What the Kremlin’s Setback May Mean

Economics Have Stalled Putin, But He Often Answers Reversals With Military Threats

In the Ukraine crisis, soft economic power last month trumped hard military power for the first time. The threatened meltdown of the Russian economy could push Russian President Vladimir Putin to dial down his undeclared war on Ukraine in return for some easing of Western financial sanctions. Still, that outcome is not assured. . . .

Even though the annexation of Crimea gave Putin’s sagging popularity a chauvinist surge at home, Russia’s military juggernaut performed surprisingly poorly thereafter in advancing Putin’s claim to seigneurial privilege in Ukraine and wherever else Russian minorities live. . . . “I think we have done better than we realize,” former Swedish Foreign Minister Carl Bildt told a Berlin audience. The West’s diplomacy had limited Putin’s options without resort to war, he maintained.

In Bildt’s view, Putin started 2014 with all of Ukraine as his client state, administered by his protégé, Ukrainian President Viktor Yanukovych. . . . The area that Putin now contests is . . . shrunken to only half of Ukraine’s two easternmost provinces. . . .

On December 16, Russia’s “Black Tuesday,” the value of the ruble plunged to a new low at 50 percent of its value last January. Capital flight continued to mount toward a 2014 high of $130 billion, and forecasts projected a likely drop in Russia’s gross domestic product for 2015 of close to 5 percent if oil stays at $60 per barrel.

The following day Putin and Poroshenko joined German Chancellor Angela Merkel and French President Francois Hollande in a late-night call to revive diplomacy in the crisis. Those governments now are discussing a new summit meeting as early as this month, perhaps in Kazakhstan.

The best Western guess now seems to be that Putin would like to deescalate fighting in Ukraine, either as a tactical pause or as an effort to stave off the financial meltdown that looms under the impact of sanctions and the plummeting price of Russia’s all-important hydrocarbon exports.

This new stage in the standoff between Russia and the West over Ukraine could be very dangerous, in part because of Putin’s impulsiveness, in part because of the lack of mutually understood constraints in a post-superpower but still nuclear world.

Consider for a moment Putin’s string of setbacks in 2014:

  • the implosion of Yanukovych and the sure-footedness of President Poroshenko;
  • the stout performance of the Ukrainian army and militias, along with the failure of eastern Ukrainians to rally to the pro-Russian cause;
  • the failure of German businessmen with lucrative Russian trade and investment deals to block Chancellor Merkel’s financial sanctions on Moscow; and
  • the counterproductive impacts of Moscow’s new intimidation–in alienating a Germany that has long been Russia’s best Western friend, in accelerating the EU drive to free Europe from its addiction to Russian energy, and in consolidating a long-tentative sense of Ukrainian identity into a new conviction that Ukrainians have a common European calling.

Putin’s response to each of these has been to make military threats. His assumption has been that he can raise the stakes with impunity because Moscow holds escalation dominance, thanks to geography and Russia’s raw military might.

Certainly Putin’s instinct today is still to up the ante by periodic nuclear saber-rattling and by aggressive Russian air and sea probes of NATO and non-NATO defenses in the Baltic, with transponders shut down. Yet amid Russia’s financial crisis, even Putin—who in the past has scorned Western sanctions as pinpricks—no longer denies that the sanctions, in combination with the plunge in oil prices, are wreaking serious damage on Russia’s economy. They also are squeezing the vast wealth that Putin and his inner circle have accumulated via their Russian kleptocracy. Far sooner than the authors of Western sanctions anticipated, the vector of soft, long-term economic power has crossed the vector of hard short-term military power in the middle term of real-time policy. “Only a Russian exit from Ukraine can begin to restore confidence,” concludes the Financial Times.

Elizabeth Pond is a Berlin-based journalist and the author of books on Russia and Europe. A version of this essay is posted at IP-Journal, the website of the German Council on Foreign Relations.

Image: Russian President Vladimir Putin gives his annual state of the nation speech to the Federal Assembly in the Kremlin’s St. George’s Hall. (Russian Presidential Press Office/ www.kremlin.ru)