Putin Laughs at Your Sanctions

Putin Laughs at Your Sanctions

Widely believed to be acting at the behest of Moscow, pro-Russian activists have seized government buildings in eastern Ukraine and prompted Kiev to carry out a limited set of military operations in the region. So far, the Ukrainian military has had little success dislodging pro-Russian forces, which for the most part appear unfazed. To bolster the Ukrainian government, the United States has unveiled a package of financial and economic sanctions directed at the Russian military and political establishment. Despite Moscow’s vulnerabilities on this front, the threat of further economic retaliation has proven insufficient in deterring Moscow’s aggression, as evidenced by the continued destabilization of eastern Ukraine. At the urging of the United States, the Ukrainian military has cautiously probed the positions of pro-Russian militants, while Washington has attempted to strike back at Moscow with financial sanctions. So far, that tactic has failed.

The Obama administration’s decision to retaliate against Russia with financial and economic sanctions reflects a broader paradigm shift in U.S. deterrence strategy. Financial warfare is supplanting deterrence based on conventional military capabilities. However, events in Ukraine have exposed the risks of relying too heavily on financial instruments of power. Deterrence requires the United States to make clear that it will support Ukrainian military resistance to any further Russian intervention.

The administration’s penchant for economic sanctions is understandable. Success in disrupting terrorist financing networks and in weakening rogue regimes has demonstrated the far-reaching toll that enhanced and fine-tuned sanctions can inflict in an interconnected global economy. At the same time, budget deficits at home and the costs of land wars in Afghanistan and Iraq have prompted policymakers to embrace more deployable, economical instruments. Recent progress with Iran has reinforced Washington’s growing preference for financial warfare. Tehran claims that it came to the negotiating table in exchange for U.S. recognition of its right to enrich uranium, but the Obama administration credits crippling sanctions for the breakthrough.

Russia also seems like a good target for economic warfare: It’s a sophisticated economic and energy power that depends on access to global financial markets and international financial institutions to advance its geopolitical ambitions. Moreover, U.S. diplomatic efforts since 9/11 aimed at enlisting Russia’s cooperation in enforcing international financial sanctions have sensitized President Vladimir Putin, as well as the corrupt elites in his inner circle, to the devastating impact that these policies can have against target regimes. Today, the ruble is in decline, the Russian Micex Index is down more than 10 percent since the beginning of the year, and the World Bank is projecting a contraction in the Russian economy of up to 1.8 percent in 2014 due to geopolitical instability. Yet none of these realities is stopping the Kremlin from fomenting instability and threatening further incursions into Ukraine. 

The shortcomings of economic sanctions don’t by themselves suggest a need to downplay financial warfare in U.S. doctrine — or even to enhance conventional capabilities. But they do demand that the United States calibrate its goals so that they match the capabilities it is realistically willing to deploy. The exact mix of financial and conventional military deterrence that must be brought to bear in any situation depends on what is at stake for the United States in the target country, and what is needed to secure important interests. 

In the context of the Ukrainian crisis, the extent to which the Obama administration is relying on financial instruments relative to conventional military deterrence is creating an alarming gap between Washington’s stated goals and the capabilities it is willing to employ to achieve them. Given Ukraine’s proximity to Russia, sizable populations of ethnic Russians, and importance in Moscow’s strategic priorities — not to mention Russia’s overwhelming military superiority over its neighbors — deterring further Russian aggression against non-allied but important states in the post-Soviet space will require more than targeted sanctions. 

Repeated assertions by President Barack Obama and other senior administration officials that a new Cold War is not on the horizon, while true at a global level, downplay the degree to which the renewed U.S.-Russian rivalry will resemble U.S.-Soviet competition on a regional scale. Throughout the Cold War, Moscow exerted enormous pressure on states on its periphery, as well as on states in the third world that fell outside the orbit of formal U.S. alliances. The West’s victory in the Cold War stemmed, in large part, from Washington’s success in deterring Soviet aggression against front-line states without deploying U.S. forces into combat. The United States convinced Stalin to back down in Iran in 1946, freed Austria from partial Soviet occupation in 1955, strengthened Israel’s defenses against Soviet-aligned Arab states, and shielded Pakistan during the Soviet occupation of Afghanistan.

The Cold War formula for defending front-line states involved a mix of political engagement, military sales and cooperation, and economic support through trade agreements and foreign aid. Even with the benefit of new sanctions capabilities, a similar playbook is necessary to prevent further Russian moves against Ukraine and other front-line states such as Georgia, as well as against U.S. partners in the Caucuses and Central Asia.

The greatest political challenge the United States faces in Ukraine is unifying the country’s diverse communities. Important elements of the Party of Regions, the party led by ousted President Viktor Yanukovych, and Ukraine’s Russian-speaking communities oppose the annexation of Crimea and Putin’s heavy-handed intervention in Ukrainian affairs. U.S. and European engagement with these elements could help facilitate political inclusion under a decentralized system of government. A parallel process to integrate Ukraine into Western institutions such as the EU would incentivize cooperation of between the country’s various factions.

On the military side, the Obama administration’s decision to reject Kiev’s initial requests for anti-tank and other weapons was a mistake. Instead, the United States should supply Ukraine with the materiel and training it needs to resist a Russian military intervention, and should persuade its allies to do the same. The White House, however, has calculated that the infusion of arms into Ukraine could escalate the crisis and undermine the prospects of a settlement with Russia. In fact, Moscow is more likely to negotiate if Putin recognizes the costs of pressing Russian claims militarily. 

Despite legitimate concerns over its readiness, the Ukrainian military, even in its current state, can make use of more weapons. As Sen. John McCain (R-AZ) has assessed, the Ukrainian military needs infantry rifles, a training regimen, and anti-tank and anti-aircraft weapons. To determine the precise size of a multi-year package of arms sales and assistance, the Obama administration should send a team to assess the capabilities Ukraine would need to wage a successful insurgency against an invading Russian army.

Finally, Ukraine cannot realize its economic potential without long-term assistance. The initial package of International Monetary Fund and bilateral assistance will allow Ukraine to weather the immediate crisis. A medium- and long-term effort to diversify the country’s energy sources, establish a credible economic reform program, and facilitate Ukrainian exports to Western markets, will require sustained Western cooperation with Kiev. Western influence in Ukraine will be contingent on the United States’ willingness to compete with Russia’s extensive economic influence in the country.

Without this kind of front-line state strategy, non-NATO member states could become victims of Putin’s drive for Russian imperial restoration. But if Washington reawakens to the spirit of the Cold War strategy of deterrence, it could set the conditions for a new regional stability. Hardening the new government in Kiev against Russian destabilization, over time, would allow Ukraine to shoulder more of the burden of deterring Russia. And Moscow, in turn, would be more likely to conclude that further aggression against its neighbors is too risky a gamble.