Has NATO’s Strategy To Bleed Russia Backfired?

My short answer to the question — Yes! I received an interesting response to my request for opinions on what constitutes the “Endgame” in Ukraine from a man named Matt. Here is his analysis:

The end game is to diminish/weaken Russia. The US has determined they cannot fight and win a war against both China and Russia. The US and it’s allies have sought to pick off the weaker of the two. The longer the US bleeds out Russia, via Ukraine, the better. Not all NATO (think Germany) were onboard with the plan. Hence, NATO starts talks with Ukraine about joining. Such talk provoked a response from Russia. Blowing up Nordstream forced Germany fully on board. The US/NATO will fight Russia to the last Ukrainian. NATO weakens Russia; US clears the decks to more capably deal with China; arms manufacturers make money, and politicians skim money here and there. The way the conflict is currently postured, this can go on for some time, all of which benefits US/NATO. Last thought, the EU will need to take laboring oar on rebuild. Current projections are $1 trillion and rising. EU will need to issue bonds. Interest rates currently too high. Plus, you get into problems between the rich northern countries, and poorer southern countries ((PIGS)). The US won’t publicly announce they win by weakening Russia, by taking away a Chinese ally, and saddling Europe with a generation of debt, but that seems to be happening. What do you think?

My response — “Matt, Thank you for taking the time to write something thoughtful. I think the facts on the ground contradict you. For example, the US economy is in recession with the added whammy of inflation. Russia’s economy is growing not shrinking. It is the United States that cannot supply Ukraine with an adequate supply of artillery rounds and HIMMARs. Russia by contrast is not running out of weapons/missiles. It continues to fire and hit targets in Ukraine. It is the US that is bleeding out.

Why do you believe that the US is so strong militarily? We no longer meet recruiting goals and the military leadership is more worried about proper pronouns rather than a competent military.”

I think Matt is correct observed that the original plan of the United States and NATO was to “bleed out” Russia. The phrase, “bleed out,” refers to an arterial wound that cannot be staunched. A person with such a wound will die within four minutes if the bleeding is not stopped. Only one little problem — Russia ain’t bleeding; it is NATO and the United States that are hemorrhaging.

The Wall Street Journal published a news item this week making this very point, Europe Is Rushing Arms to Ukraine but Running Out of Ammo:

Europe, home to some of the world’s largest weapons manufacturers, is struggling to produce enough ammunition for Ukraine and for itself, jeopardizing NATO’s defense capacity and its support for Kyiv, officials and industry leaders say.

A lack of production capacity, a dearth of specialized workers, supply-chain bottlenecks, high costs of financing and even environmental regulations are putting a brake on efforts to increase output, presenting the West and Ukraine with a fresh challenge for next year.

The United States and its European allies have been deceived by their use of military force over the last 30 years. They have never had to fight a peer nation with the capability to produce all of its own military equipment that is on par with what the West relies on. They have deployed their military forces against ill-equipped, poorly trained armies that lacked air power and effective artillery and tank forces. The United States and NATO were lulled into a state of complacency.

Compounding the problem was the decision of the West to shift much of its manufacturing capability to foreign countries. American can no longer do what it did in the wake of Japan’s attack on Pearl Harbor in December 1941, when the United States switched its massive industrial base into manufacturing tanks, planes, ammunition, battleships and air craft carriers. Modern day America specializes in producing grotesquely expensive, unreliable weapons that take months and years to appear on a battlefield.

This also is an intelligence failure. It appears the CIA bought into the nonsense that Russia had a small, weak economy and would crumbled in the face of Western sanctions. A real analyst would have raised the fact that sanctions, historically, have been ineffective in forcing regime change. Cuba and Iran are primary examples. It looks like the CIA donned its cheerleading uniform, complete with Blue and Yellow pom poms, and parroted the lie that Russia could not produce the rockets, artillery shells and precision missiles to support a long war. We are ten months into Russia’s “Special Military Operation” and they continue to shred Ukraine’s troops and infrastructure like a lethal Energizer Bunny — those pesky Rooskies keep going and going.

We enter the New Year under a dark and dangerous cloud. The failure of the United States and NATO to stop Russia may lead the Western alliance to act with more desperation and recklessness. Russia, for its part, admitted as much this week and is taking steps to bulk up its forces in the event this escalates into a World War. I continue to pray for peace, but there are no Western leaders embracing that approach. They are pinning their hopes on getting rid of Vladimir Putin without taking a moment to consider that Putin’s replacement would likely be more nationalistic and less inclined to negotiate. We are living in an historic, epochal moment that likely signifies the beginning of the end of American dominance in world affairs.

Major wars are often decided when one side becomes economically and financially exhausted. That happened to the South in the US Civil War and to Imperial Germany in World War I. My view is that Russia is heading for defeat on both the battlefield and due to economic collapse.

You are correct to ask for links in support of my negative take on the Russian economy. Macroeconomics is one of those complicated subjects that invites opinion from all comers but requires a high degree of knowledge and expertise to genuinely understand. That being so, it is usually best to look to credentialed experts who offer detailed assessments.

The best such expert analysis of Russia's current economic circumstances that I have found is at Business Retreats and Sanctions Are Crippling the Russian Economy. Here is the cite and abstract:

Business Retreats and Sanctions Are Crippling the Russian Economy

118 Pages Posted: 20 Jul 2022 Last revised: 2 Aug 2022

Jeffrey Sonnenfeld, Yale School of Management; Steven Tian, Yale Chief Executive Leadership Institute; Franek Sokolowski, Yale Chief Executive Leadership Institute; Michal Wyrebkowski, Yale Chief Executive Leadership Institute; Mateusz Kasprowicz, Yale Chief Executive Leadership Institute

Date Written: July 19, 2022

Abstract

As the Russian invasion of Ukraine enters into its fifth month, a common narrative has emerged that the unity of the world in standing up to Russia has somehow devolved into a “war of economic attrition which is taking its toll on the west”, given the supposed “resilience” and even “prosperity” of the Russian economy. This is simply untrue – and a reflection of widely held but factually incorrect misunderstandings over how the Russian economy is actually holding up amidst the exodus of over 1,000 global companies and international sanctions.

That these misunderstandings persist is not surprising. Since the invasion, the Kremlin’s economic releases have become increasingly cherry-picked, selectively tossing out unfavorable metrics while releasing only those that are more favorable. These Putin-selected statistics are then carelessly trumpeted across media and used by reams of well-meaning but careless experts in building out forecasts which are excessively, unrealistically favorable to the Kremlin.

Our team of experts, using private Russian language and unconventional data sources including high frequency consumer data, cross-channel checks, releases from Russia’s international trade partners, and data mining of complex shipping data, have released one of the first comprehensive economic analyses measuring Russian current economic activity five months into the invasion, and assessing Russia’s economic outlook.

From our analysis, it becomes clear: business retreats and sanctions are catastrophically crippling the Russian economy. We tackle a wide range of common misperceptions – and shed light on what is actually going on inside Russia, including:

- Russia’s strategic positioning as a commodities exporter has irrevocably deteriorated, as it now deals from a position of weakness with the loss of its erstwhile main markets, and faces steep challenges executing a “pivot to Asia” with non-fungible exports such as piped gas.

- Despite some lingering leakiness, Russian imports have largely collapsed, and the country faces stark challenges securing crucial inputs, parts, and technology from hesitant trade partners, leading to widespread supply shortages within its domestic economy.

- Despite Putin’s delusions of self-sufficiency and import substitution, Russian domestic production has come to a complete standstill with no capacity to replace lost businesses, products and talent; the hollowing out of Russia’s domestic innovation and production base has led to soaring prices and consumer angst - As a result of the business retreat, Russia has lost companies representing ~40% of its GDP, reversing nearly all of three decades’ worth of foreign investment and buttressing unprecedented simultaneous capital and population flight in a mass exodus of Russia’s economic base.

- Putin is resorting to patently unsustainable, dramatic fiscal and monetary intervention to smooth over these structural economic weaknesses, which has already sent his government budget into deficit for the first time in years and drained his foreign reserves even with high energy prices – and Kremlin finances are in much, much more dire straits than conventionally understood.

- Russian domestic financial markets, as an indicator of both present conditions and future outlook, are the worst performing markets in the entire world this year despite strict capital controls, and have priced in sustained, persistent weakness within the economy with liquidity and credit contracting – in addition to Russia being substantively cut off from international financial markets, limiting its ability to tap into pools of capital needed for the revitalization of its crippled economy.

Looking ahead, there is no path out of economic oblivion for Russia as long as the allied countries remain unified in maintaining and increasing sanctions pressure against Russia, and The Kyiv School of Economics and McFaul-Yermak Working Group have led the way in proposing additional sanctions measures.

Defeatist headlines arguing that Russia’s economy has bounced back are simply not factual - the facts are that, by any metric and on any level, the Russian economy is reeling, and now is not the time to step on the brakes.

Download the visual slide deck accompanying this research monograph here.

Click here to read a brief summary of our research in Foreign Policy.

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