Alexey Navalny is Russian strongman Vladimir Putin’s biggest enemy—a survivor of an assassination attempt and currently imprisoned on trumped-up charges. Somehow, he’s still got access to Twitter, and while this entire thread is great, this tweet stands out:
Navalny rose to political prominence by focusing on oligarch corruption and the sorry state of the Russian economy. And indeed, outside of the fossil fuel industry, there’s not much else.
The United States has the world’s largest economy, by far, with a GDP of $19.5 trillion. Second-place China, with almost five times the population, is $12.2 trillion. Japan, Germany, India, the U.K., France, Brazil, Italy, and Canada round out the top 10. Russia? It’s 11th, with a GDP of $1.6 trillion, or one-half an Apple, Inc. Canada tops Russia, despite having roughly one-fourth the population.
Russian GDP, per capita, is $11,566, compared to $53,366 for the United States. There’s a reason that most former Soviet client states, when given a choice between Russian-style economic oligarchy and western prosperity, usually look toward the European Union and its NATO security umbrella. The ones that don’t—Russia itself, of course, but also Belarus, etc.—have to do away with democracy and fair elections to retain power. Just like the GOP’s efforts to undermine democracy, those undemocratic efforts betray their fear of their populace. If they really thought they were that popular and represented a majority, they wouldn’t fear the voters and free elections.
It’s no wonder that conservatives have embraced Putin. He is their model for unaccountable autocracy.
Russia’s economy is heavily dependent on fossil fuels, accounting for 60% of its national budget. It boasts the world’s largest natural gas reserves, second-largest coal reserves, and eighth-largest petroleum reserves. It is the largest exporter of natural gas, with Europe getting somewhere between 40 to 50% of its supplies from Russia. Beyond fossil fuels and mining, agriculture is just 5% of GDP. Weapons manufacturing is the only other industry of note. While these sectors have enriched the country’s oligarch class, the lack of any real growth sectors has choked economic opportunity, and the pain is being felt by ordinary Russians.
Carnegie Moscow Center writes:
“Most of the key challenges facing the Russian political system are related to the lack of economic growth. One of the factors inhibiting that growth is the state’s excessive interference in the economy and indeed all other aspects of life, creating an overcentralized and ineffective administrative state. This overcentralization, coupled with constraints on the media and other outlets for freedom of speech, means that the Russian authorities get little feedback and consequently have at best a blurry picture of what life is really like for average Russians. The country’s economic risks are also exacerbated by unaddressed environmental challenges and the lack of steps being taken to address them, such as decarbonization.”
That last sentence is particularly noteworthy. Decarbonization: Enter Nord Stream 2, the natural gas pipeline directly linking Russia with Germany. The pipeline cost $11 billion, half of it paid by Russia, the other half by a consortium of European energy companies happy to distribute that gas to its households. While Germany waffled in the early days of the crisis, President Joe Biden clearly stated that any incursion into Ukraine would cancel the pipeline. While construction is completed, it has been held up awaiting final permits and approvals. Germany announced today that final approval wasn’t going to happen.
While reports vary, it appears the pipeline was slated to generate around $15 billion annually to Russia. Blocking its activation won’t necessarily stop the flow of natural gas into Europe as existing pipelines are already supplying the continent (including Nord Stream 1), but Europe has taken note of Russia’s attempt to economically extort it, and it realizes real national security is incompatible with Russia’s hands on such a key economic lever. Thus, while it works to replace some of the lost Russian supply from the United States, Turkey, and Qatar, it has already spurred a continent-wide discussion on the need to accelerate decarbonization, or the shift to renewable energies. For a Russian country dependent on such exports, the long-term prognosis is brutal.
China might absorb some of that Russian capacity short-term, but China itself has embarked on its own decarbonization efforts. And with the European market increasingly closed off, China has all the price leverage it needs to pay low-dollar for such supplies. Countries like Mongolia and Azerbaijan won’t make up the difference. With his Ukrainian adventurism, Putin has now mortgaged his country’s economic future, while a growing sanctions regimen will make it even harder for its ossified economy to find other levers of growth.
And then there’s the cost of the invasion itself. Russia has already forgotten the lessons of Afghanistan, which led to the downfall of the Soviet Union. It didn’t even need to look back that far back in history. The United States’ own wars of choice in Afghanistan and Iraq—the latter based on similarly trumped-up lies—have cost us dearly in lives and treasure. But a $19 trillion economy is better able to absorb the costs of such needless adventurism than a $1.5 trillion one—and one that will now see its access to foreign capital and the international banking system restricted.
Those tanks, missiles, planes, and ships cost money, and even if Russia can subjugate Ukraine, it will extract a deep financial toll. Merely supplying an army away from its barracks is horrendously expensive, requiring massive supply and logistic efforts to feed, arm, and shelter those troops. Tracked vehicles can’t go far without breaking down. Aircraft require constant repair and ongoing maintenance, even in the best of peacetime conditions. About the only reliable piece of battleground equipment in Ukraine right now, on both sides, are AK-47 rifles, and those won’t give Russia any advantage. In an all-out shooting war, expect Russian troops to experience supply shortages in a matter of months, if not weeks. If the initial barrage of missiles and bombs don’t quell resistance (and I’m willing to bet it won’t, just like American “shock and awe” didn’t auger a quick end to the Iraq War or subdue the Taliban), the war will become a bloody quagmire.
The weather is also critically important. Look at the seven-day outlook in Ukraine’s capital city, Kyiv:
Those are above-freezing temperatures, meaning that grounds are already thawing out, creating a soft mushy mess that would bog down any Russian incursion deep into Ukraine.
About the only good news is that Biden’s relentless stream of “Russia is invading, watch the false flags” announcements seems to have removed Russia’s element of surprise, as has wide access to satellite imagery and local cell phone videos of Russian troop movements and actions, like the temporary erection of a pontoon bridge over a Belarusian river just five hours north of Kyiv. When the false flag operation was announced, it was so flimsy that Putin quickly discarded it in favor of a bizarre historical justification:
“First and foremost it is worth acknowledging that the demise of the Soviet Union was the greatest geopolitical catastrophe of the century,” Putin said. “As for the Russian people, it became a genuine tragedy. Tens of millions of our fellow citizens and countrymen found themselves beyond the fringes of Russian territory.
Remember, that century included two world wars and the Holocaust. Putin has essentially declared his intention to claw back the old Soviet bloc. As I noted a few days ago, Putin’s efforts to split NATO and roll back the alliance are having the opposite effect—Finland and Sweden are openly talking about their right to join NATO, while Swedish aircraft have joined NATO reconnaissance flights in keeping an eye over Belarus, Russia, and Ukraine. Turkey and Poland, each of them slipping into autocracy and straining their bonds with NATO, have reaffirmed their role in the alliance with renewed vigor, each of them offering Ukraine some of its strongest assistance.
While these efforts seemed to have staved off a massive all-out invasion for the time being, the current “we’re just peacekeeping” ruse doesn’t seem to give Russia much of anything. The West is proceeding with harsh sanctions and Ukraine has more time to not just arm itself, fortify defenses, and train reservists, but also to learn how to use the advanced anti-tank and anti-air missiles it’s receiving from NATO countries. And as noted above, the cost of occupation is steep. Troops in barracks are cheap. Troops in the field are frightfully expensive—and troops shooting at stuff exponentially so.
Russia’s economy was already weak. Cutting off exports to the West, able to pay top-dollar for energy supplies, will compound the economic pain. Putin has bragged that the country has stockpiled financial resources to stave off any consequences, and who knows, maybe he’s right. But if Europe and the United States stay strong and committed to starving the Russian bear, any such reserves will eventually be used up.
And then the oligarchs will have to decide if their economic ruin overcomes their fear of Putin and they must do something about this disastrous war of choice. If they don’t, the Russian people may do it for them. It wouldn’t be the first time.
