Ukraine: Sanctions and Opportunities


There are two schools of thought about resolution of the Ukraine-Russia conflict. One argues that there must be a negotiated settlement and the other believes the conflict will only end when Russia is “brought to its knees.”  The latter perspective carries risk but notable opportunities.

The negotiated settlement perspective suggests that Russia will stop the invasion if the eastern portion of Ukraine is ceded to Russia; that is, the Donbas region. Russia would require Ukraine to declare “neutrality.”  A negotiated settlement ends the conflict, for now; Russian bombing would stop, along with the horrific civilian casualties.  It’s unclear what would happen with sanctions or who would pay to rebuild Ukraine.

The “bring Russia to its knees” perspective argues that the invasion will only stop when the Russian economy is so weakened that Putin can no longer afford to have armed forces in Ukraine.  This is the position argued eloquently by Bill Browder in  a recent Renew Democracy podcast (https://renewdemocracy.substack.com/p/-winter-is-here-ep5-how-do-sanctions?s=r)

In essence, Bill Browder’s argument has three parts;

1.The west can’t negotiate with Putin because he is a psychopath.  Browder argues that the US and our allies  cannot trust Putin, because he invades neighboring countries as a tactic in his grandiose scheme to stay in power.  Therefore, from Browder’s perspective, a negotiated settlement is impossible because Putin will use this as an opportunity to rearm; Putin will not be deterred by an settlement in Ukraine.  Speaking to Barron’s magazine (https://www.barrons.com/articles/putin-sanctions-bill-browder-51646267765) Bill Browder observed, ““Putin has no reverse gear. His whole psychology is prison-yard psychology. You can’t show any weakness. You have to be more brutal than anybody out there.”

In recent days, as Russia has withdrawn from northern Ukraine, we have seen graphic evidence of Russian war crimes.  This underscores Browder’s contention that Putin is a psychopath.

The only way to stop Vladimir Putin is to (metaphorically) put him in jail. He cannot actually be put into prison, because he is in Russia.  Therefore, the strategy has to be to isolate all of Russia.  There must be a total blockade.

2. The best way to stop Putin is through sanctions.  One way to stop Russian aggression in Ukraine is for NATO forces to enter Ukraine, to fight alongside Ukrainian troops and force all Russian forces out of Ukraine.  The west hasn’t chosen to do this because of our belief that Putin would respond by using weapons of mass destruction and the conflict would escalate into world war III.

Browder believes Putin will stop the war in Ukraine when Russia runs out of money.  Browder notes  that Putin is financing the war by using funds gained from selling fossil fuel to the west.  (Estimated to be $1 billion per day.) That is, the current sanctions have diminished the flow of EU money to Russia but not eliminated  it.  Russia is wounded but not yet “brought to its knees.”

Renew Democracy is grading the sanctions (https://fight4ukraine.com ).  The US grades at B-.
Sanctions are broken down into seven categories: condemnation, military support for Ukraine, financial sanctions, sanctions on individuals, diplomatic isolation, propaganda, and replacement of Russian energy. Renew Democracy observed that the US is doing well on “condemnation” and “financial sanctions” but needs do more work on the other categories such as “military support” and “sanctions on individuals.”  The US and our NATO partners are sending increased level of military support to Ukraine.

The key problem is that NATO is not united in the severity of sanctions.  Some NATO members are buying lots of oil and gas from Russia and have implemented only limited financial sanctions.  (They can’t block money transfers to all Russian banks because they need to have a payment channel.)  Most Russian fuel exports go to EU countries: the largest customer is Germany which gets 49 percent of their fuel needs from Russia; the second largest is Italy (46 percent); then Turkey (65 percent); France (24 percent); Hungary (72 percent); Finland (100 percent); Slovakia (100 percent); Poland (60 percent); Czech Republic (82 percent) and Austria (63 percent).  If Russia were to cut off fuel exports to the EU, these countries would be severely impacted.

On April 8, the US Congress voted to ban all Russian oil imports.  (https://thehill.com/news/senate/3261477-senate-passes-package-to-limit-trade-with-russia/)  The same day, the European Union voted to stop all Russia coal imports by August (https://www.nytimes.com/2022/04/06/business/russia-coal-europe.html ) : “Imports from Russia accounted for 47 percent of coal coming into the European Union in 2019.”

To use a deliberately disturbing metaphor, NATO is a fossil-fuel junkie that finds itself at war with its dealer.  It is proving difficult for NATO to stop using Russian fuel imports.  So NATO continues to fund the Russian war in Ukraine.

Obviously, this is an opportunity for a massive shift to renewable energy.

2. Another way to stop  Putin is to seize the assets of Russian Oligarchs.  Bill Browder estimates that Vladimir Putin and his associates have looted $1trillion from Russia.  Browder estimates there are more than 100 “oligarchs.”  They have a straightforward relationship with Putin: half of their assets belong to him; they do his bidding without equivocation or they die.  (https://www.theguardian.com/world/2022/mar/04/meet-the-oligarchs-sanctions-russian-billionaires )

NATO has  begun seizing the assets of these oligarchs; for example, seizing their super-yachts and planes.  However, many of these assets are hidden deep in a web of legal deception.  Like sanctions, dealing with the kleptocrats will take time.

This is an opportunity to deal with kleptocrats, in general.  For example, the US has oil barons.

Summary: Once again, I’m conveying a grim message.  Nonetheless, I do not feel pessimistic; i feel determined.  We’re at a moment similar to that in “The Wizard of Oz” when the curtains are lifted and we see the Wizard for who he truly is — a fake.  The curtains of Russia have been lifted and we’ve seen Vladimir Putin for who ihe truly is — a psychopath.  We can’t play nice with a psychopath.

We know what to do.  Now we must do it.  We must take the actions necessary to bring Russia to its knees.