It is fashionable among iPad generals and amateur military historians to explain Russia’s invasion of Ukraine by citing Russia’s historical concerns about an invasion of its territory from the West. This theory holds that Russian action in Ukraine is informed by the historical lessons of Napoleon and Hitler’s invasions that both nearly succeeded. Russian offense in Ukraine, these idiots pontificate, is actually a defensive move when considered in historical context.
The analysis is absurdly wrong and easily discredited by one simple fact: Russia has committed 75 percent of its combat-ready forces to the Ukrainian theater, leaving practically nothing left to defend against the supposed threat of an invasion from the West. Ukraine has already swallowed up irreplaceable equipment and manpower. Estimates vary wildly. But NATO estimates Russia has suffered anywhere from 7,000 to 15,000 killed in action with an estimated total casualty rate of around 10 percent of the invading force of 150,000 troops. The combination of battlefield losses, low morale, and poor logistics have likely rendered a much larger portion of the invasion force combat ineffective.
In other words, if these reports are accurate, Russia’s best course of action is to pull back as many of its forces that can still be salvaged or risk losing the bulk of its army to the operation. The past month demonstrates that the Ukraine invasion was not a brilliant move for Putin on the world’s chessboard. Mounting losses have already overshadowed whatever mercurial justification Putin had for the ill-fated invasion.
The war is going so badly, so quickly for the Russians that oil markets are beginning to bet on a foreseeable end to the war with a resumption of orderly energy trade. There’s no more talk of China exploiting the Ukraine distraction to launch an attack on Taiwan. Phrases such as “a new world order” have begun to pass the lips of triumphant politicians as the conventional war capability of Russia sinks into the Ukrainian abyss.
Russian losses are mounting so quickly that the country is losing leverage in future peace negotiations. As badly as our withdrawal from Afghanistan embarrassed American prestige, nobody questioned the post-withdrawal readiness of the U.S. military. It will take years for the Russians to replace their losses in Ukraine.
So what happens next? Will Russia be able to reconstitute the pre-war energy relationships with Europe? Will the Chinese furnish modern military equipment to replace the tanks and trucks lost in Ukraine? Will Russia open its vast natural resources to China in exchange for Chinese military and economic protection?
Since the days of the Obama Administration, permanent Washington has revived and maintained the image of a Russian boogeyman to justify large expenditures on military and diplomatic initiatives.
China might be the more realistic object of American conflict preparation. But China’s entanglement with so many of America’s elite institutions and corporate interests has made it an inconvenient target. Russia, on the other hand, has little or no influence on K Street. Hollywood freely censors and revises scripts to please Xi Jinping, but Vladimir Putin not so much. Until Ukraine, Russia remained powerful enough to fulfill its role as a plausible justification for our military-industrial complex. But Russia has never posed a credible financial threat to monied interest in the West the way China can.
The Justice Department used Russophobia to interfere with the orderly transfer of power following the 2016 election. Leveraging fear of Russia, the Biden Administration developed exotic and biting financial sanctions that tested the norms of international finance.
The war in Ukraine threatens to challenge the continued use of Russia as a justification for all of that. Russia will be grievously wounded by the Ukraine war. Putin’s political survival may come under attack. The West may soon lose its manufactured antagonist, leading to some uncomfortable questions about the size and scope of U.S. military adventurism, NATO, and whether the international financial system has become a tool of U.S. foreign policy.
Biden’s sanctions against Russia have raised even more uncomfortable questions about the safety of wealth in Western banks. As the Wall Street Journal reported:
After Moscow attacked Ukraine last week, the U.S. and its allies shut off the Russian central bank’s access to most of its $630 billion of foreign reserves. Weaponizing the monetary system against a Group-of-20 country will have lasting repercussions . . . Many economists have long equated this money to savings in a piggy bank, which in turn correspond to investments made abroad in the real economy. Recent events highlight the error in this thinking: Barring gold, these assets are someone else’s liability—someone who can just decide they are worth nothing.
If the Russians are forced to accept unfavorable terms to extricate themselves from Ukraine, the question of financial compensation for the damage they’ve inflicted on Ukraine will place these reserves in long-term jeopardy. While it is just that Russia pays for the damage the war caused, the Chinese (who ran an unsafe lab in Wuhan) are surely wondering if its foreign reserves are safe.
China, Iran, Saudi Arabia, and India—all countries among the largest foreign currency reserve depositors—are also countries against which the United States has either levied or considered levying sanctions. After the success of the financial sanctions against Russia, the quasi-rivals to the United States must be worried about the possibility of a future political dispute with us leading to a sudden forfeiture of financial security. With this in mind, China is actively courting countries to obtain support for a Chinese-led financial system. If the United States is unwilling to guarantee apolitical administration of the financial system, others will step in to fill the void.
In the short term, Ukraine is shaping up to be a spectacular victory for its patrons in the State Department and the military. Their celebrations may be short-lived and bittersweet, however. In the wake of this experience, permanent Washington bureaucrats will have to develop new justifications for their outsized power and bloated budgets.
The United States will also need to consider the long-term consequences of weaponizing its dominating influence in international finance if it wants to maintain the primacy of the U.S. dollar. The recent example of Justin Trudeau’s Canadian banks freezing the assets of his political opposition clearly demonstrates how easily financial sanctions can be abused. If it can happen in Canada, it will eventually happen here. Americans need to stop letting career bureaucrats dictate our national direction and start asking uncomfortable questions.
