Russia will pay an enormous price if it invades Ukraine, whether it goes for the whole country or only the eastern region around Donbas. Vladimir Putin has already assembled well over 100,000 troops near Ukraine’s borders, moved in tanks, heavy artillery and aircraft, and brought in the medics and blood supplies needed to deal with casualties. Western governments have evacuated all but essential diplomatic personnel and told their citizens to get out now.
Still, no one knows what Putin has decided, or even if he has decided. Visits to Moscow by senior western politicians have yielded little information and no diplomatic solution. The message seems to be that Putin remains uninterested in a compromise.
Instead of trying to guess what Putin will do, let’s focus on the costs and benefits he faces if he does invade.
Brutal economic sanctions on Russia
Whatever Putin may have thought when he began his military build-up, he must now recognise that he faces devastating economic sanctions if he invades. He is partially prepared for them, but only partially. Russia has built up substantial central bank reserves ($600 billion) and has made fewer trade and investment ties with the West since the 2014 Crimean invasion.
A new set of western sanctions on energy and international banking transactions would effectively cut off Russia from western markets and new investment. That would be bad news for the whole country and especially for the oligarchs around Putin. Of course, the hit would work both ways: Germany would be particularly vulnerable to export slowdowns.
Much higher energy prices
Those would obviously hurt the entire global economy, including China (as a major energy importer), but would help Russia as a gas-producing country. Yet higher prices would mean Putin would be forced to sell almost everything to Beijing, which would (a) negotiate hard on prices and supplies, and (b) make Russia a subordinate partner, politically and economically.