Deflating Putin best done with money, not might
Last year, noted President Obama in his recent State of the Union address, his critics were saying that Russian President Vladimir Putin's aggressive moves into neighboring Ukraine were “a masterful display of strategy and strength.”
But now, he added, after Western countries leveled stiff sanctions against Moscow, “Russia is isolated, with its economy in tatters.”
He's right about the economic impact of sanctions — helped along by plunging oil prices. Days after Obama spoke, bond-rating agency Standard & Poor's downgraded Russia's credit to “junk” status. The ruble has lost half of its value against the dollar, and investors pulled $152 billion out of the country last year.
The problem is that Putin seems undeterred by these economic penalties. A rocket attack on the Ukrainian city of Mariupol — clearly launched by Russian-backed rebels — recently killed 30 and wounded more than 100.
The Washington Post said the attack, part of a larger rebel plan to capture Mariupol and surrounding territory, revealed Obama's speech as “wishful thinking.” The reality is that “the Russian ruler has been neither deterred by the impending economic crash caused by Western sanctions and declining oil prices nor attracted by the prospect of reconciliation with the West.”
It's hard to argue with that conclusion, so Putin has left Western leaders no choice. They have to impose a new round of harsher economic measures against Moscow.
Putin is a bully, at times a dangerously deranged one, who fantasizes about restoring the Soviet Union to its former glory — dominating smaller and weaker states from the Baltics to Central Asia. And like all bullies, he has to be challenged and confronted. Otherwise he'll never stop.
No one wants a shooting war with Russia, and this showdown should never come to that. On today's global economic battlefield, markets are as powerful as missiles.
“The crucial question,” the Post said, “is whether the West will now have the fortitude to respond to Mr. Putin with tangible measures of deterrence, rather than mere rhetoric.”
The answer is not yet clear. The global marketplace cuts both ways. Western countries like Germany and France are made cautious by their deep economic ties to Russia — importing energy, exporting machinery.
In fact, Berlin and Paris seem far more willing to play tough with a fellow member of the European Union — Greece — than with Russia. But then Russia has oil.
Obama was right to say in his speech that America leads best when it displays “persistent, steady resolve,” not “bluster.” That resolve is exactly what's needed now.
In explaining its decision to downgrade Russia's credit status, S&P mentioned that the country has dramatically raised interest rates in order to stabilize the ruble, so it has few levers left to influence the economy.
Two other credit companies, Moody's and Fitch, seem poised to join S&P in downgrading Russian bonds. If that happens, the outflow of capital could accelerate quickly.
The famous money manager Warren Buffett has long been fond of praising the benign influence of “Mr. Market.” Maybe it's time to start calling his hero “Gen. Market.” After all, he's the chief commander in the conflict with Putin and his Puppets.
© 2015 Universal