Sanctions will bring Russia to its knees
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Vladimir Putin ’ s war is spinning its wheels. For now. Tough Ukrainian resistance is slowing his army ’ s advance on the capital. Ukraine ’ s president Volodymyr Zelensky is playing a blinder.
This will not last. Putin, as I argued here , is on a mission, part personal, part messianic to shore up his power base and restore a Greater Russia in Slavic lands. Failure to achieve his strategic goal of neutering Ukraine will cost him dear, possibly his job, perhaps his life.
We can expect him to double-down on his efforts inflicting more casualties with greater savagery, confident that neither Ukraine ’ s neighbours nor the West will challenge him by putting boots on the ground or imposing a no-fly zone.
His barely veiled threat to use nuclear weapons in the face of NATO “ aggression ” may, or may not be a bluff. But the West cannot take the risk. Putin ’ s recent appearances suggests that this is a man on a mental tightrope.
Putin will have priced in a tough but hesitant and incremental western response. The first few days of the invasion suggests he was right. We knew he was (probably) coming but not when or how. Early intelligence was less than clear.
It is time to throw the book of sanctions at him: namely, full-blown economic warfare with measures that will bring the Russian economy and its financial system to its knees.
Ukraine faces an existential threat. But the West and everything it stands for is also being challenged. This is the resurrection of history in spades: a democratic world order rooted in freedom versus autocracies — including China — that place staying in power above all else. This turns the world after the fall of the Soviet Union upside down.
Europe ’ s indirect military response to the invasion has been unprecedented. The EU is considering gifting fighter jets to counter the Russian advance. A number of other countries including Britain are also sending weapons. This signals the emergence of Europe as military power.
Germany ’ s decision to increase its defence spending by €100bn to above 2 per cent of GDP represents a sea-change in its post-Cold War stance. This too is a big moment. It turns out that Chancellor Olaf Scholz, who succeeded Angela Merkel, is not as feeble as some thought.
NATO meanwhile is strengthening its presence in an arc from Poland to Turkey, not the outcome that Putin wanted.
Economic warfare now needs to go to the next level. This means, in simple terms, isolating, unmooring, the Russian economy from the West not incrementally or selectively but, as Martin Sandbu says in the Financial Times , with “shock and awe” tactics.
We should do to Russia what we have done to Iran.
The UK ’ s initial pea-shooter approach (sanctioning three small banks and minor oligarchs) from one of the world’s most powerful economies sent Putin precisely the wrong signal although Boris Johnson has somewhat redeemed Britain in his joint press conference today with the Polish Prime Minister in Warsaw.
Foreign Secretary Liz Truss ’ s announcement that it has compiled a hit list of oligarchs to be targeted over the “coming weeks” reinforces the hesitancy we ’ ve witnessed in government ministers as the invasion unfolded.
The Tory party ’ s relationship with Russian money is frankly toxic and, despite repeated assertions that it will tackle dirty money, we have yet to see real action. The EU has been marginally slower off the mark but is now setting the pace.
Cutting Russia off from SWIFT, the banking messaging system, is an important but not insurmountable obstacle for the Kremlin. The rouble has plummeted. Russian interest rates have rocketed. We are seeing the start of a run on Russian banks as they run out of US dollars.
But we need to do more.
The international community should draw up a clear and enforceable pact to stop the laundering of dirty money. All money, equities and property belonging to every oligarch with links to Putin should be frozen. This week. No ifs, no buts, no exceptions.
Russia has shown itself to be an unreliable energy partner. With hindsight Angela Merkel ’ s decision to mothball its nuclear plants was a mistake. Its announcement to keep the remaining three going to reduce and eventually eliminate its reliance on Russian gas is welcome.
Russia has enormous natural resources especially in oil and gas, by some estimates up to 30 per cent of the world ’ s total. Hitting its trade in energy both in the short and the long-term would have a huge impact on its ability to project geopolitical influence.
Blockbuster sanctions will be painful for ordinary Russians and not without pain to Europe, which faces soaring energy prices and a cost-of-living crisis after a decade of austerity in the wake of the 2008 financial crisis and the crippling cost of the pandemic.
This is not just Ukraine’s war. It is our war. What is stake is nothing less than the civilisation which we, and the Russians, fought to defend in World War II. Half-measures won ’ t do.
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