Aug 15, 2023

Rethinking the West’s Russia Strategy

The United States and Europe need a new approach to dealing with Russia. Any new strategy has to accept that the West will be facing an aggressive Russia for decades rather than years.

Russia's President Vladimir Putin is seen on a screen during the broadcast of a Russian state TV news report as a local resident walks near an apartment block decorated with a mural, an element of which depicts a nuclear power plant, in the course of Russia-Ukraine conflict in the city of Enerhodar in the Zaporizhzhia region, Russian-controlled Ukraine, October 14, 2022.
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The bloodiest war in Europe since 1945 is continuing, with Ukraine unable to push back Russian forces to the pre-2014 borders, despite significant Western military and economic support. This has led a number of strategists in both Europe and the United States to argue that “the West needs a new strategy in Ukraine.” While such a need certainly exists, in order to decide upon a new and productive agenda, two major changes in our understanding of the current situation are essential.

On the one hand, it should be acknowledged that there is no “Ukraine problem” but rather a “Russia problem.” Increasing financial and military assistance to Kyiv will not solve or even ease the existing conditions: The Ukrainian advance might become a bit more impressive than it is now, but to defeat Russia militarily will require the deaths of many more dozens of thousands of Ukrainians and the loss of billions of dollars of Western money. Moreover, such a success will not change Russia’s attitudes to the world, because a military defeat, or even the departure of Russian President Vladimir Putin, will not produce the societal changes that can only take place from within the country, rather than be imposed by the outside world.

On the other hand, any new Russia strategy needs to include the realization of the following: what was done wrong from the very start of the Russian invasion and what should be changed in the current Western approach; how the ongoing war can be terminated if the Ukrainians prove unable to achieve a straightforward military victory in order to stop the country’s ongoing destruction; and, last but not least, by what means Russia might be transformed into a decent modern society after Putin leaves—since, there are few grounds to believe personnel changes in the Kremlin would mark the end of Russia’s recent struggle with modernity.

What Went Wrong

It seems that while Western leaders were well informed about President Putin’s preparations for an invasion of Ukraine, they initially regarded it in the way that Russia itself described it—as a “special military operation” and not a full-scale war. Only this can explain why direct military assistance to Ukraine only began in earnest two months after Moscow launched the invasion in February 2022, while both personal and economic sanctions formed the major initial response to the Russian attack.

The latter were impressive if compared to those that followed the annexation of Crimea, the occupation of Donbass, and the downing of Malaysian passenger jet (flight MH17): They immobilized half of Russia’s foreign exchange reserves, cut off Russian companies and citizens from global financial markets, and disrupted transportation links between Russia and the West. Two weeks after the start of the war Russia formally became the world’s most sanctioned country, outpacing Iran with 9,117 individuals and 2,210 legal entities targeted by sanctions introduced after February 24, 2022. But, just one year later, the Russian economy has resumed growing after a mere 2.1 percent decline in 2022, the national currency has remained relatively stable until its sudden mid-August dive (the ruble fell to its lowest point for sixteen months on August 14, when one dollar was worth more than 100 rubles). Both inflation and unemployment are remarkably low. Why have sanctions had such limited effect so far?

I would argue this is for five major reasons.

First, Western policymakers greatly overestimated the importance of their own nations to the Russian economy—in terms of trade, investment, and innovations. While in the first quarter of 2022 40.6 percent of Russia’s exports went to Europe and North America, in the first quarter of 2023 the figure only stood at 14.8 percent as China, India, and Turkey combined increased their share from 24 to 63 percent and replaced the West as the main consumers of Russia’s resources (with pipeline natural gas being the only exception).

The Russian government seized the service outlets and production facilities of hundreds of Western companies, confiscating at least $28-34 billion in assets in what I call “the largest theft in history.” Moscow nullified almost all intellectual property rights and turned to China for most of the goods it needed while using Hong Kong, the United Arab Emirates, and Turkey to bypass the high-tech restrictions imposed by the West. Putin has turned the Western exits from the Russian market and the “parallel imports” to his advantage: He is using the ex-Western assets to compensate his most loyal supporters among Russia’s businessmen, while his bureaucrats and their associates earn billions of dollars smuggling foreign goods into Russia.

Second, Western governments appeared to be very slow and/or selective in introducing sanctions: e.g., while some restrictions were imposed on Russian banks on the first day of the war, it took six weeks to target Sberbank, which was given two months to terminate its dollar-denominated transactions, and the latest Russian banks were only sanctioned in February 2023. Meanwhile, it took over nine months for European Union officials to establish an embargo on Russian crude and almost a year on petroleum products.

Furthermore, only a quarter of all the Western companies that officially announced they were terminating business in Russia completely exited the Russian market. This has allowed the Russian economy to adopt new regulations, diversify into new markets, and find alternative partners in both technological and financial sphere. By early April 2023, the Chinese yuan successfully overtook the dollar as the most traded currency on the Russian forex exchange market, while in the first half of 2023 Russia became the world’s largest foreign market for Chinese-produced cars.

Third, many policies promoted by Western authorities appeared to be more painful to their own economies than to Russia’s—while not benefiting Ukraine. The prime example here is the European energy sanctions that caused a massive hike in gas and oil prices well before the EU member states were ready to forgo Russian supplies. As a result, Russian crude and processed oil export revenues increased by $115 billion in 2022 year-on-year, and gas exports were $27.2 billion higher, while the European nations (including the UK and Switzerland) have spent at least €500 billion on subsidies to keep energy affordable  for both companies and individual consumers. The moves by Visa and Mastercard to stop servicing payment cards issued by Russian banks were also counterproductive: They succeeded in keeping at least half of the around $30 billion Russians usually spent abroad each year inside Russia, thus contributing to the growth in domestic demand.

Fourth, the Western sanctions mistakenly first targeted private Russian businesses and the Westernized part of the Russian public. When imposing restrictions on Russian energy, the EU started with coal, all of which is mined by private companies, and only later expanded sanctions to oil (mostly pumped and processed at state-owned facilities) and never imposed a ban on pipeline gas, exported exclusively by Gazprom. The superrich Russians whose mansions and yachts were seized all over the world were those who for years respected Western rules when it came to their companies and legally bought their property abroad, trying to curb their exposure to Russian risks. The travel and luxury goods restrictions hurt those Russians who had become accustomed to European living standards and the vast majority of whom had never been Putin fans. The West blatantly sent thousands of entrepreneurs into Putin’s embraces, and alienated hundreds of thousands of self-made liberal-minded Russians, many of whom nevertheless left Russia—not for Europe but rather for the United Arab Emirates, Turkey, Kazakhstan, or Israel. By sanctioning businessmen, officials, and even many mid-ranked military personnel, Western policymakers decreased their potential ability to revolt against the Kremlin, simply by limiting their options for retreat in the case of failure.

Fifth, almost no sanctions that would damage those sectors of the Russian economy that ordinary people rely on for their survival were imposed. While the Kremlin claims it had made Russia self-sufficient in agriculture, more than 95 percent of sugar beet, carrot, and cabbage seeds are imported, as is 98 percent of hop, and almost the entire stock of whitebait and compound feed used in fish farming. No restrictions were imposed on supplying vaccines for chicken and cattle, foodstuffs, or pharmaceuticals. All this, combined with the moderate indexation of pensions and salaries, allowed the Russian government to keep the living standards of the lower middle class relatively stable and even report new milestones in reducing poverty, which recently fell below 10 percent of the population. Western smartphones were not blocked, the internet still works—so that “ordinary” people who en masse at least passively support Putin’s war against Ukraine, are almost unaware of any sanctions.

To summarize, the sanctions pushed Russia closer to China, India, the UAE, and other non-Western countries, but did not paralyze its economy. At the same time, they succeeded in undermining trust in Western values and practices on the part of the many Russians who never supported President Putin’s policies, and even united them around the “national leader.” The sanctions, even if they are expanded, cannot destroy the Russian economy—in the best scenario they may hurt it significantly  two to three years from now, but such a delay would leave millions of Ukrainians exposed to Russian war crimes for many years to come.

Which Ceasefire Is an Option?

Already last summer, with the first signs that the Russia-Ukraine conflict was evolving into trench warfare, many Western policymakers and experts started to voice their proposals for finding a solution that might satisfy both parties. Different initiatives were proposedfrom negotiating a ceasefire with the troops remaining at their current positions  to sophisticated schemes that included new plebiscites held in the occupied territories. In May 2022, French President Emmanuel Macron said that “peace is of greater importance than territories.” While this became less relevant as Ukraine began to take back control of some occupied territories, these arguments are now reemerging as the cost of the war increases for both Ukraine and the West, and the Russian forces seem to remain resilient in the wake of a Ukrainian counteroffensive that hasn’t brought any significant successes yet.

Those authors who advocate the termination of the current hostilities through either an armistice or some more lasting peace are making a completely reasonable point. Every month of war brings thousands of casualties, additional destruction, slowing economic activity in Ukraine, and, what I see as the most crucial consequence, the changing nature in Ukrainian emigration: many of the six million Ukrainians that had fled to Europe were ready to return back last autumn, but are more reluctant to do so now, and will most likely settle abroad forever if the war goes on for one or two more years.

Nevertheless, there are two major obstacles to a peace treaty as envisioned by some Western strategists.

First, President Putin cannot be trusted—especially when it comes to Ukraine. In 2003, during a visit to Kyiv, Putin signed the Russia-Ukraine Treaty of the Interstate Border, and the following year he signed Russia’s federal law ratifying that treaty after it was approved by the State Duma of the Russian Federation. Later, however, he broke his own promise at least four times: First as he ordered Russian troops to invade Crimea in 2014, then as he supported the Donbass separatists and brokered the so-called Minsk agreements in 2014 and 2015, and finally as he “recognized” the Donetsk and Luhansk “People’s Republics” on February 22, 2022, and two days later attacked Ukraine. No one should criticize Ukrainian President Volodymyr Zelensky when he says he will never negotiate with Putin.

Second, the Kremlin seems now to be vitally interested in continuing the war. When President Putin announced his “special military operation,” he claimed the main reason was “to defend Russia from those who have taken Ukraine hostage and are trying to use it against our country and our people... to defend ourselves from the threats created for us and from a worse peril than what is happening now” as the Western countries were, he argued, endangering Russia by rearming Ukraine and nurturing its ambitions to join NATO. Later the Russian leader presented additional reasons for the war, including the aim of “de-nazifying” Ukraine. Quite recently Russian Foreign Minister Sergey Lavrov voiced another set of objectives, saying that “the war is waged not for territories, but for people, for our history, our religion, for the Russian language.”

The Kremlin will invent as many causes and objectives for the war as it needs—and it will continue fighting whether the Russian troops are advancing or retreating. Political scientist Samuel Charap rightly observes that “even if Kyiv were successful beyond all expectations and forced Russian troops to retreat across the international border, Moscow would not necessarily stop fighting.” Putin’s propaganda has depicted Russia as a besieged fortress, and the president as its only savior. But what seems even more important is that Russia is now transforming its economy into a war-time one: While many experts told Western policymakers for months that the Kremlin would fail to produce enough armaments and ammunitions, the opposite is happening. For example, Uralvagonzavod increased its monthly tank production by at least five times in the last 12 months, producing more than 30 percent profits and enormous bribes, all of which benefits the loyal Russian businesses. With a dramatic increase in military salaries and payments for soldiers killed in action, President Putin has made it possible for the family of a 35-year-old man from a central Russian province killed in action to receive more money than he would have earned till retirement.

Therefore, it seems that the Russia-Ukraine conflict cannot be ended through negotiations. The Russian leadership denies Ukraine’s very right to exist, and will likely invent any number of pretexts to resume the war.

I would argue that there is only one chance for terminating the war: to do so without Russia’s formal consent. For this, the West should propose to the Ukrainians that they declare a unilateral ceasefire along the current frontline in exchange for either acceptance of Ukraine’s NATO bid or assuring its security with NATO forces stationed there, and to allow Ukraine to immediately enjoy full membership of the European Union and a Marshall Plan-like assistance.

Such a scenario would provide Kyiv with both security guarantees and the economic levers for a post-war rebuilding effort without a formal agreement with Russia—thus leaving it free for further military actions if the war resumes in the future. I would argue that such an option is the only one that might satisfy all the sides of the conflict: Ukraine would get all the security guarantees it wants; the Kremlin could announce its success, as it would have seized some Ukrainian lands; and President Zelensky could say that he refrained from agreeing to any treaties with Putin and saved Ukraine’s independence. The task of expelling the Russians from Ukrainian lands should be postponed until such a time as when Putin’s regime is dismantled.

Vested Interests in Regime Change?

As I mentioned earlier, lasting peace in Europe could be achieved when the “Russia problem” is solved through the changing of its current regime, and supporting what might be called its “Europeanization”—similar to that which occurred in Germany after World War II.

On the issue of regime change, the US leadership has reiterated many times that it has no plans to attempt to topple or kill President Putin, and  many academics argue that “any US push for regime change in Moscow is a bad idea.” Nevertheless, it seems there are no other means to ensure a lasting peace between Russia and the West—and there are signs that a debate among US and European experts is emerging about this issue. This may gain traction following the challenge to Putin by a group of his own mercenaries led by Yevgeny Prigozhin a few months ago.

However, several crucial issues need to be addressed when it comes to talking about regime change.

The first is the role of the Russian people. Some experts compare the current situation to that of the Cold War, arguing that “the answer to regime change in Russia must come from the Russian people, so the West can help by deploying its most potent weapon, the one that brought down the Iron Curtain: the truth.” Such an approach looks very naïve, since for decades the Russian public enjoyed unrestricted access to “the truth,” but it was so distasteful that President Putin’s lies were preferred. Moreover, to know for sure what the “truth” is doesn’t necessarily mean to actively support the right cause: As I argued more than a decade ago, Russian society had become extremely individualized and atomized well before President Putin arrived in the Kremlin. The recent mutiny revealed how difficult attracting popular support for regime change could be—while many Russian citizens sympathize with Yevgeny Prigozhin, the head of the Wagner group, no civilians joined his “March on Moscow.” Putin’s regime would not be defended by ordinary people if someone wished to topple it, but no one should bet on a mass movement aimed at overthrowing him either.

The second issue is the role of the Russian opposition. It has become a common notion that between 10 to 15 percent of Russians oppose President Putin, and this might be true. But I would argue that what is regarded as the Russian oppo­sition is rather a group of intellectuals, journalists, and activists whose career paths don’t suggest they would pose a challenge to the regime. Many of the prominent figures inside this movement—from late Boris Nemtsov to Mikhail Kasyanov, from Vladimir Ryzhkov to Alfred Kokh—were perviously top officials, prime ministers and vice-premiers, vice-speakers of the State Duma, etc. Mikhail Khodorkovsky was Russia’s wealthiest businessman in early 2000s.

Decade after decade, these people have been losing their positions and wealth, turning into commentators and influencers until being forced into exile in recent years. They are all undoubtedly decent individuals, committed to liberal values, but I cannot imagine how those who have been losers for almost quarter of a century could suddenly reemerge as their country’s leaders. Moreover, for years they were regarded with ambivalence as emigrant dissidents—but now almost all of them openly declare their commitment to Ukraine’s victory over Russia, which makes them traitors in most Russian citizens’ eyes. Taking all this into account, I would not recommend that Western policymakers bet on these people.

The third issue concerns people and social groups inside Russia that might be the most interested in changing their country’s course. I would say  that these days the composition of Russia’s social groups is much more complex and complicated than it was, for example, in the Soviet Union in 1953 after the death of Joseph Stalin, or in late 1980s and early 1990s. During these periods of great change, the vested interests of the bureaucracy and the middle class were quite clear: In the first case, the bureaucracy was interested in terminating the purges and protecting itself from Stalin-era violence; in the second, ordinary people were seduced by the promise of enjoying a Western-style way of life and therefore supported Perestroika quite enthusiastically. These days, almost every social group in Russia is internally divided. 

When it comes to those working in the country’s bureaucracy, it should be noted that they enjoy unprecedented wealth. Russia functions as a “commercial state” where  public service is the most profitable kind of business—and therefore the majority of bureaucrats support Putin. Nevertheless, some of them are very ambitious, hoping to advance futher than is possible in Putin’s hierarchy, and some envision tough problems ahead and might favor change because they want the system to become more stable. The high-ranking members of the military are loyal to the president, since they all benefit from his rule (the deputy ministers of defense are thought to be dollar billionaires), but that might not be so true concerning mid-level generals who are now being killed in Ukraine (another lieutenant-general perished in July bringing the total number of Russian generals fallen in action to 11) under an ineffective and unprofessional command. The munity of the Wagner group showed that even a limited number of fighters can knock out the entire government structure, and commanders of several elite divisions can be relatively confident that the rest of the army would not stop them if they tried to orchestrate a real coup.

The Russian business class is considered a pillar of Putin’s rule, and a great part of this class will not revolt—but nevertheless, many had global ambitions and owned large international businesses before they were locked into Russia with much of their fortune seized because of the Western sanctions (I would even argue that the entrepreneurial community is the most receptive to the anti-Putin movement since it believes that money, not sheer force, should rule the country they have built since 1990s).

Therefore, I would argue that inside every social group in Russia there are forces that would support any trends that might take Russia away from its current path. But it should be noted that these days, those unhappy with Putin face two major obstacles: On the one hand, they fear an imminent danger from the Russian security services, and, on the other hand, they feel alienated from the West as not only Putin’s war criminals, but thousands of much less guilty Russians are being placed on different sanction lists. If the West wishes to see the Russian regime to deteriorate, it should introduce at least two changes into its policies.

Two Proposals for Changes in Strategy

The first change must be the unilateral termination of the current intensive phase of the Russian-Ukrainian war. If a ceasefire is established, and Ukraine starts its post-war restoration while enjoying EU membership and either NATO member status or direct Western military support, the Russian elites would find themselves in new circumstances -- with the war ending, but the economy remaining in its poor condition and  all the financial and trade sanctions still in place.

Currently, President Putin may enjoy his status of a war-time leader, and may not care about the everyday issues that Russian society considers relatively unimportant while the war continues. The end of war would force Putin to face peacetime issues that he would be unlikely to be able to resolve—and this would undermine his power. It is important to point out that his attacks on Ukraine both in 2014 and 2022 came at a time when his approval ratings were low because of poor domestic economic performance, and that to therefore force Putin to deal with these issues is another important argument for an immediate ceasefire. A peacetime blockade is more dangerous for the regime than a wartime one.

The second step would be the creation of a split inside the Russian elites. All the necessary means to achieve this are in the West’s hands. To disorient the Kremlin, the Western policymakers should diversify the personal sanctions imposed on Russian nationals. Those of them engaged directly in Putin’s war would never betray the president and should join their commander on the list of individuals wanted by International Criminal Court, thus being once and forever designated as “untouchables.”

Meanwhile, all the sanctions should be lifted from those who can significantly influence Russian politics and have vital interests in the West; while those who may be seen as the core of the post-Putin ruling class in Russia should be left in their current position on the sanction lists. Such a differentiated approach would cost the West nothing, and would immediately ignite quarrels within Russia—since it would make President Putin and his secret service commanders suspicious that many around him had switched sides and could no longer be trusted, as they were no longer sanctioned. This may deliver a more serious blow to the system than either the Prigozhin mutiny or even the Ukrainian counteroffensive—especially if some of these people start to flee Russia for Europe or the US.

The task of elaborating a new Russia strategy is extremely important for one more reason. The Russian liberal opposition is trying to solidify its cause by insisting that Putin’s regime is unstable—but they are doing so only because this is what they dream of. They try either to be seen as more influential than they are, or to agitate their supporters by disseminating “fake news” about Putin’s deteriorating health (in some cases these rumors have even been debated by the most respected Western newspapers, despite there being no proof). Putin’s regime is actually much more stable and solid than most analysts assume, and if Western policymakers want to see a post-Putin future, they should produce a Russia strategy that would work for decades rather than years.

Vladislav Inozemtsev, Special Advisor to MEMRI’s Russian Media Studies Project in Washington (DC), is Founder and Director of Moscow-based Center for Post-Industrial Studies.

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