Putin Will Fight Until His Army or Economy Collapse. Oil Sanctions Will Hasten That. But China Does Not Want a Russian Collapse.

Widespread hope for a negotiated peace in Ukraine looks misplaced.  Most evidence suggests Putin will fight on until the army or economy (or both) collapse.  We can hope collapse comes soon.  The risk is it doesn’t.

The US has likely come to the same conclusion.  That argues for sharper escalation to hasten that collapse.  My guess is Biden’s trip to Brussels is to arm-twist the EU (really the Germans) into cutting off or tax-penalizing oil/gas/both purchases from Russia – or at least setting some uncomfortable red lines for doing so.

The US argument? You are already at war with Russia whether you want to face it or not, so take a 2%-5% “sanctions” GDP hit now instead of a 10%-15% “hot war” GDP hit later.  Note that Saudi Arabia on Monday set out its terms to crank up its pumps (help in Yemen, no deal for Iran, and stop talking about that dang journalist we dismembered…).  The US probably brings that Saudi commitment to the negotiating table to help cushion the supply shock.

Energy sanctions would have a drastic impact on Russia.  It might help force the issue and/or hasten the military/economic collapse.  More to the point, they are worth a try.  Even if it doesn’t end the war, Russia still ends up less dangerous (deeper in a hole).  It would remain disruptive, but the “free world” must figure out how to get along without them.  Because we can’t rely on Russia anymore anyway.  Even Germany knows that even if it doesn’t want to face up to it (yet).

But (clutching handbag) surely Russia doesn’t want to end up a pariah state like Iran or North Korea…!?  Yes, the “Russian people” don’t want to live in a pariah state, but they have no voice here.  Putin and his cronies are probably looking forward to running a pariah state. 

For Putin and the Cronies – that should be a band’s name! – pariah state status looks like a pretty good outcome.  Building a wall around Russia builds a wall around their own perks and privileges.  No more pesky pretending around elections and silly legalities.  They can get the Chinese to build a Great Firewall to lock down the Internet.  The economy will stagnate, but the oil money will flow well enough to grease the corruption machine.  Best of all, those annoying, smarmy, educated, Western-leaning, economically dynamic elites will all emigrate!!!  Leaving behind a more tractable, resigned, less dangerous, but less productive population to control.

OK, they will lose some trips to the Riviera, but Putin and his crowd prefer Sochi anyway.  Eventually, they will find some clever Western quisling law firms who will poke enough holes in the sanctions regimes.   Life will go on quite comfortably for the people at the top and their kids.  At least for those who evade Stalin-esque show trials, disappearances, and etc…  Their imagined model is likely more China than Iran or North Korea, but these are the same delusional idiots who though Ukraine would be a walk-over.

The one wrinkle is Russia will end up uncomfortably dependent on China.  Because the Russian military will emerge broken from Ukraine and Russia is unlikely to have the economy (or semiconductor supply) to rebuild it quickly or at all.  The Chinese yoke will likely chafe more than Putin and the Cronies appreciate.  But they won’t fully understand that until they are fully wearing it.

This is incredibly depressing.  Unless the sanctions ramp up to seriously “break” Russia’s ability to fight, Putin and the Cronies will keep pressing because the outcome – pariah status – has its appeal.

But…  the above ignores China’s interests. I see a decent chance China twists Putin’s arm to bring the Ukraine war to a close.  Not because China wants to “do the right thing,” but because it is in China’s self-interest to yank Putin back from the abyss.

Put another way, a China intervention would be great for Ukraine.  But a China non-intervention would be great for the West’s chances of “winning” Cold War 2.0.  If China understands its own interests, it will yank back Putin to give China a better shot at replacing the US down the road.  So maybe we should be rooting for China to make a strategic blunder here?  Let the war drag on?   I’ll save that for my next piece.

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