December 2, 2022

Donalds Hobby

World Finance Reviews

Putin’s war will shake the world

The phoney war is over. The real war has begun. For several weeks, the US and British governments have believed that Vladimir Putin was intent on a full-scale invasion of Ukraine. That is now happening.

The precise targets of the Russian military are still emerging. But it is already clear that this is not a limited attack, confined to the disputed regions of eastern Ukraine. Explosions have been heard in the Ukrainian capital, Kyiv. And there are reports of Russian troops crossing the border from Belarus — which is the shortest and most direct route to Kyiv.

Western security services, which have accurately predicted the course of events up until now, believe that Putin intends to overthrow the Ukrainian government and install a puppet regime in its place. This “decapitation” strategy will take in not only the central government, but also regional and local governments. Lists have been drawn up of Ukrainian officials who will be arrested or killed.

The military tactics that Russia uses are likely to be extremely brutal — “the kind of thing we saw in Syria and Chechnya”, according to one US official. The deployment of Russian artillery and its air force would mean heavy military and civilian casualties on the Ukrainian side. Some western sources have spoken of 50,000 deaths within a week.

The Ukrainian military is determined to fight back. But it is likely to find itself heavily outgunned. The Russian goal may be to surround Kyiv and force the collapse or resignation of the Ukrainian government, led by Volodymyr Zelensky.

The Russians will not want to get involved in urban warfare, if they can avoid it. They are also determined to keep the west out of this conflict. In his speech, announcing the invasion, Putin warned outsiders tempted to interfere that there would be “consequences you have never encountered in your history” — a thinly veiled reference to nuclear war.

For now, the western reaction will be confined to economic sanctions. Fearing that this moment was fast approaching, US and European diplomats have been working on a co-ordinated sanctions package for some weeks. That will be rolled out over the coming days.

Russia will now be hit with financial, individual and technological sanctions. Russian banks will be cut off from finance. Powerful Russian individuals will find themselves unable to travel to the west and will have their assets in western banks frozen. Russia will be cut off from advanced technology — such as semiconductors and aircraft parts.

The effects on the Russian economy are likely to be profound. But that is unlikely to divert Putin from his chosen course. The Russian leader himself is not going to go hungry. Instead, he is likely to use the war he has unleashed as an excuse to wipe out the last vestiges of political freedom in Russia. The country will now tilt into full-scale dictatorship, which will make it easier to stamp out any dissent from Russians dismayed by the course that Putin has chosen.

An economic rupture between Russia and the west will also have serious economic consequences for Europe and the US. Even before this conflict broke out, energy prices were soaring. If Russia cuts off gas supplies to Europe, then consumers and industry will suffer badly. The direct effects will be felt most heavily in those countries that are most dependent on Russian gas — in particular Germany and Italy. But the whole of the western world could be tipped into recession and inflation. And western political leaders are much more vulnerable to public opinion than Putin.

Although Nato has made it clear that it intends to stay out of the war in Ukraine, there is a risk that the conflict could expand. One scenario that western leaders are concerned about is that the Russian air force may chase the Ukrainians into Polish airspace. That could lead to direct clashes between the Russians and Poland, a Nato member. Russian air strikes could also kill Americans or Europeans still resident in Ukraine, increasing pressure on their governments to respond.

Western governments are also actively debating how to help a Ukrainian insurgency — if and when it emerges — to fight a Russian occupation. Supporters of this plan of action believe that it will be both a moral duty and a strategic imperative to allow Ukrainians to continue the fight. Others worry that supporting an insurgency could turn Ukraine into a new Syria on the borders of Europe.

These debates will take on an increasing urgency in the coming weeks. But, for now, Putin has the initiative.