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    Wolfgang Münchau

    How Putin wins the war

    We have reached the limits of meaningful sanctions

    How Putin wins the war
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    There was a revealing comment yesterday from Robert Habeck, the German economics minister. It is a comment that inadvertently suggests how Vladimir Putin will end up winning the war. Habeck said Germany would not agree to an import ban of Russian gas, oil and coal, because this would endanger the social peace in Germany. It is not clear whether he spoke for himself or the government. But as of now, we have reached the limits of meaningful sanctions. Germany ended Nord Stream 2 unilaterally. Germany raised its defence budget to 2 per cent of GDP, plus extra investments, again unilaterally. Germany reluctantly agreed to what turned out to be very limited sanctions on Russia’s exclusion from the Swift payment communications system. For now, this is it.

    As so often, Europeans stand in self-admiration of how much more we have done than in the past, while losing sight of what we are trying to accomplish. The reason Putin has the power to invade a country the size of Ukraine is western money. Each day the west is importing energy from Russia to the tune of $700 million. We even increased our reliance on Russian energy after Putin annexed Crimea. At no point did we ever solve the problem. Going after the yachts of some oligarchs is one of many ways of not solving this problem. Inviting President Volodymyr Zelensky to a grand-standing session in the European parliament is another one. We are not going to make Ukraine a member of the EU.

    There is now a clear path for Putin to win this war. He encircles and destroys. He will do to Kiev what he did to Aleppo, Grozny, and most recently to Kharkov. Putin is a very predictable military strategist.

    The purpose of an import ban is not to stop him now, but to stop him later. I will avoid speculating about a possible coup in Russia. That would be an obviously intruding event. In the absence of a coup, Putin has the gear he needs to destroy Kiev. But he might not have the funding to do this ever again. This is the best outcome the west can achieve right now.

    Francois Hollande, the former French president, said yesterday that the EU should consider an import ban on Russian energy, and that Germany would have to accept to shoulder that burden. He is right. Pressure is increasing. Though a smoke and mirror version could be used instead, similar to what happened with Swift. The EU could try to reduce gas purchases by, say, 50 per cent, just above the maximum pain threshold.

    A total import ban is unlikely, just as a total Swift ban was never going to happen. Ursula von der Leyen announced it to great fanfare. The newspapers reported it. And when it emerged that it would only affect seven banks, nobody paid attention. If we ban Russian energy, the EU will use the same playbook.

    If it imposes partial sanctions, to stay just below the pain threshold, two things could happen. Either Putin does nothing, and still collects the money. Or alternatively, he cuts off the rest of the energy supplies, and sees what happens to German social peace. This is not just the social peace. Cutting off Russian gas would constitute a material shock to Germany’s entire economic model. Germany’s energy needs and the structure of its export industry are inter-connected.

    What happened in the German economics ministry is that they have realised the costs of the sanctions they have already agreed to. The economic boomerang effect cannot be measured by net flows of Russian energy goods. Russia, too, is part of our supply chains. For example, one way German companies managed to circumvent the shortage of container ships was to switch to trucks and trains from China through Russia. That route is now closed.

    One way the EU has dealt with its perma-crises is to try to create a celebratory parallel universe. We celebrate ourselves. We celebrate Ukrainian successes in battle, and daydream about whether Ukraine might even win this war. We wax lyrical about the changes in Germany. For as long as Germany imports Russian gas, oil and coal, it remains true that the most strategic alliance on the Eurasian continent is that between Germany and Russia.

    Like a distracted chessplayer, Putin has miscalculated how his opponent would react to his move. But he has many more pieces on the board. Gary Kasparov, who knows a thing about strategy, and chess, wrote yesterday that Putin was winning because his opponents do not know how to play the game. There is one specific area where this is the case: we need to declare very precisely in advance what would happen if Russian troops crossed a Nato border. Kasparov interprets the West's principled reluctance to enter into combat with Russia as strengthening Putin’s confidence. If he gets into Ukraine, the Baltic republics will be next. Zelensky said the same too. Putin could make the case that he needs access to the Russian enclave of Kaliningrad. And he will also claim that the eastern Baltics, too, were part of the Soviet empire.

    The historian Niall Ferguson has asserted that this situation is a self-inflicted policy disaster by Joe Biden and assorted European politicians, who fed Putin’s war machine. The Ukraine war started in Putin’s head when Biden lifted the Nord Stream 2 sanctions. That’s when Putin realised that he could win.

    This article was first published in the EuroIntelligence morning briefing. For a trial subscription click here.

    Written byWolfgang Münchau

    Wolfgang Münchau is a former co-editor of Financial Times Deutschland and director of Eurointelligence.

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