Economic Statecraft
Ukraine: Three Scenarios After the Answer From Washington

The main task for Russia is to avoid excessive overexertion and, at the same time, not get bogged down in a costly confrontation, maintaining and using levers of pressure on the West where its own interests require it, Valdai Club Programme Director Ivan Timofeev writes.

The United States handed over to Russia a written response to the proposals for security guarantees. Washington refused to accept Moscow’s demands for legally binding guarantees of NATO’s non-expansion, but indicated its readiness to discuss certain issues, such as arms control and strategic stability. Starting from December 2021, both sides have consistently raised the stakes. Russia has concentrated a significant military group near the borders of Ukraine. The United States directly announced a set of restrictive measures that would be taken against Russia in the event of war. Apparently, another round of escalation is coming. In the near future, we can expect the development of the situation according to one of the following scenarios.

The first scenario is “War”. Russia in this scenario will proceed from several premises.

It is inevitable that amid peaceful conditions, Ukraine will pursue an anti-Russian course. An outwardly loose but sufficiently stable political regime has been formed in the country, for which compromises with Russia are impossible. The Ukrainian government itself sees no alternative to ensure the country’s security other than through NATO membership. The West will also work towards integrating Ukraine into its security structures. It is impossible to change Ukraine’s course of action without a war. Even if NATO membership does not take place for formal reasons in the coming years or decades, nothing is preventing the deployment of striking or other systems on the territory of the country, as well as the large-scale rearmament of the armed forces of Ukraine at the expense of Western countries. Sooner or later, Ukraine will turn into a springboard for possible military operations against Russia. Given the length of the border, this situation puts Russia at a disadvantage, incomparable with the NATO membership of the Baltic countries. The military development of Ukraine by the United States and the West is a fundamental threat to Russia.

The Ukrainian army can be defeated relatively quickly. It is possible to avoid a protracted war by carrying out a lightning-fast operation. Furthermore, it is possible either to divide the country into two states, one of which (Eastern Ukraine) remains in the Russian orbit, and the other (Western Ukraine) — respectively, in the western one. Another option is a forceful regime change in Ukraine, with the expectation that there will be no massive resistance from the population.

Western sanctions will be a painful blow to Russia, but they won’t be fatal. The benefits to military security are greater than the economic damage. Economic damage will not translate into public protest in Russia; it can be kept under control. The prestige of the authorities will grow as a result of the solution of a major historical task. Sanctions against Russia will further undermine confidence in the US-centric financial system. Russia will be able to exist as a “fortress”. An exit from the global economy is possible and even desirable. The West itself is in decline. Its imminent death is inevitable. A victory in Ukraine will deal another blow to the authority of the United States and the West, and will accelerate their global retreat.

In this scenario, we should expect a radical breakdown in relations between Russia and the West, incomparable with any previous crisis. It will lead to (a) massive loss of life; (b) a serious and long-term economic crisis in Russia as a result of Western sanctions; (c) significant militarisation of Eastern Europe by NATO.

It will be possible to talk about the formation of a fundamentally new order in Europe. It will be rooted in an arduous confrontation. The only obstacle to a major war will be nuclear weapons, although the risks of escalation into a conflict between Russia and NATO cannot be ruled out either. Russia in this scenario becomes a kind of European North Korea, but with much broader opportunities.

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The second scenario is “Permanent tension”. The possible premises of this scenario are as follows.

The costs of a military solution to the Ukrainian issue are too high. Even in the event of a quick defeat of the armed forces of Ukraine, the problem of control of the territory arises. The puppet regime will require significant financial injections. At the same time, it will certainly be inefficient and corrupt. In the face of the damage from sanctions, fuelling the regime will further exacerbate the shortage of resources within Russia itself. Even complete control of the territory of Ukraine will not prevent the West from forming and arming Ukrainian formations in adjacent territories, financing a wide underground in Ukraine itself. The war will lead to economic decline in the occupied territories, which will make their population even more susceptible to Western propaganda. If part of the territory is retained by the pro-Western regime, the conflict becomes permanent. At the same time, none of the problems of Russia’s security would be solved, and their number would only grow, due to the militarisation of Eastern Europe.

The internal stability of Russian society is not guaranteed considering the economic damage from sanctions, the cost of war, and injections into Ukraine. Inevitable inflation in this case and the reduction of already-low incomes are fraught with the growth of protest moods. It could be possible to compensate with military victories, but only for a short time. A protracted economic crisis or, at best, stagnation creates the basis for a long-term protest. At the same time, certain standards of consumption and lifestyle have developed in Russian society. It is hardly ready to be a European North Korea.

The global role of the West is declining. For the US, the Asia-Pacific region is indeed a growing priority. But this does not mean that the West is weak enough not to inflict significant damage on Russia. There is no guarantee that sanctions against Russia would critically harm the West itself. In Europe, the West has significant reserves to contain Russia, even in the event of rivalry with China. Beijing’s support for Russia isn’t guaranteed in the event of war.

Maintaining permanent tension in relations with the West is producing results. At least the Western powers are beginning to listen to Russia. Tension is a useful tool for diplomacy. It is necessary to keep it on Ukraine’s borders, and also apply it in other regions — Latin America, the Middle East, the Asia-Pacific Region (together with China), and Africa. If possible, Russia can operate with relatively cheap but effective campaigns, similar to the Russian operation in Syria.

This scenario does not radically change the situation in Europe. Relations between Russia and the West remain categorised by rivalry, but do not cross red lines. The West is slowly building up sanctions pressure, as well as consistently integrating Ukraine into its security space.

The third scenario is “Smile and wave.” The possible scenario goes as follows:

Ukraine is a toxic asset for the West. Large-scale aid is stolen and institutions remain corrupt. The country is not a supplier, but a consumer of security. Its NATO membership is counterproductive for the bloc due to unresolved conflicts and dubious contributions to common security. On the contrary, Ukraine is a source of numerous problems. Bailing it out is troublesome and costly. If the West goes for it, then Ukraine will make NATO an even more unbalanced structure, in which the number of “free-riders” will grow. While it remains in the western sphere, Ukraine is doomed to further degradation. There will be a “Moldovisation of Ukraine”, that is, the outflow of citizens to the West and the primitivisation of its economy. The West has no reason to support Ukraine for a long time with its help. Aid will dwindle as Ukraine’s position slides in the West’s list of priorities. Without any military intervention, Ukraine will degrade, turn into a peripheral country and a third-order priority in the global agenda.

Russia has significant military capabilities to stop any threat emanating from the territory of Ukraine and the NATO countries. Even without the use of nuclear weapons, Russia in a regional conflict can inflict unacceptable damage on rivals in Europe. Control of Crimea ensures dominance in the Black Sea. The deployment of strike weapons or missile defence elements on the territory of Ukraine is possible in the long term. But it does not prevent Russia from improving its own offensive systems, which in any case are capable of inflicting inadmissible damage on a potential adversary.

The Ukrainian political regime is unstable. Competent and long-term work will allow Moscow to find its levers of influence on the regime and communication with society. It will be difficult for Russia to remain indifferent. Russia retains humanitarian opportunities in the form of a labour market and education system. They are much more modest in comparison with the EU, but it does not negate the possibility of their use. When playing the long game, humanitarian mechanisms produce good results.

Relations with the West are not limited to Ukraine. Russia has many dimensions in which it can bargain with the West. The marginalisation of the Ukrainian agenda is quite possible and even desirable. The rivalry between the US and China is likely to set the pace for global politics in the coming decades. It is advisable to avoid direct participation in this clash and make room for manoeuvre.

The Russian economy remains fragile and dependent on commodity markets. Overstraining in through war and sanctions is inappropriate. Breaking economic relations with the West is also counterproductive.

In this scenario, there is a partial de-escalation of the Ukrainian issue, although rivalry with the West remains. Moscow skilfully manages such rivalries, facilitating them, where possible, and thereby overloading the West with toxic assets in the form of free-riders and fiery liberals. At the same time, it continues to play the game on all the fronts of the global agenda — from climate action to arms control.

Russia and Global Security Risks
War Between Russia and Ukraine: A Basic Scenario?
Ivan Timofeev
The costs of a possible war between Russia and Ukraine far outweigh the benefits. The war is fraught with significant risks to the economy, political stability and Russian foreign policy. It fails to solve key security problems, while it creates many new ones, writes Valdai Club Programme Director Ivan Timofeev.

The first scenario is obviously fraught with significant risks for Russia. For the West, it is also undesirable, but it also has some advantages in the form of an accelerated consolidation of NATO and the exhaustion of one of the major global adversaries. The second scenario is quite acceptable for the West. For Russia, it has fewer risks, but the benefits are limited. Its main danger is the gradual build-up of Western pressure. There is such a danger in the third scenario. The West also feels quite comfortable in it, but Russia’s success is not predetermined and will depend on strategic patience, the ability to manage limited resources and use the opponent’s energy in their own interests. The main task for the West will be to “calm down” Russia and bring the competition into a sluggish mode that is convenient for itself. The main task for Russia is to avoid excessive overexertion and, at the same time, not get bogged down in a costly confrontation, maintaining and using levers of pressure on the West where its own interests require it.

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Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.