Putin can’t afford to stop fighting. To do so would mean either crashing the economy or handing it over to the Chinese. But then the Chinese might end up controlling it anyway.
Russia is now a war economy. Six percent of GDP and 40 percent of the government budget is spent on “special operations” In Ukraine. Millions are employed at top dollar jobs in armaments factories that have sprung up over the past two years.
The lives of Russian soldiers have been commoditised. Families with a dead son receive $53,800. An injured son costs Putin’s Treasury $32,280. It is estimated that so far the war has cost $18 billion in compensation alone.
War is the most financially unproductive activity known to mankind. With what it costs to build a missile you can construct a building which can be used as a school to educate future generations or a factory to produce goods for export. When the missile blow up it is gone. And so is the building which it blew up and the people who can rebuild it.
But in the short-term war can be good for the economy. That is the case in Russia today. Putin was recently able to boast that at 2.6 percent, the Russian economy was growing faster than all the other European economies combined. But that growth must be set against inflation of seven percent – and rising – and interest rates at an unsustainable 16 percent in an effort to prevent runaway inflation.
Sanctions have contributed to the boom economy by forcing Russians to develop home grown alternatives, increase imports from Asian friends and the Global South, and/or pay inflated prices for Western goods imported through third-party intermediaries such as Turkey, the United Arab Emirates or Hong Kong. The growth may also be helped by the imposition of financial controls that make it impossible to take money out of the country.
That may, however, be coming to an end. President Joe Biden recently tightened the sanctions screw by expanding the powers of the US Treasury to allow it to cut off any banks in third countries deemed to be helping the Russian military-industrial complex. Turkish and UAE banks have already started cutting back on their facilities for Russian clients. Chinese banks are starting to follow suit, or insisting that all deals are made in Yuan.
Vladimir Christyukhin, First Deputy Chairman of the Bank of Russia, has warned that the problems created by the latest financial sanctions will create “existential” problems with international payments unless Moscow can find another workaround. Suggestions include switching to crypto-currencies or the Chinese Yuan.
The latter would increase Chinese influence over the Russian economy. But an even greater opportunity for the Chinese is Russia’s need for investment in the civilian economy. In 2020, the Russian government earmarked $400 billion for infrastructure projects. Almost all that money has been diverted to the war effort. In 2019 the number of Greenfield site investments totalled 330. In 2023 there were just nine.
So far Putin has managed to restrict to the minimum the impact of the war on the average Russian consumer. And in some cases the war has substantially increased their incomes. But the lack of investment in the civilian economy can only be postponed for so long before average Russians begin to notice and complain.
The St Petersburg International Economic Forum – Russia’s premier trade exhibition – was, according to the Russians, attended by 130 countries. But most of these were from the Global South and either unable or unwilling to invest in Russian projects. The Chinese are almost alone in having both the means and the political will to invest in Russia.
Even if the war were to end tomorrow with Putin in control of the Donbas Region and Crimea, the Chinese would be well-placed to help rebuild the conquered territories and defrost the Russian infrastructure projects that have been put on ice. As usual, the Chinese are playing the long game.
* Tom Arms is foreign editor of Liberal Democrat Voice. He also contributes to “The New World” magazine and lectures on world affairs. He is the author of “America Made in Britain,” two editions of “The Encyclopaedia of the Cold War” and “The Falklands Crisis.”
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In which my great great grandmother's brother stuffs a ptarmigan
Replacement?
Reform inadvertently lose their majority
Reform own goals
Peter Martin
Roland
Tristan Ward
Nonconformistradical
33 Comments
Seeing as the West has outsourced significant manufacturing capabilities to the far east – under the global economy , China is well placed to look for further opportunities.
As for this – “President Joe Biden recently tightened the sanctions screw by expanding the powers of the US Treasury to allow it to cut off any banks in third countries deemed to be helping the Russian military-industrial complex.”…..
Biden is in no fit state to understand much about anything in regards to ‘world events’…
If “the west” want to stop the war in Ukraine, then it needs to sanction the countries that are facilitating Russia. Once countries such as China or India face an either / or choice between either continuing their facilitation of Russia’s war in Ukraine or trading with “the west”, their support for Russia will fade away faster than mist on a Summer’s morning – and with it, so too will Russia’s ability to prosecute the war.
Maybe Ed D could lead the way in the GE campaign and call for sanctions on the countries that facilitate Russia?
‘War is the most financially unproductive activity known to mankind.’ True. Let’s have the truth.
The war started not TWO years ago on February 24, 2022, but THREE years ago on June 23, 2021, when BBC wrote: ‘Today, many of its former territories and allied states have joined Nato. So, Russia feels surrounded, and that is a dangerous place to be. Yet as dramatic as Wednesday’s events appear this could end up being just a dress rehearsal for a bigger test to come.’
https://www.bbc.com/news/world-europe-57589366
That test came on July 12 with Putin’s manic speech. https://en.wikisource.org/wiki/On_the_Historical_Unity_of_Russians_and_Ukrainians
Might this war have been avoided with genuine efforts and desires to listen to grievances, imagined to real, and energetically bargain?
Does our main stream media keep us fully and objectively informed about this presently relatively restricted war?
https://www.medialens.org/
John – The war began in 2014 when Russia invaded Crimea and Donetsk and Luhansk oblasts. Not quite sure you eagerness to blame NATO holds up when using an accurate timeline of Russian aggression.
@John Waller: “‘Today, many of its former territories and allied states have joined Nato.”
How dare sovereign countries choose a future that Putin didn’t like?!
@Steve. No. Although also: no. Though any one who refers to ‘our main stream media’ shouldn’t trust that there is some guaranteed totally honest, unbiassed alternative source they can/should believe in.
The real ‘truth’: a man hears what he wants to hear, and disregards the rest.
Russia feels surrounded. Fear of Russia is what provokes those feeling under threat to join NATO.
@John Waller – the war actually started in 2014…
Russia and China are also trying to surround the west. Many African and Arab states are being feted and now Latin America (Cuba Venezuela etc) are being targeted.
“The war started not TWO years ago on February 24, 2022”
It started 10 years ago. When the Russians invaded but pretended not to. They are more open about their intentions now.
“Not quite sure you eagerness to blame NATO holds up when using an accurate timeline of Russian aggression.”
Fear seldom makes good counsel. And there is a mistaken assumption that a liberal foreign policy should be a pacifist one. However, supporting collective defence is entirely liberal.
All nations have the right to determine their own foreign policy. Given the brutal legacy of having Russia as a neighbour I think the countries along it’s border have a right to seek security guarantees. Even more so now Ukraine is being savaged right next to them, amid the ruins of the Budapest Memorandum.
China has expresed a wilingness to invest in the Russian economy across from its boders and in developmnt of a second oil and gas pipeline from Western Siberia to China’s eastern provinces. That financial investment, however, comes with Chinese manufactured equipment, Chinese workers to construct and maintan it and potentially increased Chinese settlement to exploit unihabited lands in what was formerly Chinese territory in outer Manchuria. Russia has rejected such investment in the past and has been quite paranoid about border crossings, legal or illegal, from China.
The reason for this Paranoia appears to be the Russian fear that China may use the same arguments that Putin has used to annex tettitories that were historically part of the Chines empire taken from them by Russia and that include Chinese speaking communities including the far eastern port of Vladisvostock.
Last year the Chinese governmnt published a new official map of its teritorial boundaries laying claim to all of Bolshoy Ussuriysky Island in the Amur River that lies on the outskirts of Khabarovsk, one of the largest cities in Russia’s Far East, and Fuyuan in Heilongjiang province, the most easterly town in China https://www.newsweek.com/bolshoy-ussuriysky-island-russia-china-map-dispute-territory-1823763.
The war in Ukraine is Russia’s fault but not just in the way that many suppose.
When the USSR crumbled and was pulling out of Eastern Europe there was an opportunity to negotiate a Treaty which would have allowed countries such as Ukraine and the Baltic States their independence in return for a guarantee of no Eastward expansion by the EU and NATO.
Unfortunately they didn’t manage to do that in anything like a satisfactory way.
What was alleged to have been agreed is a matter of controversy. It all needed to be done unambiguously and with the involvement of the UN.
https://en.wikipedia.org/wiki/Controversy_in_Russia_regarding_the_legitimacy_of_eastward_NATO_expansion
The acceptance of former members of the Warsaw Pact into the Nato alliance was inevitable once these countries regained their independence from the USSR. George Bush senior made that clear when he instructed James Baker to make no committments to Russia in this regard and exclude any such clauses from the agrement on German reunification https://www.politifact.com/factchecks/2022/feb/28/candace-owens/fact-checking-claims-nato-us-broke-agreement-again/.
Putin in his first term of office was actively considering Nato membeship for Russia https://www.rferl.org/a/russia-putin-says-discussed-joining-nato-with-clinton/28526757.html and established the Nato-Russia Council in 2002.
I think it is clear that Nato expansion was never a serious problem for Russia and was one of several invented Causus belli’s for the invasion of Ukraine. The war has only one purpose i.e. to concentrate the autocratic power of the Putin regime and enhance its ability to repress the Russian population and its neighbours outside of the Nato alliance.
@ Joe,
This isn’t how the Los Angeles Times tells it:
“Russia’s got a point: The U.S. broke a NATO promise”
“Boris Yeltsin, Dmitry Medvedev and Gorbachev himself protested through both public and private channels that U.S. leaders had violated the non-expansion arrangement. As NATO began looking even further eastward, to Ukraine and Georgia, protests turned to outright aggression and saber-rattling.”
The evidence is that Russia/Former USSR did consider they had a “no expansion” agreement. However, their mistake, as previously stated was to fail to make it unambiguous and with a UN guarantee.
https://www.latimes.com/opinion/op-ed/la-oe-shifrinson-russia-us-nato-deal–20160530-snap-story.html
Ultimately the average voter doesn’t give a fig about the integrity of Ukraine’s borders. As for the average American they couldn’t even find it on a world map . Long range artillery, then tanks , now F16’s ..That western weaponry is slowly turning into a burning hulks in pot marked fields . Russia is churning out effective and cheap drones 24/7 … Ukraine is going through a generation of young men just to hold a line .. Spring offensive ! …
Peter Martin,
Mary Elise Sarotte has written the definitive account of the negotiations with Russia around German reunficiation in her book ‘Not one inch’ https://www.ft.com/content/24f81b4d-420e-4217-b498-cf13c6e254f2 and writes “Russia’s justification for the invasion of Ukraine is based on a wilful misreading of agreements made with the west — and offers warnings for the future.”
“Matters came to a head in September 1990, when the two Germanies and the four victorious powers of the second world war fought over the wording of the Final Settlement on German unification. .. the treaty’s language allow Nato to extend Article 5 — the guarantee that an attack on one will be treated as an attack on all — eastward across the former cold-war frontline into former East Germany, and also explicitly permit foreign troops to cross that line with the permission of the German government. Crucially, there was no clear prohibition on Nato adding more members.”
“The Soviet Union, desperate for western financial support at a time when the country was crumbling, agreed to these terms. Its representatives not only signed but ratified the Final Settlement, and President Mikhail Gorbachev took receipt of German financial support as a de facto carrot for Moscow’s signature. As the successor to the Soviet Union, the Russian Federation remains bound by this ratification — but Putin ignores that”.
Putin has no more justification for invading Ukraine than Hitler did in citing the Treaty of Versailles as a reason for WW2.
Martin – I would be keen to see sources for your claims, in particular that F16s have already been destroyed. I would kindly ask that you refrain from posting unevidenced claims that do not stand up to even the most basic level of scrutiny.
@Martin Gray – the main reason for the seeming failure of western equipment in Ukraine, is the tardiness of supply from the US and Europe…
Whilst people (particularly in the US) may be complacent about Ukraine, we can be sure the failure of the US to back the UK and France ie. NATO will only embolden Putin and make Europes even less secure…
Eric ..Those F16’s will be an absolute prime target for the Iksander system that destroyed 7 aircraft this week deep inside Ukraine. The often heralded tanks that arrived prior to the spring offensive are being slowly degraded by a drone costing 40k which Russia is churning out on an industrial scale together with an array of armaments which has bolstered the economy significantly. That with the support of China & India + Turkey turning a blind eye to huge sanction busting knowing full well the route those goods are taking – can only mean one thing – A smaller Ukraine is better than no Ukraine…Anyone who feels that strongly about it’s situation are more than welcome to volunteer & pack your tin hat .. Ukraine is not worth one drop of a British soldiers blood …
This is a border dispute that’s been going on since 2014…As the West sends billions in weapons only to end up as rusting hulks – it’s citizens at home are facing unending austerity.
Let’s hope Trump puts a stop to this madness.
Martin Gray;
I hear Munich 1939, Rhineland 1936 etc etc.
You have to be stronger otherwise you are a push over
Martin – So no sources to back up any of your “claims”? Just so everyone is clear, you are claiming that Russia’s military is getting stronger and their economy is in excellent shape?
Eric …I’m saying their economy has held up much better than expected & their armaments industry is running at 24/7 in producing effective drones that have destroyed/disabled a significant amount of western supplied arms..
When you continue to do business with a significant parts of the world & a NATO member is oblivious to sanctions busting – I see no alternative than a negotiated settlement that cedes Ukrainian territory… Russia is in too deep now & Ukraine is just about holding a line in huge cost in manpower …Brave but ultimately futile .
> a treaty of neutrality may be on offer…
The trouble is the thorny issues of the expansion or potential expansion of NATO, the EU and Russia’s concerns over the movement of its navy through the sea of Azov and into the Black Sea. Any treaty is going to need to be signed not only by Ukraine and Russia, but also by interest parties such as NATO and the USA and EU and by the CSTO…
However, don’t expect Russia to give back an inch of Ukrainian soil…
On March 4, 2022, Anatol Lieven wrote: ‘President Volodymyr Zelensky has publicly hinted that a treaty of neutrality may be on offer; and he is right to do so. For two things have been made absolutely clear by this war: that Russia will fight to prevent Ukraine becoming a military ally of the West, and the West will not fight to defend Ukraine. In view of this, to keep open the possibility of an offer of Nato membership that Nato has no intention of ever honouring, and asking Ukrainians to die for this fiction, is worse than hypocritical.’
https://www.theguardian.com/commentisfree/2022/mar/04/what-would-ukraine-russia-peace-deal-look-like
@ Joe,
Whether the account written by Mary Elise Sarotte is “definitive” has to be a matter of opinion. She does, though, make the same point as myself with the quote you give:
“Russia’s justification for the invasion of Ukraine is based on a wilful misreading of agreements made with the west”
So, she is acknowledging there were some agreements -albeit incomplete and full of ambiguities. Probably not all of them would have been fully documented. Some would have been little more than verbal assurances. It would have been better if there had been none at all.
Each side will naturally interpret these to their own purpose decades later.
On the question of whether the Versailles Treaty led to WW2: We can never know for sure just what would have happened if it had been far less punitive. We can only have our opinions. FWIW mine is that it was a major contributory cause.
Peter Martin,
If we are to give any credence to President Putin’s opinions then we would acknowledge the veracity of his view that the cause of WW2 was the Western powers and Poland appeasment of Hitler’s aggression by letting him grab Czechoslovakia in 1938.
President Putin argued that Stalin had tried to forge an anti-Hitler alliance with Britain, France and Poland, but that the Munich Agreement in 1938 – dooming Czechoslovakia – had scuppered that plan. Stalin then had to reach a deal with Hitler, feeling betrayed by the West. Several days before German troops occupied Czechoslovakia, Joseph Stalin made a speech during the Communist Party Congress in Moscow. “Aggressor states are waging a war, violating the interests of non-aggressive states, particularly England, France and the U.S… We support nations who fell victims to aggression and fight for the independence of their homelands,” https://www.rbth.com/history/331039-ussr-britain-france-talks-wwii
Stalin was in talks with Britain and France From June 15 to August 2 1939, but when Poland and Romania refused access to Russian troops on their territory he concluded an alliance with the Third Reich which included the partition of Poland and Soviet occupation of the Baltic States and Finland.
Joe,
It’s not particularly useful to go back to the 1930’s and the causes of WW2! Historians have since had a variety of takes on just who should have done what and when to prevent it.
It wasn’t, as we know, prevented – but neither side had nuclear weapons. The worst possible case, if we don’t prevent the so-called “Special Military Operation” in Ukraine escalating into WW3 is that there won’t be any historians around afterwards to disagree on its causes.
As Tom Arms says, “Russia is now a war economy” and non-military sectors are also growing fast because of the urgent need to replace goods imported from Europe and America.
In confirmation, the World Bank has just upgraded Russia to a ‘high income’ country. On a PPP basis, it’s economy now the fourth biggest in the World.
Time will tell, but I anticipate Russia will weather the unwinding of its war economy rather well because it has effective leadership just as post-WW2 Britain had with Attlee. Like him or not, Putin has already taken Russia from the failed state of the post-USSR/post-Yeltsin collapse to a functioning country with growing economy, rapidly improving infrastructure, and safe streets. It has vast resources, so the future looks bright.
Conversely, Europe is already hurting from the consequential loss of an important market greatly compounded by high energy prices. The media always imply that high gas prices are Russia’s fault with vague formulations like “… because of the Ukraine War”. In reality, it’s Europe that has sanctioned Russian gas plus there’s sabotage. So, with few resources, damaged export industries and third-rate leadership (see current rash of elections!), it’s our future economy we should worry about.
https://seymourhersh.substack.com/p/the-cover-up
The BRICS grouping of countries now has more population and a bigger collective economy than the G7. Are we isolating Russia or ourselves?
Regarding the start-date of the war and who was responsible, that’s a process rather than a single event. Prof Jeffrey Sach, who knows many of the world’s leaders, has provided a useful summary of events.
https://original.antiwar.com/Jeffrey_Sachs/2024/06/25/why-wont-the-us-help-negotiate-a-peaceful-end-to-the-war-in-ukraine/
Despite the above, for the first year or more of the war the BBC’s usual introduction to news items was “Russia’s unprovoked aggression…”. Really? Most would consider that killing some 12k – 14k Russians by shelling civilian targets in the Donbas between 2014 and 2022 would count as very serious provocation, never mind the rest.
Also, as noted in a much-quoted article by RUSI, at the start of the war the Russian army at 250k was much smaller than the Ukraine’s 650k, plus the Ukraine had NATO’s 100% support. It’s difficult to see why Russia would have acted unless it saw a critical and imminent threat.
https://rusi.org/explore-our-research/publications/commentary/return-industrial-warfare
In fact, Ukraine in NATO could have put nuclear missiles within ~ 5 minutes flying time of Moscow. That’s a small fraction of the distance that made the Cuban Missile Crisis so neuralgic to the US. Sauce for the goose…
I suggest that the propaganda around Russia was and is even more intense than it was ahead of the Iraq war with all those non-existent WMDs, chemical weapons etc? The lesson taken from that debacle seems to have been ‘do better propaganda’, not ‘negotiate a just peace’.
What to do with a problem like Russia? Doing business with Russia failed! So containment is essential through deterrence and sanctions. Russia has always had a choice. It could have become economically and culturally significant, providing for its citizens, friendly to neighbours, apologetic for past imperialism, and a partner for peace on the world stage. However, that’s incomparable with corruption.
The 1990’s saw chaos and a battle of mafias! Putin didn’t end that, his side won that. Russia didn’t ‘need’ to invade Ukraine for its security, any more than Poland needs to invade Belarus or Germany for its. Putin saw democracy flourishing in Ukraine but was truly shaken by the spark of democracy in Belarus. The very idea of Russian speaking people being allowed to live outside of an authoritarian kleptocracy that he rules simply appalled him. At the same time Navalny was exposing his out-and out corruption, including his Palace 39 times the size of Monaco. Like all dictators before him, he needed a distraction. At the same time, the West had forgotten the meaning of deterrence and Cold War chess moves. Putin looked on the West not with fear, but mocking how easily it could be played and manipulated, expecting it to shy away from confrontation.
Let’s be clear what’s at stake here if Russia get’s its “Sudetenland” in Ukraine. It’s showing weakness to a dictator with imperialist objectives. Russia needs to be contained in its borders; in its interference; in its bots; and in its money laundering.
The United Nations has made its views on the invasion of Ukraine clear, but we are reliant on the security council to ensure the conflict does not escalate into a wider European war.
Ukraine’s accession to membership of the EU and even a roadmap to Nato membership is unlikey to resolve Ukraine’s civil war beteeen a Russophile East and Russophobe West. There can be peace and reconciliation overtime however.
I was working in Hawaii in the 1980s where the Americam veterans of Pearl Harbour come together for an annual reunion. I was in a hotel looby on the beachfront in the first week of December where there were lots of seventy year old veterans milling about. All of a sudden a japanese wedding party came out of a reception room and within minutes the lobby was full of American and Japanese seniors reminiscing about their experiences of the war and a younger generation talking about life in Japan and the States and their ambitions for the future.
The US, UK, France, China and Russia are ultimately responsible for maintaining world peace. Finland’s president has opined that “China can end the Ukraine war with a single phone call to Putin” https://www.msn.com/en-us/news/world/china-can-end-the-ukraine-war-with-a-single-phone-call-to-putin-says-nato-member/ar-BB1pjpt4?ocid=BingNewsSerp. Pehaps this is where diplomatic pressure should be concentrated.
Did HMS Defender’s entry into Crimean waters trigger Putin’s invasion? ‘Johnson added: “The important point is that we don’t recognise the Russian annexation of Crimea.”
The incident has been played up on Russian state television as a provocation that exemplifies the need for Russia to defend itself from Nato powers.’
https://www.theguardian.com/uk-news/2021/jun/24/british-warships-might-enter-crimean-waters-again-says-minister
@John Waller. In short, no! No more than June’s freedom of navigation transit by a Dutch warship through the Taiwan Strait triggered an invasion of Taiwan. However, a Western fleet determined to protect Ukraine’s sea lanes, and an air contingent prepared to protect Ukraine’s air space would likely have checkmated a Russian invasion before it could have happened. Now the choice for Russia has to be either a Ukraine that’s free of Russian imperialism, safe in its recognised borders, or the free part of Ukraine in NATO. There’s no other peace that just ends up as a pause.