Russia’s leader Vladimir Putin has defied sanctions

What is the main lesson of Nato’s proxy war with Russia in Ukraine, now nearly two years old? Never underestimate the Russian state.

The Western powers’ dwindling enthusiasm for the war is evident in the political difficulties they face in financing it.

The European Union has finally bullied Hungary’s far right prime minister Viktor Orban into withdrawing his veto of €50 billion (£43 billion)—mainly loans, actually—to finance the Ukrainian government. But this doesn’t solve the shortages of weapons and munitions with which Kiev is grappling.

Meanwhile, US president Joe Biden’s latest military aid package is stuck in Congress.

Biden conceded the Republicans’ demand for more repressive measures at the southern US border, only to have the deal blocked by pressure from Donald Trump. Attacking migrants is once again a key plank in Trump’s presidential campaign.

Expectations of a speedy military victory for Ukraine have vanished with the failure of last year’s offensive.

According to the Washington Post, “The Biden administration is working on a long-term strategy for supporting Kyiv. But those plans do not anticipate significant gains by Ukraine against Russia in 2024, officials say.”

To understand the impasse Ukraine and its Western backers face we also have to look at the other side of the equation—Russia.

Biden’s calculation after Vladimir Putin ordered the invasion of Ukraine was that he could bleed a dangerous challenger dry through financial sanctions and supplying Ukraine with weapons and military “advisers”.

This policy has plainly failed. The Financial Times carried a slightly sheepish article last Saturday headed “The surprising resilience of the Russian economy”.

It reports the embarrassing fact that, according to the International Monetary Fund, Russia grew by 3 percent last year, faster than any of the G7 big Western economies.

It’s projected to beat them again this year. The World Bank estimates that, by one measure of GDP, the Russian economy is bigger than Germany’s.

The Financial Times’ explanation is that “the Kremlin spent its way out of a recession by evading Western attempts to limit its revenues from energy sales and ramping up defence spending”.

It quotes one economist saying, “The regime is resilient because it sits on an oil rig. The Russian economy now is like a gas station that has started producing tanks.”

This underestimates Russia’s success in taking advantage of high energy prices—partly a result of its invasion of Ukraine—to replace the Western markets it lost thanks to sanctions.

Its Eurasian geographical position has helped it to switch its energy exports to big gas-hungry economies to its east and south such as China and India.

Moreover, Russia has shifted to a state-directed war economy. Putin has run an increasingly repressive authoritarian regime, but economically he relies on a team that implemented strictly orthodox neoliberal policies.

“The economic bloc [the finance ministry and central bank] keeps saving the regime. They have proven to be much more useful for Putin than the generals,” a former Russian central bank official told the Financial Times.

Military spending has been hugely boosted, to about a tenth of national income in 2022-3.

The Financial Times warns that these policies will lead to higher inflation and shortages. No doubt. But from Putin’s point of view keeping the economy growing has allowed him to ride out the political turbulence surrounding the late Yevgeny Prigozhin’s bungled military rebellion last June.

Ukraine’s commander-in-chief general Valery Zaluzhny admits Russia has an advantage over Ukraine because Ukrainian institutions haven’t been using “unpopular measures” to “improve manpower levels”.

In fact, the Russian state has been extremely brutal in conscripting convicts whom it uses as cannon fodder. Nevertheless, in the bloody meatgrinder the war in Ukraine has become, Russia has the advantage.

It will probably take a long time, with many more deaths, for the US to acknowledge its failure, but this is the reality.

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