Thread by @samagreene

So, I'm increasingly seeing stories like this one, together with takes from foreign policy analysts along the lines of "the West lacks a strategy for deterring Russia." (You know who you are.)

And it's going to make my head explode.

(An annoyed 🧵)

economist.com/finance-and-ec…

First of all, Russia's economy is NOT back on its feet. The ruble is back on its feet, yes. But the ruble isn't the economy -- and the ruble is only back on its feet because it's being propped up by massive capital controls and $50.1 billion of reserves spent since the war began.

Second of all, no Western policymaker or serious analyst expected a massive immediate impact on the economy. We knew that they had reserves (even if we could freeze half of them) and that those reserves would last them some time.

CBR Chief Nabiullina believes the sh*t will begin to hit the fan towards the third quarter of 2022, and I'm inclined to believe her.

kommersant.ru/doc/5315472

Or there's the IMF, which is projecting an 8.5% drop in Russian GDP this year.

imf.org/en/Countries/R…

So, the damage to the Russian economy is real, even if it's not immediately preventing Muscovites from sitting in cafés. Putin has spent 20+ years building sound fiscal and monetary policies. It will take more than a couple of months to undo that. Venezuela wasn't built in a day.

Third of all, the long-term damage is even greater. And it's not just about the lack of investment and the fact that Russian companies will have to work with subpar resources at inflated prices.

Per Russia's own border guards, 3.8 million people have left the country since the war began. Now, that's down to Putin as much as it is to sanctions, but that's a hit to productivity right now and growth potential down the line.

themoscowtimes.com/2022/05/06/nea…

Fourth of all, one thing we're not paying attention to is the degree to which Russia has outsourced its pain -- at least in the short-ish run -- to Belarus and Kazakhstan, its two key trading partners in the Eurasian Economic Union.

While the Russian ruble is up 12% vs the dollar since the start of the war, the Belarusian ruble is down 24% vs USD and an even more massive 32% vs the Russian currency. The IMF is projecting the Belarusian economy to contract by 6.4% this year.
imf.org/en/Countries/B…

The Kazakh tenge, meanwhile, is down 3% vs the dollar and 13% vs the Russian ruble -- though the IMF is projecting growth there of 2.3% (anemic given where oil prices are right now).
imf.org/en/Countries/K…

In other words, Russia is sustaining itself by impoverishing its closest allies. How sustainable is that?

And fifth of all -- and this is the part that really bugs me -- these sanctions were never designed to deter Russia. They were designed to punish Russia, but not to deter it.

Why was punishment the goal, rather than deterrence? Because if Putin was working with any logical cost-benefit framework, this war would never have happened. Ergo, you're not going to get him to back off by increasing the costs.

Punishment, by contrast, was meant to help Russia lose the war it had chosen to fight, but sapping it of money and morale, but starving the war machine and the economy that feeds that machine. That was always going to be a gradual endeavor, and the verdict is still out.

Folks, we played this game with the post-Crimea sanctions, the post-MH17 sanctions, the post-Skripal sanctions: they were imposed for specific reasons, about which pundits and others quickly forgot, and then started measuring effectiveness by totally different yardsticks.

Now, I'm not here to say that sanctions are always or even often effective. They most often aren't, even if there isn't often a better alternative -- and doing nothing is usually worse. I'm just here to call for honest analysis and a bit or memory (or at least Googling).

And if we're honest, then we have to acknowledge that these sanctions were meant to cause significant medium and long-term pain, and they're doing that. Calling them a failure because Muscovites can still go out for coffee is just dumb.

And no, I have nothing better to do on a Friday evening than to tweet about ostensibly smart people being dumb. (Again, you know who you are.)