War in Donbas
Article by: Fritz Ehrlich
About the author: Fritz Ehrlich is a German engineer and businessman who first became connected with Ukraine in the late Soviet period. He is a longtime resident of Ukraine and currently involved in projects supporting Ukrainian civil society.
Whoever goes looking for the true reasons for Russia’s invasion of Ukraine doesn’t need to bother with conspiracy theories. One of the most important sources is as trivial as it is obvious: because there is money to be made. And precisely at this moment Russia’s economy is hanging by a thread on weapons exports. Earnings from oil and gas have collapsed, even turning into losses. Russia doesn’t export significant quantities of anything apart from from raw materials and armaments.
With 27% of the global market, Russia is the second-largest supplier of large weapons systems after the USA (29%). However, while the US has tightened its spending, Russia massively increased its defense budget in the 2000s, thereby securing long-term delivery contracts for the defense industry. An important difference to the US: While the US economy is diversified and highly developed, Russia’s economy can barely survive without the military-industrial complex. It would simply be massive hit for the economy. According to my analysis, at least 30% – if not 50% – of Russian industry is directly or indirectly tied to the defense sector. As a reminder, it was up to 80% in Soviet times.
This is what makes Russia so dangerous. Of course, 20 years ago the West had already started to help Russia with investments in peaceful industries and technologies. But, it didn’t achieve anything; Russia continued to focus on armaments and systematically prepared its population for war. New, imagined enemies were created, while the reasonable worries of the Russian people were allayed with the supposed invincibility provided by the country’s nuclear arsenal. In light of these clear facts, the attempts to reach a peaceful resolution only using diplomacy – and not economic pressure – seem detached from reality. The West will only solve this problem in the long run with the help of Russians themselves. For this to happen, Russians must realize that the leadership under Putin carries the responsibility for the economy being “top heavy” – balanced on only a few pillars, one of them being the war business. This misguided Russian policy can only be papered over by winning new weapons deals, which Russia accomplishes by creating new markets for its weapons systems, that is, by fueling and conducting wars. As macabre as it sounds, successes in the field are still the best argument for buying any product. And Russia has exactly this kind of practical experience after waging plenty of wars over the past years: Transnistria, Yugoslavia (yes, Russian equipment was also tested and deployed there, particularly on the Serbian side), Abkhazia, Chechnya, Ossetia, and now Crimea and the Donbas. Anyone who happens to have the chance to listen Russian arms dealers at military trade shows will hear the sales pitches, with direct references to specific battles, regions and operating conditions.
Economic sanctions by the West are, for this reason, extremely important – and not only because they hinder the technological advancement of Russia’s war machine, but also because the resulting isolation accentuates the weaknesses in Russia’s economy and political system, and additionally restricts markets available to the largest Russian industry, the defense sector. The unavoidable resulting economic collapse will raise domestic political tensions, and, just as occurred over 20 years ago, Russians will take to the street to demand political change and a sensible economic system. What today still looks like a potentially bright future, judged by the jubilant supporters of Putin’s policy of expansion, will quickly change into bitterness if Russia finds itself on the edge of a state bankruptcy.
What Putin truly fears are his own people. That’s why they are massively manipulated; that’s why there is an attempt to crush any emerging domestic separatist movement. This can be successful for a while, but only up until Russian parents no longer know how they can feed their children. This was the reality for many families in Moscow before, during and after the Soviet Union.
Unfortunately, Russia’s military-industrial complex has proven itself to be very lucrative. Oligarchs and shareholders in these corporations have absolutely no interest in a shift in Russia’s foreign policy – they have gotten their teeth in the weapons business, and this doesn’t make things any easier. The West’s “change through trade” policy has not been a success; the hand of partnership extended by the West has been slapped away by Russia.
Russia’s economic system needs to be reformed from the ground up. Russia needs a “reset.” First and foremost, the Russian people need to want this. Russians must recognize that an economy based on natural resources and war materials is condemned to failure in the modern world. As history teaches, people quickly come to their senses when their pockets are empty.
That is why sanctions are of such great importance.