The West isn’t going to confront a nuclear state militarily, so an Economic World War is the way to tip the balance in the right direction. Western nations have the power to put Russia in the economic position that led to the collapse of the Soviet Union. Since Russia isn’t going to catch the communist disease again, we must destroy its economy from the outside.
Why the West is failing
To understand the paucity of Western efforts and why Russia still has enough money to pay for a war made expensive by Ukraine’s stamina, it’s necessary to see sanctions in four dimensions rather than one.
When loopholes are the rule rather than the exception, they become loopholes in nothing.
Russia has been economically confronted only on a tiny number of products, these enforced only to a feeble extent, only by a limited number of countries, and, fourthly, unplugged from only a portion of the banking system. The mathematical result of a percentage of a percentage of a percentage of a percentage produces a miserable fraction of what is possible.
When loopholes are the rule rather than the exception, they become loopholes in nothing. The picture that Russia is looking at is closer to an open field with a handful of areas cordoned off with low fences. It’s a common misconception that we have done a lot on oil.
Meanwhile, the devil has been laughing at our naivety.
In fact, we have allowed it to be sold subject to a price cap, while the oil fixation has distracted us from the hundreds of other things we could also be targeting. In short, without a four-dimensional approach across the board, the West has only been nibbling at the devil. One thing worse than doing little is doing little while thinking you are doing a lot—it blinds you to the opportunity to do more.
Meanwhile, the devil has been laughing at our naivety, lack of resolve, and coordination, hoping we won’t wake up. This is just when we must wake up from our four-year sleep.
Desert island economy
The central goal is to deliver Russia into a “desert island economy” where it can only do business with other dictatorships. Russia’s extreme dependence on trade as a percentage of its GNP compared to most nations is a wonderful Achilles heel. Without trade, it could hardly survive economically and certainly would be unable simultaneously to afford a war.
China, by contrast, is much better insulated due to its more self-sufficient domestic market. To sink the Russian ship of state, we must create a “perfect storm” by sending as many “tornadoes” as possible into its path and, to ensure this storm is perfect enough so there is no escape, these must surround Russia in all dimensions.
I propose that the Economic World War be declared based on a 10-point “business plan” that would impoverish Russia.
To achieve this, I propose that the Economic World War be declared based on a 10-point “business plan” that would impoverish Russia and simultaneously help Ukraine. Each of these tornadoes sent Russia’s way will augment each other to deliver this perfect storm.
These elements of the plan are not in any particular order and should be launched as soon as possible.
1. Maximize impact on Russian oil
Following recent oil inflation, if we don’t do more, Russia is likely to become richer, so we are going backwards. Four things need to be done about oil.
No oil exceptions. The short-term lifting of part of the G7’s oil sanctions by the US to alleviate pressure from the Straits of Hormuz bottleneck must expire in April and not be repeated. This error only helped Russia sell trapped oil and a complicit nation, India, buy cheap oil.
Stop-not-cap oil. No more capping the price of Russian oil but a real embargo – the G7 cap does no harm to Russia whenever the market price for Russian crude trades below the cap. The embargo will stop Russian oil from moving through the Western-controlled ports and logistics infrastructure.
Such secondary sanctions then would be imposed on countries still obtaining it by sea and pipeline, forcing deeper discounts.
Secondary oil sanctions. After making it illegal for Russian crude to be shipped anywhere controlled by the West in a real Western oil embargo, secondary sanctions would be imposed on countries that still manage to buy what gets through by sea or pipeline.
These need to be coordinated by the G7 and followed through properly, so we have no more cases like India making token reductions under pressure only from the US, which then ended up not even keeping India to those levels. Such secondary sanctions then would be imposed on countries still obtaining it by sea and pipeline, forcing deeper discounts and Russia suffering increased costs to get it to further markets.
Ground the “shadow fleet.” With its “shadow fleet” then as Russia’s last sea route lifeline, we would drive the discount further by grounding the by-then burgeoning fleet with “pincer movement” sanctions on insurers that cover Russian cargo and on any ports that allow uninsured ships to dock, and if necessary, with a blockade on the high seas. This would involve more aggressive sanctions against shell companies.
Insurers would be punished if they insured a vessel discovered to be carrying Russian oil.
High standards for maritime insurance, a sector based in the UK and Europe, would be enforced. Insurance and reinsurance of anything related to Russian oil would be sanctioned. Insurers would be punished if they insured a vessel discovered to be carrying Russian oil. Ports would be punished if they dock vessels with Russian oil or those that are uninsured.
Even if ports in Asia don’t comply with secondary sanctioning, they may voluntarily refuse to allow uninsured ships to dock due to the risk of environmental disasters. If that doesn’t ground the shadow fleet at its stopping points or before it sets sail, we would blockade it on the high seas.
Like blood diamonds, blood oil will suffer a discount, no matter what happens to the price of oil.
Unless a ship can prove to the boarding party that its oil didn’t originate in Russia, the ship and the oil will be commandeered. The oil will be kept by the nation that confiscates it. Russia won’t get paid, and the third-party countries buying its oil at a deep discount will be punished by having to pay world crude market prices for the shortfall.
Oil may be a commodity, but “pariah oil” will operate in its own oversupply/reduced-demand sub-market at a significantly lower price, volume, and profit margin. Like blood diamonds, blood oil will suffer a discount, no matter what happens to the price of oil. We should never be in a position where oil price inflation makes our enemy more dangerous by allowing it to become richer.
2. Upgrade from patchwork sanctions to a comprehensive trade and investment embargo
We should end patchwork sanctions across the product dimension beyond oil. Every sector would be covered. Full stop. Cut all Russian exports. The export embargo would cover all sectors as opposed to the current approach of only some products and often less than a ban. Cut all imports. Likewise, there would be a total embargo on Russian imports.
Cutting off Russian imports would be more painful than Western governments fully appreciate.
So far, sanctions have been mostly limited to energy, defense, and tech. Cutting off Russian imports would be more painful than Western governments fully appreciate because of their leveraged damage to Russian industry. Blocking some Russian imports can bring a factory to a halt with a powerful economic pain multiplier effect.
Since it will become illegal to do business with Russia, there will no longer be a risk of U-turns.
Investments. There would be a Western embargo on ownership of Russian businesses and Russian outward investment, covering past investments as well. Western companies will have to dump their Russian assets, pull out management, and provide no cooperation.
Russian state-controlled assets in the West will be expropriated and private sector assets would be barred from removing cash from the host country. Since it will become illegal to do business with Russia, there will no longer be a risk of U-turns by Western corporations that left Russia.
3. Impose secondary sanctions to broaden the trade and investment embargo
Once the West has filled in its patchwork approach to trade and investment with a full embargo, we will take these new Western embargoes global through secondary sanctions. Such a 360-degree trade and investment embargo would be the first step towards the creation of a “Single Democratic Market.”
All countries would have to close out Russia or lose access to the West, polarizing the world into two economic blocs. Successful secondary sanctions obviously require economic courage, but the size of Western markets has the “chilling effect” that allows it to win the game of chicken. The SDM will succeed in sweeping up many countries because it works like a cascade that grows in momentum.
The momentum grows in strength as the market on offer from the Western side becomes ever more attractive to accept.
India, which trades more with the US and Europe than with China and Russia, would no longer be able to have its cake and eat it – it would leave BRICS. Then, with India on the Western side of the equation, Brazil would find itself in the position of having more trade with the Western bloc than China and Russia. The momentum grows in strength as the market on offer from the Western side becomes ever more attractive to accept and ever more crippling to reject.
4. Close banking loopholes
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Parallel with the embargo rolled out, we would make it difficult for Russia to pay for imports and get paid for exports through the maximum possible globalization of banking transaction sanctions. This is a pincer movement to comprehensive trade sanctions on the other side in the sense that, theoretically, one of them might be enough, but, in practice, everything is needed. Russian trade will become doubly difficult.
Digital exchanges, gold brokers, and alternative payment networks that facilitate these out-of-band settlements need sanctions.
Secondary sanctions would force third-party countries to make Russian banking transactions illegal. China, India, and some countries in the Middle East and Central Asia are the critical culprits, while Türkiye is only half-compliant. If they don’t comply, they will lose their access to the dollar, euro, and SWIFT.
China will likely hold out, even though it has more to lose than to gain economically. Simultaneously, the West would wage a war on alternative payment systems and crypto-laundering routes used by Russia and trading partners to get around the Western banking system. Digital exchanges, gold brokers, and alternative payment networks that facilitate these out-of-band settlements therefore need sanctions and clever solutions.
5. Punish countries hosting trade embargo evasion hubs
Just as oil slips out of Russia in its shadow fleet, sanctioned goods from the West have been slipping in through “shadow intermediaries” via countries like Kazakhstan, Kyrgyzstan, and Armenia. It doesn’t take a rocket scientist to figure out that the skyrocketing volume of rocket components imports to these countries since the 2022 invasion isn’t for purely domestic use.
As sanctions expand to cover all products and turn into a full trade embargo, they will see their businesses mushroom.
Currently, they serve Russia in the black market for specifically banned components, but as sanctions expand to cover all products and turn into a full trade embargo, they will see their businesses mushroom. So, the West will sanction host governments for allowing such companies to operate, in addition to the companies themselves.
6. A duty to damage
Just as there is legislation in the US that puts an onus on American companies to prevent their foreign entities from engaging in corrupt practices, there would necessarily be radical legislation giving companies a “duty to damage” Russia by impeding their past Russian business and state customers.
This would include companies having a duty to know their customer so they can help prevent obvious embargo evasions, and even a duty to disrupt Russian industry and society from their effective use of imports and services that have already been delivered, such as forcing software companies to flip kill-switches and cut off know-how transfer under existing contracts. Sanctioning governments would underwrite any legal liability that companies may face.
7. Exacerbate the brain drain
The specific goal is to turn Russia into a particularly badly-run economy. This must be an active economic destruction strategy, not a passive immigration policy. Not everyone wants to give work visas to Russians, but the economic destruction upside of brain-draining Russia is a no-brainer. This strategy is well-hedged because, if Putin bans talent from leaving, he will only make the cleverest Russians hate him.
8. Ukraine to sanction Russia more aggressively itself
Ukraine should sanction Russia more comprehensively, in line with what it expects of other countries. For example, Ukraine has supported consumer boycotts of Western businesses still doing business in Russia, and correctly criticized some of them as “International Sponsors of War,” but it didn’t block them from accessing its own consumers. Ukraine cannot expect the other Western countries to cut off Russia economically if it doesn’t do more of this itself.
It doesn’t make sense to have your enemy profiting from your economy to pay for its war against you.
Ban companies working with Russia from Ukraine. This would add pressure to get the remaining ones out of Russia.
Expropriate Russian-owned companies still in Ukraine. Enact laws that treat working for entities connected to Russia and helping to hide their ownership as severe crimes, including failing to report Russian ownership if the person has clear knowledge. Expropriate the companies discovered. It doesn’t make sense to have your enemy profiting from your economy to pay for its war against you.
9. Make Ukraine an investment hotspot
Ukraine can become a focal point for investment from the democratic world based on a trajectory beyond the war as a democratic growth market. Apart from boosting the economy, this will entwine other Western countries into Ukraine’s future.
Combined with the ban on companies still working with Russia, it will create a morally polarized investment incentive program.
New legislation would incentivize investment by companies that have quickly left the Russian market. Combined with the ban on companies still working with Russia, it will create a morally polarized investment incentive program. A company would be eligible for incentives after four years of having quit Russia.
This would mean those who left promptly after the 2022 invasion would already be eligible for the program. Multi-year tax breaks linked to new or incremental investment would be reimbursed to Ukraine’s treasury by foreign governments to fuel this investment flow.
10. Use Russia’s money against Russia
Get the famous $300 billion in Russian cash held across Western jurisdictions, the largest chunk at Euroclear in Belgium, to Ukraine, using the Ukraine Repatriation Loan solution, under which it would only be repayable to the West from future Russian war reparations.
Although this won’t directly damage Russia’s economy in the short term, since the funds are already frozen, it would obviously be a major boost for Ukraine’s economy and war funding. It is ironic that Europe spends money on the war but keeps the enemy’s money safe in Belgium due to technicalities.
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The Economic World War, combined with Ukraine’s valiant daily fight, if waged with the same determination, can bring Russia to its knees, get Putin out of the Kremlin, and give liberty a better chance on Earth. Moreover, at a time when much of the world craves military peace, an Economic World War will shorten the war in Ukraine. If you treat your enemy with kid gloves, you are throwing the next generation to the wind.
The author wishes to thank Eric Grover for his contribution to this article. A banking sector expert, he advises payment issuers, networks, and processors.
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