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Putin’s Endgame

Yuriy Gorodnichenko, associate professor of economics | September 2, 2014

By Yuriy Gorodnichenko and Gerard Roland (UC Berkeley)

There is every evidence that Russian troops are fighting the Ukrainian army on the Ukrainian soil. This Russian invasion is a further escalation of the war between Ukraine and Russian-sponsored separatists and terrorists in the East of Ukraine. As soon as the Ukrainian forces were about to take over cities in Eastern Ukraine, Mr. Putin raised the stakes and sent Russian military to rescue the separatists from certain defeat. Both sides have experienced heavy losses, but the Russian government denies any involvement. The excuses sound increasingly surreal (e.g., Russian paratroopers got lost).

Vladimir Putin

Vladimir Putin (Kremlin Presidential Press and Information Office via Wikimedia Commons)

Furthermore, dead Russian soldiers appear to be buried in secret and journalists trying to reveal these losses are harassed, intimidated and severely beaten. Finally, Russia shows no sign of being willing to engage in genuine negotiations to establish peace — all previous attempts turned into farce when Russian calls for peace were followed with more Russian weapon deliveries and casualties.

After the cut-off of gas supplies in 2014, the infamous annexation of Crimea earlier this year, the delivery of weapons (including tanks, artillery and BUKs that shot down Malaysian airline civil airliner MH17) to separatists, and now an invasion in Eastern Ukraine, one may ask where Mr. Putin is going to stop

We believe that Mr. Putin has been making calculated choices all along the way. His objective in Ukraine is to destabilize the new government that emerged from the Euromaidan movement that toppled Yanukovich. The ultimate motivation for this is to consolidate his own power at home and to prevent a similar democratic revolution in Russia. In each step of the Ukrainian conflict, he has weighed the benefits of each move, from the point of view of this strategic objective, against the costs. The current invasion is motivated by the need to prevent a military defeat of the separatists and to keep the conflict in Eastern Ukraine alive.

The costs of this latest move have so far not been very large for Mr. Putin. The reaction of the West has proved to be weak, exactly as he expected. Most sanctions are too narrow or are going to have tangible effects only in the medium or long run. Discussions to ban imports of Russian caviar and vodka are just laughable.

To the extent that the stock market shows the health of the Russian economy, sanctions have had no real bite so far. True, there was some volatility — there was a dip after the annexation of Crimea in March — but this volatility is not unusual by Russian standards. Furthermore, the West refuses to sell weapons or to provide intelligence to the new Ukrainian government. At the same time, France is still going to sell assault Mistral-class ships to Russia.



Russian stock market index (MOEX), source: Google Finance.

To Putin’s surprise, the Ukrainian government and army have put up serious resistance to his earlier moves. The level of popular support for his people’s republics in the East has also been low. At the same time, there is a truly popular movement to support the Ukrainian army, with people enrolling into the army by the thousands.

Given this situation, what are the possible outcomes?

  1. Ukraine continues fighting without any material help from the West. By now it is clear that Ukraine is not going to give up fighting. Even with a large numeric superiority in armed forces, Russia cannot win the war when people do not want to be occupied. On September 1, 2014, the Ukrainian army authorized the creation of guerilla units to fight the Russian army in the East of Ukraine. While symbolic, this move signals that resistance is going to be fierce and some calculations suggest that Russia will need to station hundreds of thousands of troops to control the territory. Invariably, an invasion of this scale can turn Putin’s war in Ukraine into a new Afghanistan with many coffins going back to Russia. How many dead Russian soldiers will it take to change Putin’s course? Nobody knows. If the history of the Soviet Union is any guide, it will be many thousands (in Afghanistan, the Soviet Army had more than 14K dead and more than 50K wounded).
  2. Ukraine continues fighting, the West radically tightens economic sanctions and gives more economic help to Ukraine. The Russian economy is heavily dependent on exports of oil, gas and weapons. It also depends on access to foreign capital markets to borrow funds and to clear transactions. If the West tightens the screw of sanctions, the economic consequences for Russia will be dire: inflation, deep recession, low income, high unemployment, a banking system in shatters. If the collapse of Lehman Brothers nearly brought down the U.S. economy, one can only imagine how bad it can turn for Russia if the banking system stops functioning. With such a negative economic background, it will become increasingly difficult for Mr. Putin to suppress protests not only of the people but also of oligarchs. Any sanctions Russia can decide in retaliation are going to mostly hurt Russia first. Indeed, the imposed restrictions on imports of food from the West already raised food prices and led to food shortages In Russia.

At the same time, Ukraine’s economy is being hurt by the war. However, with economic aid from the West, Ukraine can carry through even these tough times. If Ukraine’s new democracy survives, it will be a major blow to Putin’s agenda and eventually genuine democracy will spread to Russia and other former Soviet Union republics.

  1. Ukraine continues fighting, the West radically tightens economic sanctions, gives more economic help to Ukraine, and provides military help. While Mr. Putin spent copious amounts of oil dollars to modernize the Russian army, it is no match for Western forces. Even if the West does not send troops to Ukraine and limits military support to supplies of weapons and intelligence, the Ukrainian forces will be able to have an upper hand in combat and it will be a matter of time before they retake the East of Ukraine. Since Putin’s Russia already provides weapons, intelligence, etc. to terrorists/separatists, it is not clear how Putin can effectively respond to military supplies from the West to Ukraine.

In short, these three scenarios suggest that Mr. Putin’s chances to eventually win the war are minimal. He has been repeatedly raising the stakes to stifle Ukraine’s aspirations to become a free, democratic European country but he is running out of cards. The key question is at what cost he’s going to let Ukraine go. He is going to step down when the cost of what he is doing becomes too high, but not before. There is no doubt that Ukraine will carry the main burden of fighting for its sovereignty and independence. It may take many thousands of lives on both sides before the war is over (scenario #1), or the war can end soon. The tally largely depends on the West’s policy response.

The West’s policy of appeasement has so far been utterly ineffective. Putin has downright contempt for what he sees as the weakness and cowardice of the West. Because he only expects a weak response from the West, he does not hesitate to escalate the conflict in Ukraine to further his goal of destabilizing the fragile Ukrainian democracy.

It is an illusion to think that trying to appease Putin will make him deescalate. On the contrary, because there is no turning back for him after this aggression, his own political survival may lead him to continuing expansion elsewhere under whatever motive he will come up with: to protect Russians in other countries (Kazakhstan, Belarus, Baltic countries), to protect spheres of influence, to counter the threat of NATO, etc. Just as the Soviet Union could not survive in peaceful co-existence and stay in its borders, Putin’s Russia will not be able to stay in its borders.

Force is unfortunately the only language Mr. Putin currently understands. By helping the Ukrainian army control its borders and chase out Russian invaders, NATO and Western powers will significantly increase the costs of Russia’s recent escalation of the Ukrainian conflict and make Mr. Putin think twice before further escalating the conflict. The West should not be intimidated by the prospect of a stand-off with Russia. If Russia raises the stakes, so should the West. Putin’s Russia is no match for the West.

Ultimately, Putin’s regime will collapse like the communist regime collapsed as it was unable to keep up with the arms race in the 1980s. If the West does not muster the military strength it possesses to pose a credible and targeted response to the Russian aggression in Ukraine, then more Russian aggression is to be feared whenever it suits the domestic purposes of Mr. Putin.


reposted from VoxUkraine.

Comments to “Putin’s Endgame

  1. Putin is a bully, end of story, sort of. You either stand up to bullies or they will crush you, so if the west has any guts left it will signal to Putin that enough is enough or take the consequences of military support for Ukraine. I have read all the comments and you can take what you like from them, but for my part we cannot allow Putin to get away with his meddling any longer.

  2. You write “If Ukraine’s new democracy survives, it will be a major blow to Putin’s agenda and eventually genuine democracy will spread to Russia and other former Soviet Union republics”. Could you indicate how the Ukraine’s new leadership was democratically elected?

  3. I think a revolution in Russia would most likely come from Putin’s right, not his left. I think that’s a very important point regarding how hard Europe/U.S. will push on this issue. Russia is a nuclear superpower and Europe/U.S. should not encourage the overthrow of their government if that involves a radical right takeover. That is unacceptable, IMO.

    Russia appears to have three objectives:
    1) Secure Crimea
    2) Complete Southstream
    3) Obtain autonomy for East Ukraine (with no budget commitment on their part)

    #1 and #2 don’t seem to be negotiable for them. #3 I’m not as convinced of.

    I think the central Ukrainians won’t accept a completely independent East as that would leave them in competition with the Western Ukrainians. They much prefer to be the moderate middle that gets to run things.

    As far as future disputes, Moldova will definitely be an issue. I think the Baltics are settled. The Russians there all live in the cities, but most of the cities are located well within the Baltic countries’ territory. Belarus and Khazikstan will need to fend for themselves. Georgia seems to be a pretty settled affair. Obama is wanting a beefed up NATO, but I just don’t see Russia looking to attack it’s customers that pay.

    I’m a complete outsider and may have the basic facts of the situation wrong, but that’s how I see it now.

  4. The level of your misinformation is literally stunning. The eastern Ukraine separatists were not rescued by Russian troops. No such rescue was necessary militarily. For several weeks, the separatists has captured large troop movements by Kiev in “cauldrons,” surrounded them and either got them to surrender or destroyed them. This happened first in the area between Donetsk and the Russian border and since then, in several other locations.

    This is not a controversial statement. It’s simple facts. Since there was no reason to save the separatists, your notion of an invasion, the pure assumption is remarkable. The Organization for Security and Cooperation in Europe (OSCE) was asked to confirm an invasion. They said they couldn’t, meaning that there was no invasion observable by the official observers.

    We can have separate beliefs but not separate facts. Your statements above start with complete ignorance of the situation.

    • One can ignore the details of what’s happened on the ground (or hasn’t), but one has to only look at the geopolitical situation with Russia and Europe. How many times has Russia been invaded by Europe? Even today that threat is alive in the Russian psyche. That alone is a huge motivator for Russia to take action to maintain chaos in Ukraine. Without an all-out invasion it’s the only way Putin can limit European influence in the region.

      Once you look at the following and add some common sense, you know that Russia is directly involved. I don’t agree with it, but I understand why Putin would do this.

      90% of the world media
      Russia’s recent moves in Georgia
      Arguably Russia’s involvement in Crimea
      Vast majority of world national governments agreement (see latest UN votes)

  5. The “Nazi putsch govt.” Let us look at some history: It was Hitler who looked to bring all German speakers into the Third Reich. It was the Nazis who invented the term “Sudetenland” and then negotiated to take it away from Czechoslovakia, even though that region was of strategic importance to the Czechs.

    It is Putin’s Russia that is echoing the rhetoric of Nazi Germany these days, and who are trying to engineer a putsch in Ukraine and put in a puppet government. We must not repeat Chamberlain’s mistake. Putin needs to be opposed, not appeased. Otherwise, if history is a guide, he will turn his attention to the next targets in the Baltic.

    • I would like to see examples of Putin’s rhetoric that echoes Hitler and Goebbels. I can show you plenty from Svoboda and the Right Sector: Svoboda leader Olah Tyahnybok has called for the liberation of his country from the “Muscovite-Jewish mafia.” Tyahnybok’s deputy Yuriy Mykhalchyshyn is fond of quoting Joseph Goebbels – he has even founded a think tank originally called “the Joseph Goebbels Political Research Center.” A self-described “socialist nationalist,” Mykhalchyshyn is the main link between Svoboda’s official wing and neo-Nazi militias like Right Sector.

    • Mr Rochlin, how is it possible that you are ignorant of the fact that the West engineered the coup that brought the current regime to power? The US has admitted to spending $5bn to support the opposition groups, including neo-nazis, in the violent overthrow of an elected government. Have you seen the video footage? If not why not? Stuck with the propaganda mills at FOX and CNN?

      Russia has responded with remarkable restraint while thousands of civilians have been bombed and shelled for demanding a federated Ukraine. You (and the author here) have been told a story that’s the exact opposite of the facts. And you’ve believed it. It’s amazing.

  6. You left out the most likely solution – those rising up in the South-East of Ukraine win the civil war and sue the puppet Kiev government (The USA being the puppeteer) for peace. That is what is going on right now.

    And what will happen in the weeks and months ahead? Well, the most likely scenario is that Ukraine will have another change of government – when the populace grows tired of being repressed by the Nazi putsch govt. Ho hum – Putin wins again. And what of the dollar? Watch…..

  7. I think the EU is somewhat constrained to do anything very significant on the threat of a natural gas retaliation by Putin. I feel that the EU has failed in their attempts to deal with Russia as a result. So, any minimal effort by the EU to counter Putin should be welcomed.

    On the other hand the Obama administration, with the greatest energy supplies in the world, should have acted unilaterally and more aggressively in the sanctions arena. Australia is acting unilaterally now and the US should have taken more severe steps in sanctions earlier. Let the EU do what they can, but the U.S. should start doing bolder sanctions now.

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