The Bankrupt Colonialist - Comment is Freed - 0 views
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Up to now the main question has been about whether sanctions and the pressure on the Russian economy will force Putin to abandon his aggression. There is, however, also a post-war issue, which is the cost of reconstruction. Estimates of the impact of the war on Ukraine are already well over $100 billion
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Understandably Kyiv wants compensation. This is raised in the kommersant story. According to Podolyak: “compensatory mechanisms should be clearly spelled out: at the expense of what and from what budget all this will be restored.
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Yet reparations of this sort - a more than reasonable request - would not only amount to an admission of guilt for the damage caused (Russia ludicrously claims only military targets have been hit) but will be beyond the capacity of the Russian economy, in its enfeebled state, to support.
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Looking forward the most worrying issue for the Kremlin is the isolation of the country’s economy. Since the start of the war the Russian stock market has closed, interest rates have doubled, inflation has shot up, and the value of the rouble has plummeted. One recent estimate suggests that Russia faces a drop of from 7 to 15% in GDP in 2022. It risks defaulting on it’s debts.
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it is hard to see how Russia is going to have much spare capacity to compensate Ukraine for the damage it has inflicted upon it, even in the unlikely event it was prepared to offer to do so as part of an agreement.
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Second, given what has happened over the past few weeks to the population of these territories, those remaining will be more hostile to Russia and will likely resist an imposed government.
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At the very least Moscow will want the provinces of Donetsk and Luhansk in their entirety, and not just the previous separatist enclaves, to be annexed or given some independent status. This was, after all, the demand with which Russia entered the war.
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First, if Ukraine has not otherwise been defeated and so “demilitarised” then this will be a frontier that will require defending for the indefinite future.
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There is a further issue here even if there is no agreement. The cities and towns that have suffered the worst as a result of Putin’s war are those that were once claimed to be pro-Russian and so required “liberation” from Ukrainian “genocide”.
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So the cost of occupying even this limited part of the country will be considerable and that is before even thinking about the expense required to render those horribly damaged towns and cities at all habitable, with effective infrastructure and accommodation.
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Their economies were in decline before 2014 and that process has since accelerated. They are now poorer than other parts of Ukraine and prone to criminality.
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The capital Grozny was rebuilt but the economy functioned thereafter at barely a fraction of pre-war levels. Despite efforts to make the economy more productive, in 2017 it was estimated that Chechnya required 80% of the government budget to be subsidised.
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The other implication is that while economic sanctions have not yet given the West much leverage over Putin’s war strategy they do offer it leverage over his peace strategy.
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Attempts to turn the situation around have not been helped by Chechnya’s rampant corruption. So this relatively small territory is already costing Moscow close to $3 billion a year. Crimea, annexed in 2014, may be costing a similar amount.
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Or take Syria. Here Russian air power was also used in a brutal way, this time against rebel populations and in support of the Assad regime. That campaign succeeded in keeping Assad in power but Russia lacks the resources to reconstruct Syria
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“Now moving into its eleventh year, the conflict in Syria has inflicted an almost unimaginable degree of devastation and loss on the Syrian people and their economy. Over 350,000 verifiable deaths have been directly attributed to the conflict so far, but the number of unaccounted lethal and non-lethal casualties is almost certainly far higher
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More than half the country’s pre-conflict population (of almost 21 million) has been displaced—one of the largest displacements of people since World War II—and, partly as a result, by 2019, economic activity in Syria had shrunk by more than 50% compared to what it had been in 2010.”
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Syria was a far cheaper war for Russia to wage, probably in the low billions of dollars, in fuel, ordnance, and personnel cost. Far less has gone into economic assistance and much of that has been returned to Russia as arms sales and gas and infrastructure contracts
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The strains on the Russian war effort are already evident, from the army’s hesitation about trying to fight their way into cities and the recruitment of mercenaries, to the reported appeal to China for help with supplies of military equipment and Putin’s fury with his intelligence agencies for misleading assessments and wasting roubles on Ukrainian agents who turned out to be useless
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He is now having to choose between a range of poor outcomes, which the US suggests may include escalation to chemical use (which would be both militarily pointless and test further Western determination not to get directly involved).
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War is rarely a good investment. Putin has acted for reasons of political and not economic opportunism. The prospects for any territory “liberated” by Russia is bleak. They will not prosper and will remain cut off from the international economy. To the extent that people stay they will have to be subsidised for all their needs while there will be little economic activity.
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Because of the destruction the short-term prospects will be bleak even if these territories are fully returned to Ukraine. But over the longer-term they will be much better off because of the amount of economic assistance Ukraine will receive and its integration into the international economy.
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as Germany and Japan showed after 1945 even shattered economies can be rebuilt to even greater levels of efficiency with sufficient resilience and resources. That is another reason why Western financial assistance and investment will be especially vital - Ukraine’s full recovery will serve as a testament to Putin’s failure.
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it is worth keeping this analysis in mind when considering prospective peace deals. The Russians may have underestimated the costs of conquest from the start but their approach to war has raised those costs considerably, especially in those parts of Ukraine close to Russia.
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Third, these territories will be economically wrecked and with no prospect of recovery so long as they are separated from Ukraine.
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The question of the future of sanctions and how they might be unwound is not one to be discussed separately from any peace talks. They are a vital part of the negotiations. As there can be no Western-led peace talks without Ukraine, it should be made clear to Moscow that for now this is a card for Zelensky to play.
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The future of the Russian economy can then be in his hands. Should a moment come to start to ease sanctions, some leverage will be required to ensure that any agreement is being honoured. There could be a link to reparations for the terrible damage caused.
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As his original war plans failed Putin has insisted his forces follow a disruptive and cruel strategy that has put his original aims even more out of reach and Ukraine with a say over the future of the Russian economy.