Slowly but surely, Western engagement in Putin’s war is ramping up. European leaders may not yet be ready to give Volodymyr Zelensky the combat aircraft he seeks, but it can surely only be a matter of time. The only question is who coughs up first, and thereby gets the credit as a savior of the Ukrainian nation. Anything, it would seem, to deflect from political and economic woes at home.
From Britain’s Rishi Sunak to France’s Emmanuel Macron and Germany’s Olaf Scholz, they were positively falling over each other last week to be photographed in the great man’s presence – so much so that Italy’s firebrand premier, Giorgia Meloni, had to formally complain about being left out. You talk of European solidarity, she said in a fit of pique, yet you fail to invite me to your tête à tête with Zelensky. What does that say about unity among European nations?
Whatever the answer, Zelensky plays his fawning suitors like a violin. Never mind war planes; fast track entry into the European Union is now virtually assured.
But first he got to win the war. Western aid or not, there is little sign of the required breakthrough, or even a plausible answer to what “winning” really means. Is it taking back all the disputed territory, including Crimea? Without regime change in Russia, there is no chance of that.
In any case, it is remarkable just how resigned we seem to have become to the prospect of war without end, even uninterested. When Putin first invaded, it felt like the sky had just caved in. Despite the war’s localized nature, the wider economic consequences for Europe and beyond seemed dire.
Yet nearly a year has now passed, and as far as the global economy is concerned, the lasting damage appears relatively small. OK, so we’ve had a big spike in inflation, and throughout Europe a consequent cost of living crisis. But recessionary forces are now receding and prices are subsiding. Europe has rapidly reoriented its energy suppliesand on both sides of the Atlantic, there is now every prospect of a soft landing.
Behind this resilience may however lie a rather uncomfortable truth – that the sanctions imposed on Putin’s Russia are not proving nearly as effective as they were supposed to. This is perhaps deliberate, because the West is trying to keep the spillover damage of sanctions to itself to a bare minimum.
It is all very well supplying Zelensky with tanks, missiles and now perhaps even war planes, but none of it will defeat Russia as long as Putin is able to wriggle off the hook of sanctions and keep his war machine going.
The sanctions regime – billed at the time as the most comprehensive and watertight such program ever imposed – is in practice riddled with loopholeswith key sectors excluded and others subject to workarounds.
The Russian economy has admittedly been very badly hit by the Western response to its invasion, yet somehow or other it still staggers on. Russia is actually projected by the International Monetary Fund to show some growth this year, unlike Britain.
Astonishingly, the overall value of Russia’s international trade, imports as well as exports, has been barely affected by the war. Any fall off in the volume of its oil and gas exports has been more than offset by higher prices. Many Western goods have found backdoors into Russia via third party countries such as Turkey and Armenia, which have seen their import/export business surge to cater for Russian demand.
Even on oil and gas, where sanctions have been more effective, Russia has found ways around the $60-a-barrel cap that Western nations have attempted to apply to Russian oil by denying insurance to carriers who ship it for more. A thriving business has developed around unregistered, or – phantom –, ships that offload their cargo mid-ocean to seemingly more respectable carriers, no questions asked about origin.
Most surprising of all, there are whole sectors, notably fertilizers and certain types of metal, that remain largely unsanctioned. Fertilisers were deliberately given a free pass because Russia accounts for nearly a fifth of the world’s fertilizer exports, and it was feared that restrictions might have potentially catastrophic consequences for world food prices.
This is despite the fact that all three of Russia’s biggest fertilizer companies rely on Putin’s patronage, and therefore help sustain his war machine. Take Acron Group, which continues to sell its potash with impunity in the US and Canada, where it enjoys substantial market shares even though its owner and effective boss, Vyacheslav Kantor, is sanctioned in both the UK and the EU.
The UK authorities were particularly damning of Kantor’s activities, which they thought of vital strategic significance to the Russian government. He’s banned from traveling, and his UK assets have been frozen, including the development of a multimillion-pound property in Hampstead Garden Suburb, north London.
By way of justification for continuing to allow Russian fertilizer exports, the US cites domestic and global food security concerns. It is easy to see why such concerns might apply to fertiliser, but not oil and gas. The US is self-sufficient in the latter, but not the former.
The double standards are breathtaking, and make you wonder just how serious the White House is in taking Putin on. You can have any number of war planes, but they won’t defeat Russia as long as its economy keeps motoring on, and in many sectors it’s just business as usual. Everyone likes to boast of how much military aid they are giving to Zelensky, but when it comes to commerce, self interest takes over.
Confusing the picture yet further is that all four main Western jurisdictions that have imposed sanctions – the US, EU, Canada and the UK – have separate regimes that often target different entities and individuals. There is a basic lack of coordination, which Putin expertly exploits.
The will to stop him seems sadly lacking. Shocking though it seems, less than one in ten G7 and EU companies with interests in Russia have so far divested themselves of their Russian subsidiaries.
As Margaret Thatcher observed of South Africa, sanctions rarely work as they are supposed to, simultaneously making life a misery for ordinary people while failing to dislodge the targeted regime. Just look at Iran, whose brutal theocracy has managed to limp on for years under the weight of particularly harsh sanctions.
One reason sanctions tend not to work is that they frequently backfire and damage the sanctioner as much as the sanctioned. When push comes to shove, few are prepared to take the required degree of economic punishment.
The bottom line is that Putin’s war has been accommodated to the point where it ceases to have any significant effect on the developed world. It’s shameful, but there it is.