President-elect Donald Trump promises to bring peace to Ukraine shortly after he takes office on Jan. 20. Many speculate that he will pressure President Volodymyr Zelensky, Ukraine’s leader, to accept ceasefire terms heavily favorable to Russia. This is unlikely. Trump has surrounded himself with advisers and officials who understand that Russia cannot be negotiated with from a position of deference. And that Ukraine will prefer to fight on alone without American support if the alternative is to surrender its sovereignty in return for a short peace.
The key to any durable peace deal will be ingredients that balance Ukrainian interests alongside a new status quo that Russia can accept. And that means pressuring President Vladimir Putin to make his own concessions. How to do so?
It’s the economy, stupid.
Trump has an opportunity to emulate President Ronald Reagan who won the Cold War by breaking the Russian economy. The Russian economy is a house of straw, one hard push and it will fall down. The country is vulnerable to economic crises. New sanctions or a drop in oil and natural gas prices could trigger a recession.
Russia spends vast amounts on defense spending. Inflation is running hot in Russia, as high as 20% on an annual basis. Food shortages are emerging. The country is running out of manpower for both its military and also its military related factories. At the same time, Russia’s population shrinks each year. To cover up these widening chasms in its economic foundations, Russia depends on exports of oil, natural gas, and other commodities to fund its war machine.
In turn, U.S. policy should aim to pressure global prices of energy commodities. Lower prices and tightened sanctions will break the Russian economy. Trump should follow through on his policy of promoting U.S. oil and natural gas production. The United States has the world’s largest recoverable reserves of oil, even more than Saudi Arabia, and vast natural gas reserves. To encourage U.S. companies to increase oil and natural gas production, the administration should set price floors, guaranteeing profits to U.S. oil and gas companies. The oil and gas industry will respond and flood the global oil and gas markets. Global oil prices will fall. Natural gas prices will fall.
Other levers of potential influence abound.
A principal trading partner of Russia is India, a rising power. The U.S. should use “carrots” to decouple India from Russia. Relief from tariffs, firm agreements for U.S. investment in India by America’s globally dominant technology companies as well as subsidies for the purchase of U.S. oil and natural gas would almost certainly cause India to stop buying Russian energy and also to cease supplying Russia with dual-use goods.
The U.S. Navy should also work with allies to seize Russian oil tankers engaged in sabotage against cable networks owned by NATO members, including Finland, Sweden, and the Baltic states. That would send a strong signal to Putin, no more sabotage and no more sanctions busting through the use of “shadow” tankers. Such an aggressive policy would also send a strong signal to China that it better get more concerned about the possibility of U.S. secondary sanctions in relation to its support for Putin’s war.
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Finally, the U.S. should more aggressively target Russia’s economy by prohibiting all dealings with Russian financial institutions (including subsidiaries). The U.S. should make it clear to third countries that negative consequences will flow from dealing with Russia. Again, “secondary sanctions” are the powerful watchwords of the day.
But the key point is this: When Trump takes office, he can begin to break the Russian economy in a manner that forces Putin to make major concessions to Ukraine. And he can do so in a way that makes good on his promise to Americans to deliver lower energy prices.
James Rogan is a former U.S. foreign service officer who later worked in finance and law for 30 years. He writes a daily note on the markets, politics, and society. He can be reached at [email protected]
This article was originally published at www.washingtonexaminer.com
