Commentary:
I am reading “American Prometheus,” by Kai Bird and Martin J. Sherwin, which is a biography of Robert Oppenheimer, the father of the atomic bomb. This exceptionally-written book provides insight into Oppenheimer’s life, and the background of how the bomb was conceived, designed, and tested in the desert southeast of Socorro, New Mexico. While this is very interesting, I find the post-WWII period even more fascinating where Oppenheimer is trying to put the genie back in the bottle by lobbying the U.S. to engage the Soviet Union in discussions to limit the production of nuclear weapons, a stance which eventually led to the rescinding of his top-level security clearance.
Oppenheimer fully realized that escalating the production of mass weapons of destruction was a threat not only to the U.S., but to worldwide humanity itself. The real possibility of a madman or rogue country using them to conduct war could destroy the world. Here we are, 70 years later, and we find that Oppenheimer was a sage. Russia has invaded Ukraine and put its nuclear armaments program on high alert, as a threat to the world not to interfere with its aggression. Thank God no nuclear bombs have been used in this war, but Russia is finding out that it is fighting a war on two fronts – an economic and public relations war being waged by most of the world against it.
Russian assets have been frozen by countries throughout the world. Russian oligarchs, many whom have made their riches in clandestine ways, are waking up to find their luxury apartments in Miami and their yachts in France seized as penalties for Russia’s attack on Ukraine. Participation by Russian athletes and teams in sporting events have been prohibited, and international sporting and other events in Russia have been moved or canceled. President Biden slapped a ban on Russian petroleum imports in the U.S. Even Russian-bred cats have been banned from competition outside of Russia.
The U.S. trades very little with Russia, having exported $6.38 billion to that country and imported $29.69 billion from it in 2021. The most popular goods that the U.S. exports to Russia are aircraft, machinery, autos, medical products. Top U.S. imports from Russia include fuels, precious metals, rare minerals, fertilizers and chemicals. Total trade with Russia is miniscule, considering that in 2021, total U.S. global imports were $1.8 trillion and exports were $1.1 trillion.
Stakes are higher for the European Union (EU), which exported €89 billion (4.1 percent of total exports) to Russia and imported €158 billion (7.5 percent of total imports) in 2021. Approximately 62 percent of the EU’s imports from Russia were in the energy sector, mainly petroleum. Russia is essentially a large fueling station. It doesn’t make a lot of products that the world wants to buy.
Restricting trade will hurt Russia’s economy going forward. However, restricting the ability of Russia’s government, banks, businesses, and citizens to access assets in foreign bank accounts will hurt even more. The ruble has crashed upon the implementation of international sanctions against Russia. Its economy, which was anemic before the invasion, will experience even more pain, especially in the long run. Restricting the economic options that Russia has is paramount. The sanctions imposed against Russia are the most ever imposed against a country in the post-WWII period. This speaks to the near universal abhorrence against Russia’s behavior.
It is doubtful that Russian President Vladimir Putin had any concept of the financial hurt that would befall his country after he invaded Ukraine. He probably thought that he would receive a gentle slap on the wrist, as he did when he invaded and annexed the Crimea region of Ukraine in 2014. However, this time the Ukrainian situation is different. Unlike the invasion of the Crimea, this time the Russian people will suffer. The run on banks is already occurring, as people are lining up to withdraw money and spend it before it loses even more value or it is inaccessible. Russia’s industrial base will experience delays and shutdowns, as the U.S., Japan, and other high-tech producers restrict the sale of semiconductors and other high-tech equipment to Russian companies.
Because of his miscalculation of the world’s support for Ukraine, Putin now finds himself between a rock and a hard place. He can’t easy withdraw from Ukraine with his tail between his legs. This humiliation could very likely lead to his deposition and a different direction in terms of Russian leadership. However, with the strict sanctions gradually tightening around his neck, how long will Russian citizens endure the position in which he has put them?
Experts are stating that Russia’s invasion of Ukraine represents a new direction in the world, and possibly a new world order, which reestablishes a new Cold War in which Russia exercises absolute control over its neighbors. No matter how the war that Russia started ends, I do believe that a new world order has been established that includes Russia being firmly established as a pariah, which only a select number of countries will trade and do business with in the future.