When I first went to the Soviet Union as a student in the early seventies, three things stood out to me: it was very cold, its women were pretty and people were both easygoing and happy. That there was an economic catastrophe waiting to happen was beyond our knowledge. It did not take long though to get a sense of this hidden reality. My preparatory year was in Kharkov (now called Kharkiv), where I soon learned that simple things like eggs or fresh vegetables could be found if one was willing to invest a good bit of time standing in a queue, often in curbsides, along with dozens of babushkas who had all the time in the world to invest. Toilet paper was a precious commodity and jubilant senior citizens would go home proudly displaying a few rolls strewn together like a garland and adorned around one's neck. Babushkas would say, it was a good day.
This period, we later learned, was called the period of stagnation. The name was coined by the last President of the Soviet Union, Mikhail Gorbachev. The Soviet economy was stagnant: it did not go down precipitously but it did not move up either. Two summers later when I first visited London during school break, I found out - as a regular twenty-something - what I was missing in the Soviet Union. I remember the first thing I bought there was half a dozen toothpaste. Mother Russia was a mighty superpower but she could not produce decent toothpaste. Whatever was available in store was so bitter that we dreaded our morning chores. Jeans or other trendy stuff was not even an option. That worked fine for us, the overseas students, who could collect a pair of jeans trouser at seven pounds apiece and sell them at 100-125 rubles.
All that changed with the collapse of the Soviet Union. The Russian Federation, the old Soviet Empire's successor, soon entered a new era. It quickly embraced uber capitalism and integrated itself with the West.
With abundant oil and gas, the country dramatically enhanced the living standard of its people. The man spearheading the change was Vladimir Putin, who assumed power, first as Prime Minister in 1996 and then as President in 2000. Reigning over the sprawling but a truncated Russia, he led an economic revival that, for over two decades, elevated his country to the status of a real superpower. Above all, he kept the old Soviet nuclear arsenal and further modernized its military. Maybe Putin is authoritarian, who doesn't mind using poison to strangle dissent but under his stewardship, people could get - without the proverbial queue - their Big Mac anytime in most major cities.
The scoure of sanctions
All of that is quickly changing as the United States and much of Europe have begun imposing punishing sanctions for Putin's decision to invade neighboring Ukraine. All the perks the Russians have taken for granted are fast disappearing. Gone are Gucci bags, McDonald's, BMWs, and even Apple Pay credit cards. Before the war, everyone ran to Cairo, Milan, or Goa. Bye-bye to that, too. Russian tourists found themselves stranded in Bangkok as no bank would honor their credit cards. Even taking a direct flight back home is impossible as many countries have banned their airspace for Russian aircraft. In addition, the lack of spare parts has forced many Russian aircraft to be grounded.
In other words, back to stagnation.
Putin himself says he cares little about foreign sanctions. Last month, in a rambling late-night speech on state TV (well, all media outlets in Russia today are run by the State) he touted the success of his Central Bank to stabilize the value of the ruble. Trading in the stock market has also started, albeit in selected stocks. Calling the economic sanctions imposed by Western countries a war against Russia, Putin reassured his countrymen that Russia would successfully battle this oppressive war. In fact, he claimed, Western nations themselves are in danger for their foolhardiness.
Putin may have tried to pull a fast one on his people, but the bubble was almost immediately punctured by his underlings. The day after his late-night bravado, Russia's central bank chief Elvira Nabiullina told the Russian parliament that sanctions have hit every sector of the economy. 'The sanctions have affected the financial market, but now they will start to impact the real economy increasingly more significantly,' she told lawmakers. She also admitted, currently, this problem might not be as acute because the economy still has inventories, but things could get worse as sanctions are being tightened almost every day (see her full statement here: https://bit.ly/3Fj6Fic).
Like Nabiullina, Russia's leading economists have also warned that unless conditions change, the gross domestic product would fall by 6 percent this year and inflation exceed 20 percent. Alexei Kudrin, chairman of Duma's special committee on the national economy, told lawmakers that preliminary estimates showed inflation could reach as high as 20.7 percent in the 2022-23 fiscal year. (See more here: https://on.wsj.com/37U3Nfv.)
One reason why the Russian economy is still humming is all due to the continued gas and oil sales to the West to the tune of almost a billion dollars a day. India's Foreign Minister Jayshanker, rebuffing Washington's entreaty to stop energy purchases from Moscow, told his American counterpart last month that India's purchases of Russian energy for a month were less than what Europe did in an afternoon. If the West finally makes good on its promise to turn off all spigots, Russia's long run of good luck with the West's money would come to a screeching halt. Three hundred and fifty foreign companies have already left the country. As a result, a good chunk of those who benefitted from Russia's good luck with new money now finds themselves left high and dry. The mayor of Moscow has said that as many as 200,000 people are unemployed and an emergency program of 3.5 billion rubles is being undertaken to help them.
Russia is now spending about $20 billion daily to wage the war. Add to that the daily toll of human lives, which as per British intelligence has already cost Putin's army more than 15,000 human lives. In a lead article, London's Economist theatrically questioned, how rotten is Putin's army? It wrote, 'The might of the modern Russian army was supposed to show the world that President Vladimir Putin had restored his country to greatness after the humiliation of the Soviet collapse. Instead, poor progress and heavy losses in Ukraine have exposed deep flaws within Russia.' (See more: https://econ.st/3F9kLlW).
The war could further whack Russia's vaunted military-industrial complex, much of which is dependent on the West and China for spares and technology. According to a report published in the Royal Services Institute, a London-based defense service and think tank, 'most of Russia's military hardware is dependent upon complex electronics imported from the US, UK, Germany, Netherlands, Japan, Israel, China and further afield.' The worst-hit is Russia's arsenal of Precision Guided Munitions, much of which relies on imports from the US. See more here: https://bit.ly/39DylCJ
In short, Putin is waging a war not only against a neighbor but also against itself.
None of this would have happened had Putin chosen not to violate a smaller and weaker neighbor's sovereignty and territorial integrity in clear violation of international law, a fact told by the UN Secretary-General directly in Putin's face during a short trip to Moscow.
It is worth recalling here that the collapse of the Soviet Union, an event Putin dubbed 'the greatest tragedy of the 20th century,' was precipitated by two factors: the collapse of the Soviet economy and the disastrous war in Afghanistan. After spending a decade in Afghanistan, and with over 15,000 deaths and billions of dollars down the great Amu Darya, Mikhail Gorbachev said enough. At his order, the last Soviet soldier left Afghan territory on 15 February 1989. Exactly two and a quarter years later, on December 26, 1991, the country called the Soviet Union to turn off all its lights. It simply went kaput.
How does it end
As the war blunders into its third month, it appears there are only two ways this madness would end: either Russia will win the war, or Ukraine will defeat Russia. Since neither seems within reach, the war is likely to be protracted, perhaps continuing for months and years, and could end up as another 'frozen conflict' like the occupations of Donbas, Crimea, and Georgia.
The Ukrainians themselves are so surprised by their success that they now feel, with the West solidly behind them, they can beat the Russian Goliath. President Zelensky, who at the early stage of the war had conceded to giving in to Russian demands, including forsaking plan to join NATO, now says no off-ramp for Putin until he withdraws all his troops. To both Ukraine and its allies in the West, Putin is a war criminal, his hands are drenched with fresh human blood. How do you sit and negotiate with a thug who has killed your children, Ukrainian President Zelensky has asked? Ukrainians now call this a war against Ruscism (which rhymes with fascism).
As for Putin, despite the looming catastrophe, it is not possible for him to withdraw from the battlefield. He must win this war at any cost, otherwise, his survival would be at stake.
New US security strategy
Putin had hoped his planned blitzkrieg into Kyiv would be over in 72 hours, giving him another victory, just like it did eight years ago in Crimea. Unfortunately for him, the war is no longer between Russia and Ukraine, the West led by the United States has become a party to it. This guarantees the war to continue as long as it takes for the West to decimate Putin and Russia's war machine. In 2009, as President Obama's Foreign Secretary, Hillary Clinton had proposed a reset with Moscow when she presented Russia's Foreign Minister Lavrov with a red button that included an inscription in bold red letters that said 'peregruzka' or reset. Now, with Russia's ugly aggression, the US has seized an opportunity to cut Putin's ambition to size.
In unscripted remarks to journalists in Poland following a visit with the Ukrainian President, US Defense Secretary Lloyd Austin said, 'the US wants to see Russia weakened to the degree that it can't do the kinds of things that it has done in invading Ukraine. 'It had already lost a lot of military capability and a lot of its troops, quite frankly, and we want to see them not have the capability to very quickly reproduce that capability.' See more: https://nyti.ms/3LNmwYQ
Earlier, in its draft National Security Strategy, leaked by the New York Times, the White House made a similar assertion. A central element to this strategy is isolating Russia from the rest of the world. With Biden in the lead, the US has already rallied the West and much of the world into a united front against Russia. The successive UN resolutions critical of the Russian invasion and a dramatic decision to expel it from the UN Human Rights Council demonstrate how completely alone is Putin and his Russia.
The war will perhaps destroy Ukraine, but it will also not spare Russia. The only alternative is to remove Putin from power. He has started this war, only with his removal can the war be ended. According to Russian investigative journalist Andrei Saldatov, anger is slowly mounting in Russia, even within Putin's inner circle. He has made a bold prediction, it's only a matter of time before Putin is deposed.
The sooner it happens, the sooner the world can exhale.
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