ECONOMY

All-out economic warfare is the best way to stop Putin | Orysia Lutsevych

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“Damn must fail.” These are the words of the British prime minister, Boris Johnson.

The way to do this is via all-out economic warfare, not the weak sanctions and half-measures that have been put in place so far. All political, diplomatic, military and economic means, short of war with Russia, must be deployed in synergy to ensure Ukraine continues to resist and Russia weakens and fails. Providing weapons, supplies and intelligence to the Ukrainian armed forces is key. But much more must be done right now to wage economic warfare to undermine Putin’s ability to continue this war.

We need to deplete Russian state income by limiting its trade with the west. Every day, the US, UK and EU buy more than $700m worth of oil, gas and other commodities from Russia. Some of Russia’s largest state-owned companies, which are key for commodities trading, have not been sanctioned. Savings in Europeespecially Germany and Italy, must start preparing now for life without Russian gas and threaten a full embargo.

In the financial sector, we must impose blanket sanctions against all Belarusian and Russian banks and put them on the US specially designated nationals list – which will block their assets and make it illegal for anyone in the US to do business with them. All Russian and Belarusian banks should be disconnected from the world’s main banking messaging service, Swift. Sanctions should be imposed on ruble clearing, ​meaning no transactions in rubles are possible and in effect trade is blocked, and there must be a full ban on US and UK public sector pension funds from holding Russian assets. Cryptocurrency wallets linked to Russia should be identified and seized.

Finally, the 5,000 members of the Russian political, economic and military elite and their families must be banned from obtaining visas to the UK, US and EU. These privileges should be reinstated to anyone publicly declaring that they disagree with Vladimir Putin’s war and resigning. And if those in control of the military operation in Ukraine are seeking another off-ramp, they could defect now and be granted immunity for war crimes, which should be investigated by a special court into the aggression against Ukraine.

We know that sanctions work. At the very start of Russian aggression against Ukraine, the US, EU and UK acted swiftly – freezing a large part of the Russian central nank’s $638bn reserves was a significant blow. Roughly $403bn of the bank’s foreign exchange reserves are held in dollars, euros, pounds and other western currencies. Russia now cannot access these funds. A range of Russian banks were cut off from the Swift payments system, which will effectively block the country from importing and exporting from and to the EU. About 80% of the Russian banking sector is currently under US sanctions.

The impact of these measures on the Russian economy is already substantial and will only become more exacerbated over time. The value of Russian companies listed on the London Stock Exchange dropped by 98%; the ruble continues to plummet and has already lost 40% of its value. The central bank is desperately trying to prop up the ruble by imposing capital controls and doubling its interest rate to 20%.

The Russian leadership now represents a pariah state. Individual financial sanctions are already in place and travel bans are in the making. Putin’s foreign assets, along with those of foreign minister Sergei Lavrov, defense minister Sergei Shoigu and members of the Russian security council have been frozen. The EU has sanctioned all 351 members of the parliament who voted to recognize Donetsk and Luhansk. More than a dozen billionaire oligarchs with ties to Putin are subject to asset freezes and travel bans. The UK’s list, however, is shamefully small – only three such individuals are included. But the UK government is working on new legislation that would allow it to act upon oligarch “hitlists”.

In the private sector, the tide is changing too: multinationals are treating Russia as a toxic market. Major energy, tech, consumer goods, car and plane manufacturers are pulling out of Russia. AT global campaign to boycott Russian goods is under way to pressure all companies to stop cooperation with the aggressor state. Norway’s sovereign wealth fund declared its $3bn investments in Russia worthless overnight. This is just a harbinger of what is to come for private and pension funds holding Russian assets.

All these efforts are heading in the right direction, but they should be intensified, as Putin intensifies his war of terror in Ukraine. One easy and swift step would be to cancel the one-month grace period for US initial sanctions.

Let us not forget that Putin declared war on Ukraine and bombarded its sleeping cities. He decided to wage war to satisfy his neo-imperialist ambitions, his desire to stay in power and his intent to destroy what is left of the global world order.

What is unfolding in Ukraine is something not seen in Europe since the second world war. Putin’s Blitzkrieg attack on Kyiv failed and the Ukrainian armed forces are successfully repelling the Russian army on the battlefield. The Kremlin is now laying siege to large cities such as Mariupol and Kharkiv and is razing to the ground smaller cities such as Irpin, Hostomel and Bucha. His soldiers kill civilians trying to flee. There is evidence of deliberate targeting of civilian buildings, including using cluster bombs, which are banned under the Geneva conventions. Russia violates ceasefires, and 200,000 women and children are unable to exit Mariupol via agreed humanitarian corridors. And the situation will only get worse in the coming weeks.

So, yes, Putin must fail. But the west must find the courage to ensure that happens. If boots on the ground and no-fly zones are off the table, then the west’s response to this war must be economic warfare in the name of defending democracy and freedom. There are costs to be shared by all, but also benefits, if Ukraine shields the rest of Europe from the horrors of war too. With the support of the west, Ukraine could become an open democratic society again – a keystone of European security right next to Russia.

Because by ensuring that Putin fails, we ensure that Putinism at large fails too, and with it the idea that brutal military force can be used to restore a former imperial possession.

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