Putin beordrar styrkor att gå in i Ukraina - INVASION NU (2022-02-24)

/.../Since February America, Europe and their allies have unleashed an unprecedented barrage of prohibitions covering thousands of Russian firms and individuals. Half of Russia’s $580bn of currency reserves lies frozen and most of its big banks are cut off from the global payments system. America no longer buys Russian oil, and a European embargo will come fully into effect in February. Russian firms are barred from buying inputs from engines to chips. Oligarchs and officials face travel bans and asset freezes. America’s “KleptoCapture” task-force has seized a superyacht that may have had a Fabergé egg on board.

/.../As well as satisfying Western public opinion, these measures have strategic objectives. The short-term goal, at least initially, was to trigger a liquidity and balance-of-payments crisis in Russia that would make it hard to finance the Ukraine war and thus alter the Kremlin’s incentives. In the long run the intent is to impair Russia’s productive capacity and technological sophistication so that, if Vladimir Putin aspires to invade another country, he would have fewer resources to hand. A final aim is to deter others from warmongering.

/.../The trouble is that the knockout blow has not materialised. Russia’s gdp will shrink by 6% in 2022, reckons the imf, much less than the 15% drop many expected in March, or the slump in Venezuela. Energy sales will generate a current-account surplus of $265bn this year, the world’s second-largest after China. After a crunch, Russia’s financial system has stabilised and the country is finding new suppliers for some imports, including China. Meanwhile in Europe, an energy crisis may trigger a recession. This week natural-gas prices rose by a further 20% as Russia squeezed supplies.

/.../You should therefore discard any illusions that sanctions offer the West a cheap and asymmetric way to confront China, an even bigger autocracy. In order to deter or punish an invasion of Taiwan, the West could seize China’s $3trn of reserves and cut off its banks. But, as with Russia, China’s economy would be unlikely to collapse. And the government in Beijing could retaliate by, say, starving the West of electronics, batteries and pharmaceuticals, leaving Walmart’s shelves empty and triggering chaos. Given that more countries depend on China than America as their largest trading partner, enforcing a global embargo would be even harder than with Russia.

/.../The good news is that, 180 days after the invasion, democracies are adapting to this reality. Heavy weapons are pouring into Ukraine, nato is fortifying Europe’s borders with Russia, and Europe is securing new sources of gas and speeding up the shift to clean energy. America is reducing its dependence on Chinese tech and urging Taiwan to improve its military defences. The catch is that every autocracy, not least Xi Jinping’s China, is also studying the sanctions war with Russia and is busy learning the same lessons. Ukraine marks a new era of 21st-century conflict in which the military, technological and financial elements are intertwined. But it is not an era in which the West can assume it has pre-eminence. Nobody can counter aggression through dollars and semiconductors alone. ■