5 Ways Putin's War Is Remaking NATO, Nuclear Deterrence, Russia's Economy and More

1: Russia's Economy is Deteriorating Rapidly [Thomas Duesterberg]

According to multiple news outlets, Russia may impose martial law in the near future, and the Kremlin may begin nationalizing foreign-held assets in Russia. The economic situation is deteriorating rapidly: digital payments systems (which dominate the economy) aren’t functioning and cash is now the most important medium of exchange; individuals cannot take holdings out of banks, acquire foreign currency; and cannot get money out of the country due to capital controls.  

As the value of the ruble declines it fans inflation, which was running 8-9% even before the invasion. Household incomes have been declining since 2013 as the economy weakened. Pressure from wealthy and technical elites to leave Russia is growing. Stock and bond markets are temporarily closed and prices are meaningless due to lack of liquidity. Export controls from western sanctions will cripple the airline industry, as spare parts for planes are cut off.

The cut-off of high-end semiconductors will undermine the operation of Russia's financial system, manufacturing industry, and technology such as robotics and telecommunications. JPMorgan estimates that the economy will crash by 20% or more in the second quarter. Oil and gas sales remain the only crutch sustaining the economy. And China pays much lower prices for natural gas from Russia even if it compensates for loss of gas exports to Europe. In short, sanctions are starting to seriously weaken an already stagnant economy and affecting households and businesses.

2: As Russia Moves West, NATO Will Come East [Peter Rough]

"Putin’s attack on Ukraine has shredded the NATO-Russia Founding Act of 1997, in which Russia pledged not to threaten or use force against NATO or third states. In return for that promise, the West agreed to refrain from deploying nuclear weapons or stationing troops on the territory of its new members. Putin’s invasion has destroyed this arrangement. Already, the annexation of Crimea had triggered NATO to deploy four multinational battlegroups into Poland and the Baltic States.

"Now, NATO will move to reinforce its eastern flank much more aggressively, overhauling its defense. For example, the U.S., France, and Germany have all in the past week offered or increased their forces in Romania, one of Ukraine’s neighbors and the alliance’s hinge in southeastern Europe. While Putin’s army bears down on vital Ukraine, from Kyiv to Kharkiv and Mariupol to Odessa, NATO will rearm and reposition itself across the board." 

3: Smart Phones Give Ukraine the Advantage in the Propaganda War [Peter Rough]

"The invasion in Ukraine is part of the next phase in the smart phone and satellite revolution. Only in very rare circumstances will it be possible in the future to hide a major war from the outside world. Even before the start of hostilities, commercial satellite companies were verifying, in real time, U.S. intelligence claims of Russian troop movements. During the early days of the invasion, Ukrainian forces seized on Russian soldiers’ use of smart phone apps to identify enemy positions.

"Short, impactful clips of the fighting and destruction have defined the information environment ever since. The power of Ukrainian nationalism, and the tenacity with which the country has resisted the invasion, has been splashed across screens in the West, strengthening international determination to support their fight. It has also made life difficult for Putin’s censors as they attempt to control the flow of information at home."

4:  Europe's Great Realignment [Peter Rough]

"Putin’s violent assault on Ukraine has shocked the conscience of citizens and leaders across Europe. In a major pivot, virtually the entire continent now considers Putin a hardened enemy to be confronted rather than a strongman to be managed. Overnight, Germany ditched pacifism and interdependence for rearmament and sanctions—joining the rest of the continent in a drastic about-face. So dramatic is this change that Finland now supplies Ukraine with weapons while Switzerland freezes the assets of Putin’s cronies. This shift is visceral and pronounced and in no small part thanks to Ukraine’s dogged resistance in the face of aggression.

"The test now is to turn these emotions into policies that can withstand a push for economic normalization in the event of Ukraine’s defeat."  

5: Countries Will Increasingly Rely on Nuclear Weapons to Guarantee Security [Jonathan Schachter]

"The Russian invasion of Ukraine joins a long list of recent failures by the 'international community,' the West, and the United States to follow through on their own commitments because of a lack of ability, will, or both. The political, economic, and human cost is likely to be exorbitant.  

"At the end of the Cold War, the newly independent Ukraine (along with Belarus and Kazakhstan) gained possession (though not operational control) of a significant arsenal of formerly Soviet nuclear weapons. Ukraine agreed to surrender these arms in exchange for assurances of its sovereignty and territorial integrity by the United States, the United Kingdom and Russia. These assurances, codified in the 1994 Budapest Memorandum, proved to be of little value in 2014, when Russia seized Crimea and now again as Russian forces advance toward Kyiv and other major Ukrainian cities. Images from the fighting make clear that even if Russia’s war plans are ultimately frustrated, Ukraine will emerge from the conflict bloodied and broken.  

"Under these tragic circumstances, where international law again reveals itself to be toothless and the United States is pivoting here or there, Washington’s friends and foes are more likely to pursue nuclear weapons. The Ukrainians wonder how their fate would have been different had they not ceded their arsenal in the 1990s. In Taiwan they are undoubtedly asking similar questions, having given up their own incomplete nuclear weapons program under U.S. pressure in the 1980s. The ghosts of Saddam Hussein and Muammar Qaddafi, who lost and gave up their nuclear weapons programs, respectively, are whispering in the ears of leaders across the Middle East, from Cairo to Tehran."

See More:

• Will China and Russia's uneasy alliance survive Russia's invasion of Ukraine? Sign up for Hudson's Weekend Reads newsletter for a special edition on the Sino-Russian relationship this Saturday.
   
• Russia's actions in Ukraine are raising concerns across Asia about the broader implications for the security of the Indo-Pacific. Join us next week as Professor Yasuhiro Matsuda—one of Japan’s leading security experts and a specialist in China, Taiwan, and cross-strait relations—offers his assessment in conversation with Distinguished Fellow Kenneth Weinstein.