39 - Paying for Putin's Destruction
No war is inexpensive. But Putin’s invasion of Ukraine has destroyed two previously well functioning, even growing economies. So we can call what Putin has done to Russia an “own-goal.” But his attack on Ukraine has obviously caused enormous economic as well as physical damage. UN Secretary General Antonio Guterres is documenting the terrible toll of war now, in and around Kyiv.
The World Bank is saying that that Ukraine’s economy will deflate this year by 45 percent. But it could slump by a much greater percentage even though Ukraine’s minister of finance is saying that it could be considerably less. The exact percentages are inexact estimates, but what is rock certain is that Ukraine cannot export wheat, barley, and sunflower oil – all big foreign exchange earners – because Russia has destroyed or blocked ports on the Black Sea. Railways and trucks could conceivably haul those agricultural commodities to Polish Baltic Sea harbors or to German ports, but the Ukrainian rail lines that are still intact are importing arms and fuel for the war and moving refugees west, out of immediate danger.
Given the $7 billion or so per month that it costs Ukraine to keep the Russians (mostly) at bay and now, just possibly, to take the war into Russia (as I discussed Monday), and given the state’s incapacity to generate meaningful revenues, it is now up to us in the West to foot the war’s big bill. The $7 billion figure is President Volodymyr Zelensky’s estimate, the IMF thinks the amount is a little less. Either way, Putin went to war in part because he thought that the West and Ukraine would shed so much wealth and blood that it would have to stop fighting early. To prove him wrong, Ukraine needs regular and continuing infusions of cash.
There are two types of need: 1) to keep fuel and ammunition flowing; and 2) to put funds aside both for immediate humanitarian assistance and, in time, for the reconstruction of pulverized cities, towns, and vital infrastructure.
Washington has either delivered or promised upwards of $4 billion in military assistance, as I indicated Monday. That now includes American howitzers as well as Soviet-style artillery platforms (the two are different and not interchangeable) and the different-sized shells that must be employed in the varied guns. A private firm in Florida specializes in wholesaling Soviet-style war equipment; it supplies the Pentagon and the Pentagon in turn transports it near to the front.
Germany has overcome political and domestic hesitation to add armored and mobile antiaircraft launchers to the mix of materiel that is heading toward the Ukrainian war zone. Canada is sending additional tanks. Ukraine already has employed specialized British drones against invading forces. The Pentagon has shipped both regular drones and a new kamikaze suicide drone that homes in on a vehicle and detonates on impact. It is rumored that the U. S. is also giving Ukraine unmanned naval subsurface drones. American troop carriers are also in service. The standard Russian Kalashnikov rifle is commonly used on both sides of the combat, as are Soviet and Russian machine guns.
Ex-Soviet helicopters have inflicted punishing damage on Russian fuel depots. American-type helicopters are coming, too. And the Ukrainian air force has inflicted damage on the Russian army with reconditioned MIG fighters, some lent by Poland or reconditioned in Slovakia. Oil depot fires in Russia may have resulted from Ukrainian sorties across the border.
This is a brutal and unnecessary war that will set both countries, and Belarus, back economically and physically. Russian Foreign Minister Sergei Lavrov spoke Tuesday about hostilities culminating in a negotiated settlement. To him, and to Putin – who seems unready to bargain – that could mean arrangements that solidify Russia’s hold over Donbas and the route to and through Odesa to Crimea. But, if Ukraine were ever compelled to agree to such a bargain, the threat of war and territorial losses would be at best postponed. Ukraine, and the free world, cannot afford to give Russia any territorial gains or any lasting benefit from naked aggression. Britain’s Foreign Minister Liz Truss forcibly made that case yesterday.
Scholars, bankers, politicians, and other analysts are suggesting that whatever happens, Russia’s considerable assets now held in the Federal Reserve and other banks in the U. S. should be appropriated for Ukraine’s benefit now, and after the fighting eventually ceases. Simply put, Russia should be forced to pay mightily through for its naked aggression. There are billions of dollars attributed to Russia in American, Canadian, and British vaults. There are numerous oligarchical assets in Europe and the Americas that could be taken to defray the costs of war and reconstruction. Indeed, it is suspected that oligarchical fortunes include Putin’s own wealth, so such sources should – by right – be devoted to the needs of Ukraine despite international legal niceties that make such takings of a nation’s deposits iffy.
Canada has promised $1 billion for Ukraine’s reconstruction. The U.S. has already budgeted $4 billion for post-war needs. The World Bank ($3 billion) and the IMF ($1.3 billion) have set aside less generous but still important funds. The World Bank says that Ukraine’s total post war needs will be about $60 billion.
The problem is how to end the war. Since President Biden refuses to put American troops and aircraft (only supplies) into the fighting mix, and NATO has embraced a congruent position, we are leaving ending the war to Ukraine’s soldiers themselves.
But the Russians have more arms and troops, and more fuel and food supplies. So long as Europe pays $1 billion a week for Russian gas and oil, Russia also can finance the war. It lacks spare parts that are only available from the West, and morale is not very high. But by concentrating its military efforts adjacent to Russia, it can more easily transfer supplies and rations into the combat zone. Earlier, its logistical lines were too extended and distended when it sought to encircle Kyiv. Now those lines are shorter and easier to manage. Railways in Russia are close by, too. Fresh troops are coming daily from Russia’s Far East, along with material reinforcements.
Ukraine will only survive the Russian onslaught if the West redoubles its financial as well as its equipment backing. Ukraine is fighting our war as well as its own. We should scrimp, save, and be generous and more generous, in order to keep the flame of freedom shining brightly into the dark and poisonous Russian night.