Anders Åslund on the shock of global isolation and the escalating risk of economic ruin.

“Russia’s economy is experiencing serious blows,” the Kremlin acknowledged on Wednesday. Which may be putting it mildly, given the scope of the reaction of world leaders, international corporations, and other powerful global organizations since Moscow initiated its full invasion of Ukraine last week. As U.S. President Joe Biden said in his State of the Union Address on Tuesday, America and its European allies were “inflicting pain” with “powerful economic sanctions”—“cutting off Russia’s largest banks from the international financial system, preventing Russia’s central bank from defending the Russian ruble,” and moving to seize what Biden called the “ill-begotten gains” of Russian oligarchs, including yachts, luxury apartments, and private jets. Companies such as Apple, Disney, FedEx, UPS, Shell, and BP have cut off extensive business with Russia. FIFA, the governing body of international football, has suspended the country from all competitions, including the World Cup. All of this is in response to the decision making of one man. What has Vladimir Putin done?

Anders Åslund is a Swedish economist, a senior fellow at the Stockholm Free World Forum, and an adjunct professor at Georgetown University’s Edmund A. Walsh School of Foreign Service, who’s advised the governments of both Russia and Ukraine. His most recent book is Russia’s Crony Capitalism: The Path from Market Economy to Kleptocracy. Åslund sees Russia’s economic situation as bad, getting worse, and now at serious risk of spiraling into total collapse. The increasing stress on Russia’s economy, he says, is evidence of the power of Western sanctions—a force that Åslund thinks both the Kremlin and some economic analysts in the West have under-appreciated. Part of the dynamic governing the moment, he says, is that the Russian president and his wealthy allies don’t care appreciably more about the suffering or experience of most Russian people than they do of Ukrainian people. Yet the effects of the past week are shaping up to be so disastrous, not just for Russia generally but for its elites specifically, that Åslund thinks Putin may face a dramatic turn among Moscow’s security officials, many of them former-KGB, who’ve historically legitimized his rule.

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Graham Vyse: What do we know about the end state Putin envisioned when he decided to invade Ukraine?

Anders Åslund: It’s pretty clear he wanted to take over Ukraine and appoint a puppet government. That wasn’t about part of the country; it was about the whole country. Putin has established this model with Kazakhstan and Belarus, which are dependent on Russia. I’m quite convinced he wanted Viktor Medvedchuk, his top agent in Ukraine and the former chief of staff to former Ukrainian president Leonid Kuchma, to head the new puppet government.

Vyse: What complications do we see Russia encountering in this invasion that it might not have expected?

Åslund: Putin has massively overplayed his hand in many ways. One problem is the state of the Russian military, which is useless—big, but useless. We saw this in World War I, at the beginning of World War II, and in Georgia in 2008; and we’re seeing it again now. Russia’s former Minister of Defense, Anatoly Serdyukov, who was ousted in 2012, reformed the military significantly, but if you’re reforming a big, hierarchical organization like the Russian military, you end up with everyone against you. Serdyukov was succeeded by Sergei Shoigu, who knows how you survive in the Russian establishment—by doing nothing, obeying orders, and accommodating all the vested interests. He undid all of his predecessor’s good reforms, and now the Russian military is even worse off than it was before Serdyukov.

The state of Russian military equipment specifically is also a problem. A lot of Russian hardware is standing along the sides of roads, because it breaks down easily or just doesn’t work. There’s been a real collapse of the military organization and material on the Russian side.

Vyse: What about on the Ukrainian side?

Åslund: We’re seeing the opposite on the Ukrainian side. The Ukrainians knew they had less of everything. They were afraid they’d be bombed out by the Russians from the beginning, so they spread out their military resources. Ukrainian planes appear to have been largely in the air when the Russians started the attack.

Russia has sustained massive losses. As of Monday, Ukraine claimed 4,500 Russian soldiers had died. The losses of Russian hardware are immense. The Ukrainians have done far better than anyone expected. They’ve focused on operating at three levels—the official military, territorial defense, and civil defense.

There was a great will in Ukrainian society to fight the Russians from the beginning. Ukrainians had a strong sense of wanting to fight for their country—not for the president, not for any party, but for Ukraine. You’ve probably heard their slogan: Honor to Ukraine, to which everyone responds Honor to the heroes.

More from Anders Åslund at The Signal:

“There’s been massive propaganda saying that sanctions don’t matter, but Russia didn’t have any economic growth between 2014 and 2020. Maria Snegovaya and I wrote a report for the Atlantic Council on the impact of Western sanctions on Russia since 2014, and we calculated that they cost Russia about 2.5 percent of its GDP each year. Real disposable income fell by 11 percent from 2014 to 2020. Yet the general attitude coming out of the Kremlin—and all these Russian state banks and Western investment banks that want to sell Russian bonds—is that sanctions don’t really matter. Putin has clearly believed this. Now Russia is utterly isolated. Putin thought he could manage with his reserves, but two-thirds of Russia’s reserves are now frozen.”

“We’ve seen a massive run on ATMs in Moscow, with people trying to take out cash. People in Russia realize they can’t travel anywhere. Where can they travel? Essentially to Turkey. They’re completely blocked from the whole of Europe and the West. They can’t get visas. There’s a frightening sense in Russia that the country is closing up like it was in Soviet times. The ruble fell by 30 percent this week against the U.S. dollar, and it’s likely to fall further.”

“What I hear from sources inside Russia is that the middle class is shocked. After 2014, the ruble lost half its value, but the country managed to come back. Things stabilized. This time the sanctions are so much worse. And we’re seeing new consequences, including in sports, not least with UEFA [the Union of European Football Associations] moving the Champions League final from Saint Petersburg to Paris. That’s an enormous insult. Like many people around the world, Russians are very focused on sports.”

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