming. We put our house on the market in February. We shut down old production plants and took a lot of heat for “closing capacity”. It was tragic to put people out of work, but in early 2008, it was still possible for many of them to find other jobs. It annoys me when I hear people say that no one saw it coming.
Carlo Graziani
@Sally: I said, specifically “no model saw it coming”. There is a difference in economic model forecasting, such as what the Economist (or the World Bank) engage in, and economic broad-trend reasoning. I’ve seen estimates from the World Bank of drops in Russia’s expected GDP of 10%-15% next year, which come out of models that are clearly calibrated for much smaller disruptions, but which people discuss as if they represented some possible reality. And yet, a year-on-year drop of 4% in Greek GDP in 2009-2010 produced one of the most significant political-economic dislocations in recent memory.
I was trying to make a point about how models misrepresent interconnectedness, and fragility. In 2009, almost every financial mode was doing exactly this — representing the risk of different stupid financial instruments as independent, when in fact they were all highly correlated, so that the “robustness through diversification” argument made by asset salespersons was 100% bullshit. An analogous category error is occurring now in the case of models analyzing Russia sanctions, in my view.
zhena gogolia
@SiubhanDuinne: Those don’t sound like anything in Russian I can think of.
zhena gogolia
@Gin & Tonic: No, I didn’t. I’ll look later. Are we not supposed to say it? Is it like “Thank you for your service?”
zhena gogolia
@Gin & Tonic: Oh, interesting. Thanks.
Chief Oshkosh
@Bill Arnold: Where upon the Wise Men will claim that any further investigation of Gaetz, who will likely win in the midterms, would be an illegitimate attempt to overturn the will of the voters.
These prosecutors are total fucking morons if they don’t see that coming. Of course, since they’re not TFMs, it begs the question – why are they waiting?
evodevo
@Adam L Silverman: Yep…I was a member of the Calculated Risk commentariat at the time, and we were prepared for the event in 2007, way ahead of the rest of the herd. I also followed Naked Capitalism at the time, and they knew what was happening…I abandoned them after Obama assumed office, and the comments went full on Bernie Bro Rose Twitter nightmare. Haven’t been back since 2010.
Anonymous At Work
@Adam L Silverman: Jordan wouldn’t want to give up being the point person on Judiciary to question Hunter Biden seven times a week. Speaker doesn’t serve on committees, but wrangles committee chairs to “produce” actual legislation, including budgets. Hence Paul Ryan resigning.
Stefanik is too smart a grifter. She knows that being a non-penile GOP, she’s guaranteed at #3 as long as she wants but would be the easiest scapegoat for problems if she was Speaker.
Barry
@Carlo Graziani: “I’m still going to register a dissent on the Economist’s outlook on the effectiveness of sanctions. In my opinion they are looking at linear-type models and effects, and neglecting the possibility that when things go bad many things go catastrophically badly all at once. It’s the same kind of forecasting error that led economists to miss the 2009 crash. When it comes, everything goes south, and no model saw it coming.”
And that is the problem. Putin *might* be teetering on the cliff-edfe as we speak, but we have no way of knowing.
Carlo Graziani
@Barry: I do agree with that. We don’t know. We do know that Rossstat doctors the statistics that it does not selectively censor, and that international economic agencies nonetheless continue to consume those numbers instead of doing the much harder work of, for example, assembling a picture from the transaction counterparty data, as the Yale group did a few weeks ago.
One can always argue about the accuracy of pictures formed from “unskewed” data, but the fact remains that the Russians are officially concealing by security classification, and otherwise obfuscating a good deal of their national economic performance data that normal nations routinely treat as with a duty of transparency. That transparency is considered a bedrock necessity of modern state capitalism, essential to engender economic confidence. The Russians have abandoned it. That should tell you something.
Another Scott
@Carlo Graziani: +1
There’s also the diary Pavel Filatyev. One shouldn’t have any sympathy for what he and his comrades went though, and we should be furious at what they have done, but one can take it as indicative of the rot permeating the russian state. Even before the sanctions hit. A strong modern state does not have starving, poorly trained, poorly led, poorly outfitted, poorly supported troops invade a neighbor. A very brittle state does that.
Yes, VVP and his cronies can find a way to keep their economy “working”. And cornered animals are dangerous. But VVP’s russia is in a weak position, it’s getting weaker all the time (even with leaky sanctions), and the only path for victory is for the US, EU, NATO, and Ukraine to give up. I don’t see that happening.
I think the ramped-up mischief in Libya and the rest of Africa, in the Arctic, and continued pressure on the EU natural gas market, are another reflection of his weakness. He knows he can’t defeat Ukraine the way things stand, so he’s trying to create enough relatively cheap distractions elsewhere to make the West lose focus. It’s the GQP’s Throw Everything At the Wall and See What Sticks tactic. I don’t see that being successful, either. (A coming test is whether he can somehow blow-up JCPOA 2.0 with Iran.)
My $0.02.
Thanks.
Cheers,
Scott.
NutmegAgain
@Gin & Tonic: thanks! way back in the yonder years, my dad was a historian of Russia (a real one–not the internet variety… well there was no internet.) He died more than 3 decades ago, and before that, he made a career out of finding ways to help kids with less (money, access) get higher ed. ANYway, many of his colleagues were Russian emigre’s following the creation of the USSR. He had a long and deep relationship with George Vernadsky–another hidden Ukrainian. Uncle George’s father and grandfather were also scholars and scientists. It’s kind of incredible how the past loops ad connects. What do they say, the past doesn’t repeat but it rhymes.
Carlo Graziani
@Another Scott: I believe this is basically right. And, with all due respect to Adam, I believe that it is a terrible error, bordering on defeatism, to undermine the credibility of the sanctions by downplaying the damage that they are doing, or their potential for causing the regime to come to terms. I know as a moral certainty that Adam does not intend this, and is merely skeptical of “non-kinetic” resolutions of the conflct. But it is nonetheless the case that the Russians themselves are telling us their greatest fears when every diplomatic contact or blackmail attempt over energy or food consists primarily of demands that the West end economic sanctions, rather than demands that the West end weapon supplies to Ukraine.
What seems not to be widely understood is exactly the factor that you are pointing to: What are the sources of state power? Even The Economist gives signs of being confused about this, when they assimilate Russia to China, despite these being two totally different cases whose national power derives from completely different sources.
Let’s leave China aside, so as not to muddy the waters. A modern state with international political-military concerns derives its power, including its combat power, from a functioning economy organized broadly along capitalist lines capable of supplying the entire nation with commercial industrial and consumer goods, as well as a healthy export sector, so as to be able to support indefinitely from excess disposable GDP an essentially parasitic (in the sense of not being in itself economically productive, except perhaps as a small contribution to exports) military-industrial and security establishment. Such an economy is an eye-wateringly complex system of laws, contracts, supply chains, finance, insurance, agricultural systems, industrial manufacturing facilities, transport, consumption, and more. Politics is layered on top of all of it, even in Russia (think of the importance that Putin attaches to “normalcy”, to the extent of criminalizing the use of the term “war” for an operation that has by some estimates produced 70,000 casualties, and insisting on recruiting new contract soldiers from outside of Russia itself).
Complex systems like that have complex dependencies and unexpected vulnerabilities, as we discovered to our surprise when toilet paper disappeared from store shelves in April 2020 “because supply chain”. There are a few key things about Russia’s peculiar style of economic mismanagement that produce conspicuous vulnerabilities. The basis for Russia’s wealth is a system of nearly pure mineral resource exploitation, and there has been no serious effort to diversify the state’s economic foundation. As a consequence, Russia produces essentially none of it’s own industrial inputs — not even the most of the high-tech gear it needs for mining and oil and gas extraction, transformation, and transport. Certainly not any of the high tech it needs in it’s weapons. And this means that some of the most effective sanctions have not been the showier embargoes on oil and gas, or the hunt for oligarch wealth, or even the freezing of Russian Central Bank currency reserve assets. Rather it is the export control sanctions, which have successfully switched off the Russian economy, as if by remote control.
There are a lot of idle loading docks in Russia today, compared to six months ago. Stuff they need to finish making stuff — not just weapons, but also cars, dishwashers, tractors, dialysis machines — or even components needed just to fix those things are not showing up anymore. Air traffic and air travel is down, not due to demand, but because part of the commercial aircraft fleet is grounded to supply parts for the rest. Automobiles simply cannot be repaired for lack of parts. And even on the Ukraine battlefield we’ve seen reports of dishwasher controllers being repurposed for weapons electronics. That’s not a sign of a thriving military-industrial sector. Rather, it’s a measure taken in desperate times.
The other thing to understand is this: economists tend to wear weird blinders. Their science really works best as a mix of mostly qualitative reasoning, aided by plotted data and very, very simple models (Brad DeLong and Paul Krugman excel at this, and are great teachers). Many economists appear to have physics envy, however, and insist on viewing everything through large complicated models, apparently believing that the more quantitatively their views are expressed the more correct they must be (or, more cynically, the more persuasive those views are, irrespective of their correctness). Often these models are nothing but large multivariate regressions under the hood, and can really only be trusted with predictions in circumstances closely resembling the data that was used to train them. When a forecasting model produces an output that resembles nothing in its training set — for example “Russia’s GDP will drop by 12% in FY2023 compared to FY2022” despite the fact that no industrialized nation has seen that large a drop in modern times — you would think that the model would also issue a warning that the result is probably invalid, or has an enormous uncertainty, and should only be published attached to fearsome disclaimers or preferably not be published at all. Economic forecasters appear to regard uncertainty as weakness, however, and rarely if ever issue such caveats.
A 12-15% drop in GDP, such as the World Bank forecast earlier this year, would not be the linear-world ho-hum event that people seem to believe it would be. That’s the reason I brought up 2009-2010 Greece and it’s 4% GDP contraction earlier. That was a political-economic disaster that could easily have splintered the EU, because Italy and Spain and Portugal were not that far behind had all that gone down. At a 10% Greek GDP contraction we would not have an EU today. Straight up.
In Russia the effects would be different, but totally unpredictable, including by The Economist. Winter is coming. Is the Russian agricultural supply chain still up to the challenge of bringing in the harvest and feeding it’s cities? We don’t know. We know they’ve been trying to generate export revenue using their harvest. Can they afford that? And what does that say about how their feel about their mineral-extraction revenue, by-the-by? How many people are no longer employed, who were six months ago? We know that there is a lot of idle industry. And a lot of commerce is dead.
At what level of economic misery does political control by propaganda cede primacy to heavy-handed security force suppression of civil disorder? At what point do the security and military themselves become divided and make choices? You think this is impossible? It is, until it isn’t. That’s what we learned (or should have learned) from the collapse of the Soviet Union. I’m a minority view on this, but I am persuaded that Putin’s regime is far more fragile than the Soviet Union was in August 1991, and that his extreme reactions to every external and internal provocation tell us that he knows it too. Under the circumstances we have a duty to keep the screws on, and even tighten them any way we can. The regime will crack. They can put on a brave face, claim their patchwork gimcrack “economy” is a world marvel of stability and a testament to Putin’s genius, and shriek threats at us, but they look scared to me. They will crack.
Bill Arnold
@Carlo Graziani:
Thanks for that detailed argument. (I happen to agree; Russia has seemed more fragile than they appear to realize for the last few years.)
A flip side of that is all the apparently-strong-believed argumentation in the Russian intelligentsia asserting immanent collapse of the US, based mostly on dubious propaganda-informed qualitative analyses. (I’m betting that the Russian Federation collapses and that the USA does not, or at least that the Russian Federation collapses first. :-)