The Great Decoupling: How Western Sanctions Are Pushing Moscow East

By seeking an economic divorce from Russia, US President Joe Biden and his European allies ignored the time-tested saying, “Keep your friends close but your enemies closer.” In doing so, they have enabled the complete economic decoupling of Russia from the West. The resulting Russian economic union with China will transform global geopolitical reality, to the detriment of those who sought these sanctions in the first place.

Ever since the collapse of the Soviet Union, Russia has had a Jekyll and Hyde relationship with the US and the West. In the dire economic reality of post-Soviet Russia, many in the West believed the Soviet ghost could best be exorcised through a crash program of democratization, which would accompany the transformation of the ruined, centrally controlled Soviet economy into a vibrant free market built along Western capitalist lines.

The result was a disaster. Post-Soviet Russia President Boris Yeltsin proved unsuited for the task, and what passed for democracy in Russia was quickly quashed in October 1993, when Yeltsin ordered the Russian Army to open fire on the Russian legislature. The strangulation of democracy was completed when Yeltsin won re-election in 1996 in a heavily tainted contest.

Rise of the Oligarchs

The Russian economy, meanwhile, had been taken over by Western carpetbaggers looking for a quick profit and unethical Russian entrepreneurs, who shaped domestic laws and policies that enabled them to acquire former state enterprises at rock-bottom prices. The resulting oligarch class of billionaires began an incestuous relationship with their Western benefactors, trading access to Russian resources for help in transferring billions of dollars to offshore shelters, in the form of prime real estate, bank accounts out of reach of Russian authority, and prestige investments such as sports teams.

Left in the wake of this unscrupulous acquisition of wealth were average Russian citizens, who got only the meloch (loose change) of Russia’s experiment in capitalism, the stores and services that constitute the trappings of an ostensibly better life. Russia struggled, but survived. And the end of the 1990s, as Yeltsin turned over the sickly body of post-Soviet Russia to his hand-picked successor, Vladimir Putin, there was a class of people in Russia who had tied their fortune and livelihood to the promise of Western-style capitalism.

Putin undoubtedly saw the promise of a Russian economy guided by the principles of capitalism. But he faced the reality that, under Yeltsin, Russia had sold itself to outside interests which, in concert with an increasingly corrupt oligarch class, was throttling Russia’s economic potential. Putin also brought to the Russian presidency a strongly held belief that Russia needed to restore its position as a great power — not fully elevated to the status of the former Soviet Union, but at least equal to other world powers as part of a multilateral approach to global geopolitics.

All Except Russia

Putin’s efforts put him at odds with the US and Western Europe, which had taken advantage of the collapse of the Soviet Union and its Eastern European satellites to create a new European security framework that sought to unify all of Europe under a single economic, political and military umbrella — all of Europe, that is, except Russia.

Russia’s role in this great transformation was to remain militarily weak and politically compliant. Putin’s efforts at restoring Russia as a great power threw a wrench into this plan, and Russia found itself increasingly viewed as a threat by both the US and Europe. Putin’s suppression of the oligarchs, where he allowed them to retain their wealth and assets in exchange for their retreat from politics, weakened Western access to and control of Russian domestic affairs.

Moreover, Russian pushback against the expansion of Nato into Eastern Europe, when combined with the US-initiated termination of some core Cold War arms control treaty relationships, transformed Russia from a political nuisance into a geopolitical rival.

Russia’s war with Georgia in 2008 and annexation of Crimea in 2014 opened the door to US-led economic sanctions designed to punish Russia for its actions. These sanctions, when coupled with similar US sanctioning of Iran, forced Russia to confront the reality that the era of unconstrained economic association with the West was ending.

Pivoting East

Russia, together with China, began looking for alternatives to the US dollar-dominated model of global economic interaction. In doing so, they began to find common cause in crafting a geopolitical alternative to the US-led “rules-based international order,” which had dominated the global political and economic scaffolding constructed at the end of World War II.

Any Russian pivot to the East, however, was constrained by the reality that the Russian economy remained inextricably intertwined with the West. Not only was the Russian oligarchs’ wealth squirreled away in offshore shelters, but there was an entire class of Russian citizens whose daily livelihood was woven into the fabric of an economy that had absorbed Western businesses and practices. Any attempt at a divorce from the West would transform what had been a largely pro-Western Russian middle class into a politically active constituency that, if coupled to a hobbled but still powerful oligarch class, could challenge Putin’s hold on power.

Strategic Error

But Biden and his European allies decided to drop their “Keep your friends close but your enemies closer” approach in favor of the opposite.

The mistake was to believe that bringing enough pain to bear on the Russian people would prompt a political backlash that could lead to Putin’s removal from power. But for this pain to bring meaningful domestic political change, Russia would need to retain some economic connectivity with the West. Otherwise, the pain would be intense, but short-lived.

Left to his own devices, Putin would never have been able to divorce Russia from the West, and thus insulate Russian society — and, by extension, his ability to govern — from Western sanctions. Here, the US and Europe are doing Putin a huge favor, with current sweeping sanctions giving him the ability to separate Russia from its economic association with the West without the politically fatal consequences of being seen to do this on his own volition.

Thanks to the US-led sanctions, Putin will now be able to neuter the Russian oligarch class for good. The sanctions have likewise politically neutralized that portion of the Russian middle class that was economically married to Western businesses, goods, services — and mystique.

Putin has been granted his divorce without so far paying any meaningful political price. While the US and Europe may claim that Putin brought this on by invading Ukraine, to the Russian people, US and European actions led to the divorce. The demonization of everything Russia-related by many in the West only helps the Russian government deflect blame from itself, and onto the West. The West made it personal.

“I assure you,” Russian Foreign Minister Sergei Lavrov told the press on Mar. 10, “we will overcome adversity, and we will do everything to no longer depend on the West in any strategic sectors of our life that are of decisive importance for our people.” Russia, Lavrov said, “will no longer depend on any Western companies.”

As Lavrov delivered his remarks, Deputy Chairman of the Security Council of Russia Dmitri Medvedev announced that the government was considering the possibility of nationalizing or bankrupting the property of foreign companies leaving Russia. The decoupling has begun.

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