Cost/benefit analysis of Ukraine war from Russian viewpoint

There is a mistaken notion that we should decide whether to get tough with Russia or not, as an ideological move to thwart the expansion of an aggressive regime, or not, depending on one’s political stripes.  These are not the real choices, because these are not the real motivations of the Russians.

For an example of this kind of thinking, see Leslie Gelb’s piece on Daily Beast, America’s Losing Russian Strategy.

I have traveled extensively in both western and eastern Ukraine, and also in Russia (my wife is Russian). and I’m heavily invested in Russian industry (through ETFs, just in the interest of full disclosure).  The war is over the loss of preferential inefficient trade which the Russians benefit from.  As Ukraine negotiates trade deals with other nations, Russia loses that.  Currently Moldova and other members of the CIS (the trade block of former Soviet states) are analyzing trade, and all seeing benefits from cutting trade deals that allow them to escape high priced Russian commodities.  You don’t have to take my word for it.  You can read the report of Moldovan economist Marcia Dumitrasco: Assessment of potential economic effect of free trade agreement between RM and EU in the context of the existence of other similar agreements in the area.

Putin, being the petty dictator that he is, would rather fight this with subversion than honest hard work and competition.  His idea is to extort and blackmail these former allies into continuing the preferential trade deals that benefit Russia.

Nonsense.  Russia is a resource-rich country with a highly educated and motivated population.  They can compete just fine, if the political establishment will quit throwing successful businessmen in jail.  The trick is to make the cost of subversion and extortion higher than the cost of honest competition.  It is a straight economic decision for the Russian oligarchy.  They have no territorial ambitions.  If they took over foreign territory, their population would oust them and they know that.

So the question on the table is not full scale war with Russia over the ideology of borders.  We sat across the nuclear fence from them for half a century and they always avoided a direct war with us – not because they couldn’t win, but because it was too expensive.  By supplying arms and training to Ukraine, et. al., we simply make their petty tactics too expensive, and they will adopt a more competitive economic stance as they should.


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