What Caused the Russia-Ukraine War? by Spaniel William

Author:Spaniel, William
Language: eng
Format: epub
Published: 2022-06-27T00:00:00+00:00

How Russia Underestimated the West

Another clear-cut failure was in the anticipated Western reaction. Following Russia’s 2014 annexation of Crimea, the West’s response was tepid. Russia suffered from moderate economic sanctions—perhaps enough to convince Putin to temporarily hold off from going any further, but not enough to remove Russia from the region.

In the eight years afterward, Russia built up a so-called “fortress economy” designed to resist the deeper sanctions that the West might impose. The hallmark of this was the enormous foreign cash reserves the Russian Central Bank held: $469 billion. Think of this as a rainy-day fund. If the West were to freeze Russia from the rest of the world, Putin could dip into those savings as necessary. Indeed, access to those funds was critical to propping up private banks and preventing the ruble from crashing at the beginning of the war. This was an initial victory.

Eventually, though, Russia encountered an unanticipated problem. It is true that Russia owned $469 billion. But that is not the same as having it. Russia stored the vast majority of that money in the hands of external banks, like the European Central Bank. More specifically, Russia had secured that money in the exact banks that were now levying sanctions on Moscow.

Without any other details, this seems like an absurd thing for Russia to do. However, these banks are the central parts of the international financial system, so keeping money in them is convenient. If Russia anticipated that the West would take similar steps as 2014, then moving the reserves to another location would be an unnecessary complication. What is more likely is that Russia wagered that the West would not shut off access to the reserves. After all, this was an unprecedented step, and those central banks paid a significant reputational cost for doing so. Putin simply miscalculated the West’s resolve to go down that road.

Finally, there is suggestive evidence of a smaller miscalculation on the sea. Russia likely did not anticipate that their navy would have a difficult time controlling the waters along Ukraine’s southern border. After all, Ukraine has no navy to speak of, having lost it when Russia annexed Crimea in 2014. Yet Ukraine sunk the Moskva, the flagship of Russia’s Black Sea Fleet. This represented the worst naval loss for Russia since World War II.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.