Treasury Implements Bottom of the Barrel New Russia Sanctions on Sunday May 8; How Broad a Nexus for Russia Retaliatory Sanctions Later This Week?

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Your humble blogger will offer a few additional observations about the Russian Presidential decree that announced “retaliatory special economic measures” on May 3, based now on having a translation of the document proper, as opposed to a press release. We’ve embedded a translation of the executive order at the end of the post; you can find the original text here. As we’ll discuss, while the executive order authorizes a broad range of actions, including cancellation of existing contracts, in response to the seizure of property and/or restriction of property rights, it remains to be seen how Russia connects the parties hit with retaliatory measures to the predicate offense.

But before we turn to that matter, it appears that the US and Ukraine are awfully desperate to undermine what they are spinning as Putin’s party, Russia’s big May 9 Victory Day commemoration. As commentators like Scott Ritter and Andrei Martyanov have had to explain to Americans, the Great Patriotic War is very much part of the lived experience of Russians today.

But the West’s efforts look petty and childish. At the end of this post is yet another list of sanctions by the Treasury Department. The fact that they were published on a Sunday, no less our Mother’s Day, makes it more than a tad obvious that they are meant to throw a spanner in Russia’s May 9 events.

And what do these grand new sanctions amount to? Not more than a hill of beans. If you read them, nearly all are silly. The executive board members of one already sanctioned bank, Sherbank and the board of directors of the unsanctioned Gazprom Bank? The US has no inhibitions about doing what it can to lower the boom on Russians executives and officers, even through the US is not at war with Russia and these executives have not been tied to particular alleged bad acts. Yet no Western bank executives were called to account in any meaningful way for widespread subprime/CDO fraud and incompetent risk management (and as we and many other described, there were plenty of legal theories available to gin up prosecutions).

Wellie, Treasury did whack another Russian bank, the Moscow Industrial Bank. Even using the current rouble value of 65 to the dollar, it has less than $4 billion in assets.

Rounding out the list is a private defense company, which makes rifles, not even serious artillery, and three state owned broadcasters. So does their staff need to worry if they travel to Europe that they’ll have their film equipment confiscated? And regardless of what it means in practice, how is this sanction supposed to help the West? It surely won’t render these media companies any more receptive to the Western storyline.

The rifle company section is noteworthy because it starts with this rant:

Russia’s defense sector is a key driver of Russia’s unprovoked invasion of Ukraine. As Russia’s forces continue to carry out Putin’s war of choice in Ukraine, Russia’s military suffers severe roadblocks such as poor morale and logistics and sustainment issues. Flagrant disregard for international norms is evident in the war crimes Russian forces have committed in Ukraine. As they continue their brutal attacks, the number of innocent civilians killed and wounded, including women and children, continues to climb.

This bit if nothing else is evidence of poor editing. If the Treasury wants to take a swipe at Russia, it should come at the top, not way into the document. I’m sure readers will have additional comments.

The last sanction US parties are subject to sanctions for providing accounting, trust, corporate formation, or management consulting services to Russians or Russian companies. I suspect Russia can survive without the tender ministrations of the Big Four and McKinsey. More seriously, there are tax havens outside the US sphere, and I suspect that Russians were already cutting their ties to them after the US started imposing sanctions in 2014.

Aside from the May 8 publication date making the Treasury’s true motives a little too apparent, there’s other evidence that the West is bizarrely fixated on winning the PR war, to the degree that it’s losing sight of the real world.

In his May 8 presentation, Alexander Mercouris could make sense of two Ukrainian attempts at offensives only as propaganda efforts designed to undercut the Russian Victory Day ceremonies, as opposed to being driven by military priorities. One was to retake Snake Island, where Mercouris expressed doubts as to its strategic significance. That effort looks like a debacle, with the Ukraine side taking serious losses to personnel and equipment (and true to form, tried to pass off one of their dead helicopters as Russian). Mercouris hedged that perhaps the Ukrainians could manage a comeback but he also ventured that the attack went so badly for the Ukraine side that it looked like a Russian trap.

The second offensive, north of Kharkiv, looks intended to encircle some Russian troops. But they involved towns where the Russians had few forces. So they simply pulled back. As Mercouris put it, the Ukraine side was left “punching at air”.

The rest of Mercouris’ show is very much worth your attention.

Now to what is likely to be an important event late this week, which will be Russia’s announcement of its initial list of targets under its “retaliatory special economic measures” plus additional clarification of the May 3 decree, which has the potential to increase its scope.

Even though I am warned that legal language in Russian can be difficult to parse even for Russians, the executive order seems reasonably straightforward. It is also broad in most respects, but might be a smidge narrow in another.

First, as the very description stresses, these measures are designed as retaliatory:

In connection with the unfriendly and contrary to international law actions of the United States of America and the foreign states and international organizations that have joined them, aimed at illegally depriving the Russian Federation, citizens of the Russian Federation and Russian legal entities of the
right to property and (or) limiting their property rights….

Notice that the decree depicts the US as the lead actor and focuses on harm to economic interests.

The decree goes to the trouble of making clear that these measures are defensive in nature (to protect Russia). That is presumably because Russia and China take the position that US sanctions are illegal because they are not approved by the UN. So it’s surprising to see it define the targets of these measures later as “persons under sanctions”. And yes, I confirmed that the Russian word is the same as used in connection with US sanctions. So perhaps this is a recognition that the West will call them sanctions regardless, and the parties that appreciate the difference will recognize it?

Notice that the sanctions are sweeping in terms of the scope of action: sanctioned parties are subject to having open contracts cancelled and being denied new ones. They can also have Russia product sales, including of raw materials, shut down.

But what is not yet clear, and we’ll presumably see soon enough, is what entities will be subject to sanctions. As I read the order now, it extends to a party that stole from Russia and anyone that does business with them can also be sanctioned. By that logic, it can pick up any US company that gets Federal funding.

But what about a defense subcontractor that uses Russian commodities? If it does not receive revenues from the Federal government but only the Lockheed Martins of the world, and the defense contractor has not made off with Russian property, it would seem to fall out these sanctions as currently stated.

By contrast, the West has taken an expansive view of sanctions. For instance, the Western press was reporting breathlessly about the seizure of a Russian yacht worth an estimated $700 million in Italy, with some stories saying it was believed to be owned by Putin, others saying it was “linked” to Putin.

Get a load of the “links”. According to the New York Times:

In March, the Scheherazade’s captain, Guy Bennett-Pearce, said the vessel’s owner — whom he didn’t identify — was not on any sanctions list. The Italian media reported that the owner was Eduard Khudainatov, an oil tycoon not currently under sanctions. He is a longtime associate of Igor Sechin, a close Putin ally and chairman of the Russian state-owned oil company Rosneft, who is believed to be the owner of a superyacht seized in March.

So an unsanctioned friend of a friend of Putin is subject to sanctions? Based on this precedent, Russia may decide to be more expansive in terms of the degrees of separation it uses in determining who to counter-sanction.

It is always a bit tricky to speculate at times like this, but it seems likely that Russia will steer clear of sanctioning foreign banks even though they made off with Russias’ $300 billion of foreign exchange reserves on the US say so. At least some banks have tried to make clear that they are mercenaries not in the sanctions business. And more generally, Russia is still winding up with dollars and euros. It makes more sense for Russians to be able to invest them abroad more or less directly, and not by finding wildly complicated schemes involving other countries to make use of them. So even though the banks would seem to be the most prominent targets, I don’t expect Russia to go after them.

However, one exception could be UniCredit. UniCredit has been the sick bank of Italy, which is the sick banking system of Europe. UniCredit is also very exposed to Russia. And it is so sick that it told shareholders it can’t be expected to exit Russia quickly, which pretty much translates into it can’t take the balance sheet hit all at once, it needs an excuse to spread it out over time.

Would Russia try to force a crisis at UniCredit to destabilize other European banks? If Italy took enough in Russian assets that a UniCredit seizure would not be financially disproportionate, one could make a case for it. After all, the West tried to bring down Russia’s banking system. But China and India might not be so happy about the knock on effects.

A more obvious target is all the German utilities who are using the Gazprom facilities seized by Germany. And even though Germany thought it had enough gas to last to the winter due to stockpiling, it’s now taken to sending some supplies to neighbors like Poland. So a Russian shutdown might do damage sooner than the wags anticipate.

I’m sure readers will have other bright ideas, but we should know for sure in just a few days.

Decree of the President of the Russian Federation of May 3, 2022 No. 252 On the application of retaliatory special ec
00 May 8 Treasury Sanctions
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110 comments

  1. Alex

    Regarding the destroyed helicopter on the Snake Island, I’ve seen the acknowledgement of its being Russian on some generally trustworthy pro-Russian telegram channels, for example https://t.me/rybar/32392. I’m not sure I agree it was for propaganda purposes only. Had the attack succeeded and had the Ukrainians been able to install their anti aircraft and anti ship weapons there it would severely inconvenience Russian activities in the Black sea and the potential attack on Odessa

    Reply
    1. Yves Smith Post author

      Alexander Mercouris gave it a very careful look and says the conclusion is that it was not a Russian helicopter.

      Mercouris makes a considerable effort to sort through conflicting claims. He says explicitly that the Ukrainian side tried to pass of one of their dead helicopters as a Russian dead helicopter but that has been completely debunked. See here (https://www.youtube.com/watch?v=nK2KRKjOqss) from 7:50 to 9:30. He also makes clear he looked at many Russian and Ukraine claims.

      Reply
      1. Thuto

        I would add that the timing of these Ukrainian counter-offensives (a day before Zelensky’s virtual meet up with the G7) was meant to buttress his “if we had more weapons we could win this thing” plea to his obsequious audience.

        Reply
      2. Alex

        Hopefully soon things will become clearer as it happened with the Ukrainian defenders of the same island who were supposedly killed and then were found very much alive

        Reply
      3. Stove Goblin

        So is Ukraine re-purposing Russian footage shot on a Russian drone? If it is a Ukrainian drone, why is the drone laze-ing a friendly helicopter? The video appears rec’d off a pilot’s workstation. If it is a Ukrainian helicopter and a Russian workstation, is this a security breach? Or is a Ukrainian exploiting the deaths of his comrades? I guess it doesn’t matter… If this is a Ukrainian heli-bourne assault, then has Russian air superiority disappeared? And why is the Ukrainian info warfare so much more effective than Russian info warfare, which appears dedicated to debunking claims? Where are the Russian journalists… Oh, right, that activity is highly discouraged.

        Reply
        1. Greg

          It’s been discussed at length here previously – Ukrainian infowar targets the west and especially the americans and british, Russian infowar is targeting Africa/Asia, and we only see the odd bit here and there in english.

          When you go onto telegram the balance is a lot more even with a ridiculous amount of both highly polished and entirely dubious russian propaganda as well as the ukrainian propaganda we see amplified in western media.

          Reply
          1. Soredemos

            The Russia ‘propaganda’ has the substantial advantage of largely conforming to reality. The Russian MoD has an infinitely better record of communicating the truth of events in this war than the Ukrainian side, who seem incapable of simply not lying (they have to: it’s the only way for them to conjure up any successes).

            Reply
    2. Polar Socialist

      Whatever the reason, Ukrainians are sending men and machines towards the island for a third day in a row. With allegedly heavy losses.

      The Serpent Island is 20 miles from the coast, so it doesn’t really add that much to the Ukrainian weapon/sensor reach and it’s too small and barren to hide any weapon platforms from Russian counter attacks.

      Reply
    3. PlutoniumKun

      The island has no significant strategic value. It has never in its history had a significant military base, despite it being contested between several countries at various times of its history. Its too small to sustain a large base which means that any garrison could just as easily turn into a hostage as it could be a threat.

      You need only look at googlemaps and overlay the ranges of Ukrainian anti-aircraft and anti-ship missiles to see that it adds nothing to existing (and far easier to supply) mainland bases. Any attempt to turn it into a missile base would be met with a hail of Kalibr missiles, which would end that plan very rapidly.

      I’ve not seen anything to suggest that video is anything other than claimed by the Russians – a Ukrainian assault that was most likely a trap. The Russians would have no need to send a helicopter there if they suspected any Ukrainian UAV’s were in the area. If it was a Russian chopper, you can be sure that video would have had saturation coverage in the western media.

      Reply
      1. Alex

        As to the strategic value, there is a video with the burning Tor AA battery on the island. Assuming it’s genuine it would indicate that the island does have some value or such a valuable and expensive system wouldn’t be deployed there.

        Reply
        1. PlutoniumKun

          The Tor is a short range system with 10-15km range at most, it a mobile system designed to protect individual units from attack. If it was on the island, it was to protect anyone on the island from direct attack, it would have no wider strategic value. In other words, if the Ukrainians brought it there, it was to protect the units on the island, nothing more.

          Reply
          1. Polar Socialist

            Just adding that Tor is usually supposed to be integrated with 3 other Tor platforms and shorter range units like Pantsir, Strela or Tunguska. Sometimes even with higher level systems like Buk or S-300.

            So, if there was only a single Tor present, I’d say it confirms that the island is indeed too small for any decent deployment and not really that important. Of course, if you do have troops there you’d like to give them some protection and this (lone Tor) sounds kinda like the bare minimum.

            Reply
      2. Dave in Austin

        I beg to differ with PlutoniumKun.

        When this whole episode ends the question of territorial waters and Exclusive Economic Zones (EEZ) will have to be hashed out. And possession is 99% of the law. the USSR occupied the Kuriles and the Sea of Okhotsk at the end of WWII; since even that 1945 occupation of those islands by the USSR left the north shore of Hokkado facing into the Sea of Okhotsk, the sea could not under international law be considered exclusive national waters by the USSR. But that’s how it has been treated since 1945.

        The Russian announcement dealing with the Transnestria did not specifically say: “We want to occupy the whole coast of the Ukraine”; it simply staked out the claim to the right to access the place.

        If Russia occupies the whole Ukrainian coast of the Black Sea, then the Ukraine will have no Black Sea maritime claims- as long as Snake Island remains under Russian control. Converely, if the Ukrainians retain a coast line and Russia retains the Crimea, then the territorial waters will be divided between the Ukraine and Russia plus if Russia retains Snake Island the island will have territorial waters and an EEZ.

        So Snake Island matters. See the South China Sea claims, Cyprus and San Andres island off Panama for other examples.

        Reply
        1. Yves Smith Post author

          As other posters have pointed out, the island is too close to the coast and too small to support a base, hence not defensible. This is not even remotely Cyprus.

          Reply
          1. redleg

            I see Dave’s point:
            Control of the island extends the possessor’s territorial waters, whether or not the islet is defensible. That’s it’s only apparent value.
            I’m not sure how that works in practice, but it is something to be taken into consideration.
            Further, doesn’t maritime access through the Bosporous somehow depend on whether or not a nation controls a part of the Black or Azov Sea littoral?

            Reply
    4. Polar Socialist

      For what iẗ́s worth, the Russian MoD evening presser gave the following numbers regarding the fighting on the Serpent Island during the last two days:

      – 4 Ukrainian aircrafts have been shot down (3 Su-24 and one Su-27)
      – also 3 Mi-8 helicopters with paratroopers on board and one Mi-24 helicopter
      – 29 Ukrainian UAVs were shot down (8 Bayraktar TB-2)
      – 3 armoured Ukrainian Project 58181 Centaur amphibious assault boats were destroyed during a landing attempt on the night of 8th
      – over 50 Ukrainian special forces members were killed during these attempts to establish a foothold on the island
      – bodies of 24 Ukrainian servicemen were left on the island

      I don’t think they said anything about Russian casualties so far.

      Reply
  2. Colonel Smithers

    Thank you, Yves.

    Readers may be interested in this article published in yesterday’s Observer, https://www.theguardian.com/commentisfree/2022/may/08/surrendering-land-is-not-same-as-defeat-if-a-stronger-ukraine-emerges-from-ruins. The author is a veteran of the Guardian and Observer and from their realist school of international affairs, perhaps reflecting his age and experience, and a historian.

    One wonders what, in particular, David and Vlade make of the contention?

    Reply
    1. JohnA

      Hi Colonel, I have just read the Guardian article and I fear the author falls into the trap of Putin being an expansionist seeking to rebuild the soviet empire:

      “But to accept Crimea’s clumsy seizure by Russia as legitimate only encourages Putin’s ambition to annex other fragments of the old Soviet dominion.”
      The Crimea seizure/reunification was bloodless, and at least as legitimate as Kosovo.

      He further falls into the Zelensky worshipping trap:
      “Volodymyr Zelenskiy’s brave and selfless war leadership has been a break with the corrupt oligarchs and demagogues who have mostly hogged the Kyiv stage”.
      No mention of how zelensky has offshore accounts, mansions in Florida and London and allegedly 30 bn in the bank. Nor how Zelensky has ordered a fight to the death with no chance of rescue rather than surrender to russians surrounding them and other meatgrinder tactics resulting in certain death for the Ukrainian troops.
      And finally, he has not noticed the Russia flag waving and thanks being given to Russian troops of people ‘liberated’ and how millions prefer russia as a refugee destination than the west. Obviously this was written pre- 9 May, but there are plenty of st George ribbon parades in what was east Ukraine today.
      And then the hopium dial gets turned up to max
      ‘But the men and women who really matter are the millions who speak Russian, who regard themselves as ethnically Russian but who now, through contempt for Putin’s regime and blazing outrage at this invasion of what is their homeland, have come to feel fully Ukrainian.”

      Russian speakers who have been banned from speaking Russian since 2018, and subjected to terrorist shelling and other bombing resulting in 14,000 deaths (or more) are hardly likely to feel fully Ukrainian or outrage at Putin rescuing them from this terror.

      All in all, standard western media propaganda, where the war was totally unprovoked, Ukraine is innocent Zelensky is superman, and Putin an utterly deranged meglomaniacal monster. 0/10 for reality.

      Reply
      1. Colonel Smithers

        Thank you, John.

        I don’t disagree with you. I imagine the author has / had to say all that to get this article published. It’s the same with the likes of Mary Dejevsky and Anatol Lieven.

        Reply
        1. Michaelmas

          Colonel S: I imagine the author has / had to say all that to get this article published.

          Thank you, Colonel. And this further step today in the Grauniad —

          ‘Further arming Ukraine will only destroy it. The west must act to end this war now’
          https://www.theguardian.com/commentisfree/2022/apr/27/ukraine-war-end-putin-russia-talks

          As someone or other said: ‘In our sleep, pain which cannot forget falls drop by drop upon the heart until, in our own despair, against our will, comes wisdom through the awful grace of God.’

          Well, maybe not in the case of the U.S.

          Reply
      2. Telee

        The line in the sand seems to have been drawn for the democratic party. I can’t find one ( there must be some, please tell me who they are ) congressional democrat who is not supporting Biden’s Ukraine policies. Even the members of the squad are voting for all the appropriations to support military aid. All supporting another war time president. The Young Turks are all in! Many liberals and many from the left are all in! Meanwhile Judge Napolitano of Fox News has given voice to the opposition like military men like Col. Douglas MacGregor and Scott Ritter who seem to be giving a more accurate account of what’s happening! McGregor and Ritter have also been interviewed on the Grayzone. Libertarians seem to be critical of US policies. Ron Paul just did an interview with Scott Ritter where many points were well taken. Also, I’ve seen no evidence that anything is happening on college campuses. It all seems upside down from what I experienced in the 60’s. Strange times!

        Reply
        1. Ashburn

          Thanks, Telee. I have become completely disillusioned not so much by the pathetic Democrats but by the so-called ‘Progressives’ that I once had hopes in. Per your post, I saw this quote today regarding the recent House vote on the Lend Lease bill for Ukraine by writer James Carden in the Asia Times via the Antiwar.com site. It really struck home to me as a Vietnam-era veteran:

          “The Vietnam era marked perhaps the high point of progressive dissent against the American war machine. The anti-war movement was certainly well represented (especially by today’s standards) in the US Senate, where J William Fulbright, William Proxmire, Wayne Morse, Robert F Kennedy, George McGovern, Eugene McCarthy and Frank Church opposed president Lyndon B Johnson’s war.”

          Further down in his piece Carden shares how the ‘Progressives voted:

          “Not a single Democratic progressive voted against the legislation. All the leaders of the progressive left in Congress, including Ro Khanna (D-CA), Jamie Raskin (D-MD) and Pramila Jaypal (D-MI), voted for Lend Lease – as did every member of the so-called “Squad,” including Alexandria Ocasio-Cortez (D-NY), Ayanna Pressley (D-MA), Ilhan Omar (D-MN), Jamaal Bowman (D-NY), Rashida Tlaib (D-MI), and Cori Bush (D-MO).”

          https://asiatimes.com/2022/05/american-progressives-join-the-war-party/

          Reply
          1. Stephen

            I think a big difference with Vietnam is simply that western troops are not on the ground fighting the war. No body bags are coming home. No college age student fears conscription. No pictures either of western atrocities on the evening news.

            Vietnam intervention was popular (or at least not unpopular) and had almost total congressional support in the early days. When it was “advisers” and money. Ukraine is still at that stage.

            True public support this time around is just as skin deep. It is great to fly flags as though one is supporting a football team but that will rapidly dissipate in the face of true sacrifice that can be linked to the war.

            Reply
    2. David

      I replied on the main Links thread and I won’t repeat myself here: just to say that I think the western politico-media class is beginning to realise it has to stage an orderly retreat to a position where it will claim that its own firmness, mixed with good sense, has avoided World War 3 in Europe.

      Reply
        1. David

          I wish I knew. It’s possible, in the sense that it can be envisaged, and I think I can see how it would be done. If you take as your point of departure the massive over-estimation of initial Russian war aims, then the EU and the West are able to interpret any Russian victory which falls short of their own exaggerated assertions as a defeat. It would be spun as the brave Ukrainians, with support and encouragement from the West, foiling Putin’s dastardly plan to occupy half Europe. There are ready-made templates in atavistic memories of Nazi Germany and the Red Menace during the Cold War.

          The key, I think, will be to look very closely at what is said, and also what is not said. “Putin must not be allowed to win” is meaningless as an objective, unless you know, and accept, what the Russians would understand by winning. Otherwise, it just means “we mustn’t let the Russians do something we would regard as winning.” Conversely, it’s perfectly possible that the West would eventually accept an outcome which was what the Russians wanted, but not as bad as what the West had feared. Look for conditions which seem vaguer and softer and capable of more interpretations than those suggested before. Conversely, if the West starts setting deadlines and precise conditions, it’s time to start worrying and hide under the table.

          At the moment, the West is running on the Sunk Costs model: we’ve done all this, we can’t give up now. But if the Ukrainian forces in the East break soon (and it’s a bit like bankruptcy, slowly at first and then all at once) there will have to be a reckoning with reality. The only two possibilities then are direct intervention by western forces, which could mean the end of the world, or some kind of acceptance of the situation through gritted teeth, with western leaders publicly congratulating themselves and each other on how they have avoided the worst. The problem is that logically it should be the second, but logic hasn’t exactly been a feature of the western response so far.

          Reply
      1. Yves Smith Post author

        Alexander Mercouris sees no evidence of that and he reads the UK press attentively, along with Russian and Ukraine sources. He’s in fact pointed out the reverse over the past few (as in fresh) presentations in the last few days, that Kiev has given stand in place orders, that troops are not to give ground but are to keep fighting, no matter how untenable their position. They are also, per Ukrainian soldiers who have surrendered, given “Help is coming” messages that are false. Mercouris contends the Ukraine propaganda campaign, particularly the bogus claims of Ukraine victories and Russian troop/materiel losses, is directed not just at the West to keep support going but also at their own soldiers

        Reply
        1. Alyosha

          No doubt, but the flip side is that there are protests now against untrained troops (from west Ukraine and transcarpathia) being sent to the front. And in some cases the troops themselves. I make it a point to check in Ukrainian telegram channels and the propaganda hasn’t cratered but it’s not as fervent and hopeful as it was. The Azov guys are currently running a letter writing campaign for submission to the UN.

          Only hints so far, but there’s even some chatter about being hung out to dry by NATO. When you’re reduced to pushing memes about Biden signing a lend-lease bill it’s getting bad. IMO, if the west wants some sort of declared success here we’ll need to get to it soon. Cracks in the eastern front are starting to show. I’m not predicting the beginning of a rout, but we are approaching that possibility.

          Reply
    3. GM

      A few things to note:

      1. If the Russians are really serious about the operation, there can be no Ukraine left at the end of it. It seemed doubtful they were going to actually invade prior to it, because it didn’t look like they were actually gearing up for that (you need a much larger force) and it didn’t seem like they were feeling strong enough for it yet. As a long term necessity that had been identified pretty much since the moment the USSR broke, certainly after the 2004-05 Orange Revolution, and beyond any doubt after the events of 2013-14. Russia wasn’t strong enough to take that task on back then, and it didn’t seem strong enough in January either. But once it invaded, then the calculus changed completely — they have to finish what they have started, and that means end of Ukrainian statehood and the gradual erasure of Ukrainian identity so that Ukraine can never be a Western tool again. We’re not discussing whether this is right or wrong, it’s just the cold hard geopolitical logic — the Russians lost a huge amount of strategic depth with Ukraine breaking off the USSR, and they cannot afford to have such a huge chunk of what they see as belonging to the Russian ethnicity (again, it doesn’t matter whether that is correct, but that they see it that way) not just torn off it, but pitted militantly against them. And any end of the war that leaves an independent Ukraine means an even more militantly anti-Russian Ukraine, which will be a huge problem to deal with after that.

      2. It did, however, look like the initial objective was merely the Donbass plus regime change in the rest (you don’t set out to conquer that much territory with so few soldiers; they do know that in Russia). But then after the Western reaction, the objectives appear to have changed. Although that still doesn’t make much sense to me — it should have been obvious that mere regime change is not a stable solution. Anyway, now the minimum, even if Ukraine somehow remains independent in some form, will be a landlocked rump state that has lost its most productive agricultural lands, much of its industry and its access to sea. It’s hard to see how it will recover from that to a state of prosperity.

      3. Perhaps the most important part. It is extremely naive and stupid on the part of any Ukrainian who sincerely held such beliefs to think that joining the EU would somehow improve their lives. We have a lot of long-term such experiments in Eastern Europe. The only countries that are somewhat objectively better off now than they were prior to 1989 are the ones immediately adjacent to the old EU — Poland, Czechia, Hungary, Slovenia, you can add Estonia too, and perhaps Slovakia (with some caveats). Everyone else has regressed by the metrics that matter the most, which assess actual human development, rather than the numbers on screens and in spreadsheets that are GDP figures.

      Because what happened was that under communism those places had highly developed industry and the high levels of education and human development necessary for it. Sure, it needed investment into modernization, but the most important thing is that it was there, together with the high-quality manpower to staff it. Eastern Europe could have been what East Asia is now.

      But what happened in practice is that first, in the 90s much of that industry was destroyed and the first wave of emigration happened, then those countries joined the EU, and the price for that was the destruction of whatever remained of their industrial base and an acceleration of the brain drain (made much easier by free movement of labor).

      The result is depopulation on unprecedented scale, destruction of educational and scientific infrastructure, deindustrialization that makes the US Rust Belt look like heaven on Earth, and a descent into a neoliberal hellhole state about the realization in practice of which even the most rabid followers of Ayn Rand and Milton Friedman could not have even dreamed of.

      Countries like Latvia and Bulgaria have lost a third of their population, and that was the most vitally important part of it, the young and educated.

      Countries like Poland and Czechia did better because they were already much more developed even before communism, and because, most importantly, it wasn’t in anyone’s interest to have the same basket cases that the more peripheral countries are currently sitting right in the middle of Europe. Thus there was outsourcing of both component manufacturing and assembly of finished goods to them. The periphery, on the other hand, now only makes some components, and is mostly a resource appendage and a captive market, and also pays regular tribute (much of the private tax collection mechanisms — supermarket chains, banks, utilities, etc. — have been privatized and are in Western hands).

      That has been happening for two decades now inside the EU, and these are objective facts for everyone to see.

      So why would any sane person in Ukraine think that it is in their interest to join the EU?

      Ukraine had a lot of both heavy industry and advanced industry in Soviet times, whatever is left of the latter will be completely destroyed in the process of joining the EU, and the country will become a resource appendage — steel and coal production and agricultural goods, and that’s it.

      It would have been much better for them to go the Belarus way. Belarus refused to relinquish state control over industry in the 1990s, and kept good relationships with Russia (leading to very large net subsidies flowing from Russia towards Belarus). As a result, while life there has never been opulently prosperous, they still make trucks, tractors, buses, and other kinds of heavy machinery (which they specialized in in Soviet times) and they still have markets for it. And it’s not really much worse than the Western alternatives. So Belarus has only lost 5% of its population, and little of that has been due to emigration, it’s just the natural result of the demographic transition and low fertility.

      Also, notice the virulent Russophobia that is spreading all over the West now. If I was an Ukrainian I would realize that my name is probably indistinguishable to a Westerner from that of a Russian, and that everyone in the West immediately jumping into such militantly Russophobic acts probably reveals the true Western attitude towards not just Russia, but the Slavic world as whole. In other words, nobody cares about the well being of Ukrainians, and once the “I support the current thing” phase is over, it will be back to cold hard geopolitics and economics. Under which considerations the West has no interest in a prosperous and strong Ukraine other than as a tool against Russia, which can be achieved without any serious non-military investment into the country. The age of building up Taiwan, South Korea, Japan and West Germany during the Cold War is long gone, what you get now for playing such a role is being the Baltics. You won’t even get to be Poland, because again, Poland is right next to Germany, but Ukraine is not.

      4. It will also be extremely hard to make Ukraine a nice place to live in because of the damage the last 30 years have done. Ukraine has legendary levels of corruption, similar to or even worse than those in Sub-Saharan Africa. Everything there happens through a bribe. The Russians will have a lot on their plate trying to fix that mess once the military phase is over, and it’s not like they don’t have a lot of corruption themselves. But it’s nowhere near the same level. It permeates everything in Ukraine.

      As an immediate example, it is not being talked about, but it’s highly likely that it is not the case that if only 20% of Western weapons make it to the frontline, the Russians have blown up the other 80% in transit. We don’t know the exact numbers, but the Russians probably blow up 40%, while the rest is currently making its way through the black market to various hot spots all over the world. Because that’s Ukraine we are talking about, and it is that much that the Ukrainians themselves are caring about the war.

      Now how do you build a prosperous country on that foundation?

      Reply
      1. Colonel Smithers

        Thank you and well said.

        With regard to # 4 and some of # 3, most of the “escorts” in the Persian Gulf, Turkey and Mauritius are Ukrainians, aka “Natashas”.

        Reply
      2. Objective Ace

        >So why would any sane person in Ukraine think that it is in their interest to join the EU?

        Just thought I’d point out that you earlier mentioned it was better for 1/3 the individuals of peripheral countries like Latvia and Bulgaria as they were able to immigrant and drastically improve their lots in life. I’d guess that a healthy fraction of those who remained were also pleased to see their children better off in life than they previously could have ever hoped.

        Reply
        1. Yves Smith Post author

          Unfortunately, many did. That was more or less the basis of the 2014 Maidan protests. This was a mere economic deal that would have opened Ukraine to EU goods. Russia objected because Russia had what amounted to a free trade agreement with Ukraine, and so Ukraine would become a gateway for European goods to go to Russia with no Russia to Europe reciprocity. Russia offered to negotiate a solution with Ukraine and the EU but the EU said no. So Russia said it would have to cancel its deal with Ukraine: “You as a sovereign country can do whatever you want to do but we don’t have to pay for it.”

          Yanukovich merely paused the approval process for the EU deal……

          Reply
      3. David

        I fear you may be right on the first point. Massive western escalation, which I don’t think the Russians quite expected, since it ultimately isn’t in the West’s interest, may force them to go well beyond where they originally intended to be, for the reasons you give. Back in February, I had started to think (and even said here) that a plausible objective would be to smash Ukraine as a country. That would mean occupying the Donbas and the coast, destroying the Ukrainian military completely, and concentrating on making the rump state collapse. It would be possible to train and equip quite sizeable local forces in notionally independent states to sit on the new frontier and look menacing, while making it clear that any attempted remilitarisation of the remains of Ukraine would be violently prevented. With no access to the sea and very limited capacity to export, the country could quite quickly become uninhabitable, especially for anyone with education and money. Those people would leave, and what remained would resemble a failed state, something like a larger Bosnia, but absolutely dominated by its neighbour. This would avoid the need for an actual occupation, for which there isn’t the military capability, nor probably the will, by effectively taking away the need to occupy the remains of the country at all.

        Reply
        1. PlutoniumKun

          Given reports of discontent and potential mutiny among Ukrainian regular troops I’ve been wondering about the possibility of the country completely falling apart if the army collapses in the east, the government finds it can’t pay the army/police and the far right decide that Zelensky has outlived his usefulness (could they resist the possibility of having their own little statelet?).

          I have no great insight into the internal forces that bind Ukraine together, but I wonder if we could see a complete disintegration, especially if Hungary and Poland look to intervene to shore up their ethnolinguistic cousins. The EU might find it has Somalia on its doorstep. A Somalia with militias armed with Javelins and Stingers.

          Reply
          1. David

            Yes, I was starting to wonder the same thing. In all such countries, there are at least as many reasons to split apart as to stay together, and I think a civil war, or even just a disintegration of the country into warlord fiefdoms, is actually quite possible. It wouldn’t even have to be on a narrowly ethnic basis either, just local affinity groupings deciding to control a particular area. Something like that happened in Bosnia during the war, when most of the country was divided into criminal-military-ethnic states that were as much protection rackets as anything else. If I were the Russians, that’s exactly what I would be trying to encourage. After all, Zelensky, and a central government are only of value as long as there is a political settlement in view, and a government is needed to implement it. If the Russians think that won’t happen, then they might simply destroy the central government apparatus and let the country fall apart.

            Reply
            1. Greg

              At the moment, the central government is the source of free money and weapons that can be converted into money if desired.
              So long as Kyiv keeps distributing the loot sufficiently widely, and there is the promise of more to come ($33bn!), they should be able to keep the various factions in line.

              Of course, if a faction negotiates direct access to western “aid”, then they might feel less inclined to keep Kyiv around.

              Reply
          2. Alyosha

            Same. Hard to verify but the reports that the Ukrainian side won’t pick up bodies and that Ukrainian families are surfing Russian telegram channels hoping not to see their loved one’s passport is disturbing. The fourth mobilization has to be the bottom of the barrel and it doesn’t seem like the average Ukrainian is jumping for a chance to go to the front.

            But man does a real collapse of Ukraine hold a whole lot of negative potential. If the west was smart it would be trying to avoid that. Instead it’s trying to get Ukrainian grain stocks into Europe so Ukraine will go hungry this year.

            Reply
      4. PlutoniumKun

        My assumption has always been that some means to stop Ukraine joining the EU would be found if Brussels was put on the spot (‘We’d love to have you but we’ve found this legal problem…’). All it would take would be some small country persuaded to veto it. But…. I’ve given up assuming that there is anyone sensible in charge anymore.

        As the accession of the East European countries to Europe has shown clearly, free trade only works as we are told it works among countries of roughly equal economic status. EU membership has only been a clear success for those relatively advanced former east European countries such as the Czech Republic. Its been a mixed bag elsewhere (depending on your interpretation of the figures). That said, the EU is still pretty popular in most East European countries, except arguably Hungary.

        That said, I don’t think membership of the EU matters so much for whatever is left of Ukraine after all this. The EU will be left with the problem in its lap, whether its a member or not. It will find it very hard to put new border controls back in place to stop the flood of people.

        Reply
        1. MILLER

          We shouldn’t forget that even the successes of the post-1989 East European states have been cemented by hundreds of billions of euros out of Union donations, i.e. the equalization funds. I’ll bet the Ukrainian elites would be happy to get their hands on that kind of funding.

          Reply
          1. Polar Socialist

            How much can want? I believe EU has already dumped almost 20 billion into Ukraine. Before the war.

            Reply
      5. KerSer

        Regarding 3, I think you’re missing the point: the prospect of emigration to some richer western European country is, in my opinion, the major motivating factor among those wishing to join the EU. As such the high numbers in support of joining the EU should probably be interpreted as a lack of hope in the ability of collective action, at the nation-state level, to improve their lives, and a retreat towards individual solutions to their problems.

        Reply
        1. IsabelPS

          Exactly. One of the main attractives of the EU for ordinary people is freedom of movement of persons (which includes the right to work).

          Reply
  3. Colonel Smithers

    “I suspect Russia can survive without the tender ministrations of the Big Four and McKinsey.” Oh, Yves. You are a rogue! Having worked at Barclays and Deutsche, carcasses feasted upon by these consultants, and now at another feeding frenzy, but with a different, but no less unscrupulous, parcel of rogues, I can assure you that Russian firms will survive as long as they keep these parasites away.

    Joking apart, I worked with Russian oil and gas, railway and banking firms from 1999 – 6 at HSBC. An executive at TNK BP advised that his firm in particular, but Russian firms in general, wanted to learn from western peers / industry leaders, hence these strategic joint ventures, but would cut loose at some point. He explained how they had objectives benchmarked against what BP became and how it did so. That point may have arrived prematurely, but two decades of working with western firms may be enough by now.

    It will be interesting to read what Vlade has to say as he has some insider insights.

    Reply
  4. Thuto

    Incompetence and power make strange bedfellows in the west, what with the political elites waging a full scale war against living standards and calling it being tough on Putin. I can’t help but think, given the dismal failure to economically blast Russia into the dark ages (as predicted with such glee by the “expert/analyst” class two months ago), that this throwing of sanctions spaghetti at the wall to see what sticks is aimed at domestic consumption, tough posturing is after all a time honoured tradition in western politics. In other news, the G7 leaders just announced that they “won’t allow Russia to win in Ukraine” so the armchair crystal ball gazer in me sees:

    1. More weapons pumped into Ukraine,

    2. Desperate scrambling to invert the curve of diminishing returns vis a vis effectiveness of sanctions, which means more comical sanctions packages on the way.

    3. A chronic, deteriorating economic situation

    4. Finally, western political heads rolling in the next six to eighteen months (unlikely, but hope springs eternal).

    Surely there’s only so much erosion of living standards people (even the terminally brainwashed) can take before taking to the streets and demanding course correction.

    Reply
    1. Colonel Smithers

      Thank you, Thuto.

      It’s not just the erosion in living standards.

      Let’s take my home county of Buckinghamshire, a Tory one party state since the (Liberal) Rothschilds left politics (and their bastion) in the 1920s and possibly the most corrupt local authority in these islands.

      Poverty, homelessness, the 400% increase in children being taken into care over the past decade, knife crime, Brexit (which affects the film industry around Pinewood, the motor racing industry around Silverstone and the financial institutions around Milton Keynes) and crumbling infrastructure does not bother the Brexiteer council. Ukraine has given these family bloggers the occasion to grandstand, so they are.

      Forty years after the Falklands task force, Buckinghamshire has set up a Ukraine task force, with Ukrainian flags on municipal buildings (and some bunting on Anglican (“Tory party at prayer”) church railings) and daily briefings to BBC local news. Local authority staff have been told to drop everything and work on resettlement only, including liaising with the Home Office for visas.

      Last month, 300 Ukrainian school children arrived, were found highly sought after school places and given every assistance, including free public transport and mobile phones and a dedicated social worker. The families have been found accommodation in villages in the beautiful Chiltern hills. Last week, it was announced that the newcomers will be fast tracked onto training courses and not have to pay.

      No one bears the refugees ill will. Locals are not saying anything in public. I can’t imagine that this silence is sustainable, though.

      Reply
      1. The Rev Kev

        Well, not until those Ukrainians tell the locals that they should be doing more for them as they haven’t done enough yet.

        Reply
        1. Colonel Smithers

          Thank you, Rev.

          The refos aren’t yet, but the council e-mails from time to time and asks the locals to do whatever they can if they can’t host a family.

          As I am a middle aged bloke and not attached, I was thinking of, er, um, “hosting” a Ukrainian glamazon…

          Reply
          1. BillC

            Oh Colonel, Sir, I have for years enjoyed your international business and life experience, insider knowledge, succinct but informative posts, and droll humor, but you’ve really outdone yourself this time: “hosting a glamazon” indeed! In company like this, I hardly dare to post (excepting the occasional humble expression of gratitude for NC’s exceptional hosts and commentariat).

            Reply
            1. Colonel Smithers

              Thank you, Bill.

              I am sorry to say that, if you read the British press, some ne’er do wells have beaten me to it.

              Reply
          2. The Rev Kev

            Hmmm. I can imagine how that meeting of a glamazon would start-

            ‘Good evening, Colonel. How much did you say your name was worth again?’

            Reply
        2. tegnost

          just wait until they register to vote and pull the lever for republicans, then the dems can say it’s proof they need to move more to the right…

          Reply
        3. JohnA

          And maybe start defacing war monuments and gravestones with swastikas and similar, as is happening in the Netherlands.

          Reply
      2. Michaelmas

        Colonel S: I can’t imagine that this silence is sustainable, though.

        It isn’t and won’t be.

        [1] For whatever the COVID vaccines are worth, at 35.7 percent of the population, Ukrainians are the least vaccinated population in Europe.
        https://graphics.reuters.com/world-coronavirus-tracker-and-maps/countries-and-territories/ukraine/
        https://www.eurozine.com/the-least-vaccinated-in-europe-war-torn-ukraine-is-hit-hard-by-covid/

        In the Russian media, glee is now being expressed at the idea of 5-10 million Ukrainian refugees carrying their infections into the EU.

        [2] Alongside that, anybody who’s had semi-close encounters with Russian mafias in the West more often than not learns they are in fact Ukrainian mafias.

        One shouldn’t be prejudiced against a whole people on the basis of something that happened eighty years ago, especially when those people are indeed suffering. But the fact that my mother’s people were in part Jews from Odessa who ended up in Cape Town and recent reports from colleagues who’ve had to go through Ukraine on business prevent me from buying into the view of the Ukrainians as saintly martyrs for democracy that’s currently being retailed by the West’s media.

        Reply
        1. Balakirev

          [2] Alongside that, anybody who’s had semi-close encounters with Russian mafias in the West more often than not learns they are in fact Ukrainian mafias.

          Just a bit of anecdotal support for this. Back in the 1980s, my cousin moved to a gentrified area of Manhattan’s Garment District. (Ironically, back in the 1920s her father, my uncle, had worked there, and taken part in numerous strikes.) She told us that the cops never came there. Protection was managed, supposedly very well, by the Ukrainian Mafia.

          Reply
      3. Thuto

        Thank you CS.

        I’ve noticed recently when watching EPL games that the pitchside advertising boards are adorned with pleas for the locals to go above and beyond to accommodate the arriving Ukrainian refugees. I can only agree that a council with a history of being unresponsive to the needs of its local citizens suddenly springing into action to hop on the virtue signalling band wagon will surely rub a lot of people the wrong way, and is surely the topic of discussion around dinner tables in your county, but of course the politicians, in their arrogance, think the public is easily hoodwinked in such matters. As regards the grandstanding, those in the soapbox and pulpit making business are making a killing because politicians of every stripe, even the ones previously withering away in obscurity, are out in numbers to preach condemnation Russia and their solidarity with the people of Ukraine. The official opposition party leader here in SA is in on it as well, having just come back from a “fact finding” mission to Ukraine, and promptly mounting his soapbox to give a rousing speech lambasting the government for its neutrality (while making liberal use of US state department soundbites and slogans like “Ukraine is fighting for the free world, SA needs to be on the right side of history blahblahblah).

        Reply
        1. Colonel Smithers

          Thank you, Thuto.

          On our High Street, Main Street in the US, a homeless man has set up a tent in the entrance of a disused municipal building. He has a piece of card board with the words “am I not human” written next to his tent. No one cares about his plight or that of the other dozen homeless people nearby apart from the local Pakistani community, which provides them with meals and, during Ramadan, shelter in the mosque.

          Reply
          1. Synoia

            Once upon a time, through the 1950 to the 1980s, there were either a tiny very number of such “Tramps.”

            Then Came a thatcher and many became vagabonds, and tramps. The Homeless.

            Reply
    2. jsn

      Neoliberalism has closed all avenues of ground-up change. This closure is being contested by union organizers, but so far no one else.

      Deflation would dramatically turf lots of capable people onto the streets all at once. Monetary authorities understand this and have done and will do what’s needed to prevent it. Inflation, on the other hand smears out the damage and keeps everyone who’s still employed solvent until everyone starts running out of food, beginning with the poor and working its way up the income distribution until, when?

      Probably until some spook somewhere deep in the Blob puts together that you can’t have a police state without anything but police. At that point all those right wing trained cops get drawn into a right wing narrative of national renewal and, while the unions get crushed, the new spook in chief starts standing up to Oligarchs, forcing them to share enough income to stabilize and keep the whole rickety ship afloat. It all sounds vaguely familiar…

      Reply
      1. Thuto

        Having listened to Andy Jassy’s interview on unionized labour at Amazon, it’s clear the forces arrayed against union organizers are formidable. For the rest of the social brigade clamouring to drive change from the ground up, imposing learned helplessness is neoliberalism’s answer to that irritant.

        Reply
    3. JohnA

      G7 leaders just announced that they “won’t allow Russia to win in Ukraine”

      Well as Ukraine cannot possibly win, this can ultimately only mean the G7 are going to have to officially join the fight and put boots on the ground. While at the same time Russia will cut off all oil, gas and other exports the west is desperately in need of. Not sure what will then be worse for the west. The casualty rate in the war, or the anguish of collapsing economies.

      Reply
    4. David

      It’s easy enough to stop Russia “winning” in Ukraine; so long as you are able to impose your interpretation of what winning means. It’s already fairly clear that anything short of occupation of Kiev and advance to the Polish frontier will be hailed as a “defeat” for the Russians. The EU, having gone out on such a limb, cannot easily crawl back, so reality will have to be massaged to suit the discourse, which was decided in advance to be that of a Russian defeat. That’s the label, it just remains to stick it on whatever the situation is at the end of the day.

      Reply
      1. Polar Socialist

        At this point the cynic in me assumes that even if there was a sudden wave of pan-slavism making all the slavic countries join Russia while EU and NATO were completely dismantled and left without energy or food, if would still be presented as a total Russian defeat.

        Reply
      2. Yves Smith Post author

        Russia never said it would conquer Ukraine, and its formulation of a “special military operation” was designed to convey the message that the aim was not territorial conquest but “demilitarization and denazification” and assurances of neutrality. Ukraine conceded most of that at the end of March in Istanbul and then the West made them walk it back.

        Reply
        1. David

          Yes, we know that, but most of the western population doesn’t, and that’s what counts. Quite well informed and educated people have suggested to me that « Putin wants to conquer Europe. » It’s about narrative control, and that’s something western governments have been quite good at.

          Reply
    5. ChrisPacific

      More likely than #4 would be a redefinition of ‘victory’ such that they can claim whatever situation they end up with represents a defeat for Russia. (Although it’s possible we could see both).

      Reply
  5. lyman alpha blob

    “Putin’s yacht” is the new “#2 ranked Al Qaeda figure” (since the US can’t tout the latter any more now that they’re BFFs again) . Exactly how many times is the US going to capture that thing?

    Reply
  6. Colonel Smithers

    Thank you, Yves.

    You mention UniCredit. Its exposure to Russia is also by way of Bank Austria, once known as Credit Anstalt, a name that may resonate with readers who know their history. French banks are also exposed by way of Italy, e.g. BNP Paribas’ BNL and Credit Agricole.

    Although the Basel III accords limited interbank exposures, they are still big and can cause contagion, if only based on misunderstanding.

    https://www.reuters.com/markets/stocks/which-banks-europe-are-exposed-russia-2022-02-28/ details some of the material exposures. If I can find something more recent, perhaps from Basel or around the corner on Threadneedle Street, I will share.

    As David pointed out recently, encouraging a bank run or arranging an outage of power distribution networks can soon bring the war close to home.

    One wonders what NC’s banking community, Clive, Harry and Vlade make of this?

    In addition, what does former British official David make of Russia’s patient approach to countering western measures? I fear that this approach, plus not taking or flattening Kiev, can be mistaken for weakness and encourage western recklessness and spinning that Ukraine is winning (or no longer losing). Let’s take the UK government for instance. The likes of Johnson (and his daughter Lara Lettice, his sister Rachel and sister in law Amelia Gentleman, at the Grauniad) and Gove made their careers in the media. Spinning is what they do and the only thing that they know and counts. Anything can be spun.

    Reply
    1. David

      Well, Colonel, since you ask, I’ll make a very amateur stab at a suggested answer. Apologies in advance to any philosophers who might be listening.

      In the West, we have a mainly Idealist culture. That’s to say, vaguely following Hegel, it’s the realm of ideas that really matters. We believe that ideas and symbolic acts are significant in themselves, and can actually change reality. You can be whatever you want to be. Anything is possible if you want it enough. Boys can be girls and girls can be boys just by speech acts. That kind of thing. And when enough people buy into a particular idea (that someone’s career is “over” for example, or that some argument has been “won”) then, indeed, it becomes a reality of a sort. Add to that post-modernism and the influence of virtual worlds and the internet, and it’s quite possible to see, for example, pointless sanctions as actually very significant. For a start, they’re a normatively good idea (‘”doing something”, “punishing the guilty” etc) even if they have little practical effect, and, if we all join hands and say we believe, then our belief becomes reality. Much modern politics is conducted on that basis in the West.

      But Marx, of course, inverted Hegel. What matters is not ideas, but the underlying economic and power basis of reality. Ideas are just froth on the top. I’d be surprised if this kind of Materialist thinking doesn’t still have a strong foothold in Russia, and I suspect that many decision-makers in Moscow, if confronted with this such ideas for retaliation, would ask, what’s the point? What does it change? Soviet strategic doctrine used to place a lot of emphasis on deception at the strategic level, but not very much, as I recall, on propaganda as such. There was plenty of that during the Cold War, but it wasn’t very good, and was largely aimed at captive or well-disposed audiences. I don’t think they’d hesitate to resort to economic warfare if they thought it was necessary, but for the moment I have the impression that the only thing that matters is the reality on the ground. And the Soviet tradition of military planning places a huge emphasis on the End State- where you eventually want to be, rather than what happens along the way. Economic warfare (and propaganda for that matter) are only going to be used if they directly help to bring about the End-State.
      I’m sure others will want to comment.

      Reply
      1. Colonel Smithers

        Many thanks, David.

        @ Yves: David’s kind reply to my question ought to be hoisted as a post in its own right. Same with the comment about influencers and academia.

        Reply
      2. Yves Smith Post author

        I’m now reading the Oliver Stone interviews of Putin in 2015-2017. A bit of confirmation. I’ll have to see if I can find what Stone question/remark triggered it, but Putin said he was not a man of ideas but of circumstances.

        Reply
  7. tom67

    Re: “And even though Germany thought it had enough gas to last through the winter due to stockpiling, it’s now taken to sending some supplies to neighbors like Poland.”
    In fact, Germany hasn´t near enough stockpiled to last thru winter. Here a link to the present state of storage facilities: https://de.statista.com/statistik/daten/studie/1294810/umfrage/fuellstand-der-gasspeicher-in-deutschland-auf-tagesbasis/
    Should the gas supply from Russia stop now there´s no LNG in the world that an make up for it. It would be an unimaginable catastrophe. Germany´s chemical industry, it´s glas industry and even its bakeries run on gas half of which comes from Russia.

    Reply
    1. Yves Smith Post author

      Apologies, the perils of AM drafting. You are absolutely correct and the worst is I knew better. They have enough to get (maybe) TO winter, not THROUGH winter. I will fix the post.

      Reply
    2. Science Officer Smirnoff

      per der Spiegel a Gazprom controlled entity (if memory serves), recently seized by Germany, has left the country with unusually short gas in storage at this time of year. Very convenient!

      Reply
  8. The Rev Kev

    There is something ominous about Russian legal documents like this. I read it as laying down the legal framework for what the Russians are going to do next and I can guarantee you, it won’t be pretty. It was not long ago that after the west stole some $300 billion, that the Russians said ‘Hey, you guys. You know how you go out and buy US dollars to buy oil and the like? Well from now on you can do the same but buy Rubles instead to buy our gas.’ It took a while for the penny to drop and realize that not only had the Russians done a ju-jitzu move to void the sanctions but at the same time to create the PetroRuble. Worse came when it was realized that the Russians will progressively do this for all commodities. And this one move is still playing out. Well this is going to be on an equal level. Probably worse. A few weeks ago I would have thought that Russia would not deliberately target Italy as they have had good relations but the present government has blown this relationship up. In any case, you can be sure that there is a group of bright young men and women at the Central Bank working out all the vulnerable points in western banking as targets to hit. Maybe Deutsche Bank would be a likely target for them. I guess that this is one boot that we will have to wait to hear fall.

    Reply
    1. Colonel Smithers

      Thank you, Rev.

      In addition to DB, which enables Russia to target central and eastern Europe, the Baltic states and Scandinavia, too, I would target Italian, French and Austrian banks, watch the feedback loops and enjoy the popcorn, having gone long popcorn.

      The favourite to be the next CEO of DB, Stefan Hoops, voiced such fears soon after his appointment as head of corporate banking and has long wanted out of the US and a rapprochement with Asia.

      Central banks are not in favour of many of these measures, as they fear retaliation, contagion, recession etc. but are ignored.

      Reply
  9. Susan the other

    Why are both sides tippy-toeing around the obvious? I have no clear idea, but it all looks like the beginning of peak oil panic. Russian sanctions didn’t mention the real threat building in Ukraine which is, of course, Western need for oil and the (ongoing) buildup of a massive weapons depot in Ukraine to be used against Russia. The real reason Russia didn’t make Donbass part of Russia in 2014 was probably to buy time and create a buffer. They took Crimea back without much rationalization – because it was critical to their military as their only warm water port – which was never even mentioned. Only the blabber about ethnic ties. With these new “sanctions” by Russia, cutting off oil to the EU (obviously), they are playing hardball. But who is goading whom? “If you want it that bad, come and take it.”

    Reply
    1. Jacob Hatch

      Russia will continue to play softball for a very simple reason, they have to offer an attractive alternative to the USA and EU to the rest of BRICKS, Islamic Nations, Africa and Southwest Asia and Southeast Asia. They can do this by proving to be far more trustworthy and predictable that the capricious USA and EU. They also need to offer balanced trade or payment in Euros or other easily traded currency and hence are trying not to start a scorched earth war. Autarchy is not in Russia’s best interest if it wants partners. Destroying an important Market for China, India, and SE Asia in the EU won’t gain bonus points. If the USD becomes less attractive, they still need a functioning Euro for where the Ruble won’t work.

      Therefore, any sanctions they deploy will have to be seen through that lens, ie: they will never break a contract, will do their best to keep a contract functioning even in the face of the most onerous sanctions, and any countersanctions they do will be tightly targeted and seen as fully justified.

      Reply
      1. Paul Damascene

        Important points:
        Not sure if Russia retains any medium-term ambitions to peel away Germany or any other Western countries, but the primary external audiences for Russia’s moves are outside the West.

        Whatever the new multipolar order emerges to be in its details, it will require trust, due process, respect for contracts & property.

        Russia seems committed to acting within what it can argue is legally justifiable–the West will never recognize this, but views of BRICS, SCO, EUAU, China, India, Gulf States matter.

        That said, if Russia wants to freeze West out of its other exports–titanium, nickel, etc.–it’s currently easy to devise contract “adjustments” that the West will refuse to comply with, and thus see itself cut off from. Ruble or gold payments, for example.

        Reply
  10. Carolinian

    Petty? Who, us(a)?

    My library does still have some Russian movies. I wonder how long before they are deemed inappropriate for the “Safe Space” sticker next to the entrance. Tolstoy’s anti-France propaganda novel War and Peace may have to go as well.

    Reply
    1. Alex Cox

      Russianfilmhub.com is still up and running. It features an outstanding collection of Russian films, ancient and modern. It’s run by an American in New York. I recommend Heart of a Dog, The Brest Fortress, plus of course Solaris and Idi y Smotri/Come and See (perhaps the greatest anti-war film of them all).

      Reply
      1. Carolinian

        The Cranes Are Flying is a terrific movie with an antiwar theme. Out on Criterion.

        Larry Johnson has a column today on how little appreciation Americans have of the trauma that was the Great Patriotic War. We can be terribly smug in our ignorance.

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        1. juno mas

          Yes, the Russians lost 27M people, the USA just over a quarter million. The Russians fought the German A-Team, the US the B-Team. The US may have won the “Victory at Sea” but did not win WWII.

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            1. Polar Socialist

              You mean the one that ended when the Red Army destroyed the million plus strong Japanese Kwantung Army in 10 days?

              Just kidding, just kidding.

              Reply
  11. KD

    The Ukrainians have made a serious advance in Donetsk Oblast, and while I am in no position to assess the relative balance of forces there, or determine if it is a feint intended to slow down Russian progress in Luhansk, or if it marks a serious push to maybe liberate Mariupol. Success or failure for the Ukrainians would modify the assessment of the war. If the Ukrainian advance just ends up getting shredded then it would appear that they are out of gas. On the other hand, success would represent a serious setback for the Russians.

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    1. Yves Smith Post author

      Please provide support, as in links. I have seen zero of the sort on any of the accounts/presentations I follow that give frequent commentary on military progress (8 in total; this excludes Patrick Lancaster who is useful for local feel but is not able to give any sort of bigger view). If this is from the Western press, it repeats Ukraine PR which has proven again and again to be totally false or at best considerably exaggerated. More specifically, the press has been discussing an campaign to retake Mariupol for some time when it has yet to materialize.

      These sources consistently say Russia is pulling troops out of Mariupol save a small crew around the Azovstal steel factory and is relocating them north. The Russians have control of the skies as well as satellites. They would not be moving troops away if an assault were underway.

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      1. KD

        Defense Politics Asia:

        https://www.youtube.com/watch?v=KESKyQdGrbs

        See 17:10 for Ukrainian breakthrough in Donetsk.

        You know as well as I do that the information quality on this war sucks, but DPA tries to get it right. Part of the data is Russian reports of shelling in areas previously held by Russian forces, which they might do but wouldn’t report if they still held it.

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          1. Yves Smith Post author

            If DPA thinks UAWire is a good source, that proves they can’t be trusted on Ukraine. MediaBias/FactCheck dings UAWire for poor sourcing, lack of publisher information, and bias, including notable use of emotionally-laden language.

            More generally, Ukraine has been pushing so many fake stories that anyone who picks them up ought to be embarrassed, yet the media relies on the next shiny news object to distract the public. How about the Snake Island fake defiance, the ghost ship, the claim that the captain of the Moskva died, the claim that Ukraine killed 12 Russian generals, trying to claim the Kramatorsk shelling was Russia’s doing…there’s lots more where that came from. Scott Ritter says 100% of what is coming from Ukraine about the war is false. I discount that to 95%.

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        1. Yves Smith Post author

          Please Look a map. Donetsk is not Mariupol.

          And Ukraine has been making some pinprick attacks. The Russians make tactical retreats. Donbass is more or less an extended suburb, with 2-3km gaps between small towns.

          I have not seen a single site other than that one treat this as meaningful. By contrast, the loss of Popasnaya, near Lugansk, is a very big deal. It’s a linchpin for taking control of a major highway and connecting the forces in the south with the push from the Russian border through the area around Izyum. If they haven’t mentioned that, you need to question their bona fides.

          I also see their tweets depicting Russia as desperate with respect to Snake Island. That’s simply false, so I can’t trust what they say otherwise. And they are not transparent about their funding or staffing, which is also not a good sign. They claim they are community funded but that does not rule out having institutional backing (as in what is “community” exactly?).

          Reply
          1. kriptid

            As the person who first posted the link to DPA’s streams on these boards, I want to step in to defend them a bit here.

            The guy doing these is a one-man operation based in Singapore. If you listen to the streams and follow his website, it’s obvious that this is just some guy who started a YouTube channel in the middle of last year and has happened to explode in popularity (but not really, he still only has 20k subs on YouTube — I started following him when he was at 5K roughly a month ago) because of his incredibly unbiased reports of facts. He amalgamates info from both Russian and Ukrainian sources and does an excellent job of noting when claims are being made by one side and not the other. He crowdsources info from the comments and does a superb job of correcting himself in the next daily stream if he gets something wrong.

            The host of DPA made it clear when he noted the so-called ‘advances’ of Ukraine in the Donetsk Oblast in the direction of Mariupol that this was based on Ukrainian sources only and that his degree of confidence in this was not high.

            He’s been following the situation in Popasna for weeks and noted many of the things the Saker did in their latest Sitrep long ago in regards to its strategic significance.

            As regards to the statements on Snake Island, he made it clear in his YouTube update (don’t follow his Twitter, so can’t speak to that) that he believed the Ukrainian side was clearly spinning their failure in Snake Island. His analysis on this point was excellent, even better than the Saker’s report, in which they failed to note that the place where the purported helicopter explosion happened was on the isolated section of the island, far away from the lone helipad. He speculated that this was good evidence that it was a Ukrainian helicopter that was caught on video because why would the Russians not land on the helipad if they control the island?

            He’s also been extremely vocal, in nearly every video, that the Ukrainian official statements are wholly unreliable. He’s always extremely cautious when changing map boundaries based solely on their info and has had to redraw the map multiple times to correct for errors.

            All this is to say, I think there’s zero evidence to support the idea that this person is anything other than an independent YouTuber whose views on the conflict and its associated propaganda align with the majority of the posters here. And he’s far better at portraying a neutral tone than the Alexander Mercouris’ and Gonzalo Lira’s of the world; although I agree with much of their commentary, it’s clear after listening to them for a few weeks that they have a deep subliminal bias towards Russia. DPA does not.

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            1. Yves Smith Post author

              We have never cited Lira as a source for reporting on the ground, evah. He has no advantage. Saker has an agenda but his sitreps by Nightvision are good. I am chiding out Lambert for linking to the one you mention on Snake Island, which was not by Nightvision. It was clearly inferior to Nightvision’s, both in documentation/detail and in insight. I am very cautious re the Saker precisely because he’s a cheerleader, and I linked to a couple of Nightvision sitreps only because they were better than anything else on those days re granularity and were well substantiated.

              Mercouris makes a point of consulting Ukraine and Russian sources, and he is fluent enough in Russian to read/listen to original sources. He also is pretty transparent about why he prefers one interpretation to another. So to the extent you can accuse him of bias, he wears it on his chest, unlike other commentators.

              As to the helicopter, after apparently a great deal of social media debate, I understand it was established that the helicopter was Ukrainian.

              As for using an odd spot on the island, recall one thesis that the defeat of the Ukie forces was so bad that this could have been a Russian trap. Therefore they might have stayed away from their facilities to better lure the Ukies in.

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              1. Greg

                If you didn’t see the comments on the most recent sitrep, Nightvision is awol and the mods have had no contact.
                Hence the change in authorship, seems like maybe the end of nightvision sitreps.

                Feels like we started out with terrible information and it’s just got worse as the conflict progresses.

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          2. KD

            Looking at a map, Vugledar is due North of Mariupol, and part of Donetsk Oblast. Looking at my conditional assessment, if the Ukrainian army were to push due South and rout the Russians, they would end up in Mariupol, which would be a serious setback for the Russians.

            Further, the Russians are putting serious pressure on the Lugansk Oblast, it makes logical sense that the Ukrainians make a drive and put counter-pressure on the flanks in Kharkiv and west of Donetsk, to try and divert Russian forces away or to tie up Russian forces so they couldn’t support the advance. Granted, the Ukrainian strategy so far seems to be about PR stunts, but its possible they might do something intelligent on accident.

            BTW, nobody can be trusted with news of Ukraine. Too close, too many spooks involved, too high stakes, too much bias.

            Reply
            1. Yves Smith Post author

              You originally said an attack was underway on Mariupol. Please don’t continue to pretend that you have not shifted ground, which is bad faith argumentation.

              I don’t know where you get these ideas from. Ukraine is virtually out gas; there’s very severe rationing at retail. Its troops in Donbass are running out of ammo. They can’t be resupplied. Russia is destroying weapons as they come in, and has taken out the electrical train system by blowing up substations, leaving only a few diesel trains…when diesel is scarce. And they’ve taken out bridges over the Dnieper too. Some of the substations could conceivably be replaced from stocks, but there aren’t many, and it’s old custom equipment, and Russia can simply take out any replacements anyhow.

              And even if we could get bigger arms to the east, we are sending old and disparate weapons systems. The Javelins are a bust. Captured soldiers say they fire only 1 time out of four and even then often explode short of the target. Russia has been able to jam all the drones types we’ve sent so far. We are finally trying newer models but no evidence so far that they are working any better.

              Scott Ritter joked that the best propaganda Russia could have planted was to encourage the West to send a bunch of different weapons systems, it would assure Ukraine troops would be killed faster. He had a seven minute very colorful rant on this topic which YouTube is making impossible to find; here’s a shorter and more temperate statement of the same thesis: https://www.youtube.com/watch?v=5VU8EK_8QlI

              All that might get to the east, stress might, is small arms and they are no match for artillery and armored vehicles.

              Ukraine no longer has command and control. Its units are operating in isolation. Its troops are surrendering in the east, despite “fight in place” orders at roughly the rate of a battalion of manpower a day.

              The big reason it’s taking a while for Russia to prevail is that the Ukrainian forces have built sturdy and extensive bunkers in many parts of Donbass. So this at worst will be the Azovstal factory on a larger scale: starve them out. But the surrenders suggest the collapse is happening faster than that.

              Reply
  12. chuck roast

    Economic determinism gets a well deserved bad rap. BUT, (as Mercouris would say) it seems to me that the daily price of the dollar/ruble is a significant indicator of the general state of this most vicious economic war. The following is a reasonable approximation of the currency battle.

    Prior to the Russian invasion the ruble was trading in the 80-82/dollar range, and I believe that the Bank of Russia interest rate was around 10%. Post invasion, the rouble dropped precipitously to north of 120 roubles to the buck. Whereupon Nabiullina jacked the central bank interest rate to 20%. When the smoke began clearing the rouble’s value improved to around 100/dollar. Nabiullina dropped the internal interest rate to 17% and the rouble continued to gain value. By April it was trading around 85/dollar. Nabiullina dropped the rate again to 14% where it stands today.

    The strum und drang continues apace, BUT in the interim the rouble has settled into the 65-68/dollar range…a far better rate for the Russian people and economy than before the war. Let us not forget that the Plutocrat Boutique Bank raised it’s interest rate 0.5% last week driving world currencies lower…with the exception of the Russian rouble.

    Reply
    1. Jacob Hatch

      This is one of the more serious issues for the Russian Central Bank, the strengthening and instability of the Ruble. Currently it’s only practicable for state player to state player to trade in Ruble because they can ‘arrange’ exchange rates with their respective banking systems at the time of contract. Commerical businesses wanting to sell into or buy from Russia will find trading in Ruble high risk, particularly due to the lack of a regulated futures market at the commercial/retail level, In deed, extremely daunting. Because the Ruble trade is “relatively” thin and restricted in the number of market members, it will be a hell of a challenge for Elvera Nabiullina to keep the currency in a stable band while allowing easy access necessary to commercial trade. I can remember how difficult trade was with China, but at least the BOC was able to maintain a tight trading band for decades.

      Reply
  13. B1WHOIS

    Alexander Mercouris briefly discusses Putin’s victory Day speech in this 30 minute video.

    https://youtu.be/A689O_Q3eZc
    (For those who have been wondering like myself, Alexander has not been posting as much the last few days because of a cold that has affected his speaking voice.)

    * Apologies if this is a repeat of a previously posted comment (I checked before I posted but things could have changed before the comment cleared moderation 🙏)

    Reply
  14. Brick

    At this point in time there does not seem to be much evidence of sanctions having much impact on Russia. Early inflation seems to have been a result of consumer stock piling and the bank rate has been reduced. I did wonder whether the requirement for Russian business to sell 80 percent of foreign currency was propping up the Ruble but the timing suggests it had limited impact. The Russian Stock market ($750 billion capitalisation) falling over 30 percent and short selling being banned does not appear to have effected the Russian economy. Latest GDP report shows the Russian economy growing although the data might not be a true reflection of current conditions due to the limitations of the data collection.

    There are still open questions about how Russia gets electrical components and semi conductors without China’s help, but I am guessing some sort of back door arrangement will occur via a third party. There are also reports of difficulties getting medicines due to payment clearing problems which might cause a western government rethink. I am not sure what to make of the ramp up in loan repayment holidays reported by the Russian central banks Elvira Nabiullina who also suggests sanctions will not bite until later in the year.

    Whatever way you look at the sanctions on Russia they have not had an immediate success and the jury is still out on longer term impacts. My guess is there might be an investment squeeze which Russian Authorities will find difficult to fill without causing issues. This current set seems to be targeted at the rich and influential Russians who rather than ousting Putin are more likely to take a more hard line view of the west. It is all about appearing to do something for the popcorn watchers whilst slowly losing the war in Ukraine and will be storing up more problems for the future.

    Reply
    1. midget

      According to the Russians, the real kick in the teeth will be when spare parts run out and the other high-tech export restrictions make themselves felt. The biggest component of the sanctions is the unofficial one, as it deprives the Russian economy of inputs it used to source from the West / major Asian companies and take for granted.

      The financial sanctions are also deterring some major Asian companies (example: Lenovo) from doing business in Russia, as they do not want to take on a risk to their Western market in order to service the Russian one. Therefore, “they’ll just trade with Asia” isn’t as simple as it seems.

      Finally, some Russian telegram channels have pointed out that, owing to the lack of trade with Europe and the Asian preference for dollars, the Euros Russia gets for its natural resources are effectively almost useless in practice even as they inflate the Ruble’s value.

      Just a collection of economic news from Russian sources.

      Reply
  15. Dave in Austin

    Rocking the babies to sleep.

    The APNews.com second headline today is “Wall Street’s losses worsen as markets tumble worldwide”. The article, 19 short paragraphs. The first two paragraphs say:

    Stocks racked up more losses on Wall Street Monday, leaving the S&P 500 at its lowest point in more than a year. (para) The sell-off came as renewed worries about China’s economy piled on top of global financial markets already battered by rising interest rates.

    The Ukraine is eventually mentioned in paragraph 18 (never put anything important in the last paragraph; some people skip to the end). But the AP knows exactly what’s going on. Here is the URL. Note the order of the nouns in the article’s URL:

    https://apnews.com/article/russia-ukraine-covid-health-business-japan-c8523aa65e034d3d58f83f23e3e46863

    By the way, I had the sniffles last Wednesday and on my visit to Moderna (I’m in the follow-on study) I asked for a Covid test. Got it back today. I’ tessted positive. No real symptoms. I’ve been swimming all week as usual. No temperature. The Moderna people said “Self-isolate for five days but the five days are over. So wear a mask in public for the next five.” No medicine needed. I’m 78 and exercise every day.

    Reply

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