Commentary on Political Economy

Monday 18 March 2024

MAGNIFICENT PIECE BY FAREED ZAKARIA! (My compliments and my respect.)

 Putin is in it to win it in Ukraine. Are we?

Opinion by Fareed Zakaria


March 15, 2024 at 21:00 Melbourne Time

In a recent interview with Russian state TV, Vladimir Putin said something that was, in his words, “important for us ourselves, and even more so for our listeners and viewers abroad, to understand our way of thinking.” The war in Ukraine, the Russian president explained, is for the West a way of improving its tactical position vis-à-vis Russia. “But for us it is our fate, it is a matter of life and death,” he said. The fundamental mistake in Western strategy against Russia has been to ignore this reality.

New data confirms that the Russian economy has withstood Western sanctions far better than most predicted. Its gross domestic product grew at over 3 percent last year, and now inflation, which reached around 18 percent in early 2022, seems to be steadying at about 7.5 percent. Russia’s largest bank, state-owned Sberbank, recently announced that profits last year, fueled by a mortgage boom, surged more than fivefold to their highest ever levels.

Moscow has survived Western sanctions for a variety of reasons. These sanctions are not comprehensive; for example, they do not completely prohibit Russia’s energy exports. Nor can they. The world is too dependent on these resources — a total ban, if enforceable, would lead oil prices to skyrocket and trigger a global recession.

And as Western companies fled Russia, non-Western ones simply replaced them. Russians addicted to Starbucks will find that those outlets have simply been taken over by Stars Coffee, a locally-owned brand. Indian business executives tell me they were able to buy Western companies’ assets at fire-sale prices and now operate those businesses profitably.

There are lessons here. The world economy is interdependent enough that it is hard to ban something such as oil without imposing huge costs on everyone. Non-Western economies now make up a large enough part of the world that if they don’t go along with sanctions, those sanctions lose much of their bite.

But the largest lesson is surely that economic pressure alone rarely causes countries to capitulate. Over the decades, Washington has placed ruinous sanctions on Cuba, North Korea, Iran, Venezuela and now Russia. Can one say in any of these cases that the regime reversed its policies?

The Russian economy has survived because Putin has done whatever it takes. He has put his country on war footing, rallying its citizens with patriotic rhetoric that often works when a people feel besieged. (For what it’s worth, the respected, independent Levada Center survey recently reported that Putin’s favorability ratings have risen to 86 percent.) The Central Bank raised interest rates sharply, the finance ministry put in place foreign exchange controls, government spending has dramatically risen — all to create a military-industrial economy. These policies will create severe, long-term costs for Russia’s economy and society. But slow stagnation is something a country can often bear far more easily than a sharp shock.

Putin sees himself in a take-no-prisoners battle with the West. He has often indicated that he would not shirk from using tactical nuclear weapons. He has directed an ongoing and vast information war against key Western nations, notably the United States. By one European commission estimate, posts by accounts linked to the Kremlin were viewed at least 16 billion times in the West in the first year of the war in Ukraine. As the United States considers banning TikTok, it is worth recognizing that the issue is not really who owns the platform but how malign forces can use any platform to get their message out, make it viral and undermine truth and facts.

President Biden has done many big things right in this war. He has rallied the West and many non-Western allies such as Japan, South Korea and Singapore. He has provided moral and material support on a vast scale to Kyiv. Republican opponents of aid to Ukraine are embracing a policy that is deeply irresponsible and unsafe, one that if it succeeds would make America weak and the world far more dangerous.

And yet Biden and other Western leaders must demonstrate that they, too, will do what it takes — and that time is not on Putin’s side. That means using Russia’s Central Bank reserves, now frozen, to help Ukraine. It means accelerating delivery of every kind of weapon that Kyiv needs. The pressure that Putin needs to feel is not long-term economic decline but short-term military setbacks, loss of conquered territory, higher casualty rates and a collapse in morale.

French President Emmanuel Macron is surely right that the central fact that must guide Western strategy is that Putin cannot win. If that means greater Western involvement, even military forces of some kind on the ground, that’s better than watching Russian aggression succeed. Macron gave a speech this week in which he said that conflict was “existential” for France and Europe. The West can only gain the upper hand in this war if it truly believes this — and acts on that belief.

No comments:

Post a Comment