Plainly, Russia’s war on Ukraine isn’t something Vladimir Putin dreamed up overnight, or did on impulse. With hindsight, Putin has been working for years to prepare Russia to withstand the economic sanctions that have been the only way the West has been willing to punish his aggression. For one thing, Putin has steadily built up a war chest of $US630 billion at Russia’s central bank to prop up the Russian economy and protect the rouble as best it can from the financial pain Putin knew would be coming once he sent Russia’s tanks rolling across the borders into Ukraine.
How has he been preparing for this? As long ago as April 2021, Bloomberg News was reporting on how Putin was systematically replacing the US greenback as the currency in which Russia does its international trades, and as the currency in which it stores its assets. At the same time, Russia was also reducing the ratio of Russia’s debt held by foreigners. As Blomberg said at the time, these steps also went hand in hand with running a conservative fiscal policy to reduce the country’s debt profile overall.
In other words, the Russian economy was being future-proofed with this war in mind. Putin’s plan involved switching the denomination of Russia’s commerce from the greenback to euros or to the yuan, thus making it harder for the US to act in unison with Europe once the Ukraine invasion began. As Bloomberg noted in its report a year ago:
Vladimir Putin’s multi-year push to reduce Russia’s exposure to the dollar hit a major milestone as the share of exports sold in the U.S. currency fell below 50% for the first time. Most of the slump in dollar use came from Russia’s trade with China, more than three-quarters of which is now conducted in euros…. Multiple rounds of sanctions and the constant threat of more to come have pushed Russia to find ways to isolate its economy from U.S. interference. The central bank has also stripped back its holdings of Treasuries in its international reserves, loading up on gold and euros instead.
The shift away from dollar trade with China accelerated in 2019 when oil major Rosneft PJSC switched export contracts for crude shipments to euros. Lots of mid-cap companies are now also seeking ways to reduce exposure to the U.S. currency, with many switching contracts to yuan or rubles in trade with China….
A year ago, the relatively new Biden administration was cracking down on Russia as part of a ‘get tough” policy ( post Trump) meant to punish Moscow for its central role in the massive Solar Winds hack, and for its aggressive meddling in US elections. Putin though, was looking ahead, not behind. Soon afterwards, in July 2021, Putin published his now infamous 5,000 essay on the “unity” of Russia and Ukraine. Putin turns 70 later this year. Ukraine seems to have long intended to be his legacy achievement, as the conquering hero who brought Ukraine back into the arms of Mother Russia. Unfortunately (see below) Ukraine may be just an essential step to an even greater goal.
The fault line in the sanctions
Two weeks ago, Werewolf reported on how – if Russia did invade Ukraine – the most powerful economic weapon the West could use against Russia would be to exclude it from the SWIFT banking system, which is the international vehicle (based in Belgium) for managing international currency transfers. (To repeat: the potential use of the SWIFT weapon is why Putin has been so methodically de-dollarising the Russian economy.)
Yet during the first few days of the invasion., the US/Europe refused to exclude Russia from SWIFT, even though (with far less provocation) they had used SWIFT against Iran to cripple its economy and reduce the living standards of ordinary Iranians.( Russia has been treated more kindly than Iran, even though it has supposedly committed the most dangerous act of military aggression in Europe since WW2.) Despite Putin’s attempts to ready Russia for war, it remains quite vulnerable: about 40 percent of the Russian government’s budget comes from energy sales. Using the SWIFT weapon would damage it severely.
A day or so ago, the US. Germany, France and the UK finally buckled to pressure and agreed to suspend from SWIFT a certain number of an already sanctioned list of Russian banks, while carefully sparing others. The reason for this selective exercise? Some major countries in Europe ( ie Germany, Italy, France) are addicted to cheap Russian natural gas and oil, to the tune of between a third and up to 45% of their energy needs; and they pay Russia for these commodities through the SWIFT system. Cutting off access entirely to SWIFT and to imports of Russian energy overnight would send the already soaring petrol and heating costs through the roof across Europe, during what is still a harsh phase of winter. The US itself annually imports billions of dollars of cheap Russian oil.
As Werewolf predicted, the West may well wring its hands over the fate of Ukraine, but would be reluctant to risk inflicting this maximum form of punishment on the Kremlin, for fear of the blowback on its own economies. Europe’s leaders have little stomach for inflicting further supply disruptions and further petrol hikes and heating cost increases on themselves, merely to defend Ukraine and punish its attacker. No doubt, Putin factored this likely European/US sell-interest into his calculus before launching the invasion.
Understandably, Ukraine’s leaders have reacted with furious dismay at the West’s reluctance to ban Russia entirely from SWIFT:
“I will not be diplomatic on this,” Ukraine’s Foreign Minister Dymytro Kuleba has tweeted. “Everyone who now doubts whether Russia should be banned from Swift has to understand that the blood of innocent Ukrainian men, women and children will be on their hands too. BAN RUSSIA FROM SWIFT.”
Kuleba has also since tweeted:
We insist on a full embargo for Russian oil and gas. Buying them now means paying for the murder of Ukrainian men, women and children. I welcome the first decisive steps by a number of European states in this regard and urge others to proceed resolutely and without delay.
Regardless, the total exclusion of Russia from SWIFT is simply not happening. Without that step, the economic sanctions on Russia will be a leaky boat. After all, it will surely not be beyond Russia’s ingenuity to re-direct its banking activities from those of its banks now barred from SWIFT to those of its banks still able to use it. The US for its part, is supposedly looking into ways to detect and exempt energy transactions from any future tightening of a SWIFT boycott. Don’t hold your breath on that one. Still, there is some other encouraging news. Reportedly, the US and Europe are working on ways to cripple Russia’s central bank, to try and prevent it from liquifying its assets.
The targeting of the central bank could, in the end, prove more consequential than the action regarding SWIFT. Russia has spent the last several years bolstering its defenses against sanctions, amassing more than $US630 billion in foreign currency reserves by diverting its oil and gas revenue.
Meaning: given those massive reserves, Russia’s economy will be able to last for some time, but not indefinitely. We shall see over time, even if Ukraine doesn’t survive to find out.
Putin’s Route to Fascism
What does Putin want ? Putin’s influence on (and funding support for) far right political parties across Europe has been part of the political discourse in Europe for the past five years or more. The Kremlin’s outreach programme has included the recruitment of home-grown American fascists like Donald Trump. From 2017, here is one attempt to draw some of the dots together:
Russian intellectual Alexander Dugin is the main architect of the neo-Russian imperialism called Eurasianism. In a series of lectures, articles, and books, Dugin has sought to “rehabilitate fascism in Russia.” He has borrowed from obscure 19th and 20th century political theories, adopted a sympathetic interpretation of Nazism that attempts to separate it from the Holocaust, and sought to thwart what he and many Russians believe is a conspiracy led by the United States to contain Russia. Dugin has called for a “Russian spring” and the domination of Europe through Ukraine.
In important ways, Russia’s international project differs from other forms of political conservatism. US neo-liberalism for instance, advocates a shrinking role for the state, as markets are given full reign to dictate the delivery or a reduced array of social services. In stark contrast, Putin and his acolytes in Europe and the US are promoting Dugin’s vision of a maximalist state that is all powerful, and that subordinates a command economy to the service of its geo-political ends:
Dugin views Russia as leading a Eurasian conservative revival that, according to scholar and political commentator Matthew d’Ancona of Queen Mary University in London, “supports tradition against liberalism, autocracy against democratic institutions, [and] stern uniformity against Enlightenment pluralism.” The conservatism that Dugin describes is, in his words, “not the same as the U.S. version, which values a small state. Here, conservatives value undivided political power, with economic power rooted in and subordinate to it.”
And yes, there is a literary precedent for some of this:
For Dugin, most of history can be lumped into a conflict between a more liberal maritime alliance, called Atlantis, against the conservative land-based Eurasian societies.This is shockingly similar to the fictional dystopian totalitarian states of Oceania and Eurasia in George Orwell’s 1984.
There’s a good backgrounder here on Alexander Dugin, and it outlines the influence he has had on Vladimir Putin, which seems considerable:
[Dugin’s]1997 pivotal work, The Foundations of Geopolitics: The Geopolitical Future of Russia, is a 600-page textbook that includes excerpts from some of history’s most prolific strategists….In eight parts…he establishes the strategies of Russia’s adversaries, devises his own, and provides bold steps to regain Russia’s position of dominance lost at the end of the Cold War. The most trenchant of these recommendations include the invasion of Georgia, the annexation of Ukraine, the separation of Britain from the rest of Europe, and the sowing of divisive seeds in the United States, each of which should sound quite familiar.
Well, Georgia got invaded in 2008, Ukraine this year, and in between Britain left the EU, NATO has been weakened and Russian cyber-attacks have sown division within the United States, a process helped along no end while a Russian proxy was occupying the White House. That’s a very impressive strike rate. And oh yes, Ukraine did feature prominently in Dugin’s calculations, nearly a quarter of a century ago:
Dugin grew in relative fame after the Ukraine conflict began [in 2014], as this was his most efficacious recommendation. As he explained, “Ukraine, as an independent state with some territorial ambitions, poses a huge danger to the whole of Eurasia, and without solving the Ukrainian problem, it makes no sense to talk about continental geopolitics.” The Crimean Peninsula has been home to the Russian Black Sea Fleet and a major military hub since 1997. Ukraine is also a significant economic hub on land, as a majority of Russia’s natural gas exports travel through it. This is an important factor in Dugin’s idea of stripping Europe’s energy dependence away from third-world energy reserves controlled by the Atlanticists.
So it would seem that there has been a long-term blueprint for Putin’s actions and ambitions in Europe and elsewhere. At the very least, he shouldn’t be patronised any longer as just a reactionary kleptocrat presiding over a country in decay while trying to shore up Russia’s fading ambitions on the world stage. While partly true, that vision of Putin has also dangerously under-estimated him.
Porridge Radio and Guest Pile-ups
Ever since they broke through with” Sweet” a couple of years ago, the British band Porridge Radio and its lead singer/writer/iconic leader Dana Margolin have seemed destined to become major stars. Here’s the lead single from their upcoming new album and it impressively delivers on (and refines) their basic style. They’re exponents of an intensity that isn’t wacky fun (see Amyl and the Sniffers) but consists of roughly equal parts of bodily desperation and exhilaration. Margolin seems to pull these songs from somewhere deep inside herself without ever appearing to be entirely in control of the forces she is summoning:
On a lighter note, this track “bbycakes” is notable (a) for its ear candy catchiness and ( b) for attracting on board so many hyperpop innovators as contributors: Shygirl, Pink Pantheress, Musa Musa and Lil Uzi Vert are all featured. Somehow, Charli XCX must have been off the grid when they put this one together.