Russia’s elites have been feeling the bite of US sanctions coupled the the near halving of the price per barrel of oil. As the West starts to look at Russia more as a gigantic criminal enterprise rather than as a nation-state, everyone is becoming more comfortable with reducing economic ties to them. Naturally, those Russians at the top of the criminal oligopoly that runs Russia are upset:
The head of a leading Kremlin-owned bank warned on Friday that further banking sanctions would lead Russia and the U.S. to the “brink of war.”
Andrei Kostin, the head of VTB, reacted angrily when asked what the consequences would be if Russia were excluded from the Swift banking system, a secure means of moving money across borders.
If it were to happen, Kostin told a session on the Russian economy at the World Economic Forum in Davos, “ambassadors can leave capitals. It means Russia and America might have no relationship after that.”
“If there is no banking relationship, it means the countries are on the verge of war, or definitely in the cold war,” he said in English, growing increasingly red in the face. “It will be a very dangerous situation.”
He said that if Russia were excluded from the Swift system, it would make the U.S.–Russia relationship akin to the U.S.–Iran one. He made the comments after noting that Russia had recently created its own alternative to Swift.
Access to the international banking system is critical to Russia. Without unfettered access its revenue from the sale of oil and gas is more difficult to manage and the skim collected by Putin and his cronies is very difficult to move out of Russia.
No one in the West should back down from this challenge.
There is a tendency to view the Cold War as a bad thing. Given the alternatives available in 1945, it wasn’t. The Cold War prevented the spread of communism in Europe and, more importantly, forestalled the possibility of a “Hot War.” During the Cold War the West achieved enormous economic integration because the USSR wasn’t able to meddle in Europe. It is hard to imagine the EU coming into existence in a national security climate like that the rogue regime in Moscow is creating in Europe.
It is difficult to see how a gradual economic distancing from Russia is anything but a good thing. Russia runs what is essentially a colonial economy. It’s main source of income is the export of raw material, primarily oil and gas. The cratering of oil prices has created a huge sucking chest wound and driven the Russian economy into a tail spin. Russian Deputy Prime Minister Arkady Dvorkovich, also at Davos, said “At any [oil] price level, you can win if you are getting more efficient.” This is whistling past the graveyard. You can become for efficient but eventually you find yourself in the position of the store owner who loses a little bit on each sale but plans to make up the deficit by selling in volume.
While it is a mistake to think of Russia as an irrational actor, it is also a mistake to think that Russia can, in the foreseeable future, but a trusted member of the international community. Rewarding Putin’s aggression, bluster, and rank criminality with increased access to Western markets and capital on the hope that he will behave better is simply wishful thinking.