Though the future path of the war in Ukraine is still uncertain, it is a safe bet that the Russian invasion of Ukraine is going to provoke a long-term economic conflict between the NATO members and Russia. Indeed, such a conflict has been under way since 2014, and the threats of sanctioning preceding the invasion can be properly considered an evolution of the conflict. Now that the shooting war has started, the economic efforts are now shifting from punishing Russia for past actions and deterring future ones to compelling Russia to change policy, weakening Russia's military capability, and undermining Putin's regime.
Though I don't want to get hung up on the term, it is the beginning of an economic war and, given the nature of the global economy, the impact of it are not going to be limited to Ukraine, Russia and NATO. Instead, no nation that is engaged in the global economy will be insulated from the impacts of the conflict. More importantly, this will be a global economic war in the sense that even if a country has not picked a side and is not actively engaged in the conflict, its economic actions and inactions will have an impact.
As an old Cold Warrior who did his dissertation on the effectiveness of sanctions, and taught IPE since then, this all seems to be in my wheel house, so I guess a lot of my "Thinking Out Load" is going to be devoted to this in the future.
As a starting point, I want to pin a couple articles to the wall (we'll get the string and Post-It notes out later).
"Sanctions will put Russia's 'fortress' economy to the test" by Chris Riley at CNN Business; Riley uses the fortress term to describe Putin's efforts to insulate Russia's economy from external sanctions. Most of the discussion is focused on financial mechanisms. However, one sentence got my attention. Riley wrote that "Putin's economic planners have sought to boost domestic production of certain goods by blocking equivalent products from abroad." This is interesting because providing protection to an industry is a private benefit to the owners of firms (probably an oligarch or two) in that industry and could be part of a pattern of providing such benefits to supporters. According to Selectorate Theory (see references at bottom) that in itself could strengthen Putin's hold on power regardless of any economic impact of the policy. These are the kind of details in which the Devil resides.
"China lifts restrictions on Russian wheat imports" by Laura He, CNN Business: In related news, Laura He reports that China has lifted restrictions on wheat imports from Russia. While one would expect China to take an active role in the economic conflict, here they are playing the simpler role of ROW (i.e., rest of the world). Sanctions on exports have no effect, other than diverting trade patterns, if the target can find enough alternate customers in the rest of the world to buy what the sanctioning nations are boycotting. I talk about this and other things in the video below.
Here are some video comments about what I see as the nature and dimensions of the conflict:
Selectorate Theory References:
Bueno de Mesquita, Bruce, Alastair Smith, Randolph Siverson, and James D. Morrow. (2003) The Logic of Political Survival. Cambridge, MA: The MIT Press.
Bueno de Mesquita, Bruce, Alastair Smith. (2011) The Dictator’s Handbook: Why bad Behavior Is Almost Always Good Politics. New York, NY: Public Affairs.
