Stephen Kotkin is a professor of history and international affairs at Princeton University and the author of several books, including a multi-volume biography of Soviet leader Joseph Stalin. In a recent interview, Kotkin and I discussed Russian President Vladimir Putin’s designs on Ukraine and whether economic and financial sanctions might deter him. Here is a lightly edited transcript of our conversation.
Tim O’Brien: Were you surprised by Putin’s rambling speech on Monday that painted Ukraine as a Soviet creation with no right to independence?
Stephen Kotkin: No. He’s made a version of this speech many times; it was emotional and it was a huge number of half-truths strung together. … He doesn’t actually have to invade and occupy. He still could do that. He’s poised to be able to do that. But what he needs to do is to get the concessions he wants without having to pay the price of a full-scale invasion.
TOB: So you don’t think he wants to bear the full cost of a war?
SK: He doesn’t pay the price personally. Other people pay the price. Ukrainian citizens, Russian soldiers, Russian domestic consumers — those sorts of people pay the price. But it’s always cheaper to get your stuff for free than it is to pay the price. So that’s why we’re discussing sanctions.
TOB: I see sanctions as a form of financial warfare that allows the U.S. and Western Europe to avoid declaring a traditional military war. But I think you see them as counterproductive unless they’re deployed properly.
SK: So you got a couple of issues here. One is, what are you trying to achieve with the sanctions, what are your aims with sanctions, and are those aims achievable? A bigger question is who pays the cost of the sanctions? What happens for the most part with economic sanctions is that the local people, the civilians, pay the price. The regimes don’t really pay a price. … The sanctions make you feel better that you are doing something, but do they achieve the aims of punishment of that regime or behavior modification of that regime? Those are empirical questions. You have to answer those questions empirically. Those are not questions you can answer philosophically.
TOB: How would you answer those questions, empirically?
SK: Let’s go through all the stuff that they’re talking about. … I’m in favor of sanctions, but they have to be smart. If you can’t deter, you’re at least looking to punish. We can start with energy sanctions. So who pays the cost of energy sanctions? The European population. European manufacturers pay the costs. Europeans do not have alternatives to Russian gas and oil right now on sufficient scale. … Let’s go down the list of all the other sanctions. Let’s talk about banking and kicking the Russians out of Swift [the international payments system]. No way the Europeans are going to allow it, because that makes it more difficult to pay for Russian oil and gas. … And in any case, who needs Swift? Do the Russians need Swift? Or do the Europeans need Russia in Swift to be able to buy their oil and gas? You can blacklist the Russian banks that don’t actually transact with the Europeans, but if you want to buy wheat, you want to buy copper, you want to buy palladium, you want to buy oil and gas — how are you going to transact?
TOB: So your view is that the impact of sanctions can boomerang back on the Europeans and the U.S.?
SK: Well, we don’t know for sure because it hasn’t happened yet, but that’s potentially the case. The more you look under the hood, the more you see that the sanctions which will cause the most pain for Russia will also cause very serious pain for our allies and partners.
TOB: Let’s talk about technological sanctions and cracking down on technology transfers.
SK: That is by far the best. Export controls on technology, technology transfer — those are always the choke points, especially for commodity-exporting nations that are completely dependent on technology transfer. Even China is completely dependent on technology transfer. So that’s your big one. That’s the one where they pay a higher price. … Just about everything has American-made software or American equipment. You’re talking about Russian aerospace, you’re talking about quantum computing, you’re talking about AI, you’re talking about things finally that Putin himself cares about. … But here’s the thing: How enforceable is a blanket ban on export of American software and equipment in the global supply chain? That’s a very difficult proposition.
TOB: If you were at the White House and could wave a magic wand that would compel the Treasury Department and the State Department to immediately embrace a sanctions menu, what would that look like?
SK: It would be about these export controls on products that were important and enforceable, and I would begin to publicly enumerate them. Let’s remember, even if we achieve that, even if we have what I would be calling “smart sanctions,” where the price is on Putin’s regime rather than on our allies or on the Russian people or on us, Russia could still retaliate. They are the source of palladium, nickel, titanium and copper. Together with Ukraine, they’re almost a third of global wheat production. People say, “Oh, that’ll never happen, because Russia needs the money. It has to keep its exports up.” But Russia is more willing to absorb that pain than European countries are, or than we might be if we see people starving. Let’s also remember, since late 2015, these guys have built the fourth-highest foreign currency reserves in the world. It’s at least $640 billion. They also have a national wealth rainy-day fund which is 12% of their GDP. It’s $185 billion because Putin did not spend on Covid relief. He just said: “My people will suffer. But I will have a rainy-day fund, because if the West comes after me, I need to be insulated. I need to be a fortress.” So Russia’s macro picture is as strong as any country ever going into a threatened financial Armageddon.
TOB: And oil is trading at almost $100 per barrel.
SK: Russia’s break-even price for oil is about $44 a barrel. Their budget is in balance, and if they sell oil next year at these prices they’re going to be in budget surplus. Foreign ownership of Russian bonds is under 20%. They are ready to absorb the kind of pain that we are threatening in many areas. Europe is not ready, and we’re not as ready as we say we are. This is not an argument to do nothing. This is an argument to do better. This is an argument to get our act together. And it applies to China, not just Russia. What are we doing transferring technology that they need for their autocratic, repressive, aggressive regimes? We have the tools and we have the experience of the Cold War, and we can do this. But are we ready to do it right now?
TOB: How do you see this playing out with Putin?
SK: We don’t know what he’s going to do. Even his own people don’t know. He does these gradual escalations. It’s not the comprehensive invasion alone that’s the threat. It’s the ratcheting up where you open fissures in the Western alliance, where you weaken the Ukrainian regime and maybe even topple it without actually going too deeply into the country. He tests our threat of systemic sanctions. If we can get him to de-escalate, we then need to negotiate more seriously about some of his concerns. We can’t give up the principles of the West that we stand for, so we have to find creative ways to give Russia a stake in the international order. It’s a recipe for permanent instability, if they feel they have no stake. If they do have a stake, then we have a chance of behavioral modification.
TOB: What does behavioral modification look like?
SK: I would say that Ukraine retains the right to join any grouping or alliance it wants, but we will transform your forced, illegal annexation of Crimea into a sale. Like Alaska, post facto. You’ll pay a very high price financially for Crimea. But for that, we want the following behavior modifications: We want you to recognize and get off all the rest of Ukraine’s territory and make sure that Ukrainian sovereignty is protected; we want you out of Moldova, and we want these other things. … Ukraine’s geography is permanent and Russia’s intimidation and invasion capabilities are indefinite. Putin de-escalates now and he comes back tomorrow. The only way you can stop that is through diplomacy, a bargaining process where you don’t give up your biggest principles. You don’t allow him to forcibly annex Crimea, you transform it into a sale. You don’t allow him to determine Ukraine’s foreign policy, because Ukraine is a sovereign nation. … [It is] a practical version of upholding principles, rather than a pie-in-the-sky version of upholding principles — which is a recipe for permanent instability. – Bloomberg.
Also read: Russia rules out any threat to Ukrainian civilians during military action