Thursday, November 27, 2014

Putin’s Perilous Course

NEW YORK – The dangers of the crisis in Ukraine cannot be exaggerated. Russian President Vladimir Putin is overtly and covertly inciting separatism in eastern Ukraine, and has declared Russia’s unilateral right to intervene there, in complete contravention of international law. Russia’s provocative policies are putting it on a collision course with the West.

Putin explained his point of view in a recent television appearance: Russia’s current international borders are provisional, determined by accidents of history, such as the transfer of Crimea from Russia to Ukraine in 1954, or the transfer of Russian territories to eastern Ukraine in the 1920’s. Putin claims that it is Russia’s right and duty to defend ethnic Russians in neighboring countries, especially in light of the arbitrariness of the existing borders.

If ethnic Russians call for a return to Russia, Putin asserts, then Russia must heed their call. Putin pointedly reminded listeners that eastern Ukraine was called “Novorossiya” (New Russia) in Czarist times, clearly implying that it could be Novorossiya again.

Evidently, Putin believes that relentless pressure and claims over neighboring states, designed to undermine their sovereignty and force them to accede to Russian demands, will result in a stronger Russia, better able to confront the West. In the recent past, Russia sharply opposed American and NATO military intervention in Libya, Syria, and Serbia on the grounds that the West was violating those countries’ sovereignty. Now Putin claims the right to ignore neighboring countries’ sovereignty on the pretext that Russia is merely defending the rights of ethnic Russians abroad, up to and including their right to secede and join the Russian homeland.

Putin no doubt hopes to create facts on the ground – as in Crimea – without provoking a severe Western reaction. Even without an invasion, Russia can use threats, displays of military power, secret operations, and heated rhetoric to destabilize its neighbors. That may be enough to achieve Russian foreign-policy aims, including its neighbors’ docility.

But Putin’s adventurism is likely to end very badly for Russia. Though the West is justifiably reticent to be drawn into any military confrontations with Russia beyond NATO’s boundaries, and is even reluctant to apply economic sanctions, Putin’s actions have triggered a strong and growing anti-Russian backlash in the US and Europe. The West’s response will intensify dramatically if Russia deploys forces across its borders, whatever the pretext; should Russia adopt subtler methods of political destabilization, Western pressure will build more gradually, but build it will.

Existing trade, investment, and financial relations between Russia and the West are already becoming severely frayed. New investment projects and joint ventures are being put on hold. Loans from Western investors to Russian entities are being called in. Russian banks and companies will face a growing credit squeeze.

In the short term, Russia has ample foreign-exchange reserves to offset capital outflows; but the reversal of capital flows will begin to bite within a matter of months. Following Russia’s forcible takeover of Crimea, it is almost unimaginable that normal economic relations between Russia and the West could survive Russian intervention, subversion, or annexation elsewhere in Ukraine.

In other words, if Cold War II sets in, as appears increasingly likely, Russia would be the long-term economic loser. The European Union can certainly survive without imports of Russian natural gas, even with a full cutoff. Russia’s gas exports to Europe constitute less than 10% of the EU’s primary energy consumption. Russia, on the other hand, would suffer a major loss of revenues.

Putin seems to believe that Russia can offset any worsening of economic relations with the West by strengthening its economic relations with China. But technologies and business are too globally intertwined to divide the world into economic blocs. China knows that its long-term economic prosperity depends on good economic relations with the US and Europe. Putin seems not to understand this point, or even the fact that the Soviet economy collapsed as a result of its isolation from technologically advanced economies.

Russia’s future economic strength depends on its ability to upgrade technologies in key sectors, including aviation, high-speed rail, automobiles, machinery, and heavy industry. That can be achieved only if Russian companies are more closely integrated into global production networks that knit them together with German, Japanese, American, and Chinese firms that rely on cutting-edge technology and advanced engineering.

Of course, matters could become much worse. A new cold war could all too easily turn hot. Many in the US are already calling for arming Ukraine as a deterrent to Russia. But, while military deterrence sometimes works, the West should emphasize trade and financial retaliation, rather than military responses to Russian provocations. Military responses could provoke disaster, such as turning Ukraine into a Syria-type battlefield, with untold thousands of deaths.

There can be no doubt that NATO will defend its own members if necessary. But Russia’s belligerency and appalling behavior should not permit Western hardliners to gain control of the policy debate. Hardline approaches brought expanded conflicts in Afghanistan, Iraq, Libya, and Syria, leading to plenty of deaths but not to meaningful political or economic solutions in the affected countries. War is not politics by other means. War is mayhem and suffering.

Putin is no doubt acting in Ukraine with domestic politics very much in mind, using his adventurism abroad to shore up his political base at home. The Russian economy is flagging, and the population is weary of repression, not to mention Russia’s pervasive corruption. Russia’s annexation of Crimea and threat to invade eastern Ukraine appear to be hugely popular. It remains a terrifying reality that politicians often perceive war to be an antidote to internal weakness.

Both Russia and the West have played fast and loose with international law in recent years. The West violated national sovereignty in Serbia, Afghanistan, Iraq, Libya, and Syria. Russia is now playing the same card with shocking brazenness in its own neighborhood, often justifying its actions by pointing to Western precedents.

But Russia’s true long-term interests lie in multilateralism, integration into the world economy, and the international rule of law. Putin’s current path is strewn with grave hazards. He is undermining Russia’s economic prospects, while confronting the world with a growing threat of war. Our only hope is that all sides return to the principles of international law, which they have forsaken for too long.

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    1. CommentedDerrick Baragwanath

      Putin's adventurism in the Ukraine, reminds me of the words written by the well known WWII historian, AJP Taylor. Taylor said of Mussolini and Hitler: " Hitler never wanted a war against England and America. Mussolini had never wanted a war against anyone stronger than Abyssinia or Greece. The Axis had moved cautiously forward in a series of small improvised wars until an unwelcome world war caught up with them." If only Putin was a student of history, he may recognize starting a war is easy, stopping it is much harder Furthermore, it is not usually ended by those who start it.

    2. Commentedhari naidu

      It’s amazing what intuitive intelligence and policy advise we’ve here on Ukraine :

      From Richard Haas & AM Slaughter: Former Director’s of Policy Planning directorate of State Department: There is a “primitive level of slogans and jingoistic ideological inspiration,” as quoted by Skidelsky.

      Personally I’m glad that neither of the two are in *foggy bottom* advising Kerry.

      In Syria, Assad has called a general election and will inevitably return to power – while +90% of chemical weapons have been removed by UN Agency under civil war conditions.

      President Obama has more or less given up on Syria – after his failed demarche.

      And it seems he’s no real or serious strategy to deal with Putin – let alone invite him to WH for a serious political dialogue.

      Bottom line: Merkel must have made it absolutely clear to Obama that military action against Russia (or Putin) is not acceptable and will not resolve the crisis.

    3. CommentedDirk Ouellette

      The "hot war" scenarios are too silly to be discussed. We should live with all of the fears we felt in the 50's and 60's?? To whose benefit...I think the corporate-military complex are the only ones to salivate at such talk.

    4. CommentedJim Nail

      Thank you, Professor Sachs - an excellent summary. In my own correspondence I have been emphasizing the domestic-policy roots of Putin's recent irredentism, but you summed those up very well, while putting them into a broader context. One point you make that I would quibble with, however, is that you underestimate Europe's dependence on Russian energy supplies. While Russian natural gas may be only about 10% of total EU energy consumption, there is also Russian oil, which is nearly as large in the energy basket, as well as coal. Cutting off Russian energy sales would lead to some cold months in Europe, as well as to a supply shock for the world economy. Hence the EU leaders will swallow a great deal of provocation first. Remember the politician's dilemma: any sanctions harsh enough to work, if they are painful to the country that imposes them, will be said in hindsight to have been excessive.

    5. CommentedStephen Mack

      'Both Russia and the West have played fast and loose with international law in recent years. The West violated national sovereignty in Serbia, Afghanistan, Iraq, Libya, and Syria. Russia is now playing the same card with shocking brazenness in its own neighborhood, often justifying its actions by pointing to Western precedents.'
      What more needs to be said? Except the mention of the Victoria Nuland/Foundation for the Defense of Democracies alliance that subverted a legitimately elected government in Ukraine. Text of her leaked phone call available here:
      America is no innocent bystander, but a plotter and financier of that subversion, which Mr, Sachs carefully leaves out of his essay, as an inconvenient historical fact!
      America does as it chooses and relies on public intellectuals like Mr. Sachs to rationalize and explain, with certain caveats, the rightness and inevitability of the American Singularity. While painting Putin as in the wrong and sanctions, not war, as the way forward. Mr. Sachs' attempt at propaganda is utterly weak, but sounds all the correct notes of ersatz political respectability, the stock and trade of American public intellectuals.

    6. CommentedVelko Simeonov

      You are so wrong in so many ways that I can write an entire book on the subject.

      THe idea that the west will be calling the shots in the future as in the past is absurd if you look at recent economic developments. Power shifts to the east and the transatlantic community will need decades to reverse that trend. And YES it is much easier for russia to swap the EU with China as its major client for the most important product it supplies gas and oil. And NO the Chinese will be delighted to secure a long-term supply of energy at the expense of EU. The Idea that they will not do that, so that they don't risk its economic ties with the west is also absurd, because the west depends on China for both manufacturing its goods and financing its economy, not the other way around.

    7. Commentedhari naidu

      I think Jeffrey is asking the wrong q's. The political paradigm in which Putin is operating is not known - at least not overtly.
      Unless and until Nato & West identify Putin's strategic framework of policy, it's going to be difficult to manage this relationship going forward. Putin is not afraid of sanctions - ie. they don't replace policy - if his goal is resurgence of (new) Russia.

    8. CommentedYuriy Gorodnichenko

      Economic sanctions are not going to work over night. Isolation is going to wear down the Russian economy, like it did with the Soviet economy. Some sanctions however can have effects even in the short run. For example, a collapse of oil prices can finish Putin's regime in Russia.

    9. CommentedVal Samonis

      The EU's myopia in not diversifying energy for so long is mind-boggling! In a perverted sense, who can blame Putin for seizing "opportunities":)

      Val Samonis
      Vilnius University