Only the US Congress can stop Ukraine from winning
WASHINGTON, DC: Helping Ukraine win its war against Russia is essential for European and global security. The good news is that the United States and its allies have recently taken two major strategic steps in the right direction, providing more capable weapons, and limiting Russian fossil-fuel revenues. The bad news is that the Republican-controlled US House of Representatives threatens to ruin everything with a fight over the federal debt ceiling.
To understand what is at stake in Ukraine, think about a scenario in which Russia “wins,” in the sense that it keeps some or all of the territory it has seized. This would strengthen President Vladimir Putin’s grip on power and embolden him to expand Russia’s borders again. After all, that is what happened after the lame Western reaction to his land grab in 2014, when he occupied Crimea and parts of eastern Ukraine. Multiple voices on Russian propaganda channels are clear that the ambition is both territorial (most of Ukraine, Moldova, the Baltics, and parts of Poland, though not necessarily in that order), and strategic (defeat of the West and its values). Nothing that Russia wants is secret at this stage, as Julia Davis’s exceptional coverage of these voices makes clear.
To stop Russian aggression, two things are necessary: defeat on the battlefield and limits on current and future revenue from the international sale of oil and gas.
Russia began with some battlefield advantages, including in tanks and artillery. The Ukrainians fought off the initial assaults with some Western weapons (including antitank missiles), as well as judicious use of their existing Soviet-era armaments. The West has not wanted to tip the balance too far or too fast, hence the slow arrival of missile systems and heavier armour. But the recent promise of advanced battle tanks is a major step in the right direction. The signal is that NATO will provide enough support for Ukraine to push Russia out, however long that takes.
This is a carefully calibrated response that will eventually succeed. As Phillips Payson O’Brien of the University of St Andrews emphasises in his highly informative newsletter on these issues, the importance of long-range weapons and particularly airpower are coming into focus.
The more difficult problem is what to do about the Russian oil industry, which accounts for over 10 per cent of world production. Russia has self-embargoed its natural gas, which was flowing through pipelines to Europe. By cutting off these supplies and driving up prices, Russia has demonstrated that it cannot be trusted as a trading partner. European reluctance ever to buy Russian gas again will put a big dent in future Russian revenues.
Crude oil, by contrast, can be shipped anywhere in the world. Refined products, such as diesel, can also be sent long distances by ship – although the transportation costs are higher.
In a recent article, The Economist claims to have found a fatal flaw in the oil price cap imposed by the G7, the European Union, and their allies: the fact that there is some sort of “shadow” fleet operating outside the price cap. But this analysis misses the point almost entirely, despite the clear explanation provided by the Treasury Department.
The Western allies’ objective is to curtail Russian revenue while preventing a spike in world oil prices. The combination of an EU embargo with a price cap on crude (which applies to all Western-owned, -insured, and -financed shipping) is designed to shift bargaining power away from Russian suppliers and toward Russia’s remaining customers, including India and China.
The goal is to keep Russian oil moving but yielding lower revenue than would otherwise be the case. This is exactly what has happened since the price cap went into effect in early December 2022. According to the Finnish Centre for Research on Energy and Clean Air, the best scorekeepers on this issue, the impact on Russian revenues has been significant; the Brent benchmark price has fluctuated around $80-85 per barrel, while Russian Urals crude struggles in the $40-50 range.
Of course, it’s still early days, and the next step – imposing a price cap on refined products – is due to enter into effect by February 5. In March, the process of potentially lowering further the price caps for crude and refined products will start. Western countries are beginning to use their power as consumers within the global trading system.
What could go wrong? The most obvious risk comes from the US House, where some Republicans are keen to disrupt federal government operations, entitlement benefits, national defence, and even payments on US Treasury debt. The debate on the US debt ceiling is dangerous idiosyncratic nonsense – Congress has already approved the spending and taxation in question. But due to a bizarre quirk in how the US Constitution is interpreted, a few House Republicans now have an opportunity to second-guess those previous decisions.
Some people on Russian propaganda channels already refer to former President Donald Trump as “Our Trump,” presumably because of perceived support received in the past. These same people will be delighted if Trump’s Republican House acolytes manage to subvert the current US effort to support Ukraine.
Simon Johnson, a former chief economist at the International Monetary Fund, is a professor at MIT’s Sloan School of Management and a co-chair of the COVID-19 Policy Alliance.
Copyright: Project Syndicate, 2023.
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