Goods and services can be sanctioned, or they can receive a tariff, but it makes no sense to do both in succession. While Donald Trump is liberal with threats of tariffs, there are fresh reports that the US is planning further sanctions on Russia unless it comes to the negotiating table. The Kremlin has dismissed this as “nothing new”.
But does it make sense for America to put tariffs on Russian imports? Back in October 2023, it imported goods worth only $314 million from Russia, primarily stuff the US needs: platinum, nitro fertilisers, and radioactive materials for its power stations. A tariff would be a tax on US farms and the nuclear power industry.
So we have to assume that Trump does not have a Russia strategy at this point. What about secondary tariffs? Some European countries such as Hungary still get their oil and gas from Russia. Trump cannot directly tariff Hungarian imports from Russia, but he can slap tariffs on his friend Viktor Orbán. Either way, additional US sanctions on Russia are not likely to scare Vladimir Putin.
There is a lot of naivety about the Russian leader in Western capitals. The Wall Street Journal this week quoted a former State Department official as saying that it was clear the Russian economy was reeling, and that Putin had hoped Trump would give him a reprieve. But one must beware of Western analysts who claim to know what Putin is thinking. Russia’s UN ambassador Vasily Nebenzya has been a source of steady misinformation, as one would expect. But he is spot on with the assertion that “so far, nothing in the signals of the new American administration indicates that this is something that will be of interest to us.”
A peace deal in Ukraine is still possible, though, as Trump has no appetite for funding an ongoing war in Europe. Shifting the burden to the Europeans would be a disaster, something that Putin knows too. European leaders would rather prance around the speaker circuit in Davos than come clean to their electorates about the financial requirements of continued engagement in Ukraine. German Chancellor Olaf Scholz’s main campaign theme ahead of next month’s election is that he does not want to sacrifice pensions for weapons deliveries. Meanwhile, Poland’s Donald Tusk says he wants to fund a rearmament programme through debt. So are we seriously trying to fight a war based on the recovery fund mechanism? Putin has reason to think that the West is bluffing because, well, it is.
The US President’s assertion that the Russian economy is about to collapse is based on a fundamental misunderstanding of how war economies work. They are, of course, not sustainable because they create inflation. The UK’s economy during the Second World War was not sustainable either, nor was it meant to be.
The question for Putin is what costs he will have to incur to achieve the final 25% of his stated goals — the total occupation of four oblasts. At the rate his army advanced last year, that goal would be out of reach for 2026, his declared time horizon. Russia’s President has also been prone to miscalculations. A deal would require that both sides have some realistic assessment of the current scenario, what goals are attainable through continued war, and what they need to bring to the table. Neither side is there yet. Despite what he tells the media, Trump is not focused on this issue for now.
It is likely that the West will have to unfreeze Russian assets for talks to begin, but this is hardly mentioned by politicians or journalists. As we enter the war’s fourth year, the sanctions are becoming less relevant because trade and financial flows have mostly adjusted. Moscow and the West are no longer interdependent, and Ukraine’s allies must realise that their sanctions become more impotent as time goes by.
This is an edited version of an article which originally appeared in the Eurointelligence newsletter.
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SubscribeMr. Münchau is at least willing to deal with reality.
However, his assumptions on the Russian army’s progress require some analysis. Mr. Münchau assumes that historical rate of advancement can be extrapolated into the future. As a financial analyst, Mr. Münchau is surely aware that past performance is no guarantee of future performance.
Also, warfare is no a linear endeavour. Change (either way) can come suddenly. Just because a leak in a dam took x duration to double from a trickle to a stream does not mean that a further duration of x would result in only another doubling of the flow. The experience with dams is rather that past a certain point, catastrophic collapse follows.
A very narrow view of Trump’s options. There are £300B of seized Russian assets that could be used to buy American weapons for Ukraine. A big increase in US oil exports will depress the global price and hurt Putin. He already has to offer buyers such as China and India big discounts. And, of course, much more aggressive action could be taken against Putin’s shadow fleet of oil tankers.
To steal the Russian money/assets would truly be the death knell of that London stock exchange + financial sector. What country or rich individual or even business corporation would put money in a place that might appropriate ie STEAL that money.
“So we have to assume that Trump does not have a Russia strategy at this point.”
I think the above should be re-written as, “So we have to assume that no one, including the writer, has a clue at this point.”
That’s a good point. Strategies are overrated. This kind of negotiation is more like playing a game of chess. You have to sit down and start making moves and let the game unfold. Too much strategy planning just locks you in.
The problem with the chess analogy is that all pieces, the property of each piece, and every move, are out in the open. Also, it’s turn-based – a player cannot move until it’s their turn, but then must move.
Liar’s Poker might be a better analogy.
Good point. Chess is not a very good analogy for negotiation. Apart from the points you make, I should add that chess is a zero-sum game (win-lose) while negotiations are, ideally at least, positive-sum games (win-win). But negotiations do usually take time and parties tend to take turns, so that means a strategy or plan usually doesn’t last too long. Like a battleplan rarely survives the first shots.
It is hard to see a solution for Donald Trump at this point. But he should not be mapping out solutions. He should be taking action, the sooner the better, the smaller the better. and getting a better feel for what is possible. That’s what he’s good at. He can’t do miracles, but at least he can get things moving toward peace instead of stalemated war.
Fun analysis:
Putin’s ideal outcome would be a fracture between the U.S. and the EU over the Ukraine war, forcing them to negotiate an end to the conflict on his terms. This is a long-term strategy, not just about stopping the war immediately. He sees weaknesses in the U.S.-EU alliance, so why rush? While the U.S. was focused on preventing closer ties between Russia and China, Russia and China now appear to be doing the same—driving a wedge between the U.S. and the EU. After all, it’s easier to break a relationship than to build a trustworthy one.
In my view, China and Russia may be working covertly to deepen this divide, which could ultimately leave Ukraine isolated and without strong international backing. Ironically, the growing rift between the U.S. and the EU over Ukraine seems like an unintended consequence of U.S. interference in creating this chaos in the first place.
I think WM underestimates the challenge of oil prices going lower and the ruble losing value. Putin may be willing to sacrifice men and machines but sanctions (not tariffs) and the price of oil will be more costly to him. Trump is NY real estate developer so he negotiates differently than politicians. And I think Elbridge Colby may have some insights into strategy..
https://unherd.com/newsroom/elbridge-colby-the-brain-behind-trumps-foreign-policy/