Total economic war is the best way to stop Putin | Orysia Lutsevych
“Putin must fail.” These are the words of British Prime Minister Boris Johnson.
The way to achieve this is through all-out economic warfare, not the weak sanctions and half-measures that have been put in place thus far. All political, diplomatic, military and economic means, except war with Russia, must be deployed in synergy to ensure that Ukraine continues to resist and that Russia weakens and fails. Providing arms, supplies and intelligence to the Ukrainian Armed Forces is essential. But much more needs to be done now to wage an economic war to undermine Putin’s ability to continue this war.
We must exhaust the income of the Russian state by limiting its trade with the West. Every day, the US, UK and EU buy more than $700 million worth of oil, gas and other raw materials from Russia. Some of Russia’s largest state-owned companies, which are essential for commodity trading, have not been sanctioned. European economies, especially Germany and Italy, must start preparing now for a life without Russian gas and threaten a full embargo.
In the financial sector, we need to impose blanket sanctions on all Belarusian and Russian banks and put them on the US Specially Designated Nationals List – which will freeze their assets and make it illegal for anyone in the US to do business with them. All Russian and Belarusian banks should be disconnected from the world’s leading banking messaging service, Swift. Sanctions should be imposed on clearing in rubles, which means that no transactions in rubles are possible and in effect trade is blocked, and there must be a total ban on pension funds from the sector American and British public to hold Russian assets. Russian-linked cryptocurrency wallets should be identified and seized.
Finally, the 5,000 members of Russia’s political, economic and military elite and their families must be banned from obtaining visas to the UK, US and EU. These privileges should be restored for anyone who publicly declares that he does not agree with Vladimir Putin‘s war and resigns. And if those in control of the military operation in Ukraine seek another exit ramp, they could defect now and be granted immunity for war crimes, which should be investigated by a special court on aggression against Ukraine.
We know that sanctions work. At the very start of Russia’s aggression against Ukraine, the US, EU and UK acted quickly – freezing much of the central bank’s $638 billion in reserves. Russian was a blow. About $403 billion of the bank’s foreign exchange reserves are held in dollars, euros, pounds and other Western currencies. Russia can no longer access these funds. A series of Russian banks have been cut off from the Swift payment system, which will effectively prevent the country from importing and exporting to and from the EU. Around 80% of the Russian banking sector is currently under US sanctions.
The impact of these measures on the Russian economy is already substantial and will only worsen over time. The value of Russian companies listed on the London Stock Exchange has fallen by 98%; the ruble continues to fall and has already lost 40% of its value. The central bank is desperately trying to prop up the ruble by imposing capital controls and doubling its interest rate to 20%.
The Russian leadership now represents a pariah state. Individual financial sanctions are already in place and travel bans are in the works. Putin’s foreign assets, as well as those of Foreign Minister Sergei Lavrov, Defense Minister Sergei Shoigu and members of the Russian Security Council have been frozen. The EU has sanctioned the 351 members of parliament who voted to recognize Donetsk and Luhansk. More than a dozen billionaire oligarchs linked to Putin are subject to asset freezes and travel bans. The UK list, however, is shamefully small – only three such people are included. But the UK government is working on new legislation that would allow it to act on the oligarchs’ ‘hit lists’.
In the private sector, the tide is also turning: multinationals treat Russia as a toxic market. Major manufacturers of energy, technology, consumer goods, cars and aircraft are pulling out of Russia. A global boycott of Russian products campaign is underway to pressure all companies to stop cooperating with the aggressor state. Norway’s sovereign wealth fund declared its $3 billion investments in Russia worthless overnight. This is just a harbinger of what is to come for private funds and pension funds holding Russian assets.
All of these efforts go in the right direction, but they should be intensified as Putin escalates his war on terror in Ukraine. A quick and easy step would be to waive the one-month grace period for the original US sanctions.
Let’s not forget that Putin declared war on Ukraine and bombed its sleepy towns. He decided to go to war to satisfy his neo-imperialist ambitions, his desire to stay in power and his intention to destroy what is left of the global world order.
What is happening in Ukraine is something not seen in Europe since World War II. Putin’s Blitzkrieg attack on Kyiv failed and the Ukrainian Armed Forces successfully repelled the Russian army on the battlefield. The Kremlin is now besieging big cities like Mariupol and Kharkiv and razing smaller towns like Irpin, Hostomel and Bucha. His soldiers kill civilians who try to flee. There is evidence of deliberate targeting of civilian buildings, including using cluster bombs, which are prohibited by the Geneva conventions. Russia is violating ceasefires and 200,000 women and children cannot leave Mariupol through agreed humanitarian corridors. And the situation will only get worse in the weeks to come.
So yes, Putin must fail. But the West must find the courage to make it happen. If boots on the ground and no-fly zones are irrelevant, then the West’s response to this war must be economic warfare in the name of defending democracy and freedom. There are costs to be shared by all, but also benefits, if Ukraine also protects the rest of Europe from the horrors of war. With the support of the West, Ukraine could once again become an open democratic society, the keystone of European security right next to Russia.
Because by ensuring that Putin fails, we ensure that Putin as a whole also fails, and with it the idea that brutal military force can be used to restore a former imperial possession.