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What, exactly, are the cards that Putin is holding that have led him to raise tensions
in Eastern Europe to Cold War levels?
What are Russia's strengths in the current conflict with Ukraine?
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The goal seems clear: Putin wants to restore Russia to political and military greatness.
In a past video, here on VisualPolitik, we told you how the invasion of Ukraine could
become a trap to hamper Russia's future.
We even told you how Washington might be looking forward to Russian troops crossing the Ukrainian
border.
However, it is clear that Moscow has, or at least had, very different calculations.
The country has changed a lot over the last two decades and Putin's government feels stronger
today than ever.
And so VisualPolitik fans, only time will tell if they are enough but in this video
we are going to take a close look at the four strengths, the four trump cards that have
led Vladimir Putin to unleash the latest great political-military crisis on the European
continent.
Listen up.
(THE FORCE UNLEASHED)
When Putin took over the leadership of the Russian Federation on 31 December 1999, the
country's armed forces were not exactly at their best.
At that time, the Russian army was little more than an ageing, rusty structure whose
capabilities were crumbling day by day.
For example, the once mighty Soviet nuclear submarine fleet languished, struggling to
survive for the sake of survival; the air force faced all kinds of calamities, the troops
lacked the most basic equipment, and both they and the officers in charge of them lived
in rundown and dilapidated housing.
To make matters worse, the war in Chechnya had become something of a never-ending nightmare.
Let's just say that back then, morale, like military salaries, was at rock bottom.
Well, Vladimir Putin tried to improve things, but it was not until 2008 that a real turning
point occurred.
That year the Russian army attacked Georgia, a small country in the Caucasus.
And do you know what?
Despite the enormous superiority of forces, the shortcomings of the Russian army were
immediately brought into focus.
All kinds of problems occurred.
For example, ground troops had no direct communication with the air force, which led to several serious
friendly fire attacks.
Tanks and transport vehicles suffered a lot of mechanical breakdowns; coordination between
the various military commands was practically non-existent, there was no precision weaponry
and troop readiness was disastrous.
The Georgian War was the most significant turning point for Russia.
From that moment on, Vladimir Putin made military reform a national priority.
In his view, Russia had to completely rebuild and modernize its military.
Well, as we say around here, no sooner said than done.
Since 2008 the situation of the Russian military has changed completely.
Vladimir Putin has driven a huge process of investment and renewal of the armed forces.
Today the Russian army is smaller but much more operational and modern.
Units have better equipment, deployment capabilities have multiplied, the air force has added hundreds
of new aircraft, and the navy is deploying new Borey-class nuclear submarines.
You could say that the transformation has been very significant in practically all areas.
But do you want a concrete example?
Well, without digging too deep, let’s look at the T-72 tanks that have been deployed
along the Ukrainian border.
These tanks have a new thermal optics system that allows them to be used in combat at night.
Then there are the Kalibr cruise missiles deployed on ships and submarines in the Black
Sea, as well as the Iskander mobile ballistic missiles deployed along the border which could
hit targets almost anywhere inside Ukraine.
And these are just a couple of examples.
Because the truth is that the Russian armed forces have changed radically since Vladimir
Putin came to power.
This has allowed the Kremlin to multiply its incursions abroad with considerable success.
Take for example, the operations in Crimea and Syria as well as the rapid deployments
in Armenia and Kazakhstan.
In fact, Russia has used these interventions to refine its strategies and gain operational
and combat experience.
This is a key factor when carrying out military operations.
And so, according to Russian Defence Minister, Sergey Shoigu, all ground troop commanders,
92% of air force pilots and 62% of navy units have battlefield experience.
Of course, the Russian military still has many limitations, such as access to state-of-the-art
technology or having the backing of a strong economy to finance its development.
But despite this, it is clear that the situation today is totally different from that of the
year 2000.
And so, Putin's first great strength in the Ukrainian crisis is precisely being able to
expect that, if necessary, the Russian army will be in a position to make a clean and
rapid intervention.
This would not only be a significant show of strength, but would also allow them to
move very rapidly into the next phase in this whole political-military conflict.
It is evident that having prepared armed forces greatly increases the number of options as
well as bargaining power.
Sure, this may be the most obvious strength, but it is far from the only one and probably
not the most important asset Putin is counting on to try to get his way.
Listen up.
(THE FORTRESS RUSSIA STRATEGY)
The economic and financial sanctions with which the United States and the European Union
punished Russia after the occupation of Crimea dealt a severe blow to Russia's economy.
As we covered in a past video, the sanctions contributed to shrinking disposable income,
as well as a reduction in economic growth and foreign investment in Russia.
Well, once again, the West has announced the threat of more and more sanctions.
Sanctions that the Russian government hopes they will be able to digest in due course.
In order to achieve this, since 2014 they have been making preparations under a strategy
that has come to be known commonly as the "Fortress Russia" plan.
And you see, in 2014, the Russian government understood that international sanctions could
cause enormous damage not only to the Russian economy but also to the government's own decision-making
capabilities.
Without resources it is difficult to have an effective foreign policy.
Precisely because of this, the Russian government realized that it had to prepare its economy
to be able to withstand new sanctions as much as possible.
Therefore, balancing public accounts, increasing its foreign exchange reserves and reducing
dependence on the dollar became fundamental objectives of economic policy.
And, VisualPolitik community, that is exactly what they have done.
For the Kremlin, the top priority has been to prepare the government to be able to withstand
the impact of strong international sanctions, if necessary, without limiting, at least in
the short term, its ability to act.
And so, in recent years, the Russian government has balanced its public accounts and has built
up a huge foreign exchange reserve equivalent to more than 600 billion dollars while reducing
its foreign debt.
Look at this.
The idea is that if a conflict with the United States and the European Union escalates, the
Russian government can use this huge stash of cash as a lifeline.
Now while it seems like a lot, a lot of money, we have to take into account that we are also
talking about a country with a population of more than 140 million people.
However, Moscow is also counting on rising oil and gas prices to further increase these
foreign exchange reserves over the next few years.
("Russia is much better prepared for sanctions than it was in 2014, at least in terms of
its macro indicators.
The State sector is in good shape and the financial cushion is large."
Natalia Lavrova, chief economist at BCS Financial Group in Moscow)
In addition, Russia has also been reducing its exposure to the dollar, and increasing
the presence that other currencies such as the euro or the Chinese yuan have both in
its foreign exchange reserves and, above all, in its own trade relations.
Check it out.
And, yes, as we told you in a past video here on VisualPolitik, in the medium and long term,
international sanctions could cause enormous damage to the Russian economy.
On that issue there is very little doubt.
("The medium- and long-term impact of driving Russia into financial and economic autarky,
as well as the cost to citizens, would be enormous.
Potential growth will be much lower without interaction with the world."
Elina Ribakova, Deputy Chief Economist, International Institute of Finance)
However, we are not talking about the most democratic, free and transparent country in
the world.
For the Kremlin, the main question is not whether or not the sanctions will doom the
Russian economy or the standard of living of the population.
Let's say that, in a way, that is the least of their concerns.
What is important is whether the government can withstand those conditions without being
limited in its operations and its ability to influence.
At least for a few years.
Well, thanks to this policy – the Fortress Russia Plan – the Kremlin hopes to be able
to count on a sufficient margin for action whatever its decision may ultimately be.
At the same time, they also hope to be able to convince European governments to adopt
a more lukewarm position.
Especially if the intervention in Ukraine were limited.
Because Vladimir Putin has a few more aces up his sleeve.
For example, what you might call counter-sanctions.
Listen up.
(MESSAGE FROM MOSCOW TO EUROPE: DON'T SHOOT YOURSELF IN THE FOOT)
Let's see, I don't think it will surprise anyone if I say that Russia is a very important
exporter of commodities such as gas, oil, fertilizers, aluminium, steel, platinum, gold
and nickel, among many other goods.
We are talking about supplies that, in many cases, are essential for European companies
and economies.
This is the case, for example, with gas.
The European Union imports more than 40% of all the gas it consumes from Russia.
So it follows that, if sanctions were excessively aggressive, they could affect the very access
of European economies to all these inputs, such as, for example, gas.
Some countries such as Austria, Finland, Poland and Germany are highly dependent on gas.
And take note, because replacing Russian gas is not an easy task.
Firstly, because Liquefied Natural Gas, which would be the only real alternative, is much
more expensive and secondly, because today the producing countries do not have much margin
to sell.
Europe would have to source gas from the Asian economies...
And pay through the nose for it.
Clearly, this whole scenario is a major deterrent.
Sanctions could make trade relations more difficult, while Russia could reduce or even
suspend the supply of many raw materials as a means of pressure.
In this way, Moscow is convinced that, in the end, the big governments of the European
Union will do everything possible to keep things from getting out of hand and apply
much more limited sanctions than Washington would like.
Especially, if we are talking about a limited or partial invasion.
And, take note, because here we can find an important precedent...
In 2018, the United States imposed sanctions against "Rusal", the leading Russian Aluminium
company for its ties to Oleg Deripaska, an oligarch close to the Kremlin.
The sanctions caused prices to skyrocket by 30%, affecting all types of industries, from
car manufacturers to soft drink can makers.
The pressure was so great that just a few months later, Washington decided to lift the
sanctions.
Well, the thing is that, as it stands, Gazprom, the Russian energy giant, has been curbing
gas supplies to Europe in 2021, something that has reduced reserves and put upward pressure
on prices.
This has contributed to the fact that according to JP Morgan estimates, Europe's energy bill
has doubled since 2019.
And remember, we’re not just talking about a few euros, but about $500 billion in cost
overruns.
Yes, yes, you heard correctly: $500 billion annually.
You could say that Moscow is using something like game theory.
On the one hand, they know that in the medium and long term they need Europe to continue
buying their raw materials.
And they know that reducing or suspending supplies could lead, as we told you in a previous
video, to huge long-term losses.
In the short term, however, things could be very different.
The enormous dependence of European economies on many Russian supplies is a pressure factor,
which Moscow hopes or at least hoped to use to gain a diplomatic triumph.
And we are not done yet.
Putin still has a fourth card up his sleeve.
Listen up.
(CHINESE DRAGON TO THE RESCUE)
Let's see, historically the Russians and the Chinese have never got along very well, terribly
in fact.
However, in recent years the situation has changed quite a bit.
Few leaders have accumulated as many tête à têtes [Tet ah Tets] as Vladimir Putin
and Xi Jinping.
To give you an idea of their esteem for each other, these two political leaders have sat
face to face and rubbed palms almost 40 times.
And something that is even more important.
According to data out of China, the volume of trade between the two countries exceeded
$145 billion in 2021.
The Asian giant is already Russia's number one trading partner and by 2024, bilateral
trade is expected to have exceeded $200 billion.
And so, if things turn ugly with the West, Moscow believes that the Chinese economy that
holds huge amounts of foreign exchange and devours raw materials like there is no tomorrow
could be quite a lifesaver for Russia.
At least for avoiding the worst-case scenario.
("I think Putin probably received some assurances from Xi that if a crisis breaks out over Ukraine
and the West imposes major sanctions against Russia, then China will stand shoulder to
shoulder with Russia."
Artyom Lukin, professor of international relations at the Far Eastern Federal University)
Of course, this presents two problems: On the one hand, China cannot completely replace
Western economies.
Economically, a Russia with less West and more China would be much, much, much weaker.
On the other hand, it would lead the Russian economy to a huge dependence on China, something
that, believe me, Moscow is not comfortable with at all.
The Kremlin may have little confidence in the Americans, but don't think for a second
that they think much differently about the Chinese.
Now, they may be relying on the very threat of strengthening ties between China and Russia
to act as another deterrent in itself.
But there you have it, these are the four major cards with which Vladimir Putin hopes
to play this game.
The problem for Russia is that, as we told you in a past video, this time the United
States seems to have decided to see the hand.
And the truth is that Putin's cards, although significant, are not so strong.
Particularly because in this game Russia has a lot to lose and very little to gain.
Exactly the opposite of the US position.
Yes, there is no doubt about it.
Russia today is much better prepared to withstand the West's political offensive than it was
10 or 15 years ago.
But in the long run, sanctions, the search for alternatives to Russian energy and the
military race along the European border would deal a heavy blow to the country.
And, all for what?
Well...
Basically for nothing.
And perhaps this is what explains why Russia has not yet intervened.
If it had really wanted to do so, if Putin had really wanted to invade Ukraine from the
beginning, he would have already done so.
Russian troops have been ready for many months and quick action would have been a major advantage
at the negotiating table.
It would have caught NATO members off guard so to speak, both militarily and politically.
Everything suggests that, far from thinking about Ukraine, Putin wanted to take advantage
of this scenario to reinforce Russia's international presence, to send a warning to the other countries
in his orbit – including, of course, Kiev – and to fracture NATO.
And the truth is that given the initial reaction of countries such as France and Germany – which
were in favor of seeking conciliation and even distancing themselves from Washington
– Putin may not have been far from getting his way.
This time, however, the strong reaction of the United States seems to have turned the
tables.
But, having said that, it's your turn:
Do you think Putin will ultimately invade Ukraine?
If so, what kind of scale do you think the operation would have?
How should NATO countries react?
Do you think Russia would really achieve anything?
Leave your comments below.
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All the best and see you next time.