In response to the first tranche of US sanctions last week, the Russian foreign ministry warned of a “strong” and “painful” response “not necessarily in a symmetrical fashion [but] well calibrated [that] will not fail to affect the United States.” Over the weekend, America and its allies raised the stakes by levying widespread sanctions on the Russian financial system.
Russian President Vladimir Putin is not in the habit of bluffing, but he also cannot match the West’s sanctions. So he is unlikely to try. Instead, he will fight back by moving the confrontation to those domains where he perceives parity, from economic chokepoints to military operations to cyberattacks.
Russia's Rainy Day Fund
To prepare for this moment, Putin has built a robust war economy. Russia boasts the least debt of any country in Europe, at a mere 17% of gross domestic product. It sits, moreover, on a war chest of more than $600 billion in currency reserves, the largest in the country’s history and the fourth biggest in the world.
After Western sanctions over the annexation of Crimea in 2014, Russia embarked on a campaign to substitute domestic production for imported goods. What Russia lost in efficiency it gained in security. By contrast, the European Union imports 40% of its natural gas from Russia, tying its economy to that of Putin’s. Similarly, Russia and Ukraine are major sources of raw inputs (metals, minerals and rare earths) for the advanced technologies that are now banned from Russia. In the 24 hours after Putin’s declaration of war, the United States and Europe bought hundreds of millions of dollars in Russian commodities. To cut off Russia means slicing into ourselves.
If the West insists on depositing payment for those commodities into frozen accounts, Putin will retaliate with a campaign of strategic denial. Putin views the West as decadent, held together by crass consumerism. In January 2019, he watched America lift sanctions on Rusal, the world’s largest aluminum producer outside of China, after US and European industry complained of high costs. Putin may calculate that a commodities crisis will force the West to lift sanctions before his coffers run dry. To make such a strategy plausible, he will double down on his relationship with Chinese President Xi Jinping.
Next Phase Bloodier
In Ukraine, Putin is operating on two ticking clocks: One measures the progress of his military operation; the other tracks the flow of Western support. His goal is to speed up the former while slowing down the latter. As a result, the next phase of Russia’s offensive will be far bloodier than last week’s opening salvo and will unleash waves of refugees that will clog resupply roads leading west. At the same time, Putin will snarl at the United States and Europe to keep them at bay. On Sunday, he ordered his nuclear forces on high alert while deploying artillery to Belarus’ border with Poland.
The final arrow in Putin’s quiver is his army of cyberwarriors. The United States is vulnerable to cyberattacks, as demonstrated by last year’s ransomware shutdown of Colonial Pipeline, the country’s largest fuel pipeline. In 2020, the Russian foreign intelligence services’ SolarWinds hack succeeded in breaching the US government, including the Department of Defense and the Cybersecurity and Infrastructure Security Agency.
Expect Cyberwarfare
In 2017, Russia’s military intelligence launched a malware attack, NotPeya, that targeted Ukraine before crippling Maersk, the largest shipping conglomerate in the world. If Putin is cut out of the world’s financial system, he may order his cyberwarriors to spring into action once more. At minimum, he could direct attacks against systemically relevant multinational banks; at maximum, he could order his submarines to sever the undersea cables that constitute the lifeblood of the transatlantic economy.
These are grim scenarios. But the West has drawn courage from the extraordinary sacrifice of the Ukrainian people. Just as America won the Cold War with an actor-made-president last century, Ukraine’s actor-turned-president has grown into an inspiring leader. Last week, when his capital came under assault and the United States offered to exfiltrate him, Ukrainian President Volodymyr Zelensky replied, “The fight is here; I need ammunition, not a ride.” Putin wants to push us from Zelensky’s side. We should not yield an inch.
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