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A “Realism 101” lesson on Russia’s zero-sum logic

The Kremlin’s invasion of Ukraine has resulted in an unprecedented level of western sanctions. Whilst Moscow did not appear to anticipate such a united response, the nature of the conflict suggests that these developments were simply inevitable.

May 9, 2022 - Jozef Hrabina Zulf Hyatt-Khan - Articles and Commentary

Photo: Pavel Bobrovskiy / Shutterstock

Vladimir Putin and his elite have probably made a self-defeating move by launching a full-scale attack on Ukraine and plunging both countries into a war of inexplicable proportions. Viewing the conflict as a zero-sum game with the West, Russia appears to have woefully miscalculated the balance of power that now arguably favours its rivals.

In contrast, Russian foreign policy had profited from consistent ambiguities in world affairs over the past two decades. The country’s asymmetric reactions to global challenges made Russian actions all the more efficient compared to those of the West. Moscow’s anti-ISIS operations in Syria, annexation of Crimea, use of particular western politicians and domestic meddling have all kept the Russian footprint in the West alive. All of these measures were rationally calculated acts of Russian realpolitik, aiming to revive the country’s great power status and keep the West preoccupied with its own issues.

Moscow has pursued an ambiguous foreign policy played according to a realist textbook. However, its actions in Ukraine appear to run counter to this strategy. Pursuing a zero-sum game against a much powerful opponent has only resulted in a cost-benefit miscalculation. Russia has now crossed a red line that its elite so often criticised over the past few decades.

The key takeaway here is that any benefit the country could gain from a full-scale invasion of Ukraine will decrease over the long term. The consequences of Russia’s actions would only make sense if the state’s survival was at stake. Even though arguments surrounding Ukraine’s supposed “nuclearisation” seem to play by this logic, there are still many states (e.g., Estonia, Latvia, Georgia or Turkey) that are close to Russia and pursue a pro-western course. In the case of Turkey, it is even possible to speak of a NATO nuclear weapon stockpile. Overall, Russian intelligence would have known well in advance if Kyiv was attempting to acquire nuclear weapons and could have taken precautions.

Counter-productive competition

It should be remembered that Russia failed to develop an attractive system that could compete with market capitalism and democracy in the West despite having numerous advantages. This includes the country’s sheer size, resource wealth, access to key global markets, nuclear capabilities and heritage in the form of great power strategic thinking. A Russian form of crony capitalism based on sustaining an oligarchic system was easy to sell to elites in post-Soviet states, though only for a finite period. Growing discontent among populations in the region is increasingly challenging Russia’s influence in its “near abroad”, where it has desperately strived to maintain its own sphere of influence through Soviet-style hard power.

Hard power and crony capitalism, however, were not enough to keep countries like Georgia, Armenia, Azerbaijan, Ukraine and even Belarus fully in Russia’s sphere of influence. Many former Soviet republics have demonstrated the very decaying symptoms of Russia itself. These countries have often moved closer to the West to solve these problems. By openly invading its weaker neighbour, what does Russia hope to gain? Moscow has effectively narrowed its actions to great power competition and directly challenged the West in ways that will either undermine the foundations of transatlantic structures or force the West to adopt a unanimous stance and openly take on the country.

As the West grew more united after the invasion, even Russian allies in Europe such as Viktor Orbán and Miloš Zeman were forced to pick sides. At the same time, Germany has now abandoned its multi-decade principles of not supplying weapons to “hot conflicts”. Russia’s neighbour Finland broke its neutrality and is now on the verge of a NATO accession vote. Kosovo has also urged NATO to allow it to join the organisation as soon as possible.

If Putin’s gambit was designed to revise Europe’s security architecture and NATO´s open door policy, then he achieved the exact opposite. Every sinew of NATO’s threshold and Article 5 are now being stretched and archaic models are under fierce scrutiny. “Unprecedented times call for unprecedented measures” has now become the phrase du jour and rightly so, as all our basic democratic and unifying principles have been put into question. Contrary to its interests, Russia’s actions have revived the very meaning of NATO´s existence and unified the West under a single banner for the first time since 9/11.

By launching a full-scale war, Russia hoped it could avoid a zero-sum game by quickly defeating Ukraine in a similar manner to past hard power actions. However, it cannot beat the West’s support for Ukraine. The Kremlin effectively narrowed its relations with the West to open great power competition, unleashing forces it cannot control. Widespread sanctions are now challenging a Russian economy dependent on raw mineral exports. If Putin counted on economic interdependence with Europe, he misread the clear red lines that were drawn when Russia started a war with its neighbour. As we see now, the rouble is plummeting to catastrophically low levels. Assets are being seized, interest rates are soaring way above 20 per cent, and banks are cut off from SWIFT. Many of the country’s airways are also shut and Russian athletes and clubs have been banned from European competitions. It is now hard for even the most ardent Putin supporter to suggest that Moscow anticipated these measures. This reality has plunged Russia potentially into the worst recession of modern times. Sentiment at home will dramatically change but will it deter the Kremlin’s myopic stance? Did Russian decision makers budget for the world unifying against it?

Economic issues

Even though Russia has accumulated an impressive 620 billion US dollars in federal reserves over the past several years, it now faces even harsher sanctions than in 2014. The West has targeted Russian federal reserves by restricting the country’s ability to use approximately 60 per cent of this total, which is held in dollars, euros, sterling and Canadian dollars. This leaves Russia with only its Yuan reserves, amounting up to 60 billion US dollars in total.

With regards to businesses within the EU, Russia’s disconnection from the SWIFT system has resulted in a loss of financial ties. European investments estimated at 200 to 300 billion euros are now at serious risk. The EU is the biggest investor in Russia, accounting for 55 to 75 per cent of Russia’s total foreign direct investment (FDI). This naturally makes Russia dependent on Europe in the FDI sector. In contrast, Russian FDI in the EU amounts to approximately 135 billion euros, or 1.9 per cent of the bloc’s total FDI.

In the case of EU-Russia international trade, the annual turnover of about 180 billion euros accounted for 37 per cent of Russia’s total foreign trade (38 per cent of total exports to the EU and 36.5 per cent of total imports). While in the case of the US, the turnover in foreign trade with Russia is about 20 billion euros.

According to Russia’s federal statistics service Rosstat, the oil and gas industry’s mining and processing activities alone accounted for 15.2 per cent of Russian GDP in 2020. This contributed up to 28 per cent of the federal budget and accounted for 44.6 per cent of Russian exports. These figures show just how important these sectors are to the Russian economy. A growing western challenge to these industries is therefore rightly described by Ivan Timofeev as “America’s nuclear option”.

Gas consumption in the EU floats at around 400 billion cubic metres per year and Russia provides approximately 43 per cent of this supply. With that said, Russia is a top fuel supplier to the EU27, as it supplies roughly 27 per cent of the bloc’s total oil imports and 47 per cent of solid fuel. Simultaneously, pipeline capacity is the most important element in this discussion, yet it is often downplayed to marginalise the Russian impact on European energy security. Moscow owns the majority of natural gas and oil transfer infrastructure to Europe. With regards to just gas pipelines, it is estimated that Russia has a transfer capacity of 175.5 billion cubic metres per annum without Nord Stream 2, which would add another 55 billion per year. This accounts for more than half of European gas consumption.

Should the West decide to fully decouple from the Russian energy sector, it would have disastrous consequences for a Russian economy so dependent on raw minerals export. Despite talk of “autarky”, Moscow lacks the economic efficiency and access to key technologies that could sustain the country independently over the long term. Therefore, the current sanctions are likely to bleed Russia dry in the years to come.

A difficult lesson

Russia built much of its geopolitical resurgence on opposition to the West’s flawed wars in the Middle East. Despite this, Moscow made the same mistake by assuming that it could simply defeat a substantially weaker opponent and secure its broader interests. Russia is now faced with problems that it often portrayed as fundamental issues of the US-led liberal order. Drawing on the West’s experiences in the Middle East, the Kremlin is now faced with a “Realism 101” lesson. This consists of the following issues:

  • Reputational damage is imminent. Assaulting other states goes hand in hand with the bombing of cities, the killing of innocents, the displacement of the local populace and breaking of international norms. The US until now carried around the stigma of its flawed Middle Eastern policies. This helped illiberal leaders to attract more opponents of the US-led international order.
  • Backlash from the local population is inevitable and partisan wars are almost impossible to win. Even though Russia is likely to push for a demilitarised Ukraine after it defeats its army, grievances against Russia will run deep among the local population for decades to come. This will make it almost impossible to bring Russia’s neighbour back into its orbit. The severity of this issue, however, will depend on the scale of Russian aims in Ukraine.
  • Domestic backlash will grow as the war upsets the population with increasing costs and losses in the conflict. Currently no polls are available, as we cannot track the imminent impact of western sanctions on the Russian public. Yet it is likely to create more discontent among Russia’s current ruling elite in the same way that “Iraq syndrome” stigmatised US politics until today.
  • Despite the lack of an external counterbalance to the US-led coalition in the Middle East, the Afghan war alone cost the US more than two trillion US dollars. The western containment of Russia, however, is offering a chance to bleed the Russian economy dry via crippling sanctions on top of the whole operation’s costs.

A pyrrhic victory?

The odds are high for a Russian victory in a war against a substantially weaker Ukraine. Kyiv’s resistance is admirable and laudable in equal measure but diminishing daily. Out of the Ukrainian rubble has emerged true and iconic leadership. President Zelenskyy is now the face of resilience and resolute nationalism and a poster child for hope, however futile it might well be. Defending Ukraine directly neighbouring Russia appears to be a seemingly impossible task for the West. But Moscow will have to put extreme measures in place to win this war and hold Ukraine in its orbit. Russia may secure its regional interests but the broader picture is much starker.

On a European level we have witnessed a radical decoupling from economic interdependence with Russia. This phenomenon will not only result in economic shocks in Russia but also energy shocks in Europe. This will be especially true if there is a blanket SWIFT Russia ban or sanctions on the energy sector. This will mean fewer incentives to seek dialogue in the future.

In terms of security, Russia is unlikely to revise European security architecture as the West is likely to proceed with its bloodletting strategy via crippling sanctions. However, the question of NATO’s open-door policy will persist as Finland, Sweden, and Kosovo consider membership. Now that NATO´s existence is well justified, Russian rhetoric delegitimising the Alliance will lose its momentum.

Globally, we will witness the “multipolarisation” of the international system. By decoupling from the West, Russia is likely to operate in Eurasia more than ever. However, it will face more problems than ever before as it will still suffer from western sanctions. This means fewer resources for foreign policy. The current situation is offering the US an opportunity to contain China and Russia at the same time, as its European allies are unanimously rallied against Russia for the first time since the end of the Cold War. With that said, the European allies could step in and contain Russia especially with regards to the economy, where the EU27 holds the biggest leverage over their Eastern neighbour. The US could simultaneously concentrate on China in the Asia-Pacific region.

So far, it appears that Russia has made a step towards direct competition with a much stronger enemy. This adversary is likely to bleed Russia dry and exhaust its citizens by crippling the economy and restricting access to international society. As a result, abysmal consequences for Russia’s domestic and global realities, in exchange for victory in a regional war, appears an inevitable price to pay for Putin’s zero-sum game.

Jozef Hrabina is Chief Analyst at the Council of Slovak Exporters, where he is responsible for in-house analytical studies and commentaries and provides strategic insights to the economic, political and geopolitical developments in the World. With almost a decade worth of academia focused in international relations, Jozef develops the think-tank section within the CSE.

Zulf Hyatt-Khan is Deputy Chairman at the Council of Slovak Exporters, whereby he acts a strategic link to its members with aspirations to expand in the MENA region. Zulf also lectures at the Diplomatic Academy of Comenius University in Bratislava.

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