Monday, April 28, 2014

High Finance Answering Putin’s Imperial Ambitions: A New Age?

A week and a half after government representatives from Russia, the E.U., the U.S., and Ukraine agreed to deescalate the political instability in eastern Ukraine, the U.S. Government imposed additional “targeted sanctions on a number of Russian individuals and companies” after concluding that the Russian government had not ceased from fomenting violence in eastern Ukraine.[1] With the official numbers on capital flight from Russia at $50 billion a month for the first three months of 2014, this announcement on April 28th is oriented to exploiting a Russian vulnerability. Moreover, the statement signals a step-wise, “surgical” approach premised on the value of money—a symbol of value. In relative terms, a broad military response looks almost primitive, if not (hopefully) antiquated.

In posing the question of how to stop a government of one country from invading another country ‘in this day and age,” Bill Browder of Hermitage Capital sought to convince the CNBC audience that the morning’s White House announcement could be seen as fit for a new age, even if we are not all there yet. With the Russian president and about a thousand other Russians holding the vast majority of the money in Russia, Browder argued that targeting the financial cost (“pain”) to particular Russians and Russian companies would be the most effective (and efficient) means of constraining Vladimir Putin’s attempts to reconstruct the Russian Empire.

The Russian Empire exactly a century before Putin's invasion of Crimea. 
(Image Source: Wikipedia)

With just such a strategy in mind, the White House announced that the U.S. Treasury Department would impose sanctions (including asset freezes and U.S. travel bans) on seven Russian government officials. Seventeen Russian companies “linked to Putin’s inner circle” would also be subject to economic sanctions; thirteen of those companies would also bear the brunt of a license requirement denying the export, re-export or other foreign transfer of U.S.-based items to those companies.[2]

How would old man Kant deem the UN as a world federation oriented to perpetual peace?

Plato and Kant would doubtless have been pleased to find the exactitude of reason replacing the shot-gun approach of a large-scale military response. A polis, whether a city or the international domain, is just, Plato reasons, only if reason is governing desires rather than vice versa.  Given the pathological nature of human nature itself, Kant reasoned, perpetual peace is possible but not probable. Although Kant advocated a world federation as a means to keep the human pathology from effecting ruinous consequences, he, as well as Plato, would likely approve of strategic reasoning oriented to balance sheets over the passions having the upper hand in the heat of battle. Moreover, the shift from military to financial geo-political strategy would likely fit within Hegel’s perception of progress through human history as the (collective) human spirit becomes increasingly free. 

Even if my inclusion of notable philosophers is too lofty, Browder’s point that countries just don't invade other countries in the twenty-first century may (hopefully) portend a new age following the astonishingly bloody twentieth century. The question facing Putin as he sought to drag the eastern half of Ukraine back “into the fold” of a Russian empire in the wake of the American invasion of Iraq is perhaps whether he could accomplish his imperial goal before the “new rules” go into effect, effectively closing the door on the old way of doing things. Considering the sheer staying power of (pathological) human nature as well as the millennia in which military might established and defended the interests of states and their respective rulers, I have difficulty seeing how geo-politics in international relations could ever reduce to high-finance. Even though this might be possible, I submit it is not probable.

[1] White House Statement on Ukraine, April 28, 2014.  Also available at: “U.S. Announces New Sanctions on Russia Over Ukraine Crisis,” The Wall Street Journal, April 28, 2014.
[2] White House Statement on Ukraine, April 28, 2014.