The West has made many bold pronouncements of its intentions for post-war Ukraine…of course, assuming a post-war Ukraine, starting with having Ukraine join NATO and the EU. And Russia has mainly ignored them and until of late, avoided making similar pronouncements. Russian officials had held to the mantra of pursuing the Special Military Operation until all its objectives were achieved. Russia has notably been closed-mouthed about how the war has been going, much to the consternation of some in Russia, who wanted to see Russia playing a more aggressive propaganda game.
So why is Russia acting in what would seem to be an out of character manner, telegraphing a maximalist view of what its Special Military Operation aims translate into when big funding packages in the US and EU are in play? Specifically, that if no one tries to come to a deal soon, Russia will install a more cooperative government, which translates into taking most or all of Ukraine. And Putin has even taken to giving more history lessons as to why Ukraine is at a minimum a branch of the Russian people and has declared Odessa to be a Russian city. 1
One would think Russia would be more circumspect. After all, pointing out what ought to be obvious is still more reality than the Collective West can bear right now. And there is a lot of “If we don’t give Ukraine more money and weapons, Putin will go to Paris” talk. Russian officials saying the end game will likely require more territorial, as in a lot more, can be spun as proof of those fears.
As we’ll discuss shortly, absent a wildly unexpected development, Russia has the capacity to subdue all of Ukraine by force. Normally cautious Russian officials are effectively saying that to Russian citizens, even at the risk of further provoking the US and NATO. That is likely because they know full well what some Western commentators have pointed out, that the West simply cannot begin to compete with Russia in arms production, even before getting to the superiority of Russian systems in most categories. Despite recognition of that sorry fact in some quarters, the West is not making serious efforts to rearm or increase manning levels. And a second, more critical factor with respect to Ukraine is it has burned through nearly all of its experienced soldiers, and is falling short of filling the ranks with new conscripts, who wind up being cannon fodder.
But does the new Russian open show of confidence merely reflect its ability to prostrate Ukraine? Or could it also mean Russia also believes it has come up with solutions to another big problem we flagged from the outset, “winning the peace”? Occupying hostile territory is costly and corrosive. How does Russia plan to get in sufficient good graces with the population in the largely-ethnically Ukrainian west Ukraine?
Towards the very end of this post, we’ll also sketch out how Russia can hoist the West a bit on its sanctions petard and even potentially use other people’s money and assets to win new friends.
How Western Continuing Refusal to Consider Russian Security Needs Means Russia Will Take Matters Into Its Own Hands
Remember that the Collective West has doggedly maintained that it will keep fighting Russia in Ukraine, even if how exactly it will do so looks increasingly in doubt.
For instance, recall how Tony Blinken, in a Washington Post interview with David Ignatius in January, was already thinking about what would happen after Ukraine won…and made clear the US would keep arming Ukraine so as to contain and weaken Russia.2
As Ukraine is now visibly losing the war, the response from the West has been more threat display, such as Lloyd Austin saying that in November the US must not let Russia win, otherwise in a new variant of domino theory, China will be emboldened in Asia. And of course Putin will soon eat up the Baltics too.
We will spare readers more examples of key Western officials saying, no way, now how will they let Russia “win” in Ukraine, whatever that might mean. It was conceivable that if Russia were to stop, say at the Dnieper, that would have been spun as a Western success since Russia would be depicted, contrary to evidence, as wanting to take over all of Ukraine.
But as Western leaders continue to be unrealistic about the state of play, most importantly, showing zero interest in negotiations between Russia and the US, Russia not only will determine the end game (something that was pretty much a given), rationally, Russia needs to take a ruthless view of how it creates new facts on the ground in the territory of Ukraine so as to impede further Collective West action and meddling.
Russian citizens criticized their government, particularly early in the war, for its weak propaganda efforts. But it looks to have played the smarter long game, with considerable diplomatic out-reach and exploiting Collective West inattention to the considerable cost of sanctions blowback on many developing economies.
So it is noteworthy that in the last month of so, Russian leaders, starting with Putin, have been saying in a not very coded manner that if the West does not come up with a way to addressing Russia’s security needs, Russia will settle the matter by force. That increasingly looks like it will include Odessa becoming part of Russia and Russia defeating and replacing the government in Kiev.1
Recall as we wrote a month ago:
This is why both Putin and Medvedev suggesting Kiev might be part of the equation would seem to be a significant shift. There are lots of maps of electoral results that Western pundits have used as proxies for ethnic Russian versus ethnic Ukrainian representation. This one from the Washington Post is indicative. You can see Kiev is most assuredly in a European-leaning part of the country, as if that were in doubt:
But in Putin’s November 3 speech, he described long form as to how Russia has claims on “Ancient Rus” and that would seem to include Kiev2:
Admittedly Western officials have taken to flogging the “Russia wants to occupy Europe” trope to insist that more more money must go into the Ukraine burn pit. But there’s no indication that that messaging is in response to Putin, Medvedev and other officials taking a harder line about the Ukraine end game. It instead seems to be a reptile-brain reflex to realizing that the Great Counteroffensive was a big bust. Even if West has no new rabbits to pull out of its hat, throwing more money at the problem will do as a temporizing response.
Has Russia Become More Confident Not Just About the War but Also About the Peace?
It is striking that Russia is preparing the Russian public for an end game for Ukraine that includes Russia taking a lot more territory than earlier contemplated, and is saying that now, when further Ukraine funding is in play in the US and Europe. Perhaps I am reading too much into what I can infer at this distance, but the change in messaging is marked enough that it appears the Russian government came to some decisions and the start of presenting what the post war map might look like is a reflection of that.
One has to wonder if Russia’s shift is a reflection not just about its ability to fully prostrate Ukraine if it needs to, but also having gotten or developed information that indicates that controlling Western Ukraine, if it comes to that, will not be unduly costly. That could be the result of assessments like:
Estimates of the able-bodied adult population that lives in non-ethnic Russian dominated Ukraine
Continuing success in military enlistments, meaning Russia has more than enough men and women to handle peace-keeping and critical reconstruction
Estimates of how many more Ukrainians will flee when its borders are reopened3
Ukraine has engaged only in pinprick-level terrorism, and Russia believes it can’t inflict meaningful harm4
Because this post is already long, I will merely introduce an idea I hope to develop further. What happens to Ukraine’s assets and liabilities?
Let’s start down this line of thinking. If Russia gets Ukraine to surrender, or otherwise achieves regime change without US involvement, it is not hard to think the US and the EU will quickly extend the Russian sanctions to Ukraine. The hope would be to collapse its banking system.
But as far as I can tell, the foreign debt of Ukraine banks is only $1.8 billion. Private external debt seems to lie mainly in other sectors. So Russia could without much outlay prop up the banks if needed. But that would or should mean it also means the Russian Central Bank becomes their regulator, and the entire banking system is under new oversight and rules.
More interesting is the opportunities that a move like this might open up. Recall that Ukraine refused to renew the Treaty on Friendship, Cooperation, and Partnership between Ukraine and the Russian Federation in 2019, so it expired in March. That treaty, by the way, is the one by which Russia recognized the invoilability of Ukraine’s borders, respect its territorial integrity, and otherwise not harm Ukraine’s national security. So Russia has no current treaties with Ukraine at Ukraine’s instigation, particularly with respect to important matters like not invading.
The fact that Russia and Ukraine stopped recognizing each other as sovereign states means Russia has no obligation to act as a “successor” to any Ukraine private or government commitments.
Now if the Collective West were to predictably and reflexively sanction a new Ukraine government, its currency would no longer be accepted in the West for payment. More importantly, Western banks would presumably be barred from remitting payments to Ukraine banks.
Now things get fun!
So pray tell how does Ukraine satisfy its foreign debt obligations when it has been frozen out of the Western payment system? We’re looking at you, IMF.
How do Ukraine asset owners, like rich Ukrainians who fled to Europe, pay taxes on their real estate in Ukraine? On the agricultural land in foreign hands?
What happens if Russia decides, arguably to rescue Ukraine, but of course also to limit its sovereignity, to put Rump Ukraine on the rouble?4 Operationally this would be trickly but since the economy is already in a state of collapse, the usual concern about downside would be moot.
Now of course Russia being very keen about observing legal forms would presumably allow Ukraine asset holders to use any deposits in Ukraine banks to pay tax and other government fees and charges. But Russia can easily use well established banking tricks practices not to make it easy. For instance, in the US, if an account is compromised, the owner must make an in-person appearance in the branch with valid ID to prove it is indeed his account in order for it to be unfrozen. Russia or its proxy Rump Ukraine could similarly require at least one in-person visit from foreign account owners for them to continue to have access to account access. Recall it is also normal for accounts that have been inactive for a certain period of time to be escheated to the state.
In other words, one could anticipate that at least some, perhaps many, assets owned by foreigners in Ukraine would be seized due to unpaid taxes. Russia /Rump Ukraine could auction them to the highest bidder…or for residential property, distribute it by lottery with people disabled in the war (from both sides) and other groups getting preference. Similarly agricultural land could be distributed according to a formula (particularly preference given to family farmers).
So there could be a path to using assets in Rump Ukraine, where the West would have created conditions for their owners to be unable to meet their legal obligations and therefore lose title to them, to then be redistributed in ways that would create good will toward the new Russian overlords.
Readers?
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1 From a recent press and public Q%A session, Results of the Year with Vladimir Putin on December 14, which as Gilbert Doctorow pointed out, did not present anything new, although some of his themes are pretty recent:
There will be peace when we achieve our goals, which you have mentioned. Now let’s return to these goals – they have not changed. I would like to remind you how we formulated them: denazification, demilitarisation, and a neutral status for Ukraine.
Look what is happening in terms of denazification. During the negotiation process, there was a certain stage after the drafting of a possible agreement, which was recently mentioned by officials in Kiev, where, in general they did not agree that some kind of denazification was needed, and they said that there was no fascistisation, no growth of such sentiments…
And when the head of today’s Kiev Administration in front of the whole world gives a standing ovation to a former SS soldier who directly participated in the Holocaust, in the extermination of 1.5 million Jews in Ukraine, Russians and Poles. Is this not a manifestation of Nazism? Therefore, the issue of denazification is relevant. It is true that during the negotiation process we, our negotiators, were told that in principle they did not rule out the possibility of adopting some legislative acts in Ukraine. That was then, during the negotiations in Istanbul.
Now, as for demilitarisation. If they do not want to reach an agreement, then we have to resort to other measures, including military ones….By the way, they got everything as promised. Ukraine received everything, and even more than what was promised by the West. But ever since the start of the so-called counteroffensive, we have destroyed 747 tanks. This is as of yesterday evening. We have also destroyed almost 2,300 armoured vehicles of various types. This is what is called demilitarisation. Alternatively, we can agree on demilitarisation and establish certain parameters. We actually agreed on them during the Istanbul talks, although these agreements were thrown out later, but we managed to reach agreement. There are also other possibilities to either reach an agreement or resolve the conflict by force. This is what we will strive for….
As for normalising relations [with Europe], it does not depend on us alone….
How did the conflict in Ukraine begin? Let us look back, even though it may take three or four minutes. It began with the state coup in Ukraine in 2014…
Do you see the core of the problem? The problem is, as I have always said and as I am saying today, that despite the current tragic developments, Russians and Ukrainians are essentially one people. What is happening now is an immense tragedy; it is like a civil war between brothers who stand on different sides [of the conflict]. But overall, they are not, to a large extent, responsible for this.
The southeastern part of Ukraine has always been pro-Russian because it is historically a Russian territory…Crimea nor the Black Sea region has any connection to Ukraine. Odessa is a Russian city. We know this. Everyone knows this. But they [Ukrainians] have concocted some historical nonsense….
But after the 2014 state coup, it became clear to us that they would use force to prevent us from developing normal relations with Ukraine. They spent US$5 billion on that state coup, as the Americans openly admitted, without any hesitation…
That, combined with a burning urge to creep up to our borders and drag Ukraine into NATO – all of this has led to the tragedy. In addition, there has been bloodshed in Donbass for eight years. All this taken together has led to the tragedy that we are now experiencing. They forced us to take these actions.
So, as I say, in a situation where the United States conceived and orchestrated this act with Europe standing by and averting its gaze, or playing along and singing along with them, how can we build relations with them in these circumstances? We would – we did not break off any ties – but they pretend they do not know or remember anything. Only two or three times did they mention the Minsk agreements, saying they were not for real and were never going to be implemented. In 2014, they also signed those guarantees, those agreements between the government and the opposition in Ukraine just like that, and immediately forgot about them or threw them away.
Do you see my point? My point is that they have lost their sovereignty to a large extent, as we can see now, and they are making many decisions to their own detriment. To their own detriment! But they do it, nonetheless…
In fact, we are ready to build relations with the United States as well. We believe that America is an important country on the world stage. But this absolutely imperial policy the country pursues is bad for them, not even for us…
As soon as they change on a deeper level, and begin to respect other people, other countries, start searching for compromises instead of addressing their problems using sanctions and military force, which would create the underlying conditions for restoring full-fledged relations. So far, there are no such conditions. But we are ready for this.
2 From the article Blinken ponders the post-Ukraine-war order:
The Biden administration, convinced that Vladimir Putin has failed in his attempt to erase Ukraine, has begun planning for an eventual postwar military balance that will help Kyiv deter any repetition of Russia’s brutal invasion….
Russia’s colossal failure to achieve its military goals, Blinken believes, should now spur the United States and its allies to begin thinking about the shape of postwar Ukraine — and how to create a just and durable peace that upholds Ukraine’s territorial integrity and allows it to deter and, if necessary, defend against any future aggression. In other words, Russia should not be able to rest, regroup and reattack.
Blinken’s deterrence framework is somewhat different from last year’s discussions with Kyiv about security guarantees similar to NATO’s Article 5. Rather than such a formal treaty pledge, some U.S. officials increasingly believe the key is to give Ukraine the tools it needs to defend itself. Security will be ensured by potent weapons systems — especially armor and air defense — along with a strong, noncorrupt economy and membership in the European Union.
The Pentagon’s current stress on providing Kyiv with weapons and training for maneuver warfare reflects this long-term goal of deterrence. “The importance of maneuver weapons isn’t just to give Ukraine strength now to regain territory but as a deterrent against future Russian attacks,” explained a State Department official familiar with Blinken’s thinking. “Maneuver is the future.”
3 From Almayadeen in August:
But this is a regime that has banned all men between the ages of 18 and 60 as well as women in certain professions from leaving the country. There is no free internal movement of citizens. The main exceptions to the prohibition on leaving the country are those unfit for military service, those fathers who have three or more minor children (all below the age of 16), and persons caring for people with disabilities. (The latter exemption only applies if there is no other family member to provide care.)
4 The counterargument is that the US prevented Ukraine from doing much. However, my impression is the sensitivity involved using US/NATO weapons and intel. Stunts like the fertilizer-truck bomb attack on the Kerch bridge, and the recent strike on a Russian train line in Siberia, can be depicted, as the case may be, as Putin-haters acting on their own or the SBU acting on its own. So Ukraine does have autonomy on this front and Russia may have deemed what it (or more accurately, dissidents after the war is over) can do as a manageable risk.
5 The US didn’t try that with Japan, where the US imposed a new Constitution and limited its military to self-defense (that has become a bit of a fiction in recent decades) but the world was on the Gold Standard then plus…Japan used Japanese, and just about no one in the West could read it, which translated into an inability to oversee banking. Even in Peak Japan in the 1980s, the number of Westerners who could read Japanese was remarkably small.
