TODAY’S CURRENCY AND FINANCIAL WARS 135the Western economic assault as a rallying cry. Rather than
looking for a way out of the sanctions, Russians took pride in
adversity, and were more determined than ever to support the
Russian-speaking peoples of Eastern Ukraine.
As for the question, “What does Putin want?” I said the an-
swer was easy. I explained that Putin wants Georgia, Ukraine
and Moldova firmly in the Russian orbit, and he’s prepared to
use military force to accomplish that. Later he will decide what
he wants next.
My question for the group was more difficult: What does
the U.S. want? The failure of economic sanctions was not only
due to mirror imaging, but also to a lack of U.S. strategy. The
U.S. did not have an endgame in Ukraine apart from wishful
thinking about the impact of sanctions.
Henry Kissinger advised that countries couldn’t formulate
policy on a case-by-case basis, but need a firm vision of nation-
al interests as a context within which to consider policy. Only
when goals are known can strategy and tactics be devised.
Kissinger said that countries not only needed to know what
they wanted, but needed to know what they wouldn’t allow.
Would the U.S. allow Russian dominance in Eastern Ukraine? If
the answer is “no” then the U.S. needs to pursue regime change
in Russia. If the answer is “yes” then diplomacy, not sanctions,
are the best path to a modus vivendi. The policy problem was
that the U.S. had neither asked nor answered the question. We
were lurching day-to-day with no vision, and no strategy.
Given the clarity of Russian ambitions, and lack of clarity on
the part of U.S. strategists, investors should expect further con-
frontation in Ukraine. There will be good days and bad days.
At times a truce may be in effect, but at other times truces will
be broken, and hostilities resumed. The Ukrainian government
is near bankruptcy, but will be propped up by IMF loans. The
Ukrainian military appears ineffective against Russian heavy
weapons, but may receive lethal aid from the U.S. and NATO.