There’s an election in Italy next Sunday, almost exactly 100 years after Benito Mussolini’s ‘blackshirts’ marched on Rome and brought the first fascist dictator to power.
Giorgia Meloni, the hard-right populist politician who is likely to win that election, rejects any comparison with that ugly past. The party she leads, Brothers of Italy, has some nostalgic neo-fascists in its ranks, but she prefers to compare it to Britain’s post-Brexit Conservative Party or the U.S. Republican Party as rebranded by Donald Trump.
She shares her hostility to the European Union with Britain’s Conservatives, her hatred of immigrants, gays and Muslims with the U.S. Republicans and her truculent nationalism with both those parties. She is also militantly Christian and she dabbles in Great Replacement paranoia. And just like them, she wages a non-stop culture war. Continue reading Gwynne Dyer: Putin’s Fans May be Italy’s Next Rulers→
Taiwan’s long-term survival prospects are much worse than Ukraine’s.
Gwynne Dyer’s new book is The Shortest History of War.
Last weekend, about 70,000 Czechs gathered in Wenceslas Square in central Prague for a “Czech Republic First” demonstration, marking the first big rally to take place in a NATO country to oppose support for Ukraine. The crowd demanded a new agreement with Moscow over energy, and an end to arms supplies for Ukraine.
The organizers were the usual suspects: the far-right Freedom and Direct Democracy Party and the quite-far-left rump of the formerly ruling Communist Party. They certainly don’t represent a majority of Czechs – at least, not yet – but winter is coming, and many of them fear that they will face a choice between financial ruin or freezing in the dark. Natural gas prices have tripled and will go still higher as Russia cuts its gas exports to NATO’s European members to almost nothing. Inflation in the Czech Republic is already at 18 per cent.
It’s not just the Czechs. Kyiv is quietly terrified that as the temperature drops, the gas supplies dwindle, the rolling blackouts multiply, the factories shut down and the jobs disappear all over Western and Central Europe, Europeans’ willingness to support Ukraine with arms and money will shrink to nothing.
Canada and the United States are less vulnerable to this erosion of the will, because they are energy-independent. But some of the wobblier European governments might well respond to a “winter of discontent” by trying to force Kyiv into a ceasefire with Moscow, which would freeze the lines where they are – and effectively give Russia most of Ukraine’s coastline.
Ukraine’s armed forces have done well in defence, but the great counteroffensive will not happen this fall or winter. They may be able to make small inroads into Russian-held territory, and maybe even recapture the port city of Kherson, but Ukrainian forces don’t yet have enough modern weaponry to take back territory on a large enough scale to make the Russians consider a face-saving deal that might return things to the pre-February status quo.
But things could be looking a lot better for Ukraine eight months from now. The question is whether or not it can get there, all that time away.
U.S. President Joe Biden’s approach to arms deliveries for Ukraine can be exasperating – increase them by 20 per cent, wait a month to see if Moscow overreacts, then increase them another 20 per cent if it doesn’t, and so on. But even so, Ukraine will likely have some serious offensive capabilities by next spring. And by next May, sanctions will also likely be hitting the Russian economy very hard, if the July analysis from the Yale Chief Executive Leadership Institute is correct.
There’s little doubt that the Ukrainians can hang on militarily until then. There is a small chance that the Russian army could just collapse, but nobody’s counting on it. So the real question is whether support for Ukraine in NATO countries will stay solid for the next eight long months.
There is hope on that front. The European Union’s governments have done a lot to buttress their societies for the coming winter by scrounging up alternative sources of oil and gas – including by temporarily restarting some nuclear and coal-burning power stations – and calling for citizens to turn the heat down, take shorter showers and not drive so fast. By next spring, too, the peak inflation in energy prices will be over, and the demand for power will be falling to summer lows.
So keeping the world’s assistance for Ukraine on track until then will mainly depend on price freezes for energy and temporary cash subsidies to see vulnerable consumers through a harsh winter.
Remarkably, those measures are starting to come through. France has already frozen the gas price at the level from last October, and it has limited electricity price hikes to 4 per cent at least until the end of the year. Meanwhile, German Chancellor Olaf Scholz recently announced another €65-billion (about $85.4-million) in measures to help households and businesses cope with soaring energy prices. And newly installed British Prime Minister Liz Truss has announced that her government will limit what energy firms can charge consumers for the next two years.
Such radical government measures to ease a cost-of-living crisis would have been unimaginable had we not seen how well they worked during the COVID-19 crisis. Certainly, they are still experimental enough that something could go badly wrong in the markets, but they stand a good chance of turning the winter of discontent into a season of tolerable inconveniences. That’s a good thing, because abandoning Ukraine would cost a lot more in the long run.
Meanwhile, echoes of Ukraine’s high-stakes winter are resonating on an island in the Pacific Ocean, 8,000 kilometres away. Taiwan has become Chinese President Xi Jinping’s legacy project, just as Ukraine became Russian President Vladimir Putin’s – and so Taiwan, too, has been pressed into playing for time.
Taiwan’s long-term survival prospects are much worse than Ukraine’s, however. Russians outnumber Ukrainians only about 3 to 1, whereas the population of the People’s Republic of China is 60 times bigger than Taiwan’s. Nevertheless, Ukraine and Taiwan are essentially in the same boat: Powerful neighbours are determined to destroy them, and their supporters (Western democracies plus Japan and South Korea, in Taiwan’s case) won’t actually commit to front-line fighting in their defence.
Taiwan’s friends will sell or give it some state-of-the-art weapons in peacetime, but in wartime the island state would probably have to show an ability to hold its own for a few weeks without help before arms aid started to flow, and still – as Ukrainians well know – there would be no active military help.
The decades-old confrontation across the Taiwan Strait has gradually drifted from safely frozen to potentially very active indeed, and it’s because successive governments in Taipei have failed to respond correctly to two quite obvious trends. One was the inexorable growth of China’s naval, air and missile power, which was only to be expected as the country’s economy grew. The other was the growing reluctance of the U.S. Navy to commit major assets close to the Chinese coast, a shift concealed by the inconsistent and longstanding U.S. policy of “strategic ambiguity” around Taiwan.
Even if Washington never told Taipei that it would probably not fight China to defend Taiwan in so many words, any competent Taiwanese military commander would have understood what was happening over the past couple decades and told his civilian superiors there was a remedy – albeit a very expensive one.
An assault landing on a well-defended coast across a stretch of open ocean is the most complex and difficult of all major military enterprises. So an invasion of Taiwan would be a more demanding operation than D-Day, and for a long time China was simply not capable of such an operation. Now it is – but Taiwan is not well defended at all.
From the 1950s to the 1970s, Taiwan was spending 7 per cent of its GDP on defence, but over the years it has fallen to only 2.1 per cent, which is about the same as Australia. Similarly, compulsory military service for young men has slipped from three years to just four months, and a significant proportion of eligible candidates can avoid it entirely by doing some sort of social service instead.
These arrangements would have made sense 20 years ago, when the U.S.’s military guarantee was reliable and the PRC seemed willing to let the status quo last indefinitely. But they make no sense now, when Beijing regularly declares its determination to “reunite” the island with the mainland by force if necessary, the American guarantee is questionable at best and Taiwan would be hard-pressed to hold out for even a week against an all-out Chinese invasion attempt without the U.S.’s help.
The outcome of a war is never certain. However, if Taiwan could demonstrate its ability to prevent or at least contain Chinese amphibious and airborne landings for three or four weeks on its own, recent U.S. actions around Ukraine suggest that some American military support could follow – enough, at least, to make Beijing doubtful about the success of such an operation in the first place. Deterrence would then be restored, in other words.
However, it would probably take Taiwan five years of defence spending at 5 per cent of GDP, significant amounts of foreign-arms buying, a return to several years of conscription and large active reserves in the Israeli model to achieve that posture. There might be popular support for such a policy now that the Taiwanese are waking up to the threat, but five years is still a very long time from now.
Adopting this policy might even just speed up the Chinese timetable for an invasion, though It’s impossible to say; other factors, such as the kind of trade embargo that has been imposed on Russia, would also play a role in any decision from Beijing. But the only long-term alternative for Taipei, barring an improbable change of heart or leadership in Beijing, may be a negotiated surrender. Ukraine’s options are a good deal better than that.
The West isn’t exactly at war with Russia. However, it isn’t exactly not at war, either. Western weapons have helped Ukraine to stall Russia’s invasion and even to counterattack, while Western economic sanctions have clearly created serious problems for Russian industry.
Russia has retaliated with a de facto embargo on exports of natural gas to Europe. This shows how Vladimir Putin actually thinks the war is going. After all, this will have huge long-run costs: Nobody will ever again consider Russia a reliable trading partner. But Putin appears willing to bear those costs in an attempt to bully the West into reducing its support for Ukraine — which he wouldn’t do if he were confident about the military situation.
In any case, the embargo has raised the economic stakes. Six months ago, there was a lot of discussion about whether Europe could or should stop importing energy from Russia. Well, Russia has in effect made that decision on Europe’s behalf.
Five predictions for the next six months in the war in Ukraine
Six months to the day since the start of the Russian invasion, here is what to expect for the next six months
1. The war will probably run on for a year at least but is essentially deadlocked and its intensity is lessening
Six months of war may have gone by, but neither Ukraine nor Russia are ready to stop fighting, despite the losses they have sustained. Ukraine wants its occupied territories back, and Russia wants to keep inflicting pain not just on its opponent but, by proxy, the west also. The Kremlin believes winter will play to its advantage.
There have been no negotiations between the two sides since evidence emerged of the massacres at Bucha, Irpin and elsewhere in territories occupied by the Russians north of Kyiv. But movement in the frontlines has been minimal since the fall of Lysychansk at the end of June. Both sides are struggling for momentum and increasingly appear combat-exhausted.
2. Ukraine has no means of effective conventional counterattack, while guerrilla raids are an optimistic way to precipitate a Russian collapse
Ukraine would like to retake Kherson, on the west of the Dnieper river, but a senior administration figure admitted in private that “we do not have enough capacity to push them back”. Kyiv has shifted its strategy to mounting long-range missile attacks and daring special forces raids on Russian bases deep behind the frontlines.
The key presidential adviser Mykhailo Podolyak said the aim was to “create chaos within the Russian forces”, but while this will blunt the invader’s effectiveness, it is not likely it will lead to invaders collapsing in on themselves and voluntarily conceding Kherson, as some Ukrainian officials have hoped.
3. Russia still wants to pound its way forward but its attention is likely to be shifting to holding on its gains and annexing Ukraine territory
Russia has no new offensive plan other than to mass artillery, destroy towns and cities and grind its way forward. It does this in part because it is effective, and in part to minimise casualties, having lost, on some western estimates, 15,000 dead so far. It continues to adopt this strategy around Bakhmut in the Donbas but progress is slow, partly because it has had to redeploy some forces to reinforce Kherson.
The Kremlin may not have achieved what it hoped at the beginning of the war, but Russia now holds large swathes of Ukrainian territory in the east and south, and is actively talking about holding annexation referendums. With cooler weather fast approaching, it is likely to focus on consolidating what it has.
4. Winter will precipitate a fresh refugee crisis and create an opportunity for whoever can best prepare
Winter is uppermost in strategic thinking for both sides. Ukraine is already anxious about humanitarian issues because there is no gas heating available for apartment blocks in Donetsk province and other frontline areas. One humanitarian official predicted there would be a fresh wave of migration in the winter, with perhaps as many as 2 million people crossing the border into Poland.
Russians sees winter as an opportunity. Ukraine fears Russia will target its energy grid, making its heating dilemma more acute, and could simply turn off the vast Zaporizhzhia nuclear power station. Moscow also wants to prolong the west’s pain over energy costs and has every incentive to rack up the pressure.
Spring, though, could be the time for a renewed attack – each side will want to replenish and prepare for what is likely to be another fighting season.
5. The west needs to decide if it wants Ukraine to win or just hold on – and it needs to match humanitarian help to the huge need
Ukraine would have been defeated without western military aid. But at no point so far has the west supplied enough artillery or other weapons, such as fighter jets, that would allow Kyiv to drive the invaders back. Politicians talk about the need to force Russia to the prewar borders but do not provide enough materiel to do it.
At the same time, Ukraine’s humanitarian need is growing. There is, for example, nowhere near enough money for reconstruction – and many homes north-east and north-west of Kyiv remain ruined five months after the Russians left, often with despairing residents living in garages or temporary structures on site.
People who are displaced internally often have to live in schools or kindergartens, temporary accommodation that people struggle to stay in for an extended period of time. Ukraine has a budget gap of $5bn (£4.2bn) a month because of the war; aid and reconstruction will cost many times that.
Russian Defense Minister Sergey Shoigu stated on August 24 that Russian forces are slowing down the overall pace of their offensive operations in Ukraine while reaffirming that Russia’s objectives in the war have not changed.
At a meeting with defense ministers from member states of the Shanghai Cooperation Organization (SCO) Shoigu stated that Russian troops will be slowing down the pace of offensive operations in Ukraine in a conscious effort to minimize civilian casualties. Shoigu also reiterated that operations in Ukraine are going according to plan and that Russian forces will accomplish all their objectives, supporting ISW’s assessment that Russia’s maximalist strategic war aims in Ukraine have not changed. The Russian MoD has previously issued similar statements to account for the pace of operations in Ukraine.
Shoigu’s statement may also represent an attempt by the Russian MoD to set information conditions to explain and excuse the negligible gains Russian forces have made in Ukraine in the last six weeks. . . .
Mobilization and Force Generation Efforts (Russian objective: Expand combat power without conducting general mobilization)
Russian federal subjects (regions) continued to form new volunteer units to reinforce Russia’s war in Ukraine. Altai Krai announced the formation of five volunteer units: the “Kalashnikov” and “Altai” battalions, the “Skurlatova” and “Katun” companies, and the “Biya” platoon. Local outlets did not specify if Altai Krai will be offering one-time enlistment bonuses but noted advertised monthly salary ranging from 30,000 to 300,000 rubles (about $500 to $5,000).
The Republic of Tatarstan local outlet Biznes Online stated that Russian authorities’ classification of such volunteer formations as “battalions” exaggerates the actual number of recruits in each volunteer unit. The outlet noted that Perm Krai’s ”Parma” Battalion has 90 people and is structurally more consistent with a motorized rifle company. The outlet noted that Russia did not previously have territory-based volunteer units as was common in the Donetsk and Luhansk People’s Republics (DNR and LNR) since 2014 and that Russian forces may be modeling these units after DNR and LNR proxy units, such as the ”Vostok” and ”Somali” battalions.
Battalion personnel complements range in size in any military based on the specialization of the battalion, but the Russian volunteer units’ advertised complements are low, and reported fill levels are even lower. Most “battalions” (and even some “regiments”) will more likely have the size of reinforced companies. It is also noteworthy that these ad hoc volunteer battalions are not described as battalion tactical groups (BTGs) and do not appear to be structured like BTGs. It is not clear how they are being employed on the battlefield unless they are being assembled with one another or with the remnants of already deployed BTGs.
It is clear that a volunteer “battalion” has nothing like the notional combat power of a battalion tactical group that invaded Ukraine in February, even discounting the inexperience and ages of many volunteers and the very limited training they receive before deploying to combat.
Biznes Online also indicated that recruitment into volunteer units decreased throughout the summer and that local Russian officials are intensifying advertising efforts in certain regions. The outlet claimed that the Republic of Tatarstan had only 10-15 interested recruits at the beginning of the recruitment campaign in early June, and such numbers reportedly tripled by the end of the campaign. The outlet’s report confirmed ISW’s assessment that federal subjects began increasing one-time enlistment bonuses to increase recruitment rates in August.
The outlet added that Russian federal subjects also began advertising military contracts in public transportation and other recruitment campaigns ”behind the scenes,” but noted that the Kremlin-sponsored sources have not shared such advertisements.
The Kremlin is likely attempting to shield Moscow City residents from the military recruitment campaign, which may lead to some social tensions. Kremlin Spokesperson Dmitry Peskov denied any reports of the formation of the Moscow-based “Sobyaninsky Polk” volunteer regiment on July 13, shortly after Russian opposition outlet Meduza reported that Moscow City military commissariats started recruiting labor migrants and residents of different Russian regions into the regiment.
Biznes Online noted that all media discourse regarding the “Sobyaninsky Polk” stopped following Peskov’s denial. The sudden change in reporting may suggest that Moscow City ceased recruitment for the “Sobyaninsky Polk” in an effort to avoid drawing Muscovite criticism of the recruitment campaign. The apparent lack of a Moscow City-based volunteer unit may also spark some criticism from other federal republics. . ..
Russian forces have lost an area larger than Denmark since the high-water mark of their invasion of Ukraine in mid-March and gained an area the size of Andorra (one percent of what they have lost) in the last 39 days.
Russian Defense Minister Sergey Shoigu reaffirmed that Russia has not changed its maximalist strategic war aims.
Russian forces conducted limited ground attacks southwest and southeast of Izyum, northeast and south of Bakhmut, and west and southwest of Donetsk City.
Russian forces conducted a limited ground attack in northwestern Kherson Oblast.
Ukrainian forces continued to target Russian military assets and ground lines of communication (GLOCs) in Kherson and Zaporizhia Oblasts.
Russian occupation authorities continue to face partisan and internal challenges to the administration of occupation agendas.
Russian proxy leadership is continuing efforts to oversee the legislative and administrative integration of occupied territories into Russian systems.
Given that I’m but a humble news aggregator-blogger, sifting for truth in the reams and sheafs of claims and counterclaims about the Ukraine War is a never-ending chore:
> Ukraine is winning! Nope-Russia is winning.
> Putin will use nukes any minute! Relax; he wouldn’t dare.
> The Ukraine war is really helping China. Fuggedit — the war is hurting China.
My apologies, but I have no answers for these. The questions don’t away, and maybe some clarity will come in time. As telephone operators said when I was a kid looking for a phone number (YES, there were such persons, and they really did that), “Still checking. . . .”
Today’s query is maybe second-tier in the continuing parade of headlines, but it’s important enough: Are the sanctions on Russia really crippling its economy and strangling the invasion war effort?
It’s easy to find overblown rhetoric about them:
Forbes:“the worst-ever sanctions against the country. . . ”
Bloomberg: “Russia Sanctions Deal Economy Worst Hit Since Covid Pandemic”
CSMonitor: Russia may be the most sanctioned country ever.
And so on.
And so it also is with gauging the effect of sanctions, which were sold to the publics in the U.S. and Europe as a meaningful, potent alternative to an actual land war with Russia there. Is it so? Has it been?
The bad news first, from across the pond:
The Guardian — The rouble is soaring and Putin is stronger than ever – our sanctions have backfired
Energy prices are rocketing, inflation is soaring and millions are being starved of grain. . . .
Western sanctions against Russia are the most ill-conceived and counterproductive policy in recent international history.
Military aid to Ukraine is justified, but the economic war is ineffective against the regime in Moscow, and devastating for its unintended targets. World energy prices are rocketing, inflation is soaring, supply chains are chaotic and millions are being starved of gas, grain and fertiliser. Yet Vladimir Putin’s barbarity only escalates – as does his hold over his own people.
To criticise western sanctions is close to anathema. Defence analysts are dumb on the subject. Strategy thinktanks are silent. Britain’s putative leaders, Liz Truss and Rishi Sunak, compete in belligerent rhetoric, promising ever tougher sanctions without a word of purpose. Yet, hint at scepticism on the subject and you will be excoriated as “pro-Putin” and anti-Ukraine. Sanctions are the war cry of the west’s crusade.
The reality of sanctions on Russia is that they invite retaliation. Putin is free to freeze Europe this winter. He has slashed supply from major pipelines such as Nord Stream 1 by up to 80%. World oil prices have surged and eastern Europe’s flow of wheat and other foodstuffs to Africa and Asia has been all but suspended.
Britain’s domestic gas bills face tripling inside a year. The chief beneficiary is none other than Russia, whose energy exports to Asia have soared, driving its balance of payments into unprecedented surplus.
The rouble is one of the world’s strongest currencies this year, having strengthened since January by nearly 50%. Moscow’s overseas assets have been frozen and its oligarchs have relocated their yachts, but there is no sign that Putin cares. He has no electorate to worry him.
The interdependence of the world’s economies, so long seen as an instrument of peace, has been made a weapon of war. Politicians around the Nato table have been wisely cautious about escalating military aid to Ukraine. They understand military deterrence. Yet they appear total ingenues on economics. Here they all parrot Dr Strangelove. They want to bomb Russia’s economy “back to the stone age”.
I would be intrigued to know if any paper was ever submitted to Boris Johnson’s cabinet forecasting the likely outcome for Britain of Russian sanctions. The assumption seems to be that if trade embargos hurt they are working. As they do not directly kill people, they are somehow an acceptable form of aggression.
They are based on a neo-imperial assumption that western countries are entitled to order the world as they wish. They are enforced, if not through gunboats, then through capitalist muscle in a globalised economy. Since they are mostly imposed on small, weak states soon out of the headlines, their purpose has largely been of “feelgood” symbolism.
A rare student of this subject is the American economic historian Nicholas Mulder, who points out that more than 30 sanctions “wars” in the past 50 years have had minimal if not counterproductive impact. They are meant to “intimidate peoples into restraining their princes”. If anything they have had the opposite effect.
From Cuba to Korea, Myanmar to Iran, Venezuela to Russia, autocratic regimes have been entrenched, elites strengthened and freedoms crushed. Sanctions seem to instil stability and self-reliance on even their weakest victim. Almost all the world’s oldest dictatorships have benefited from western sanctions.
Moscow is neither small nor weak. Another observer, the Royal United Services Institute’s Russia expert Richard Connolly, has charted Putin’s response to the sanctions imposed on him since his 2014 seizure of Crimea and Donbas. Their objective was to change Russia’s course in those regions and deter further aggression. Their failure could hardly be more glaring.
Apologists excuse this as due to the embargos being too weak. The present ones, perhaps the toughest ever imposed on a major world power, may not be working yet, but will apparently work in time. They are said to be starving Russia of microchips and drone spares. They will soon have Putin begging for peace.
If Putin begs, it will be on the battlefield. At home, Connolly illustrates how Russia is “slowly adjusting to its new circumstances”. Sanctions have promoted trade with China, Iran and India. They have benefited “insiders connected to Putin and the ruling entourage, making huge profits from import substitution”.
McDonald’s locations across the country have been replaced by a Russian-owned chain called Vkusno & tochka (“Tasty and that’s it”). Of course the economy is weaker, but Putin is, if anything, stronger while sanctions are cohering a new economic realm across Asia, embracing an ever enhanced role for China. Was this forecast?
Meanwhile, the west and its peoples have been plunged into recession. Leadership has been shaken and insecurity spread in Britain, France, Italy and the US. Gas-starved Germany and Hungary are close to dancing to Putin’s tune. Living costs are escalating everywhere.
Yet still no one dares question sanctions. It is sacrilege to admit their failure or conceive retreat. The west has been enticed into the timeless irony of aggression. Eventually its most conspicuous victim is the aggressor. Perhaps, after all, we should stick to war.
Simon Jenkins is a Guardian columnist
Hmmm. Haven’t worked; never worked anyway?
We’ll leave the past sanctions in the past. But some heavyweights in Foreign Policy magazine say, “rubbish and fiddlesticks” to Jenkins and his ilk. Rather, i these excerpts they insist:
Actually, the Russian Economy Is Imploding: Nine myths about the effects of sanctions and business retreats, debunked:
By Jeffrey Sonnenfeld, the Lester Crown professor in management practice and a senior associate dean at the Yale School of Management, and Steven Tian, the director of research at the Yale Chief Executive Leadership Institute.
JULY 22, 2022
Five months into the Russian invasion of Ukraine, there remains a startling lack of understanding by many Western policymakers and commentators of the economic dimensions of President Vladimir Putin’s invasion and what it has meant for Russia’s economic positioning both domestically and globally.
Far from being ineffective or disappointing, as many have argued, international sanctions and voluntary business retreats have exerted a devastating effect over Russia’s economy. The deteriorating economy has served as a powerful if underappreciated complement to the deteriorating political landscape facing Putin.
That these misunderstandings persist is not entirely surprising given the lack of available economic data. In fact, many of the excessively sanguine Russian economic analyses, forecasts, and projections that have proliferated in recent months share a crucial methodological flaw: These analyses draw most, if not all, of their underlying evidence from periodic economic releases by the Russian government itself. Numbers released by the Kremlin have long been held to be largely if not always credible, but there are certain problems.
First, the Kremlin’s economic releases are becoming increasingly cherry-picked—partial and incomplete, selectively tossing out unfavorable metrics. The Russian government has progressively withheld an increasing number of key statistics that, prior to the war, were updated on a monthly basis, including all foreign trade data. . . particularly with Europe; oil and gas monthly output data; commodity export quantities; capital inflows and outflows . . .[and much more].
Since the Kremlin stopped releasing updated numbers, constraining the availability of economic data . . . , many excessively rosy economic forecasts have irrationally extrapolated economic releases from the early days of the invasion, when sanctions. . . had not taken full effect. Even those favorable statistics that have been released are dubious, given the political pressure the Kremlin has exerted to corrupt statistical integrity.
Mindful of the dangers of accepting Kremlin statistics at face value, our team of experts, using private Russian-language and direct data sources. . . have released one of the first comprehensive economic analyses measuring Russian current economic activity five months into the invasion. . . .
From our analysis, it becomes clear: Business retreats and sanctions are crushing the Russian economy in the short term and the long term. Based on our research, we are able to challenge nine widely held but misleading myths about Russia’s supposed economic resilience.
Myth 1: Russia can redirect its gas exports and sell to Asia in lieu of Europe.
This is one of Putin’s favorite and most misleading talking points, doubling down on a much-hyped pivot to the east. But natural gas is not a fungible export for Russia. Less than 10 percent of Russia’s gas capacity is liquefied natural gas, so Russian gas exports remain reliant on a system of fixed pipelines carrying piped gas.
The vast majority of Russia’s pipelines flow toward Europe; those pipelines, which originate in western Russia, are not connectable to a separate nascent network of pipelines that link Eastern Siberia to Asia. . . . Indeed, the 16.5 billion cubic meters of gas exported by Russia to China last year represented less than 10 percent of the 170 billion cubic meters of natural gas sent by Russia to Europe.
Long-planned Asian pipeline projects currently under construction are still years away from becoming operational, much less hastily initiated new projects, and financing of these costly gas pipeline projects also now puts Russia at a significant disadvantage.
Overall, Russia needs world markets far more than the world needs Russian supplies. . . . Indeed, the Russian state energy company Gazprom’s published data shows production is already down more than 35 percent year-on-year this month. For all Putin’s energy blackmail of Europe, he is doing so at significant financial cost to his own coffers.
Myth 2: Since oil is more fungible than gas, Putin can just sell more to Asia.
Russian oil exports now also reflect Putin’s diminished economic and geopolitical clout. Recognizing that Russia has nowhere else to turn, and mindful that they have more purchasing options than Russia has buyers, China and India are driving an unprecedented approximately $35 discount on Russian Urals oil purchases, even though the historical spread has never ranged beyond $5. . . . Furthermore, it takes Russian oil tankers an average of 35 days to reach East Asia, versus two to seven days to reach Europe, which is why historically only 39 percent of Russian oil has gone to Asia . . . .
This margin pressure is felt keenly by Russia, as it remains a relatively high-cost producer . . . with some of the highest break-evens of any producing country. . . . There is no doubt that, as many energy experts predicted, Russia is losing its status as an energy superpower, with an irrevocable deterioration in its strategic economic positioning as an erstwhile reliable supplier of commodities.
Myth 3: Russia is making up for lost Western businesses and imports by replacing them with imports from Asia.
Imports play an important role within Russia’s domestic economy, consisting of about 20 percent of Russian GDP, and, despite Putin’s bellicose delusions of total self-sufficiency, the country needs crucial inputs, parts, and technology from hesitant trade partners. Despite some lingering supply chain leakiness, Russian imports have collapsed by over 50 percent in recent months.
China has not moved into the Russian market to the extent that many feared; in fact. . . Chinese exports to Russia plummeted by more than 50 percent from the start of the year to April, falling from over $8.1 billion monthly to $3.8 billion. Considering China exports seven times as much to the United States than Russia, it appears that even Chinese companies are more concerned about running afoul of U.S. sanctions . . . reflecting Russia’s weak economic hand with its global trade partners.
Myth 4: Russian domestic consumption and consumer health remain strong.
Some of the sectors most dependent on international supply chains have been hit with debilitating inflation around 40-60 percent—on extremely low sales volumes. For example, foreign car sales in Russia fell by an average of 95 percent across major car companies, with sales ground to a complete halt.
Amid supply shortages, soaring prices, and fading consumer sentiment, it is hardly surprising that Russian Purchasing Managers’ Index readings—which capture how purchasing managers are viewing the economy—have plunged, particularly for new orders, alongside plunges in consumer spending and retail sales data by around 20 percent year-over-year. Other readings of high-frequency data such as e-commerce sales within Yandex and same-store traffic at retail sites across Moscow reinforce steep declines in consumer spending and sales, no matter what the Kremlin says.
Myth 5: Global businesses have not really pulled out of Russia, and business, capital, and talent flight from Russia are overstated.
Global businesses represent around 12 percent of Russia’s workforce (5 million workers), and. . . over 1,000 companies representing around 40 percent of Russia’s GDP have curtailed operations in the country, reversing three decades’ worth of foreign investment and buttressing unprecedented simultaneous capital and talent flight in a mass exodus of 500,000 individuals, many of whom are exactly the highly educated, technically skilled workers Russia cannot afford to lose. . . .
Myth 6: Putin is running a budget surplus thanks to high energy prices.
Russia is actually on pace to run a budget deficit this year equivalent to 2 percent of GDP, according to its own finance minister. . .thanks to Putin’s unsustainable spending spree; on top of dramatic increases in military spending, Putin is resorting to patently unsustainable, dramatic fiscal and monetary intervention, including a laundry list of Kremlin pet projects, all of which have contributed to the money supply nearly doubling in Russia since the invasion began. Putin’s reckless spending is clearly putting Kremlin finances under strain.
Myth 7: Putin has hundreds of billions of dollars in rainy day funds, so the Kremlin’s finances are unlikely to be strained anytime soon.
The most obvious challenge facing Putin’s rainy day funds is the fact that of his around $600 billion in foreign exchange reserves. . . $300 billion is frozen and out of reach with allied countries across the United States, Europe, and Japan restricting access. There have been some calls to seize this $300 billion to finance the reconstruction of Ukraine.
Putin’s remaining foreign exchange reserves are decreasing at an alarming rate, by around $75 billion since the start of the war. . . .
Furthermore, although the finance ministry had planned to reinstate a long-standing Russian budgetary rule that surplus revenue from oil and gas sales should be channeled into the sovereign wealth fund, Putin axed this proposal . . . as Finance Minister Anton Siluanov floated the idea of withdrawing funds from the National Wealth Fund equivalent to a third of the entire fund to pay for this deficit this year. If Russia is running a budget deficit requiring the drawdown of a third of its sovereign wealth fund when oil and gas revenues are still relatively strong, all signs indicate a Kremlin that may be running out of money much faster than conventionally appreciated.
Myth 8: The ruble is the world’s strongest-performing currency this year.
One of Putin’s favorite propaganda talking points, the appreciation of the ruble is an artificial reflection of unprecedented, draconian capital control—which rank among the most restrictive of any in the world. The restrictions make it effectively impossible for any Russian to legally purchase dollars or even access a majority of their dollar deposits, while artificially inflating demand through forced purchases by major exporters—all of which remain largely in place today.
The official exchange rate is misleading, anyhow, as the ruble is, unsurprisingly, trading at dramatically diminished volumes compared to before the invasion on low liquidity. By many reports, much of this erstwhile trading has migrated to unofficial ruble black markets. Even the Bank of Russia has admitted that the exchange rate is a reflection more of government policies and a blunt expression of the country’s trade balance rather than freely tradeable liquid foreign exchange markets.
Myth 9: The implementation of sanctions and business retreats are now largely done, and no more economic pressure is needed.
Russia’s economy has been severely damaged, but the business retreats and sanctions applied against Russia are incomplete. Even with the deterioration in Russia’s exports positioning, it continues to draw too much oil and gas revenue from the sanctions carveout, which sustains Putin’s extravagant domestic spending and obfuscates structural economic weaknesses.
The Kyiv School of Economics and Yermak-McFaul International Working Group have led the way in proposing additional sanctions measures across individual sanctions, energy sanctions . . . . Looking ahead, there is no path out of economic oblivion for Russia as long as the allied countries remain unified in maintaining and increasing sanctions pressure against Russia.
Defeatist headlines arguing that Russia’s economy has bounced back are simply not factual—the facts are that, by any metric and on any level, the Russian economy is reeling, and now is not the time to step on the brakes.
So — which is right? Sanctions are a boomerang failure, hurting the West and U.S. as much as or more than Putin’s Russia? Or behind a propaganda smokescreen, they’re taking him and “his” economy down rapidly?
I hope it’s the latter, but the work of following the war’s impact within Russia and in the rest of the world is up to those of us who are trying to make sense of this turbulent, dangerous scene.
And what should we look for from our own policymakers?
Maybe the wisest summary was this offhand remark by a supposedly canny business journal:
Jerusalem (AFP) – Moscow’s former chief rabbi now living in exile in Israel warned Thursday of “dark clouds on the horizon” for Russian Jews, as ties between the two countries deteriorate over the Ukraine war.
Pinchas Goldschmidt, who left Russia in March over opposition to the conflict, told reporters that “the Jewish community was pressured… to openly support the war. Our community did not support the war.”
“The situation is worrying” and there are “many dark clouds on the horizon” for Russian Jews, he said, adding that their “security and future… is dependent on Israel-Russia relations”.
Israel has been trying to walk a cautious line in order to maintain ties with Moscow — seen as crucial to preserving the Jewish state’s ability to carry out air strikes in neighbouring Syria, where Russian forces are present.
“Right now, it would be impossible for me to return,” the Swiss-born rabbi told an online briefing, adding: “If I would have (remained) the chief rabbi of Moscow, I wouldn’t be able to speak out openly without endangering my community.”
“I decided to stay in exile until the political situation will change.”
Following the February 24 invasion, then Israeli premier Naftali Bennett withheld criticism of Russian President Vladimir Putin’s actions and stressed the need for close ties with Moscow.
But Bennett’s successor Yair Lapid has condemned the Russian invasion.
Analysts say Lapid’s rhetoric has partly driven Moscow’s move to close the Russian branch of the Jewish Agency, which processes the immigration of Jews from the diaspora to Israel.
Lapid has warned Moscow that the closure would be a “serious event” threatening bilateral ties.
The Kremlin has said the move should not be “politicised”, calling it a purely legal matter.
According to the Jewish Agency, 16,000 Russian Jews have immigrated to Israel since the invasion began.
‘Fear of rising anti-Semitism’
Goldschmidt estimated that more than 30,000 other dual passport holders had left Russia for Israel since February 24.
Jews were leaving Russia in high numbers partly over fears of a new “Iron Curtain — that one day (it) will be impossible to leave”, the rabbi said, articulating what he described as concern among Jews that Putin’s government could ban outbound travel.
He said Moscow’s moves against the Jewish Agency, among other incidents, had fostered “fear of rising anti-Semitism”.
Some experts have attributed Russia’s threats against the agency as part of an attempt to slow mass emigration.
“If Russia wants to stop the brain drain of its best scientists and creative class, the best way to do this is not by closing the Jewish Agency, but by stopping this war,” Goldschmidt said.
At a preliminary hearing on Thursday, a Moscow court set an August 19 trial date for the Russian justice ministry’s case against the agency, which has been accused of unspecified legal violations.
The Jewish Agency began working in Russia in 1989.
More than one million of Israel’s 9.4 million residents today have roots in the former Soviet Union.
Art of dissent: How Russians protest the war on Ukraine
They risk jail, stigma and fines. But Russian protesters are finding creative ways to get their message out.
Washington Post: By Robyn Dixon, Mary Ilyushina and Natalia Abbakumova — July 7, 2022
It was 4 a.m. on Moscow’s second ring road. Early light bathed the empty street.
Lyudmila Annenkova and Natalia Perova remember stepping out of a taxi, draped in blankets to hide white dresses splashed with red paint, like blood. They were terrified of arrest, they said, so they worked quickly.
They flung off the blankets, posed, held hands and gazed into a smartphone lens. Snap, snap, snap. Three photos and they fled. The images went viral on independent and activist Telegram channels and social media pages.
Russia’s antiwar movement has found creative ways to express dissent despite President Vladimir Putin’s hard line crackdown.
Protesters are arrested for crimes as trivial as holding up a blank sheet of paper, merely implying opposition to the war.
“You have about 30 seconds to show what you want and then you will be arrested,” said Annenkova, a photographer.
“We were very afraid. We had so much adrenaline,” Perova said.
The red splashes on white dresses symbolized the killings of innocent people, especially women and children. They held hands to send a message to Ukrainians “that we want to hold the hands of everyone who is there and who is in trouble now,” Annenkova said. Continue reading The Colors of Courage: Underground Russian War Protests:→
“In war,” goes an old saying, “truth is the first casualty.”
Hmmmm. The chestnut seems accurate enough. And its relevance to the Ukraine war is direct: most Western reporters, scholars and analysts (including this blogger) have operated on a simple, Good Guy (Ukraine/Zelenskiy), vs Bad Guy (Putin/Russia) truth frame. Ukrainian leaders have worked tirelessly and skillfully to maintain that, against Putin’s insistence they’re all Nazis.
But how close does this frame get to the truth? How much is propaganda? Is truth a casualty in this war too? How?
For that matter, what about the saying itself —is it just some stray cliche among the multitude strewn across our public rhetoric? How old is it? Who coined it? What’s its track record?
That truth, it turns out, is not so simple. President John F. Kennedy cited it as having originated with the Greek tragedian Aeschylus, about 450 BC. Aeschylus supposedly wrote several score plays, but only a handful survive; they often deal with war, but none says that.
Presidential biographer Arthur Schlesinger, a big JFK fan, admitted that his idol had erred: “Kennedy enjoyed using quotations, and he kept a notebook containing noteworthy statements. Unfortunately, Kennedy somehow acquired the Aeschylus misattribution:
Some quotations he carried verbatim in his mind. Others he noted down. The loose-leaf notebook of 1945-46 contained propositions mistakenly assigned to Aeschylus (“In war, truth is the first casualty”) . . .
More or less contemporaneously, a world away from Aeschylus, the classic Chinese text The Art of War by Sun Tzu comes much closer: one of its key principles is that “All warfare is based on deception”. (We’llskip the scholarly debates over whether Sun Tzu himself is a mythical figure; whatever, his book does exist, it’s old, and the saying does come close.) Continue reading Truth, War, & Ukraine War Crimes→
New York Times – Europe, Facing Energy Shortages, Moves to Shore Up Providers
Berlin and Paris are preparing bailouts as Europe braces for further cuts to gas supplies next week and economists warn of a recession.
By Melissa Eddy and Stanley Reed — July 6, 2022
BERLIN — Leaders in Europe, facing their worst energy crisis in decades, are taking extraordinary steps to secure supplies for winter amid fears of fuel shortages and near-record electricity and natural gas prices.
In Berlin, lawmakers prepared to approve legislation that would pave the way for Germany to bail out the country’s largest importer of Russian gas. In Paris, the prime minister announced her government’s intention to take full control of France’s state-backed electric utility provider.
There are mounting fears that skyrocketing energy costs, driven by steadily diminishing Russian gas shipments, will force energy companies into collapse — a spiral that Germany’s energy minister has likened to the way the fall of Lehman Brothers triggered the global financial crisis in 2008.
“The scale of the crisis and risk of disruption and further price spikes is now so big that there is a sense in the major E.U. governments that it requires national bailouts,” said Henning Gloystein, a director at Eurasia Group, a political risk firm. “Private companies won’t be able to shoulder these costs.”
The disruption is being felt across the continent as countries including Austria, France and the Czech Republic try to find enough gas to fill their storage tanks before the temperatures drop — and, many fear, before Russia stops shipping gas altogether, possibly as soon as late July.