Tuesday 12 April 2022

Sanctions and their hard-to-judge effect

There's a very long history of financial sanctions.  Apartheid-era South Africa and Rhodesia suffered for years, but somehow got by (and a lot of oil traders got rich).   It can't have done them any good, though.   The West managed against OPEC in 1973-74, but hardly emerged unscathed.  Cuba also got by, but hardly thriving by the standards of the hemisphere where it lies.  North Korea gets by, after a fashion, and scrimps together enough surplus resources to mount a nuclear ballistic missile development programme.  Iran hasn't obviously been brought to its knees.  Most societies only really prosper with a basic level of efficiency in day-to-day commerce, import/export etc.  Undue friction eventually wears things down.  *Eventually*, however, is to be measured not in months, but in years or even decades.

So what will be the impact of sanctions on Russia? (- imperial Russia, that is: oligarchs will just have to mourn their yachts in private.)

On the one hand, we gather Putin laid in quite substantial foreign currency reserves (and gold?).  Russia is probably OK for food, and obviously awash with energy (Germany's perpetual strategic weakness).  It seems - and this is truly remarkable, even granted the well-known long-term demographics - they are short of manpower for the fray, drafting in Syrians, Chechens, and the assorted orcs and dregs of the mercenary world: but sanctions don't really affect that kind of import.  Equally astounding, it seems they are also short of military supplies; but China can make good, if minded to do so.

Where's the short term pressure-point, then?  Or even medium term?  The only compelling answer I've read is that Russian manufacturing - such as it is, i.e. not much to write home about** - is wholly dependent on western imports for vital higher-tech components, and will rapidly grind to a halt without them.  Where will this bite?  (a) They'll need to import more or less everything from China & India eventually; and (b) their efforts to open up more remote oil provinces will be stillborn.

(b) is an interesting one for the long strategic haul.  "Upper Volta with rockets" is the traditional insult, but more recently I've heard Russia pithily described as "the oil exporter that ran out of cheap oil".  Yes, exporting oil is just as important to Russia as gas - and a lot more flexible when it comes to dodging boycotts and embargos, as those Swiss-based oil traders will helpfully confirm.  But, they're coming to the end of the cheaply-produced reserves.  The next few decades depend on opening up some much more difficult oil patches, which will be beyond them (and probably China, too) - this is the province of prime US / UK expertise.

(a), however, bites a lot more quickly, and equates to the severing of Russia from the modern world.  Do they care?  Well, Putin probably has his populace where he wants them: either patriotically onside, or thoroughly suppressed - and with a near-infinite capacity for suffering privations, let it not be forgotten.  And there's always the China trade, energy-for-stuff.  Surely that's not even remotely satisfactory, for Putin or anyone else in Moscow?   But is it sufficiently intolerable to be a deadlock-breaker, via something like a putsch, or a resort by Russia to massive escalation? ++

I really don't know the answer.  Never a good idea to place too big a bet on who can hold their breath the longest.  But it seems we may be limbering up for a contest of that sort.

ND

_____________________

** Obviously, there are some areas of remarkable strength: I gather Russia's titanium industry is second to none.  But that's just a North Korea phenomenon.  Their trucks (for example) are utter crap: as related here before, when the Chinese were first in the market for gas, Russia tried to make them buy a bundled offering, gas + trucks.  The Chinese laughed in their faces.  Either gas on its own - and deeply discounted, too - or nothing, comrade! 

++ Which can surely only mean tactical nukes, which turns out to be the only military thing Russia still has that impresses anyone.  PS, I'm willing to bet most of them won't work, either, if it comes to it.  But you might only need a couple ... 

14 comments:

DAD said...

Can you please write a post on the possibility of Russia defaulting on its Sovereign Debt?

In my simple mind it will be the lenders who suffer, but everyone assures me that it will be Russia as she will not be able to borrow on the International Markets. But since Russia now has the sanctions against her in place, I assume, she will not have access to the International markets, anyway.

Help needed.

dearieme said...

If it weren't that the US fedgov always seems so incompetent I'd begin to wonder whether this whole schemozzle is a case of Putin falling into a trap carefully laid by the USA.

Lots of potential oil territory but useful only with US/UK kit and expertise? Hm.

As for tactical nukes: I warmly recommend Paris, Berlin, Brussels, and Dublin as targets for "warning shots". That would simultaneously sober the rest of us up while also bringing silent cheer.

Anonymous said...

I worked for a Russian company in the UK during the time of Perestroika and many of the employees were Russian nationals. I was always struck by the stoicism of these people, little ambition and a sense that wherever they headed the shit would catch up to them so was there any point trying to get away from it.
A couple of the Russian directors were in it for whatever they could steal (in the end this was the whole company, offices in London and associated housing in Hampstead), the rest just expected to suffer and shuffle on.

Nick Drew said...

@ the stoicism of these people, little ambition and a sense that wherever they headed the shit would catch up to them so was there any point trying to get away from it

Victor Chernomyrdin, one-time head of Gazprom who parlayed that rather key position into becoming Russian PM, said wistfully after leaving office:

we had hoped for better things: but it turned out the same as always ...

The standard Russian reply to the cheery greeting of как дела? - how's it going? - is a resigned shrug and the response нормаль - normal.

dearieme: as I think I've mentioned before, when I was on the staff (army) and we were discussing a strategy problem, it was traditional for someone to kick off the brainstorming with: well, first, we bomb Paris ...

DJK said...

Firstly, the list of countries that aren't applying sanctions is a great deal longer than the list that are. And secondly, is there any conceivable action that the Russians could take that would result in the sanctions being lifted?

In that sense, sanctions are ineffective. Since Russia will remain under US/EU sanctions pretty much whatever they do, Putin may as well go all out and continue with the "Special Military Operation" until full disarmament/denazification applies in Ukraine.

On long-term demographics, Russia is hardly alone in facing a problem. South Korea is the worst (0.81 babies/woman). The UK is only at a comparatively comfortable 1.75 babies/women because of all the boat people arriving across the channel.

andrew said...

One of issues with battlefield nukes is that the 50% mortality blast radius of a 10kt nuke is about 600m.

This and the entire concept of a 'rolling nuke barrage' behind which their troops advance presupposes there is a large enemy unit to hit.

One response that springs to mind is to run away and go round the sides in small units.

Setting off a nuke anywhere near civilians would not be well received by rotw.

Don Cox said...

" is there any conceivable action that the Russians could take that would result in the sanctions being lifted? "

Yes. They could negotiate a treaty with the Ukrainians. It can't be any harder than the Good Friday agreement. Putin would have to swallow some of his pride. Would that kill him ?

Don

Nick Drew said...

@ Would that kill him ?

Some people think that someone would kill him ..!

Nick Drew said...

DAD - what you've been told relates to A.N.Other random country, defaulting out of a clear blue sky, so to speak (obviously not clear blue for them, one assumes). Russia in 1998, e.g.

even then, the lenders suffer too, unless default gives them collateral and/or certain intervention rights, which it sometimes does, AND these rights are worth the paper they are written on

there are plenty of creative restructuring specialists who can (sometimes) pull (some) fat out of (some) fires

Russia this time is, errr, a bit different

Anonymous said...

Don Cox: "Yes. They could negotiate a treaty with the Ukrainians. "

That's what the Minsk accords were.

Ended up being an object lesson, why the West isn't to be trusted.


Russia has everything that we need; Oil, Gas ( raw material for fertilizer production), Gold, 20% of the world grain supply.

In return the West is going to stop leaching from Russia with it's exotic financial products - AKA usuary. Oh, and cut off Facebook and that sewer Twitter.

Elby the Beserk said...

Nick Drew said...

dearieme: as I think I've mentioned before, when I was on the staff (army) and we were discussing a strategy problem, it was traditional for someone to kick off the brainstorming with: well, first, we bomb Paris ...

5:09 pm
===================================================
I give you the glorious Mr. Leonard Cohen...

They sentenced me to twenty years of boredom
For tryin' to change the system from within
I'm coming now, I'm coming to reward them
First we take Manhattan, then we take Berlin

I'm guided by a signal in the heavens
I'm guided by this birthmark on my skin
I'm guided by the beauty of our weapons
First we take Manhattan, then we take Berlin

:-)

Elby the Beserk said...

Cohen


https://www.youtube.com/watch?v=JTTC_fD598A

Charles said...

Poland is calling up reserve soldiers and sending them to Ukraine, they deploy before the end of this month. I know someone who has been called up. Also apparently Boris is a regular visitor to Poland, almost on a monthly basis, not something that has been in the press.

DJK said...

Poland is one to watch. They would quite like a slice of Ukraine (Galicia), preferably with the US or Britain doing the actual fighting. Personally, I'd rather not get sucked into WW3 over this.