Devastating moment of clarity in Ukraine

According to a piece by Tablet News, sanctions have not been able to deter Putin, and the West is running low on weapons and ammunition. Caliber.Az repinrts the article.

Watching Volodymyr Zelensky fight back tears as he addressed his soldiers in Kyiv’s St. Sophia Square last Friday, it was hard not to think of two of the past year’s most common refrains.

The first is that, in his determination to eliminate Ukraine as a national concept, Vladimir Putin has done more than any man in history to consolidate Ukrainian national sentiment. The second is that, in his attempt to prove the decadence of the West, Putin has breathed more life into the Western alliance than it’s had since the end of the Cold War.

It’s true that the West, with the support of official, public, and elite opinion, has formed a united front to uphold the principles of territorial integrity and national sovereignty in Europe. We have done this while making great economic sacrifices of our own, and walking the tightrope of avoiding direct confrontation with Russia even as we help Ukraine build the most formidable land army in Europe.

The average voter in America or Europe can therefore be forgiven if he believes that the war has steeled rather than strained the idea of the West, the same way it has fortified rather than broken the idea of a free and independent Ukraine.

But this truism, which is repeated as much in the United States as in Europe, is at least somewhat illusory. In reality, the war has revealed that the West’s position is more contingent and isolated than we’d thought, while the prospects for Ukrainian freedom may rest on a set of promises and expectations that the West is not prepared to fulfill.

Few things capture the brittleness of the Western alliance like the otherwise discrete issue of tanks. For months, German Chancellor Olaf Scholz was seen as the sole obstacle to providing Ukraine with two battalions of German-made Leopard 2 battle tanks, which are maintained in arsenals all over Europe.

Scholz claimed he simply sought guarantees that a tank package for Ukraine would be seen as a Western rather than a German initiative; his critics, including the author, suspected he was really just seeking to forestall a Ukrainian victory in order to protect German relations with Russia. Scholz finally caved at the end of January under pressure from NATO allies and his coalition partners in the German government, and after obtaining a commitment from the Biden administration to send its own M1 Abrams tanks.

Only a few weeks later, however, the tank coalition started to come apart. Portugal announced it would send three tanks, Spain six, and Norway eight. But the Netherlands, having pledged 18 tanks, suddenly revised its offer to zero. Ditto Denmark, which will now offer none of its 44 Leopard 2s to Ukraine. Greece, which has more of the tanks than any country but Germany, has also declined to participate.

Sweden signaled that it wouldn’t provide any battle tanks to Ukraine until after it becomes a member of NATO, a process that could outlast the war. Finland will supply three Leopard mine-clearing vehicles, but no battle tanks. The effort to put together two small battalions—just 62 Leopard 2 tanks out of a European inventory of 2,000—nearly collapsed, leaving Germany (and Poland) holding the bag.

Some of the damage has since been reversed—Sweden has offered “up to 10” tanks, Spain may add four more later this year, and the Dutch and Danish will now furnish 40-year-old Leopard 1s by year’s end—but only after furious activity from Berlin, which increased its own commitment to complete a battalion of advanced model Leopard 2s. The tank coalition now appears every bit a “German” endeavor—precisely the situation Scholz had said he needed to avoid.

The political consequences of the battle tank fiasco should not be dismissed. A large percentage of German voters already oppose arms deliveries to Ukraine on principle; now, German media and public opinion leaders will find it hard to complain about Scholz’s gut policy of hesitance and reluctance, which Western and Northern Europe have revealed to be justified.

The tank episode will likewise weaken the position of Germans in favor of further military aid like fighter jets and long-range missiles—which means those requests may have to find their way through Western, Northern, and Southern Europe without the decisive backing of Berlin. Scholz’s more hawkish coalition partners in the Green and Free Democratic Parties have taken a hit, and forces opposed to NATO and to higher defense spending have been strengthened. America and Europe remain more united in Ukraine than they ever were over Serbia or Iraq, but there are reasons to worry about the future and value of Western solidarity.

The political crosswinds now buffeting German supporters of Ukraine suggest that the burden of arms provisions in 2023 and beyond will likely fall even more heavily on the United States, whose contributions to Ukraine’s war effort already dwarf those of the other top 30 donor countries combined: Between Jan. 24, 2022. and Jan. 22, 2023, the United States committed $47 billion in military aid to Ukraine, compared with $5.8 billion from Britain, $2.6 billion from Poland, $2.5 billion from Germany, and a derisory $700 million from France. (When accounting for all bilateral commitments as a percentage of GDP, including the costs of settling refugees, Poland, the Baltics, and the Czech Republic have contributed the most.)

The physical limitations to this trend continuing much further are stark: As a recent Bloomberg essay by Niall Ferguson and a New Yorker interview with historian Stephen Kotkin vividly brought home, Ukraine is using up far more ammunition, artillery, rockets, and missiles everyday than the US defense industrial base is capable of replenishing—to say nothing of reserving stocks for possible conflicts in the Taiwan Strait or the Middle East. The Pentagon has ordered a review of US arms stockpiles, and further budget allocations to ramp up production are likely. But it’s not clear the United States can simply spend its way out of the consequences of a 20-year industrial offshoring frenzy in a time frame relevant to the military needs of Ukraine.

Perhaps even more severe than the physical limits are the political ones. For now, talk of waning GOP support for Ukraine is mostly overblown—a recent House resolution calling for the end of military and financial aid to Ukraine won the support of just 5 per cent of the GOP caucus. But the stage is clearly set for a fight. As the Fed tightens policy to lower inflation, a real or perceived US recession may not be far away, even as Ukraine—which is already battling 30 per cent inflation, currency debasement of some 70 per cent, and burning through its foreign exchange reserves—becomes more desperate for a financial life vest.

According to recent polls, between March 2022 and January 2023, the percentage of Republican voters who favor military aid to Ukraine fell from 80 per cent to below 50 per cent. Regardless of the ironclad support of Republican congressional leadership and doomed GOP presidential contenders like Nikki Haley, Mike Pence, and Mike Pompeo, every additional dollar of US aid to Ukraine plays into the hands of Donald Trump and Ron DeSantis—both of whom are likely to argue, with an entirely predictable measure of success, that fiscal support which might have gone to poor and working-class American families is going instead to Eastern Europe.

No matter that US military expenditures in Ukraine as a percentage of GDP have been only one-third of what we spent on an average year in Iraq, and one-thirteenth of annual spending in Vietnam. Neither Joe Biden nor any other Democrat wants to enter 2024 against DeSantis or Trump as the candidate of indefinite fiscal support to Ukraine—especially as hopes recede that there will ever be an end to this war that looks and tastes like real victory.

So much for guns and politics. But what about the unprecedented Western sanctions regime? Our economic strategy for a year now has been to accelerate an end to the war by denying Russia the means to continue funding it, or by fueling enough domestic turmoil in Russia that Vladimir Putin feels compelled to negotiate a settlement. Hasn’t it worked, at least in part?

Looking back on a year of war, the reality is that the sanctions have worked as a means of punishment, but not as a means of victory or even of hastening an end to the bloodshed. Perhaps even more than the challenges of continued military aid, alliance management, and domestic politics, the shortcomings of the sanctions regime spell trouble.

Consider that last year, the IMF predicted Russian GDP would shrink by 8.5 per cent in 2022 and by 2.3 per cent in 2023; for its part, the White House projected a year-on-year decline in Russian GDP of 15 per cent. Last month, the IMF revised its growth estimate for Russia to 0.3 per cent for 2023 and 2.1 per cent in 2024—higher than the eurozone and the United Kingdom.

What happened? For the first eight months of the war, thanks to a 250 per cent increase in hydrocarbon prices combined with an unavoidable lag in sealing off imports, Western sanctions actually raised Russian revenues from exports to the European Union.

Sanctions only started to inflict significant damage on the Kremlin at the very end of 2022, after which the Russian Finance Ministry reported a budget deficit of nearly $25 billion for January, and an overall decline in revenue of 35 per cent. In the meantime, however, Russia managed to tap gray and black trade markets across the Middle East, Africa, and Asia while continuing to sell oil around the world and provide petroleum services like maritime shipping and insurance. The EU has admitted to not knowing the quantity or nature of the Russian central bank assets it’s supposedly blocked. At the same time, thanks to China, Russia now imports more semiconductors than it did before the war.

According to a Swiss study that compiled data from February to November 2022, Western corporate virtue-signaling has likewise only gone so far. The percentage of EU and G7 companies that divested at least one of their Russian subsidiaries is a mere 8.5 per cent—120 companies out of a possible 1,400. The study found that fewer than 18 per cent of US companies, 15 per cent of Japanese companies, and 8 per cent of European companies have done so. This is not the Russia of shuttered McDonald’s and vanishing iPhones that saturated the Western press in the early months of the war.

At least two conclusions can be drawn from this. The first is that Western sanctions are powerful enough to make Russia poorer and weaker, but not poor or weak enough to force either an end to the war or the kind of internal unrest that might rupture Putin’s regime. In other words, despite the sweeping nature of the sanctions, they’re not working the way they’re supposed to—or at least not the way they’ve been sold to voters in Western democracies, who themselves are also bearing the burdens of commodity inflation and economic decoupling.

The second conclusion is that, for the first time since the end of the Cold War, and in large part thanks to Western sanctions, a feasible non-Western trade block may actually be emerging. In addition to increasing energy and agricultural imports from Russia, China has also committed to increasing Sino-Russian oil and gas projects, investment in Russian infrastructure, and substituting for the loss of certain Western capital goods and technology components (including “dual-use” products)—all by transacting in yuan and rubles rather than dollars or euros.

Together with Iran and large parts of Africa, and with help from democracies and US allies like India, Turkey, South Africa, and Brazil, China and Russia are working to overcome Western-imposed shortages by creating competitor industries and markets. At the same time, according to recent reports, Russia is in the process of linking its banking system with Iran’s, which has long experience bypassing SWIFT and working through proxy entities (“friendly firms”) that are difficult to monitor.

In the short run, no one thinks these ad hoc arrangements will seriously rival the Western-led international trade and financial system any time soon. But they might be enough to allow Putin to weather Western support for Ukraine for the foreseeable future. It certainly helps China, whose companies will gladly assume any key market positions being vacated by the West. Meanwhile, sanctions may come to be seen as an increasingly vain and ineffective tool of Western foreign policy.

This is a more devastating moment of clarity than it might seem at first glance. The promise of economic sanctions was never that they would punish people and corporations in authoritarian countries in order to provide vicarious emotional satisfaction for Western voters; the hope was that sanctions could simultaneously strengthen diplomacy while more or less replacing military force as an instrument of coercion.

Western domination of key technologies, banking, trade routes, and international institutions like the IMF, World Bank, and the Paris Club—so the thinking went—would allow us to impose our desired outcomes not only on irritant regimes like Cuba, Venezuela, and Myanmar, but also on peer-competitors like Iran, China, and Russia. And we could do it all without having to fire a shot.

That hope appears to be another casualty of the war in Ukraine, where the initial euphoria of the first year—when the West came together to uphold its most cherished values on behalf of a fellow democracy—is giving way to the setbacks and disillusionments of the second.