Russia Contemplates The Price Of Its Ukraine Policy

Having decided first to recognize the breakaway republics of Donetsk and Luhansk and then mount a special operation to reverse the pro-Western Maidan revolution of 2014, Russia's leadership realized that there would be consequences to these actions. As the West made it clear from the outset that its response would take the form of imposing severe sanctions rather than a military, the issue of the economic damage that Russia would sustain naturally surfaced. President Vladimir Putin in his address announcing the special operation conceded that Russia's economy would be affected but claimed that the government had taken measures to cushion the blow.[1]

As a further measure, Putin exhorted businessmen to understand the situation and work with the government to find tools that would support production, the economy and jobs. The government for its part would provide good conditions for business, and more freedom for doing business. Most importantly, Putin promised "We cannot fully predict geopolitical risks, but in the relationship between government and business, of course, you can expect that government predictability will be clear and stable."[2]

Despite these assurances there were diverse appraisals on how much economic pain would Russia have to absorb and the duration of such pain. The assessments generally followed political leanings, with supporters of Putin dismissing any lasting consequences, and critics sounding the economic alarm bells.

A second issue of concern was Russia's global position as a result of Putin's policy towards Ukraine. Would Russia face isolation or even be considered an international pariah?   Here too the familiar divide reasserted itself. Putin backers claimed that Russia could not be isolated, while Putin opponents claimed that Russia by its actions had revived the Cold War. Some critics claimed that Putin had poisoned relations with countries that were formerly members of the Soviet Union meaning that his restoration of the Russian Empire was built on extremely shaky grounds.

Below is a selection of comments on the price that Russia can expect to pay for its actions in Ukraine:

The Russian ruble tanks as a result of Western sanctions "When will the exchange rate hit 100 rubles to the dollar? (Source: Youtube.com)

Economic Consequences

Professor Konstantin Sonin: Lukashenko Had Russia To Bail Him Out, Russia Has No Such External Sponsor

Konstantin Sonin, an economics professor at both the University of Chicago and Moscow's Higher School of Economics believes that the optimal scenario as a result of the war is the economy's continued stagnation and regression to late Soviet times. The pessimistic scenario would resemble the chaotic period following the collapse of the Soviet Union. He wrote:

"The economic impact? The direct effect of the sanctions would be a ruble of 90-100 [to the dollar] and a massive withdrawal of currency deposits; Central Bank guarantees would probably be sufficient to prevent a real bank panic. In the medium term, prices will rise more than they would have without war, by 10-15% in a year. There is nothing fatal about this, of course. Long-term - continuing stagnation while it lasts - is a good scenario. An economic crisis with catastrophic 1990-type escalation within a few years has gone from a most implausible scenario to a possible one.

"And this crisis is completely man-made. There is no rational basis for attacking Ukraine. It is impossible to describe briefly how this war is contrary to Russian interests. It is a crime - both by historical standards and under Russian law - and I hope that all - the organizers of the attack and the perpetrators - will answer to the law...

"Will international isolation and economic autarky be the end of Russia? I don't think that will happen because of this alone...If Western Europe stops buying Russian gas... the decline in the standard of living will be noticeable and strong, but not fatal - in this case it is possible to decrease the standard of living to 'late Soviet levels'. That is, shortages of staples, queues and distribution systems, but not hunger...

And that is, if we don’t talk about the possibility that the war will be prolonged, that the need to wage a very unpopular war will lead to another twist, making the economic situation even worse. With the tightening of the screws [Belarus' Alexander] Lukashenko led the country to economic collapse and complete dependence on an external sponsor for a year, but our country does not have an 'external sponsor' that could replenish the budget as the political crisis unfolds. "[3]

Konstantin Sonin (Source: Hse.ru)

In contrast, other commentators believed that the sanctions even if they initially caused Russia pain, would soon blow over and could even boomerang against the West.

Political scientist and publicist Boris Yakemenko, invoked the failed Western attempt to isolate the Soviet Union in its early days to prove that the sanctions policy would not last.

"Currently, in the West, there is, as usual, a movement afoot for a complete rupture with us. But severing relations with such a vast market and such a gigantic territory is simply not advantageous. In the 1920s, the Western countries announced that they would not do business with the Soviet Union. But a couple of years went by, and [Weimar] Germany quietly negotiated a trade treaty [the 1922 Rapallo Treaty] and then established diplomatic relations. Everyone else ran after her. Why? Because you cannot pass up a giant market. And now the same thing will happen."

If the West believed that sanctions would drive a wedge between the Russian business elite and Putin they were likewise mistaken: "We must realize that the sanctions resource is largely exhausted. All anti-Russian sanctions are directed against the elite. Their mission is to divide the elite with Putin. What we see, however, is that sanctions actually do the opposite: they rally elites around the figure of the president. And the further the sanctions against the elites, the more it will force them to transfer their capital to Russia. "[4]

Oleg Ivanov, Head of the Center for the Settlement of Social Conflicts trusted the leadership to make the necessary adjustments: " The new sanctions will be very serious, however the Prime Minister stated at the Security Council meeting that the government had been preparing for the sanctions for several months and was working on the relevant risks. Naturally, in order to stabilize the economy, Moscow will increase its interaction with friendly states, the BRICS member-states, and above all, with China, which, in all likelihood, will become the main importer of our natural energy resources."[5]

Kirill Koktysh, Associate Professor of Political Theory at Moscow State University believed that the sanctions would boomerang and spotlight NATO as ineffective: "As for the West's reaction, it risks going overboard with sanctions: voters don't like failed politicians, especially if they have to experience losses due to their failures. The Ukrainian situation is very likely to be assessed in the West as a defeat, the blame for which (provided the 'Russian issue' won't be resolved) will be placed on their own politicians, who chose the wrong strategy in the first place.

"A second NATO defeat (the first one being Afghanistan) would automatically raise questions about the effectiveness of this body and Euro-Atlantic solidarity per se.

"And these issues will enter the public sphere, as it usually happens, during election campaigns. The latter will be held this year in France and Italy, where there are enough economic and historical grounds for skepticism about the US and its effectiveness."[6]

Political Consequences

Aleksei Makarkin, a political analyst, and first vice-president of the Center for Political Technologies, believes that now everyone has grasped the reality that we are in the midst of a new Cold War. He wrote:

"The new Cold War began on February 22, 2014 - but compared to the previous one, it was a strange war. It ran at two speeds for eight years. At the political level, it was very active and determined, moving into a hot phase from Donbass to the Central African Republic. But there were many politicians in the West, who thought that there was a way to put this war to rest, to act as mediators, and if not revert to the situation before 22 February, then at least to find some compromise that would allow for détente (which, in turn, is a relaxed form of the Cold War). As for societies, they have mostly lived their lives. Sanctions and counter-sanctions were quickly adopted as an unpleasant but not fatal reality...

"But even so, the majority of the population in both Russia and the West were in a state of demobilization, not accepting the logic of the Cold War. In the US, there was a spike in hacks in the 2016 election campaign, but they did not consolidate the country, but divided it (the Republicans did not believe them). In Russia the Donbas theme by the end of 2021 mainly interested retiree television viewers.

"Today’s war has turned a new cold war into a total war. In the West, Russia is completely stigmatized - a tough sanctions war has begun, retired European politicians are urgently leaving the boards of Russian companies - reputational costs outweigh material benefits.

"Everything associated with Russia - from politics to sports - is perceived as dangerous and unacceptable, and it is a long process that is just beginning. In Russia today, the main trend is confusion, misunderstanding of the situation, and a large part of society (if not the majority) does not want to think at all on this difficult subject. But the totality of war doesn’t go away. For example, for the Westernized layer of society, Westernization itself, which in the 'pre-war period' was a competitive advantage, can become toxic. And large segments of the population will be drawn into more powerful anti-Western campaigns than before..."[7]

Aleksei Makarkin (Source: Stavgorod.ru)

Political scientist and columnist George Bovt warned of the growing hostility to Russia that would also impact the average Russian citizen: "Polish President Andrzej Dzuda admits aloud that sanctions against Russia may reach the point that its citizens will be denied entry to the countries of the European Union.

"There is no such officially approved standard for [denying entry to] ordinary citizens, for almost any country in the world, including Iran and North Korea. But Andrzej Duda is no longer alone in such forecasts. And when such appeals come from the lips of some Eastern European or Baltic politicians, it is increasingly difficult to shed the feeling that they have been entertaining such unavoidable feelings towards citizens from Vladimir Putin's country for quite some time and that they are about to let slip from their mouths something about the fact that Russians are generally second-class people, who have no place in civilized Europe. Unlike the citizens of Ukraine, of course.

"On the part of high-ranking EU politicians there are also calls for transitioning towards a complete rejection of Russian gas, as soon as possible. And although this is currently impossible, due to a number of reasons, the trend has already been set for years to come."[8]

The liberal writer Yulya Latynina believed that Kremlin policy not only isolated Russia but would lead the West to accommodate Erdogan and Xi Jinping at Russia's expense:

"The world order that is in place today stipulates that the main instrument of a country's expansion, and the main reason behind its international power, is a flourishing economy, advanced technology, and science. Russia can boast of none of these things.  For that reason, it has decided to turn to geopolitics and territorial expansion.

"President Putin is not the only one interested in such a revision. There are at least two other world leaders: Xi Jinping and Erdogan, who would love to use the collapse of the world order to build their own empires from the wreckage. Both are too smart to wreck that order themselves, but they would love to see the Kremlin act as an icebreaker. At the very least, it will make the US and the West seek an alliance with them."[9]

Fyodor Biryukov, a political analyst and director of the Liberty Institute was certain that the "hysterical" Western reaction born out of frustration would soon blow over, and besides Russia enjoyed the friendship of Beijing.

"The Western reaction is expected to be hysterical, followed by even more aggressive Russophobic rhetoric and new sanctions.  Meanwhile, the West is now quite confused, since events are not developing according to its plan at all. Russia is finally acting from a position of strength, ahead of the curve, but within the framework of a peacekeeping operation, whose goal is to defend Russian compatriots and Russian citizens in the Donbass.

" In this regard, Beijing's friendly stance towards Moscow is of great importance too. For the West and, above all, the US, all these developments present a great problem..."

Firkov was certain that the special operation would leave no scars as the Russians came to Ukraine as liberators. "Russia is not an enemy of Ukraine. We act as peacemakers and liberators. No matter what will be the further development of event, the Kiev regime has already lost; it is a gathering of bankrupt war criminals, liars, and thieves, first and foremost, in the eyes of the Ukrainian people themselves. For the West, the best course of actions in this situation, is to wash its hands, step aside and to not meddle with the triumph of historical justice.

Or else, the negative consequences for the US and its allies will outweigh any benefits for them. For the time being, Western leaders are in shock and convulsively trying to draw up a coherent position. However, this position, common sense-wise, can only be one: to leave Russia alone and accept the true state of affairs. The Russian world is already a reality, a formidable reality for the today's West, but one that is fair and just to ethnic Russians, Russian citizens, and Russian-speaking residents of Donbass and all of Ukraine. Our adversaries themselves came to our doorstep with a sword. And the outcome of such actions has long been known, St. Prince Alexander Nevsky warned of it [that the invaders would die by the sword]."[10]

Latynina was not so sure that the Russians would be regarded as liberators by the Ukranians:" "Only the future will tell whether Putin is restoring the Russian Empire or dealing a final blow to it, but I shudder to think that the Kremlin's decisions will make relations between Russians and Ukrainians the same as that between Turks and Bulgarians."[11]

Kommersant columnist Dmitry Drize, writing like Latynina, after the recognition of Luhansk and Donetsk, claimed that Russia was isolated on this issue as it had been supported by the likes of Cuba, Venezuela, Nicaragua, Bashar al-Assad, and the Houthis, in Yemen. Kazakhstan, where Russia had recently intervened to support the government, also made it clear that it would not recognize the breakaway states.  However much Russia bridled at the charge that it harbored imperial designs in the post-Soviet space, the issue was real, and this was a major reason why some states sought to shelter under the NATO umbrella. Russia by its actions in Ukraine was only further reinforcing suspicions amongst former Soviet countries.

"The fact of the matter is that the aforementioned 'imperial' issue is extremely relevant and, one might venture to say, painful, especially for the former fraternal republics of the USSR. And even more so for those who have problems with different breakaway territories. In particular, we can talk about Azerbaijan, that literally only recently regained Karabakh.

"As for Kazakhstan, talks about annexing the predominantly Russian north of the republic to the Russian Federation arise from time to time. If we talk about Belarus, of course, I don’t want to aggravate things, but there are currently active discussions that, let’s call it, deeper integration is just around the corner - Russian troops are already right there. And when the 'Crimean Spring' happened, this issue was also actively discussed.

"Not everyone is ready to become part of the 'Russian world' and feel the restoration of 'historical justice', as well as join the fraternal family of peoples. And, most importantly, you cannot remove and sweep away all these fears at once. It's simple: today you are a friend, and tomorrow you [like Ukraine] are a threat to national security. The world is changing. This is why some strive to join NATO - they want guarantees that they will neither be liberated again nor annexed."[12]

Dmitry Drize (Source: Ladno.ru)