Ukraine’s essential problem is that Russia will always be there. Russia’s essential problem is that Ukraine is already gone.
Even if Kyiv cannot fully recover all its lost territories, Ukrainians are well on their way to joining the rest of Europe economically and politically. For all Moscow’s recent battlefield success and glee over dwindling US support, Vladimir Putin’s hopes to restore Russia’s brotherly ties to Ukraine have evaporated and his country looks headed for deepening isolation, impoverishment and irrelevance.
Mustering western resources to bolster Ukraine’s resistance remains the immediate priority, but the far greater challenge will be to manage the unpredictable risks of the world’s largest country as a sullen, nuclear-armed and resource-rich outcast. And that challenge may be as frustrating in Beijing as it is in Washington or Berlin, and as risky for investors and business leaders as it is for foreign and defence ministers.
Russia’s seizure of the eastern town of Avdiivka in February seemed to confirm rising voices in Washington that insist Ukraine can never win. It still seems hard to believe that a $60bn aid package won’t somehow win Congressional approval with majorities in both houses backing it, but it’s also clear that future US assistance is winding down regardless of who wins the November presidential election.
While this makes it harder for Ukraine to reclaim lost lands, it doesn’t shift the odds much in favour of Russian victory. The central military lesson from the last two years is that the combination of drones and landmines makes it even easier than normal to defend territory rather than to invade it.
This has some military experts urging Ukraine to focus on holding territory rather than losing ammunition and men in fruitless efforts to drive Russian forces back. In one scenario, Ukraine might even advance after a year of regrouping, but with the limits of outside support now apparent Kyiv will need to ensure its goals match its resources.
Meanwhile, disappointing progress on the battlefront distracts from the economic and political forces still playing out. Ukraine’s drift westward dates at least to the 2017 European Union Association Agreement and has only accelerated with the launch of negotiations to actually join the EU. The EU just committed $54bn to Ukraine reconstruction. Full Nato membership may be more of a stretch, but it’s clear Kyiv will enjoy benefits from some kind of western security support long after the fighting ends.
Look beneath the surface
Russia’s upgraded 2024 economic forecasts and stunning images from Moscow suggest a country thriving in spite of sanctions. But the underlying statistics tell a different story with the economy well below its pre-war growth path, key medical and industrial imports running short and foreign direct investment turning negative. Trade with China has boomed and plenty of goods have found their way around export restrictions, but Russian technology lagged before sanctions and the gap will only grow.
Contrary to some expectations, sanctions rarely produce quick results, but their effect grows over time as they increase costs and limit future innovation. In Russia’s case, sanctions also aggravate a heavy dependence on oil and military production, even as the country loses access to advanced technologies crucial to both sectors. Defence comprises roughly 40% of government spending this year and has forced the central bank to raise rates to 16% to contain inflationary pressures. Meanwhile, many of Russia’s most creative minds have joined the exodus of at least 800,000 people since the war started.
This is where the geopolitical challenge arises. The politics of any country can be unpredictable but, for now, Russia’s path forward appears fixed. Even if Putin passed from the scene, voluntarily or involuntarily, succession would most likely echo Armando Iannucci’s ‘Death of Stalin’ as a huddle of suspicious would-be successors scramble for power while sheer inertia keeps the country plodding on its current course.
This is a country that grows ever more dependent on its only reliable friends in Beijing, Tehran and Pyongyang. This is a country straining under the weight of its military spending. Through cheaper methods of disruption, such as cyberattacks, disinformation campaigns and opportunistic support for troublesome dictators from Mali to Venezuela, however, Russia is able to continue exerting power and influence at a cut-rate.
West must prepare for more mayhem
The US and its western partners need to brace for more global headaches from a Russia with few incentives to co-operate and plenty of reasons to cause havoc. But it’s not a great prospect for China’s leaders either, who don’t want to get drawn into confrontation with Washington by an unpredictable Russian leadership. India, Brazil and other developing countries that have tried to avoid taking sides will face similar risks.
The geopolitical challenge of managing this disruptive power also adds risks to the choices of anyone trying to deploy capital or maintain a global supply chain. US and European sanctions will continue expanding to people and companies anywhere in the world who do business with sanctioned Russian entities. President Joe Biden’s administration has announced 500 new designations, which include firms in China, Vietnam, Saudi Arabia and Liechtenstein.
For all the focus on the battle lines near Bakhmut and Zaporizhzhia and potential limits to western support, Russia will have trouble claiming more territory than it currently holds and will find it impossible to convince 43m Ukrainians to be friends. But the longer game and more daunting task for leaders and investors is to prepare for and manage the consequences of Moscow’s never-ending penchant to cause mischief.
Christopher Smart is Managing Partner of Arbroath Group and writes the ‘Leading Thoughts’ column on Substack.
