2022: How European ‘Moral’ Policy Prolongs War And Supports Russia, In Detail And In Fact – Analysis

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I am an unconditional relativist. Everyone who reads me knows that. If you understand economics, anthropology, biology, mathematics, know a little history, and have read the Bible, you can’t help but be a relativist. Otherwise, you are ignorant or an idealist, both of which are equally unacceptable to me. After all, as they say, gray has 50 shades.

Also, I’m a financier and fund manager, and that puts a very significant imprint on your way of thinking: you think in rational categories, you are committed to formal logic, you investigate and determine the cause-and-effect relationships of any phenomenon, you weigh probabilities and compare benefits/costs. These skills often help you abstract away from emotional evaluations and try to get to the bottom of things.

But there are few people who have cumulative, cross-subject knowledge. Those who can trace long and multifactorial causal relationships and relate, for example, thermodynamics, relativity, and the biology of behavior are always in the minority, and are not really listened to by ordinary everyday people. This is an obvious social and even biological phenomenon: intellectuals are always in the minority, and great intellectuals in an even “smaller minority,” even in the most advanced societies.

The individual adapts along the path of the greatest probabilities of survival, and a deep understanding of things, though it has an unconditional advantage over philistine interpretation, does not obviously increase the probabilities of social success at all: additional factors of social competitiveness are needed – what is called the ability to live and win. These characteristics of social competitiveness are not often inherent in the kind of smart guys I am talking about, but when the combination happens, we see the most successful businessmen, great scientists, or talented and effective politicians. These are people who have proven to be more adaptable, intelligent, and entrepreneurial than their tribesmen. They are all partly politicians. Let us not forget that politics is the most effective combination of cooperation and conflict in social relations to maximize personal and group gain and leadership within consensual social rules, with the ability to convince other members of society of their own exceptionalism. 

As we know, the existence of living matter exists in continuous movement within dichotomies – poles – and this applies to every dimension of life – cognitive, emotional and material-tactile. Trying to keep oneself at the pole with a plus sign is a feat that usually involves falling out of sociality and decreases one’s social competitiveness. The optimal way, however, is to gain advantage with the rational use of both poles. This is the natural rational and competitive goal of any living organism and group, including the total human majority.

The alternative pole for relativism and critical thinking is unequivocal affirmation, a kind of imperative determinism, which, without appropriate constraints, becomes dogma that grows into ideology, and any ideology is the beginning of destruction and decay. 

But with regard to humanistically and technologically developed social formations, competition exists within the framework of natural rights of the individual in human society, which generates a host of rules protecting society itself and individuals from the expansion of imperative dogmas or the prevalence of any of them.

At the same time, natural rights, in essence, are themselves some postulates, reference points, i.e. semblances of dogmas. However, both they themselves and their derivatives, which are ethics and institutions in today’s civilized world, are products of competition, including findings, transformations, interpretations and experiences of applying optimal norms and rules for individual and social progress.

The existing macro- and micro-social order has evolved in an evolutionary-dialectical way, which means that it is competitive and consistent. That is, the norms of natural rights themselves are the result of a changing set of changing rules in an evolutionary current that allows the individual – the individual – to have maximum opportunities and maximum protection within the group or community with the most equal distribution of such opportunities and protection, but not the results of their application. That is, the dogma has been transformed into an elastic concept, and this already brings it into the realm of critical appraisal and, therefore, conditional relativism.

The evolutionary development of this construct has brought modern civilized societies – liberal market democracies, corresponding to the above-described arrangement – into the present, our present state. However, macro-competition generates less civilized societies, which, however, wish to obtain a maximally competitive macro-niche, being, however, much more atavistic and archaic due to the lost humanitarian competition.

If such societies and states move toward institutional, ethical and legal liberalization, they are integrated into the civilized world, albeit with considerable political friction and internal transformation costs. But if societies that are not in the best competitive niche begin to encapsulate themselves in their archaism, to nurture illusions about a special path and to actively pursue these illusions, then macro-competition once again enters a cycle of aggressive conflict, a stage of intense aggravation between a liberal democratic world and an authoritarian-dictatorial world.

It would seem that the civilized side of such a conflict should act in the wake of its own progress – ethical, institutional, scientific and technological after all. Such progress and its consequences offer a host of competitive advantages in conflict with an archaic adversary, most notably in terms of methods, tools, and the ability to think strategically. It is strategic goal-setting and the ability to achieve these goals that distinguish advanced humanitarian societies from degenerate ones, which lack in principle the capacity and capability for strategic success: their construction by nature does not allow them to go beyond tactical successes.

What I observe in the course of Russia’s growing conflict with the civilized world (by which we must, of course, understand liberal democracies) is vexing.  I see a significant strategic inefficiency in the policies of civilized countries toward Russia, countries with all the technical, ethical, and intellectual advantages.

When a natural social sentiment like “I am entitled because they are the aggressors” is passed off as moral and humanitarian justification for actual strategic short-sightedness or totally ineffective policies, or rather, even substitutes for them, I immediately suspect the personal or group interest of those making the relevant ineffective decisions, i.e. the political elite. This is evidence of the increasing political conformism of the power elites: the shortening of planning and goal-setting horizons, the substitution of strategic goals for tactical ones, and, accordingly, the transformation of instruments for achieving goals, the satisfaction of any mass intensions regardless of their rationality, usefulness and adequacy with strategic interests.

The mass consciousness does not become a resource and an object of electoral support for elected elites through political advertising and competition. The problem is that mass mood is becoming a determining factor in the process of routine decisions within the electoral cycle, i.e. between elections. It has become too influential in tactical decisions in the work of the chosen social political “management”, which, I note, was chosen precisely for the management of public resources by virtue of its competencies and proposed strategy. But now, under the influence of mass mood, both the strategy itself and the methods of achieving it, i.e. tactical processes and decisions, are changing. On the one hand, the masses began to influence routine decisions and their implementation by political management, and, on the other hand, political management began to adapt all its decisions to the mood of the masses, thus falling through excessive political conformism into the framework of conditional behavior.

We can say that this situation emasculates the essence of representative democracy, returning us to the times of direct democracy, which is actually at the same archaic pole as the tyrannical dictatorship: egalitarianism is very characteristic of archaic proto-societies.

Inclusiveness is good up to the point when it comes to making decisions that require special professional competencies. We can decide as a whole house to improve the yard, and we can even vote for a certain project as the most suitable for the majority, within the framework and competition of such projects. But once a project has been accepted, we cannot tell its authors how to put up a fence or what kind of uniform a carpenter should wear. We voted for the project, we understood it, we accepted it, we control timing and quality as residents, but we do not interfere in the tactical and technological process. We can only intervene if extraordinary things happen – violations of generally accepted rules that cause a threat to the whole project: for example, the fence is made of gopher carcasses, and the carpenter walks around naked and drunk.

Right now, the political elites of the European Union actually have no ability to make qualified and effective decisions with respect to Russia, because such decisions are dictated and conditioned by the mass mood and situational social rhetoric based on conventional “justice” and so-called morality.

Speaking about morality, as a relativist who understands the extreme elasticity, philosophical and even more so the scientific ephemerality of this notion, I immediately ask a mass of questions: morality of whom, morality in relation to whom, what is the purpose of applying moral restrictions or extensions, who will be well and who will be bad as a result of submission or disobedience to morality, what will happen after a clash of different morals, how the moral question is resolved, etc., etc.

Various goals, for example, in the geopolitical or economic field, the achievement of which was covered by the flag of morality or conditional justice, tended to be implemented in the most rigid, destructive or, on the contrary, decorative and ineffective way. After every bombardment of an Israeli town by Palestinian terrorists, the European Parliament necessarily passes a lengthy anti-Palestinian condemnation resolution as a way of keeping morality, just as in the case of the famine with its millions of victims or the savage barbaric repression in North Korea. At the same time, the moral issue with the Iraqi or Yugoslav tyrannies was handled somewhat differently, and there was a great deal of morality there as well, including in the significant civilian casualties in Yugoslavia or in the empty tube in the hands of Colin Powell. According to key figures in the Russian authoritarian government, and according to a large part of the Russian population, Russia is now effectively and very morally addressing one of the most important moral issues since World War II. Ukrainians who demand that all Russians be locked up inside the country and call for an admission of collective guilt are also morally entitled to such suggestions. After all, Latvia, which revoked the license of the Russian opposition TV channel Dozhd for some controversial comments made by its host on the air, has also unequivocally asserted its moral right to do so, although under the guise of legal grounds of insignificant regulatory violations. I will not go into complicated arguments and analysis of the concepts of “morality,” “ethics,” “morality,” and “justice” here – this is a separate and extensive conversation on topics that, incidentally, are in my field of academic interest and research, and may be worth talking about specifically and at another time.

In the context of the theme of this essay, I would like to make two points. First, no matter how unambiguous the moral question may seem, it is important to understand who is solving it, how and why, and what they want in the end. Morality is merely the evolutionary product of a conditioned adaptation of intragroup behavior, which means that in any case it is an attempt to maximize benefits and minimize costs.  And second, righteous, morally justified indignation and thirst for justice are natural bio-social emotions, reactions that are determined by the precursor nucleus of the brain responsible for irrational spontaneous decisions, and are propagated in the social group through certain biological patterns.

Accordingly, like any acute emotion, they carry in the vast majority of cases distortions: biased assessments, false goals, delusions, and demands for action that are in reality not effective for either individuals or society. But more importantly, it is always fertile ground for empowerment and adaptation for dominant social groups, making strategic and tactical decisions in their own interests, but with externalities for the interests of the group.  In other words, for political elites. But, as a matter of fact, it is to level social emotions or to translate them into creative rationality through qualified and weighted decisions to maximize the common and personal good that social managers – political groups – are hired.

But atavistic manifestations of social consciousness are used by the power elites of the European Union as the basis of their stability, in political decisions concerning Russia combining simultaneously decorativeness, radicality and inefficiency. And this is unfortunate, because it is reasonable political tactics and methods of its implementation within the framework of a sound and formulated strategy could be much more effective and progressive both in terms of weakening the Russian regime and its ability to wage aggressive war, and in terms of creating positive prospects for the international order as a whole.

Hiding behind a moral basis, the EU authorities are trying to present their actions in the paradigm of “an eye for an eye. This, firstly, actually forms a new ideological doctrine that covers up inefficiency in reality. And second, let us not forget that “an eye for an eye” is not the most successful strategy in game theory.

Certainly Western civilized societies are less prone to animalistic and ineffective reactions than archaic societies in their ethical development.  However, in the case of shock or extraordinary threat, Profane, as we see it, still takes over. At the same time, it is in such special situations that all the intellectual, technical, ethical and political potential must be engaged to achieve the most effective result in geopolitical decisions. As a result, bypassing the obvious goals, like stopping the war, the result in this case is only one: the change of the political regime in Russia to a more or less democratic and the possibility to get a predictable partner as a participant in global exchanges.

However, most of the measures taken against Russia, as a militant aggressive nationalist state, are not only weakly effective in neutralizing it. They also look somewhat destructive for the EU itself, and have a very blurred chance of achieving the above goals in the near future. They all have a certain commonality, within which, at first glance, is sewn a paradox that is not, on closer examination, a paradox.

On the one hand, as has already been said, the main idea of the policy, acquiring the features of dogmatic ideology in relation to Russia, is based on the mass mood and postulates the isolation of Russia in all senses, as a treacherous aggressor (which is unconditionally true). And in this regard, decisions have been made that have little meaning in reality, but are loud in their sounding and consistent with the ideological mass consensus. The name for this is populism.

On the other hand, the really nominally important decisions turned out to be incomplete in reality, having little effect on the Russian regime and its capabilities, and sometimes actually supporting its stability.

As usual, ideology is either a way for the masses to be satisfied by the authorities in order to strengthen their stability, or a way for the political elites themselves to create a mass community for all the same stability. In both cases, ideology is a phantom that binds individuals not by rational interests, possibilities and goals, but by chimeras and necessarily and always by discourses of morality and righteousness that substitute real effectiveness. 

There are three aspects to the EU’s decisions regarding the current conflict:

– Military, financial and humanitarian support for Ukraine.

– Sanctioning economic and political pressure on Russia and limiting its economic and political opportunities

– humanitarian pressure on Russia in order to limit the population’s options and create civil protest.  

In each of these aspects, ideology, i.e. the substitution of rationality and efficiency with populist claims and actions, appears in great variety.

Two words about financial and military support for Ukraine. I will not speak in detail on this topic, not being an expert in military strategy. I will only say that the total assistance of the world community to Ukraine for 2023 is planned at 41 billion dollars, which will amount to 58% of the expenditures of the Ukrainian budget, which is estimated at 70 billion dollars. The budget deficit will be about $35 billion. But it should be noted that aid consists of non-repayable transfers and loans, with non-repayable transfers falling into the revenue side. It’s not hard to calculate, then, that only $6 billion will be transferred to Ukraine without a refund requirement – $5 billion less than the $11 billion donated in the first 9 months of 2022. The remaining $35 billion that will cover the budget deficit are loans, in one form or another, which is $27 billion more than in the same 9 months of 2022. Such a change in the ratio of gratuitous and borrowed aid is not in favor of Ukraine and speaks volumes.

The main item of expenditures of the Ukrainian budget is obviously military, it will amount to 31 billion dollars. That is, nominally, only $10 billion of the planned aid will go for non-military purposes. This is simply nothing, taking into account the expected inflation rate of 31% in 2023, the huge destruction in the infrastructure, the poor humanitarian situation and the economy as a whole, which is already losing a third of GDP from the level of 2021.

In addition, according to a study by the Hoover Institution of Stanford University prepared for the U.S. Congress, the shortfall of cumulative both offensive and defensive weapons in Ukraine to begin a progressive shift of the entire front line is 85% and 75%, respectively. Estimates by the Ukrainian military are even harsher, for example, the Main Intelligence Directorate of the Ukrainian Ministry of Defense estimates a deficit of 90%. That is, with the status quo, the nominal probability of the situation remaining or deteriorating for Ukraine is about 80%. As one respected expert, my colleague said in a debate with a representative of the European Parliament: aid per hour by the teaspoon.

Here we can also mention the quality of weapons supplied to Ukraine, which are mostly old stockpiles, according to the same Hoover Institution.

Regarding the lack of the latest and high-tech weapons, there is an argument about the need for long-term training in their use and the fact that such weapons are supplied according to the pace and capabilities of their mastering by the Ukrainian side. This argument looks relevant at first glance. However, an increase in funding for instruction, quality, variety, and growth of weapons supplies would greatly accelerate the process. It would take will, but as we can see from the previous arguments, there are problems with it.

In conclusion, speaking of military and financial aid to Ukraine, I note that nominally and legally in relations between Ukraine and the West no one owes anyone anything, everything is of goodwill, as economist V. Inozemtsev correctly said. But when the European Union is not stingy in its assessments of Russia’s actions, heats up the degree of moral condemnation and daily declares its wholehearted support for Ukraine, the question arises about the inconsistency of “high moral” statements with real actions.

If we look at the economic picture of this discrepancy, then, as they say, it goes on and on.

So, a couple of words on the economic and political pressure on Russia.

The sanctions have two main tendencies: personal restrictions on the enablers and actors of the regime and restrictions on national economic opportunities, mainly through restrictions on income, i.e. exports.

 Until very recently, the European Union was the main source of resource export revenues for the Russian budget, i.e., the main source of funding for Russian aggression – against the backdrop of heated anti-Russian rhetoric and moral condemnation of the barbaric actions of the Russian regime. The introduction of the first packages of sanctions, aimed at restricting imports without simultaneously affecting the main export item – the supply of hydrocarbons, helped the Russian authorities to achieve a significant current account surplus and keep the national currency exchange rate, preventing inflation. Meanwhile, inflation, as we remember, is the main socio-economic threat to the stability of any authoritarian regime.

The announcement of the intention to introduce a price ceiling or to refuse from some supplies a few months before the implementation led to an increase in the volume of purchased oil, which, on the one hand, led to an increase in Russian budget revenues, and on the other hand, increased the market price and became one of the important factors of inflationary growth and the actual recession in the Eurozone. The growth of Russia’s export revenues from the sale of hydrocarbons has increased by more than 30% relative to 2021, and at the end of 2022 will amount to about $300 billion.

As for the implemented restrictions on Russian exports, most of them, including the ceiling on oil, have low efficiency and too long a horizon of real usefulness. For example, the introduced ceiling will deprive Russia of about $5-10 billion next year, while, incidentally, very likely to give China a significant resource advantage because of the price discount. A reasonable proposal to impose an excise tax on Russian oil without introducing a price ceiling was not adopted, mainly on the grounds that it would be difficult to sell it to voters as a new tax burden, which perfectly illustrates the aforementioned populism and conformism of the European authorities.

The oil market will inevitably recanalize global oil supplies simply by virtue of its structure, that is, Russia’s share of the global market will somehow remain the same.

The reduction of gas exports to Europe, which the Russian regime has undertaken for the purpose of geopolitical pressure, will mean a loss of less than $70 billion, which is a significant, but not critical sum: Europe accounts for about 65% of exports and about 20% of all combined – domestic and foreign – gas sales. Even in the event of lower prices or further restrictions on supplies for other export commodities, Russia’s internal accumulated financial resources are quite substantial, as I have mentioned in other articles. The budget deficit budgeted for the next year of …… trillion rubles, as a result of sanctions pressure, is not an insoluble problem either for the economy or for the regime’s ability to finance the war. 

Now two words about imports.

About 60% of all foreign companies operating in Russia remained in the market, despite “moral judgments. According to data from Yale University and Leave Russia, 42% of all foreign businesses have left Russia entirely, 40% continue operations, 8% are operating with restrictions, and 10% have suspended operations but have not left the market. It is noteworthy that the smallest percentage of businesses that have left are German, French and Japanese companies – about 20%-30%. Among American firms have left about 50%, among companies from Britain, the Baltic States and Northern Europe – more than 60%.

If you look at a cross-section of the industry, the data is more than expressive.

In agriculture more than 90% of foreign companies have left, in pharmaceuticals – more than 80%, in metallurgy and mining – about 80%, in energy, oil and gas – about 70%, in manufacturing – 77%. The largest percentage of businesses that left are concentrated in IT, online services, and consulting. However, we remember the specialization of the Russian economy and the source of budget revenues: these are natural resources and products of the first stage of processing. This is where Western businesses have stayed, despite the acute moral issue.

This picture makes it clear that even despite the decline in business volume and margins, these companies continue to finance the Russian budget – their combined revenues as of October 2022 for the previous 12 months were about $295 billion.

The departure of Western brands has increased import costs in Russia, but imports are going through parallel channels, brands are returning through franchises to third countries or “left” quite conditionally, having options to buy back the sold share and leaving all the accumulated logistics and technology to local companies that bought them out.

75% of EU countries ensured the increase in trade with Russia by more than 30% from January to September. Overall, the average monthly imports in dollars in 2022 exceeded the average monthly imports in 2021.

According to a Goldman Sachs study, a number of EU countries significantly exceeded exports to Russia compared to 2021. Among them – Latvia, one of the main European critics of Russia, increased exports to Russia by 67%. Slovenia – 25%, Croatia – 28%, Bulgaria – 25%, Cyprus – 12%, Luxembourg – 7%.

At the same time, according to the same study of Goldman Sachs, imports from Russia in a number of EU countries increased … several times! In Slovenia – 4, 4 times, in Croatia – 2,2 times, in the Czech Republic – 2 times, in Malta – by 88%, in Spain – by 46%, in Belgium – 39%, in Luxembourg – 22%, in Estonia – 11%, in Bulgaria – 10%.

Highly moral statements about the need to recognize Russia as a sponsor of terrorism in reality conceal the funding of such sponsorship by those claiming it. It is hard to believe, once we understand the numbers, that the “realpolitik” paradigm has ended. On the contrary, it is evolving and taking on new shades.

For example, the volume of timber exports from Kyrgyzstan and Kazakhstan – countries with predominantly steppe territories and, to put it mildly, not leading in global timber supplies – to the European Union increased – attention! – by 18 thousand and 74 times!  The reasons for this anomaly are obvious: it is a “parallel export” from the countries where timber export is limited by sanctions, i.e. from Russia and Belarus. And this situation obviously suits the European Union, when it is possible to comply with morality in words and be pragmatic in practice. 

Finally, the sanctions measures do not apply to some Russian companies and entire industries that are important for global chains. For example, such companies as Norilsk Nickel, VSMPO Avisma, Alrosa, companies producing mineral fertilizers, diamonds, some types of non-ferrous metals are not subject to sanctions for obvious reasons – they are global producers and monopoly suppliers of essential resources and materials. Transferring and increasing their extraction and production by alternative producers is a costly and not quick affair under recessive pressure and rising inflation. A necessary and harsh measure, as well as a number of others, becomes difficult to implement without political will, which apparently does not exist for the reasons I have described earlier.

Consumption within Russia is shrinking, and the assortment is decreasing, but gradually, and the alternative choices of assortment are quite diverse. This has a weak and slow effect on changes in consumer choice and preferences, especially considering that the majority of the population lives outside large metropolitan areas with millions of people – about 75%. Consumer preferences of this dominant part of the population are significantly simpler, less diversified and more static, and therefore less sensitive to external shocks.

Personal sanctions against the power and business elite have no meaningful effect without simultaneous positive incentives for their activity to change the regime. On the contrary, negative restrictions without an alternative only strengthen the adaptability and resilience of the elites. Expecting big businessmen, long removed from any meaningful political influence, to have an impact on the regime is entirely unreasonable.

Political elites, on the other hand, will stick to Pavlov’s strategy for as long as possible and do what was profitable yesterday so that it is not worse today. And being encapsulated inside, they receive additional incentives to act in favor of the regime as the optimal and closest force to secure their current interests. This is confirmed by the facts: we do not see any significant members of the elite who have decided not only to protest, but even to flee, with the exception of Anatoly Chubais.

Besides, the outflow of capital from Russia, as an important factor in the weakening of the regime, could be much more significant for the countries of the European Union.

According to the latest estimates of the Central Bank, the outflow is forecast at $252bn, with an average annual rate of $100bn. Based on the data on migration to neighboring countries and at the same time on limitations of the EU countries, the expert consensus says about the unrealized potential of the capital outflow of $400 billion. In fact, the EU willingly left this extra 150 billion at the disposal of the regime to finance aggressive expansion and armament.

Russia’s trade surplus as an exporting country has been between $100 and $200 billion a year in recent years. This year’s surplus will obviously be a record, due to reduced imports and increased income from exports. Capital outflows typically account for about 20%-30% of the trade surplus, going as high as 40% in 2011, for example. In 2022 the capital outflow is close to the size of the trade surplus, which is an extraordinary phenomenon in the world, but not a significant blow to the Russian budget, especially taking into account the available internal resources such as the National Welfare Fund, the total capital in deposits and low levels of public debt. Certainly, as I said earlier, the capital outflow could have been much more significant if the European authorities had opened possibilities for the productive qualified part of the population and the influential representatives of the upper social strata to take the capital back to the countries of the European Union. In this case the inflationary pressure created by the reduction of foreign currency would be more significant and dangerous for the Russian regime.

Moreover, the main beneficiaries of capital flight from Russia are the countries which take this capital and the people who take it out. And given the fact that these people are the most enterprising and productive part of the Russian population, there is a multiplicative effect for the growth of this capital and, accordingly, a positive contribution to the growth of the economies of these countries. All this does not get the European Union, which was potentially the most desirable place for the export of Russian capital and emigration of its owners.

Humanitarian pressure to restrict the movement and stay of Russians in the European Union is completely senseless from the rational and strategic point of view to achieve the main goal, and is due to the same populist ideology to satisfy the growing moral indignation, and in reality, the masses’ profane instincts.  There is nothing but the same ideological pathos about justice and satisfying the masses’ instinct for a symmetrical response.

First of all, Russians used to leave about $45 billion a year in the European Union on their travels – now that’s gone. And it’s not that Europe will miss out on this money. 

Now these 45 billion will finance Russian aggression – in addition to the revenues received from the export of hydrocarbons. That is, the European authorities introduce a price ceiling on oil, which will reduce the income of Russia by 10 billion dollars at most in the near future, while consciously leaving to the regime 45 billion as a resource for activism.

Secondly, such restrictions drastically reduce the possibility of weakening the human capital serving the regime: the arrival of white-collar workers, highly qualified specialists, and students is now much more difficult – Europe is voluntarily giving up on Russian goodwill.

Third, the doctrine of “deal with your criminal power, and then come,” i.e. encapsulating people inside the regime country for a long time only increases socially aggressive cohesion, entrenches an anti-Western worldview, and fuels the regime with human military and productive power, while this power is not extraordinarily expensive, patient and loyal.

I have said many times that any sanctions, pressures, and restrictions are coercion with an expected positive perspective. This is not the death penalty, where there is no prospect. Even long-term imprisonment, in addition to restricting the offender, has the purpose of changing his behavior in the interest of society and in accordance with the rules accepted in society. For such changes in civilized societies, the offender is given a host of incentives and conditions, thus increasing the probabilities of his “re-education” and return as a generally useful individual.

Thus, sanctions and pressures that limit and coerce specific individuals or groups, or society to certain actions or to refuse certain actions, must contain a motivational part and conditions.

In our case, both motivation and conditions are an absolute ideological chimera. It is not defined what, how, under what conditions and within what time frame the sanctions will be lifted. A vague, general, not detailed, not graded requirement is put forward as a condition – the withdrawal of troops and the cessation of hostilities. Who and how do you want to be motivated to peace by such sanctions in an aggressive nationalist autocracy with a population loyal to the regime, existing so far in economic conditions acceptable to them?

Motivation is more effective when it is directed at certain groups or subjects, and the conditions are more feasible, as deterministic and detailed as possible. This is when it ceases to be ideology and becomes a real strategy – goals and means that have a high probability of being realized.

Thus, no matter how righteous and holy ideology is, it always leads to disequilibrium in favor of those who implement the ideological narrative, namely, political entrepreneurs. And it is a different story when rational ignorance turns into total ignorance. How total ignorance ends, we all know from history – near and far.

It must be understood that all the restrictions imposed affect the gradual degradation of Russia, but have no effect on its ability to wage regional war and kill people, nor does it finance the creation of weapons, albeit lamplight, as well as its army, even though it is ill-equipped.

The weapons Russia fights with were developed in the Soviet Union, a perennial autarchy that, despite sanctions and a lack of Western technology, was able to develop and intensively produce its own very technological weapons. Iran, after 40 years of harsh sanctions, is pursuing a nuclear program and supplies Russia with drones. The DPRK, a vacuum tyrant, practically owns nuclear weapons and regularly practices launching missiles beyond its borders.

Even a closed and deteriorating autarky, with more or less rational actors in political leadership, is quite capable of developing and producing weapons and keeping the economy from extreme disequilibrium for a very long time.

Russia today, on the other hand, is a mercantilist resource capitalist petrocratic state, and, at least during the first stages of its isolation, has every opportunity to partially compensate for the negative effects of the sanctions measures. Realizing that it is impossible to isolate Russia due to its resource importance and territory, as well as implementing an economic, social and informational policy that is rational for its sustainability, the Russian regime, other things being equal, is quite capable of significantly prolonging its power. Its main vital task is to slow down economic degradation against the background of inevitable socio-economic turbulence and flatten its negative slope as much as possible. So far, we can state successes in this difficult matter for the regime.

One of the significant arguments of the European authorities regarding the gradualness and caution of sanctions and other restrictions against Russia is that Russia is a nuclear power with a leader who may well decide to use unconventional weapons. I will not go into the many factors that make such a scenario extremely unlikely; that is a topic for a separate and big discussion. All I will say here is that if you are afraid of the threat to blow everything to smithereens by an actor “playing mad”, then simply by formal logic it means that you give him a significant tactical advantage – the opportunity to move forward and raise the stakes. Any game mathematician will tell you that. Fear of the use of nuclear weapons is actually a transfer of advantage to the side of the one who threatens them, as articulated by Thomas Schelling, the author of the concept of nuclear deterrence. To interpret otherwise is futile idealistic and, I’m sorry, pointless and pernicious moralizing that has nothing to do with humanism in the end.

If you want to keep stomping around, watching the ground fall away from under your feet, then the most logical thing for you to do is to be “patient” and “unhurried” in your dealings with the villain. Feeding illusions that you are potentially much bigger, smarter, and more dangerous “in case of trouble” is a typical dominant mistake, as codified in game theory.

Russia, as a shifting to fascism state with nuclear weapons and a patient and unsophisticated indigenous population, could get a long enough history of existence, perhaps a generation, perhaps more. The probabilities of this happening, based on the inputs we have at the moment, are quite strong. Of course, any extreme escalation of aggression would lead this regime to collapse faster. But as we can see, even the current “initiation” of February 24 does not look as insane today for regime stability as it did even to me in early 2022.

And ideological moralizing on the one hand, and the actual financing of the aggressor under the guise of “real politics” and national interests in the decisions of Western countries on how to deal with the “diabolical mechanism” on the other hand, will only prolong its functionality. Maximal loosening of its foundations and breaking the engine – that is where the points of application for the appropriate effective activity of the civilized community.

This, unfortunately, cannot bring peace tomorrow, but it will certainly accelerate the leisurely pace taken by the EU authorities. Let me recall here a series of proposals and justifications for the need for the earliest refusal to buy Russian hydrocarbons, presented in the articles of S. Guriev and O. Itzhoki, as well as several German economists back in March 2022. Despite all the possible justifications and forecasts, which are now being implemented before our eyes, the EU authorities then chose to reject the proposals.

In conclusion, I will say that the vector of effective methods with regard to Russia, which has a much greater probability of changing the situation more effectively and quickly, I have repeatedly described in several articles throughout this sad year. It is quite obvious and consists of four main points:

-Maximum full and rapid arming of Ukraine and expanded humanitarian subsidies

-Total restriction of imports to Russia of any goods with maximum allowance of secondary sanctions, along with expanded export restrictions

-intensive weakening of human capital through facilitating the emigration from Russia of the highest number of productive and highly qualified part of the population. Of course, this requires developing a significant amount of various procedures within the EU, which, if properly designed, will themselves neutralize the flow of regime sympathizers who want a better life.

-Revisiting the policy of personal sanctions in order to attract the most influential political and economic actors in opposition to the upper power group and to create a heterogeneity in the mood of the elite as a whole.

However, this is another topic for another time.

Here I will also note that every time you hear politicians talk about “big” and universal morality and justice in relation to peoples, nations, and big society in general, you know that something is about to go wrong. The entire twentieth century is a prime example of this.

Horrifyingly, so is the beginning of the 21st.  

Paul Tolmachev

Paul Tolmachev is an Investment Manager, Economist and Political Analyst. He is Certified Professional in Philosophy, Politics and Economics (PPE Program), Duke University. Having more than 20 years' experience in the financial markets, Paul held management positions in leading international investment and wealth management firms. Paul is serving as a Portfolio Manager for BlackRock with more than $500 million in personally managed assets. He also is a visiting scholar at the Stanford Institute for Economic Policy Research, where he researches institutional and political economy, decision science and social behavior, specializing in the analysis of macroeconomics, politics, and social processes. Paul is a columnist and contributor to a number of international think tanks and publications, including Duke University, Mises Institute, Eurasia Review, WallStreet Window, RealClear World, Investing.com, The Epoch Times, L'Indro, etc.

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