Russian President Vladimir Putin chairs a meeting with members of the Security Council via a video link at the Novo-Ogaryovo state residence outside Moscow, Russia, on March 3.SPUTNIK/Reuters
Watching Russian President Vladimir Putin do his best to trash the existing world order, it’s hard to believe he once belonged to an elite Western political and economic club that played a key role in shaping it. Even more puzzling is the question of why someone once regarded as a reasonably rational, pragmatic autocrat is willing to inflict so much pain on an already troubled domestic economy while thumbing his nose at some of his country’s biggest trading partners and sources of foreign capital.
So far, Mr. Putin seems unperturbed by the unprecedented Western financial sanctions that have shredded the ruble, hamstrung his central bank, hammered Russian securities and triggered a run on the country’s banks. Russians, stuck with worthless credit cards and worried about the safety of their pensions, are withdrawing as much cash as they can get their hands on to weather the coming storms.
Russia’s central bank would usually have dipped into its war chest of more than US$640-billion in foreign exchange and gold reserves to prop up the plunging ruble. But its currency assets held in Western financial institutions – amounting to more than half the total – have been frozen by the latest sanctions. So the bank has resorted to imposing capital controls and more than doubling interest rates to 20 per cent. So far, this has failed to stanch the bleeding, as the economy hurtles toward disaster.
Mr. Putin appears equally unmoved by the plight of his old oligarch pals, who helped him amass and hide a sizeable fortune. They face losing their posh London properties, access to their Swiss bank accounts and the use of their fleets of private jets and superyachts.
Such callous indifference stems from the Russian leader’s obsessive determination to dismantle an independent, democratic Ukraine and bring a docile version back inside his domain. He has obviously decided this is his last chance to avoid losing yet another former Soviet satellite to the allure of the European Union, which is already Ukraine’s largest trading partner.
Mr. Putin gambled that this would be a quick, relatively bloodless exercise and that soaring prices for oil and natural gas would help cushion the economy from any possible repercussions. He may also have concluded that deepening ties with China, Brazil, India and a handful of other governments would enable Russia to replace lost Western capital and technology while providing ready markets for increased energy exports.
Unfortunately, there was no one in his shrinking inner circle of advisers to warn the increasingly isolated leader about the disasters he might be unleashing. His war cabinet consists of a handful of aging hardliners who don’t fear sanctions because they have no assets or business interests outside Russia.
Three of them, like Mr. Putin, are old KGB hands who yearn for the bad old days and share his vision of a new world order dominated by a trio of great powers operating within distinct spheres of influence. In this dream, a more closely allied Moscow and Beijing could team up to further diminish Washington’s waning global clout.
“When it comes to Ukraine, people in Moscow and the West can be forgiven for assuming that the Kremlin’s policy is informed by a dispassionate strategy derived from endless hours of interagency debate and the weighing of pros and cons,” Alexander Gabuev, a senior fellow at the Carnegie Moscow Centre, wrote recently in The Economist. “What actually drives the Kremlin are the tough ideas and interests of a small group of longtime lieutenants … as well as those of the Russian leader himself.”
Since Russia’s 2014 seizure of Crimea, it has lived with Western sanctions, which have prompted the Kremlin to try to safeguard the Russian economy. It was as part of this “Fortress Russia” strategy that the central bank built up its huge foreign currency reserves and the government reduced the country’s reliance on Western imports, including technology.
It was the Crimean annexation that got Russia booted out of the Group of Eight industrial countries. The United States and other Western powers had been so eager to welcome a reforming Russia into their capitalist club that they made room for then-president Boris Yeltsin at the table in 1997, less than a year before his bankrupt government defaulted on its massive debt and the country’s economy ended up on life support.
Mr. Putin stayed in the group when he replaced Mr. Yeltsin in 2000, but he never looked comfortable hanging out with democratically elected politicians he didn’t trust, and who espoused a version of global open-market capitalism he didn’t believe in. They certainly hadn’t done much to help fix the fiscal and economic mess he inherited.
On his way out the G8′s door 14 years later, he remarked that the important work on international issues was being done by the Group of 20 anyway. Yet a year before the G8 reverted to the G7, Mr. Putin observed that the group’s discussions were “distinguished by their depth and confidentiality, making it possible to constructively resolve many political issues, even the most difficult ones.”
One contentious issue they could not resolve was the future of a now pro-Western Ukraine. The country had no desire to return to the Kremlin’s little club of former Soviet satellites, which was designed to serve as a buffer against further encroachment by the European Union and NATO while providing captive markets for Russian exports.
Without Ukraine (whose large population has been growing and getting younger while Russia’s is shrinking and aging), Mr. Putin’s grandly labelled Eurasian Economic Union, conceived as a counterweight to the EU, doesn’t work.
“The union’s aim was to cement and institutionalize Russian influence,” geopolitical strategist Marko Papic writes in his 2021 book Geopolitical Alpha. But if Ukraine is allowed to continue charting a Western course, Mr. Putin is left with little more than his own country, shaky Belarus “and a collection of Lilliputian economies from central Asia and the Caucasus.”
British political philosopher John Gray once opined that the Kremlin’s goal “may be to roll back Western influence in Russia’s ‘near abroad,’ but their strategy is to take whatever they can. Perceiving the West to be in decline, they are testing whether it has any coherent strategy to protect its interests.”
That was in 2008, after Mr. Putin launched a military assault against Georgia following the election of a pro-Western government there. Now, with the co-ordinated Western response to his full-scale invasion of Ukraine, he may finally be getting the answer to that question.
Soon, he may also discover that peddling more gas to China, military gear to India and uncompetitive goods to a few hapless members of his little club is no substitute for what he could have gained by keeping the existing world order – and Russia’s place in it – intact.
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