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    Making Sense of the Economic Consequences of the Russia-Ukraine War

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      The Unthinkable: War Returns to Europe

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      War has returned to the European continent. President Vladimir Putin’s invasion of Ukraine is more than a Russian war on one nation. It is a war on the West and everything the West represents — its democracy, rule of law, liberty and the rules-based international world order it has established, largely as a result of America’s military power and the combined economic might of the United States, the European Union and various like-minded nations.

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      Superficially, one might look at the start date of this war as February 24, when Russian forces invaded Ukraine. In fact, President Putin declared his war on the West 15 years ago, when he addressed the Munich Security Conference, lambasting the US and its allies for overstepping boundaries, unsettling global order and threatening Russia itself. He was especially sharp in his criticism of the US invasion of Iraq and NATO expansion to include the countries of the former Soviet bloc.

      Putin’s Long-Declared War Against the West

      One year later, in the summer of 2008, Putin launched his first military campaign. Russian forces invaded Georgia, another aspiring democracy, following its (and Ukraine’s) application to NATO. He had drawn his line and made clear he was prepared to resist. In 2014, following the ouster of the pro-Moscow President Viktor Yanukovych during the Maidan Revolution (aka Euromaidan and Revolution of Dignity), Russian forces — disguised by the absence of uniform — invaded and captured the Crimea region in southern Ukraine, subsequently annexing it. 

      Shortly afterward, Putin threw his support behind Russian separatists in the Donetsk and Luhansk regions of Donbas in eastern Ukraine, on the border with Russia. That conflict continued to fester through last week’s invasion.

      As he rationalized in Munich, NATO was advancing east, encircling and threatening Russia. In fact, it was the nations of Eastern Europe and the Caucasus moving West, adopting the Western model of democracy and free economy, and electing to formally associate with them. Their rationale has been made ever clearer now: They feared Russian aggression and sought the security of NATO and the prosperity of the EU. Russia and Putin’s model of one-man rule, fear and intimidation, repression and stymied economic opportunity held no attraction, and even less under some misguided, fever-dream version of a resurrected Russian empire.

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      It may have been easy to compartmentalize Putin’s antagonism as directed solely at former eastern bloc states on Russia’s periphery. But Ukraine and Georgia have always been merely the staging grounds of Putin’s assault on the West. His calculation was that a seemingly enfeebled US, weakened abroad and divided at home, and a fractious and divisive NATO would not respond. They would acquiesce to his vision of a neo-Russian empire and the recently resurgent notion — also supported by China — of the spheres of influence of great powers. He also calculated that Ukraine, after its failure to defend Crimea or defeat the Russian-backed separatists in Donbas, would fold in the face of Russia’s superior military might.

      Putin doubtlessly also realized that Russia is a declining power. The base for its economy, oil and natural gas, while still much in demand, is facing a declining shelf life as advanced countries turn rapidly to renewable energy technologies. Enormously rich in natural resources and even richer in human ingenuity, it is a one-dimensional economy, making it dependent on the vagaries of commodity markets to keep its budget in balance. Its population has been declining over the last decades and is aging. Russia’s status in the global power alignment is fading, and Putin knows it. Now was the time to strike.

      Putin’s whining aside, the invasion of Ukraine was never about the West’s threat to Russia. Democracies go to war only when threatened. In fact, Putin was crystal clear in his purpose when he belittled Ukraine and dismissed its independence in a speech on February 21, a nakedly transparent declaration of Russian expansionism. Holding up NATO as the aggressive villain and Ukraine as an inherent and natural part of greater Russia was a red herring that earned no perch outside his most ardent apologists.

      Calculating Putin Miscalculates

      The reputedly calculating Putin underestimated his immediate enemy, the Ukrainian people, and his ultimate enemy, the West. Nor did he grasp the dimensions of the new kind of war that would result when great powers enter the fray in an overwhelmingly interdependent world. His war has all the signs not only of a hot war but also the Cold War, an economic war, an exponentially more expansive information war than he could have imagined, and a cyberwar.

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      All will claim causalities across the map, most especially in his own country and Ukraine. Importantly, Russia’s vaunted propaganda engine may prove no match for the millions of Ukrainians with cell phones and the hundreds of millions cell phone users around the world supporting them.

      But the economic disruption of the unprecedented sanctions imposed by the rest of the world’s economic powers, save China, suggests that people everywhere will suffer to some degree. Financial flows are massively displaced, most seriously for a Russia that has been effectively cut out of global financial markets. Note the massive falls in Russian financial markets and the Russian ruble, the clearest signs of an economy in freefall as investors and consumers rush to cash out and then run for the exits.

      Even the massive $630 billion in reserves Putin had thought he was so clever in amassing to blunt the anticipated sanctions have become a dead asset. No one will take his dollars, euros, yen or Swiss francs, not even his gold; they’re all toxic now.

      Oil and grain markets have been colossally disrupted. Import-dependent nations, both developed as well as poor, will pay much higher prices, leading to increased inflation and hardship. We should also expect other secondary effects from the war and sanctions.

      Unique Insights from 2,500+ Contributors in 90+ Countries

      Ukraine has become the proving ground for democracy. Can the immense financial and economic powers amassed by the world’s democracies counter the brute force military power of one country? Nine of the 10 largest economies in the world are democracies, China the lone exception; Russia ranks 12th.

      Democracies run the world’s financial systems from SWIFT to the global financial institutions that fall under the UN, the International Monetary Fund, the World Bank and the World Trade Organization. The US dollar dominates global financial transactions and national reserves. Money has often determined wars’ winners in the past, but never one on the scale of this one, especially when the antagonists wield nuclear weapons.

      It may all fall to the courage and resilience of the valiant Ukrainians. The longer they can hold out against Russia’s onslaught, already fraught with unanticipated planning, logistical and tactical problems and questionable troop morale, the more unbearable the economic costs will become for Russia. 

      Ukraine possesses some of the world’s largest areas of super-rich and fertile black earth. The world is hoping it may also prove to be the perfect soil for democracy to flourish.

      *[An earlier version of this article stated that for “the first time since 1945,” war had returned to Europe. Updated March 2, 2022, at 15:00 GMT.]

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More

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      in World Politics

      Sanctions as America’s Universal Response to Evil (and Anything Else)

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      Our regularly updated feature Language and the News will continue in the form of separate articles rather than as a single newsfeed. Click here to read the previous edition.

      We invite readers to join us by submitting their suggestions of words and expressions that deserve exploring, with or without original commentary. To submit a citation from the news and/or provide your own short commentary, send us an email.

      February 25: Appetite

      Is it justified to think that nations have personalities, along with tastes, fears and desires? People do. But can we assume there is an equivalence between the demonstrable inclinations of a national government and the needs, ambitions and predilections of the people in a democracy? It appears ever more obvious that the political class — increasingly perceived as an isolated elite in modern societies — is less representative of and responsive to the people who elect its leaders and officials than to the economic and cultural elite those politicians tend to associate and identify with.

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      In a Los Angeles Times article on the Kremlin’s view of international sanctions, David Pierson and Sam Dean seek to explain how the West has been elaborating an effective strategy designed to counter Russia’s militarily assault on Ukraine. “With no appetite for military confrontation,” they write, “the U.S. and its allies are relying on sweeping economic sanctions to persuade Russian President Vladimir Putin to pull out of Ukraine.”

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      Most people would find this sentence a reasonable description of the American reaction to events in Eastern Europe. The comforting message is that the West has no interest in war. The damage and suffering caused by this war can be blamed on one government and indeed one man, Vladimir Putin. 

      But does it make any sense to talk of an “appetite” when speaking of the foreign policy of a nation? If the metaphor of a nation’s appetite has any factual foundation in the realm of foreign policy, the history of the United States over at least the past three-quarters of a century reveals an aptitude of American leaders for war in all its forms, which may or may not reflect an appetite or even a craving of its leaders.

      Recent decades have revealed a proclivity of the American political class to toggle between physical warfare itself — which traditionally pitted trained and equipped armies against each other — and economic warfare directed against entire civilian populations. The latter has recently been deemed by political leaders to be more humane, even though it spreads suffering wider and disproportionately affects uncounted masses of people not remotely involved in wartime aggression or any of the practices cited to justify going to war.

      In 1996, when Madeleine Albright, the US ambassador to the UN at the time, was asked about the death of 500,000 Iraqi children due to US sanctions, she said “the price is worth it.” This reflects the kind of political calculus that counts half a million lives not as a tragedy, but as a “price,” something to be evaluated in purely monetary terms. In moral terms, Albright was counting on a form of specious reasoning that says if we haven’t directly sought to kill those children, we bear no responsibility. Their sacrifice is thus of no concern.

      A similar form of reasoning led to the policy privileged at least since Barack Obama’s presidency of seeing drone warfare as humane because it is “clean,” to the extent that it precludes any risk to the “good guys” (ourselves) doing the killing. If only bad people are being killed, war appears to be humane and possibly as fun as playing a video game.

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      So now The Los Angeles Times wants us to accept the idea that American leaders have “no appetite for military confrontation” in the current Ukraine drama. Apart from the irrelevance of the question of appetite, that idea is contestable for another reason. In this case, it isn’t a question of desire, aptitude, proclivity or even ingrained habit. The unwillingness to mount a military operation is due to the simple fact that the United States has no legal justification for engaging in physical war with Russia, which has not threatened US security or the security of any NATO nation. 

      Invoking the idea of appetite is disingenuous. Had Ukraine achieved its goal of joining NATO, no one doubts that there would have been plenty of appetite, even a devouring hunger, at least on the part of the military-industrial complex in the US, who are nevertheless actively supplying weapons. Any war is good for business, even a war the US is not allowed to engage in directly. This one, which holds the promise of reinforcing NATO thanks to the magnified fear of Russia, already makes good economic sense for the defense industry at home. That stimulates a lot of appetites. And for the past five years, mainstream Democrats have plenty to munch on after doing everything in their power to enforce the belief that Vladimir Putin is Satan incarnate.

      The complementary question The Times authors raise of “relying on sweeping economic sanctions” to wage war is more ambiguous. Sanctions can be, and in this case are very likely to be, a two-edged sword, even if it’s the only sword left in the armory due to the rules surrounding NATO defense. Disturbing the flow of global commerce entails a raft of unintended and often unanalyzed consequences for all parties concerned. 

      What is clear, however, is that US administrations have in recent decades developed not so much an appetite as a craving for applying sanctions in every direction whenever anything displeases them in the behavior of any country in the world. Sanctions have become the essential pheromone of the world’s unique hegemon, intent on leaving its odor in every nook, cranny, crevice or just bare wall of the global economy.

      Why Monitoring Language Is Important

      Language allows people to express thoughts, theories, ideas, experiences and opinions. But even while doing so, it also serves to obscure what is essential for understanding the complex nature of reality. When people use language to hide essential meaning, it is not only because they cynically seek to prevaricate or spread misinformation. It is because they strive to tell the part or the angle of the story that correlates with their needs and interests.

      Unique Insights from 2,500+ Contributors in 90+ Countries

      In the age of social media, many of our institutions and pundits proclaim their intent to root out “misinformation.” But often, in so doing, they are literally seeking to miss information.

      Is there a solution? It will never be perfect, but critical thinking begins by being attentive to two things: the full context of any issue we are trying to understand and the operation of language itself. In our schools, we are taught to read and write, but, unless we bring rhetoric back into the standard curriculum, we are never taught how the power of language to both convey and distort the truth functions. There is a largely unconscious but observable historical reason for that negligence. Teaching establishments and cultural authorities fear the power of linguistic critique may be used against their authority.

      Remember, Fair Observer’s Language and the News seeks to sensitize our readers to the importance of digging deeper when assimilating the wisdom of our authorities, pundits and the media that transmit their knowledge and wisdom.

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More