For years, I have heard Russia described in the parlance of American officials, think-tankers, and other hangers-on in the Blob as a "near-peer competitor." This is nonsense, on two counts. Russia is now an outright enemy, and it was never a near-peer anything. As I explain below, these two realizations should lead to a considered scheme of economic warfare against this enemy, and quickly.
Here, I follow a typology of economic statecraft warfare developed by Will Norris at Texas A&M University, highlighting two of his six components. I say warfare because it's now wartime, and the exertion of wartime measures is merited. Corrosive economic warfare is intended to weaken a national economy generally, hopefully with the secondary effect of harming its military power. Disarming economic warfare is meant to weaken military capability directly. Against Putin and his regime today, I expect the direct action to be far less important in the short run than a general assault on the Russian economy.
Weakening is rather the easier part. Embargo of high-technology exports to Russia will generally weaken the economy, and specifically harm its military. No one, after all, can seriously suggest selling the Russians guns these days, right? However, the problem is not just that it may not matter enough in the short run, but that it actually may never have mattered much at all.
To begin, note that the Russian Air Force (VKS) in particular seems to have benefited little from the general development over the past 50 years of what the old Soviets used to call the "reconnaissance-strike complex." Who bombs today from low altitude with unguided weaponry, particularly when your opponent's air defenses are mostly of the low-altitude type? Even if your target is an apartment building, the losses in aircraft—for an air force that's not so large in modern jets—aren't worth the cost. No, you do that if you have not trained for high-altitude precision delivery, because you actually don't have the precision-weapon inventories for a sustained campaign. Oops.
The emerging fact, contrary to the hand-wringing of so much of the press for years, is that the Russian Army and Air Force just suck. As Sean Spoontz of SOFREP recently wrote, this 'New' Russian Army showed up on the Ukrainian border with expired rations, 40-year-old rockets, rifles without optical sights, and a paucity of night vision gear, and apparently no clue of how to conduct combined-arms operations. This army is arguably little more than the Soviet Army of the 1980s, rebadged with those loathsome letters, and with shrunken divisions now described in autocratic puffery as "field armies." Its troops are foraging for food and water, and sabotaging their own vehicles to avoid fighting.
How did this happen? Exactly as you might imagine in a kleptocracy. As the inestimable Holman Jenkins wrote in theWall Street Journal last Friday, "from underlings whose chief motive perhaps was to get out of the room without a scene, [Putin] heard that billions gifted to the military were spent efficiently and without graft." As an ex-Soviet friend of mine put it to me that day more directly, "it was all spent on vodka." Maybe yachts too, but I don't have an inventory.
The trouble, though, is that this army and air force actually do suck, and on the material side of the matter. At this point, we're denying high-technology inputs to the inept, state-owned military-industrial complex that's supplying military forces that wouldn't know what to do with high-technology anything. Yes, they have some decent electronic warfare people, but mostly in comparison to the abject neglect that the US Army and some others showed that function for two decades. So, keeping commercial microchips from them is not actually going to blunt their murderous rampages in the short run. Indeed, having generally embargoed high-technology inputs two decades ago could actually have been counterproductive. Whatever the Russians paid for, they wouldn't have paid us for, and either way, they couldn't have used it.
Did our people know that at the time? No. Could they have known that? Doubtful. Recall just how bad the CIA really was at forecasting Soviet military and economic prowess during the Cold War. Theirs were not the reports you wanted decision-makers reading.
What we did know and now clearly know is that the Russians have an insurmountable short-term economic mobilization problem. No matter how much Vlad wants to unstick this mess, his national economy is not calibrated to produce useful weaponry in meaningful quantities. As Byron Callan of Capital Alpha Partners pointed to a Russian report on the matter, the VKS seems to have taken delivery of 11 fighter aircraft last year. Eleven. Eleven is the number of verified fighter losses for the Russians so far in the war, in eleven days. Think of how many they'll lose over a year, just to Ukrainian ground fire, if the war drags on that long. That doesn't mean, of course, that the Russians can't go fully Serbian, park their jets, and just endlessly fire artillery into Kharkiv and Kyiv.
Corrosion of that capability is far more difficult, and for the allied side, because so many countries that count are so invested in their imports from Russia. Economically, as the joke today goes, Russia is a big gas station with nuclear weapons. Fairly, it's also a huge exporter of wheat and specialty metals. That none of these relatively basic sectors—petroleum, agriculture, mining—worked much under the Soviets testifies that kleptocracy actually outperforms collectivism. (Note to Bernie about billionaires: even if they were thieves, we should probably prefer them to socialists.)
Now, fully crushing Russia's exports means an embargo of its petroleum products, which may well be nigh. This does also mean oil prices well above $140 per barrel, and a cold late winter in Germany. Embargoing more would mean that Boeing would need to find new suppliers for one-third of its titanium, and Airbus for fully half. With the disruption in shipping across the Black Sea, some parts of the world will face higher foods prices, regardless. The list of difficulties continues from there. The United States Congress is about to have the opportunity to show leadership around the world, to set the example for what others must do as well. For my part, I won't be buying fuel from anyone who loads cargos of oil in Russia.
The result could be a quick and yet tighter choke-hold on Vlad's gun money. Anders Åslund, a Swedish economist late of the Atlantic Council, expects the Russian economy to contract by 2.5 to 5 percent this year, just on the sanctions already in place. In just the first week of the war, the Russian Central Bank increased its interest rate to 20 percent, to prevent an even greater collapse of the value of the ruble. That's before any further sanctions, embargoes, or covert sabotage.
Building a commodities-dominated, export economy has exposed Russia's economic fate to the political tolerance of its customers. We're not talking about supply chains for bespoke microchips here; customers may find other sources of wheat, oil, and even titanium, and possibly on tolerable time frames. For any responsibly governed country, that's a perfectly reasonable policy. There's a reason, after all, that the Kim family enterprise in North Korea is so autarkic.
We will hear talk about the quite-reasonable "bathtub" theory of commodity prices: all that oil is going onto a world market, so the Russians merely need cut their prices (below $140!) and sell to customers willing to look away from the rubble of Kharkiv. That works only so far. The pipelines to China don't support the flow rates needed to make up for a loss of European customers, and huge pressure can be brought on shipping lines not to load Russian oil for other destination. If necessary, those cargos can be seized as contraband, and sold to support Ukrainian reconstruction. It's not as though the anemic Russian Navy could protect them.
Of course, if you think that funding Vlad Putin's war machine by buying his oil and gas and titanium is reasonable, then please try to make that argument on the ground in Kyiv. When you get back, we can discuss. This is a sacrifice worth making on behalf of the frontline soldiers that the governments to the west won't properly support. The task then becomes import substitution. What's stupid in peacetime suddenly become essential in wartime. And that's where this discussion of economic warfare, for every decent person in a position of economic power in the world, now needs to go.
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