1. Chaos Reigns
Last week I wrote that with the outbreak of war, no one was in control. Four days later, this point has been clearly illustrated.
In the span of 96 hours:
Belarus has become a nuclear state.
Germany has chosen to re-arm.
Finland and Sweden have signaled that they are interested in joining NATO.
Ukraine has applied to join the E.U.
That’s a decade’s worth of geopolitical change in four days.
Over the weekend a consensus seemed to gel that Ukraine might somehow “win” this conflict. Certainly this is now a greater possibility than it was two weeks ago. But it is also true that Russia seems to have been fighting in a reasonably restrained manner—I’m comparing their rules of engagement to what we saw in Grozny and Aleppo. Obviously, even the manner in which Russia has engaged so far is contemptible.
But at some point, Putin could decide to take the gloves off.
If that happens, what then?
Again, no one is in control.
It’s possible that his soldiers could refuse orders to flatten Kyiv or deploy thermobaric weapons against the population. It’s also possible that they’d follow his orders and create a humanitarian catastrophe. We don’t know and neither does Putin.
Let me sketch out a few possible scenarios for the coming days, which span a wide range of outcomes.
(1) Putin seeks a ceasefire. Facing an assault that has bogged down, financial ruin, and the possible creation of an organized opposition to his rule, Putin decides that he needs to retrench and focus all of his attention on survival. He offers some sort of compromise—Russia takes direct control of the breakaway “republics” and Ukraine promises not to join NATO for ten years. Putin then declares victory and tries to consolidate his position at home.
(2) Putin is deposed. There’s a revolt in the Army. They find a viable figure either somewhere in the government or in the wider oligarchy to be installed as president. The regime changes. This is a scenario Russia has some experience with.
(3) Putin uses a nuclear weapon. I share Tom Nichols’ assessment that Putin’s escalation of nuclear readiness is a man bluffing with weak cards. But sometimes a guy looking to bluff with nothing but a pair of 4’s becomes so pot-committed that he pushes all-in.
It seems unlikely that Putin would order the use of a nuke. Even if he ordered it, the chances of his order being carried out are not 100 percent.
(4) NATO winds up actively engaged with Russian forces. This might be the worst-case scenario and Biden, the EU, and NATO have been wise to avoid any actions that might lead to a direct exchange of hostilities.
But what happens if Putin decides to level Kyiv?
At that point, maybe the pressure to create a No Fly Zone in order to stop the mass killing of civilians becomes irresistible.
And any attempt to create a No Fly Zone is likely to end with NATO and Russia shooting at each other. Which is probably the most dangerous and destabilizing scenario possible.
Some of these scenarios are more plausible than others. The point of this exercise isn’t prediction, but rather demonstrating how it is impossible for any actor to know how this episode will end. There are simply too many actors, too many moving parts, too many dynamics and cross-currents and unknowns.
2. Biden Has Done a Good Job
In the weeks leading up to the Russian invasion, Joe Biden used his administration to loudly and transparently demonstrate that Putin’s irredentist claims were bunk and that the looming invasion was a premeditated act of aggression.
He simultaneously worked—quietly—with NATO and the EU to achieve a larger consensus than there has been on any military matter before the alliance since . . . well, let’s call it a generation.
Biden did not draw lines in the sand. He did not personalize the conflict. He did not turn himself into the star of the show. He did not allow anyone, anywhere, to believe that this was about America.
Since the invasion, Biden has been a full partner with our European allies. He has not pushed them into decisions. He recognized that having a united front was more important than any particular aspect of the response. And after only four days Europe came to the conclusion—on its own—that it would do everything the American foreign policy establishment had wanted. Biden understood that these countries needed to come to the decision to fight back on their own, and not be publicly cajoled into it.1
Biden also understood that the EU and NATO are actually very powerful allies and that when they work in concert with the United States, we represent a significant geopolitical force.
At home, by not being publicly domineering, Biden has made it much harder for Republicans to polarize public opinion over Ukraine. Because Joe Biden has not allowed Ukraine to become an issue about Joe Biden. This should make the continued prosecution of Russia more tenable in the short and medium term.
Biden has done all of this—a hawk’s dream response—without escalating the conflict or pushing the West closer to kinetic warfare with Russia.
The West is stronger because of the actions of the Biden administration and Russia is weaker because of them.
The last month has represented America’s best showing in foreign policy in a generation, and this with a president playing a weak hand in a crisis forced on the country.
It would be nice if Biden got some credit for this from the public. He’s only making it look easy.2
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3. Rubles from Heaven
If you want to get smart about the financial hellstorm that Russia has now entered, you should read Adam Tooze.
If you do not have time to read an entire essay on the subject, here’s a quick summary:
Now here’s Tooze talking about how Russia is fighting back on the economic front of the war:
The Russian central bank has since 2008 acquired a wide range of tools to dampen stress in financial markets and limit their impact on the real economy. As Vladislav Inozemtsev put it on the invaluable Riddle website:
The Bank of Russia now has all the necessary support tools for the market (starting from the ability to allow financial institutions not to reflect losses from the revaluation of securities on the balance sheet to interventions in the foreign exchange market and provision of ruble and currency liquidity to banks).
Already on Sunday the bank announced across the board support for the financial system.(Reuters) -Russia's central bank announces a slew of measures to support markets as it scrambles to manage the fallout from Western sanctions, including: * Buying gold on domestic market * Repurchase auction with no limits * Easing curbs on banks' open foreign currency positions
It is also moving to block the exit for foreign investors, who can no longer liquidate financial assets they hold in Russia.BREAKING - The Russian central bank has ordered market players to reject foreign clients' bids to sell Russian securities from 0400 GMT on Monday, according to a central bank document seen by Reuters. The bank did not reply to a Reuters request for comment.
The latest report is that Russia will force companies to sell 80% of their foreign currency earnings - in other words buy rubles. This in effect substitutes private balance sheets for the central bank which is sanctioned. It is a de facto form of exchange controls.
Whether this will be enough to hold the system together only time will tell.
On Monday the first line of defense was to hike interest rates to a punitive 20 percent and put back the opening of markets until 3 pm Moscow time. All the trading up to that point consisted in Westerners unwinding exposed Russian positions.
Update, 12:54 p.m.: When I first published I embedded this tweet. But after seeing Jim Tung ask about it in the comments I went digging and the author claims the source is a German news site. I can’t find a translation so I can’t verify the cite. I deleted the tweet from the piece. Sorry about that. I shouldn’t have included in the first place.