The Washington Post - USA (2022-04-01)

FRIDAY, APRIL 1 , 2022. THE WASHINGTON POST EZ RE A

war in ukraine

BY MERYL KORNFIELD

AND AMY CHENG

Russian soldiers short on mo-

rale and weapons have refused

orders, sabotaged their own

equipment and shot down one of

their own aircraft, Britain’s spy

chief said Thursday, painting a

picture of chaos on Russia’s front

lines as the war in Ukraine drags

into its second month.

The efforts are evidence of Rus-

sian President Vladimir Putin’s

miscalculation when he decided

to invade Ukraine, Jeremy Flem-

ing, head of Britain’s signals intel-

ligence agency, said in a speech

Thursday at Australian National

University. U.S. and British offi-

cials have said Putin, more isolat-

ed than ever, was misinformed by

his aides, further stoking tensions.

“It’s clear he misjudged the re-

sistance of the Ukrainian people,”

Fleming said. “He underestimat-

ed the strength of the coalition his

actions would galvanize. He un-

derplayed the economic conse-

quences of the sanctions regime.

He overestimated the abilities of

his military to secure a rapid victo-

ry.”

Putin’s “strategic miscalcula-

tion” has cost innocent Ukrainian

lives — and now is being felt by

“ordinary Russians, too,” Fleming

said.

Putin has attempted to stop

news of the setbacks from reach-

ing Russians, but Fleming said his

efforts have failed to quell the

growing global support for

Ukraine, whose president, Volod-

ymyr Zelensky, has operated an

“extremely effective” information

campaign.

In the months leading up to

Russia’s Feb. 24 invasion, U.S. and

European officials repeatedly cit-

ed intelligence reports to warn of

Putin’s plans to launch an assault

against Kyiv.

The West’s success in anticipat-

ing Russia’s strategy so far has

buoyed the credibility of its intelli-

gence, said Australian National

University’s John Blaxland, who

specializes in international secu-

rity and intelligence. He added

that he finds the “startling” details

in Fleming’s speech “reliable.”

“I am actually reasonably confi-

dent that we can place trust in

what he said, because in due

course, we will be able to corrobo-

rate it,” Blaxland said.

But other observers have cau-

tioned against dismissing the

strength of the Russian military,

warning that the Kremlin has

shown little sign of backing down

from its war efforts. “We are now

running into the risky business of

simply underestimating the quali-

ty and capacity of the Russian

force,” said Alexey Muraviev, a na-

tional security expert at Aus-

tralia’s Curtin University.

Although Muraviev said he

does not question the veracity of

the British spy chief’s claims, he

argued that it is critical to distin-

guish between Russia’s own serv-

ice members and the Russian-

backed separatist troops in

Ukraine’s eastern Donbas region.

The latter, who are Ukrainians

recruited to fight on Russia’s side,

are more likely to suffer from the

kind of breakdown outlined in

Fleming’s speech, Muraviev add-

ed.

Despite the heavy losses Russia

has incurred in the past five

weeks, Western officials and ob-

servers say Putin shows little sign

of abandoning his war efforts, pos-

sibly influenced by advisers mis-

leading him about how badly the

Russian military is performing

and how his country’s economy is

being crippled by sanctions, ac-

cording to the White House. For

instance, Russian soldiers have

surprisingly relied on unsecured

communication devices on the

battlefield, which has proved to be

a costly mistake.

But chief among Putin’s miscal-

culations, Muraviev said, was his

failure to gather accurate intelli-

gence that portrays the “psycholo-

gy” of the Ukrainian public, which

has greatly turned against Mos-

cow since the 2014 annexation of

Crimea.

“It almost seems like Putin in-

doctrinated himself ... and his in-

ner circle,” Muraviev added.

U.K.: Russian soldiers

in a morale meltdown

recent days, showing that the

banking sector is stabilizing, she

added.

The ruble’s recovery, and the

strong financing that oil and gas

revenue are giving Russia’s gov-

ernment and war effort, have

heightened calls from Ukraine

and its supporters for an embargo

on Russian energy exports.

The United States and United

Kingdom have stopped buying

Russian oil and gas, and Poland

on Wednesday said it will halt

Russian oil imports by the end of

the year.

Other European nations, in-

cluding Germany, have vowed to

drastically cut imports but have

been reluctant to embrace full

embargoes because they rely

heavily on Russian energy.

“If we see more shelling and

bombing, I would say pressure

will be growing on Germany, in

particular” to adopt a full embar-

go, said Maria Shagina, a sanc-

tions expert at the Finnish Insti-

tute of International Affairs.

On a scale of 1 to 10, the current

sanctions on Russia are a 7 or 8 in

intensity, says Edward Fishman, a

former State Department official

who worked on sanctions policy

during the Obama administra-

tion.

In addition to halting purchas-

es of Russian oil and gas, there

are several other steps Western

countries can still take to in-

crease pressure, he said. These

include adopting full blocking

sanctions on more Russian

banks and companies, and cut-

ting more banks from SWIFT, the

global financial messaging sys-

tem that serves as the backbone

for bank-to-bank transactions

worldwide.

At the moment, only one of

Russia’s five largest banks, VTB,

has been cut off from SWIFT and

subjected to full blocking sanc-

tions, said Fishman, who is now

adjunct professor of internation-

al and public affairs at Columbia

University.

“There was sort of a big bang of

sanctions in the first 10 days of

Putin’s declaration of war ... but I

think pressure has leveled off in

the last few weeks,” he said.

its stash of dollars and euros to

buy rubles to prop up the ruble’s

value.

But Russia has found a partial

way around that punishment:

The central bank in late February

began requiring exporting com-

panies to exchange 80 percent of

their hard-currency revenue for

rubles, creating new demand for

Russia’s currency.

Russia’s continuing oil and gas

exports, amid high global prices,

has ensured a steady stream of

hard currency to support this

state-mandated exchange.

“Yes, this is not a freely deter-

mined ruble exchange rate, but

we could have easily seen a sce-

nario where a [central bank]

would have not managed to pre-

vent further ruble depreciation

even with emergency measures.

Furthermore, Russia is continu-

ing to enjoy large [foreign curren-

cy] inflows as it is still selling

commodities,” Ribakova said.

Just after sanctions hit, long

lines appeared at ATMs as pan-

icked Russians queued to with-

draw cash, worried about a col-

lapse of the currency and the

banking system. That forced

banks to borrow heavily from the

central bank to meet demand for

withdrawals, Ribakova said. But

this borrowing has lessened in

economy, and the ruble is one of

the main indicators that every

Russian knows.”

The official rate doesn’t neces-

sarily reflect the ruble’s real value,

economists say. The central bank

has banned citizens from ex-

changing rubles for dollars until

Sept. 9, creating a black market

where the ruble trades at weaker

values than the official rate, ac-

cording to Russian economists

and media reports.

One of the toughest sanctions

imposed by the United States and

its allies was a freeze on the

Russian central bank’s foreign

currency reserves. That was de-

signed to stop Russia from using

bring a flood of hard currency
into the country.
“I think the key signal is that,
for now, it appears the Bank of
Russia managed to avoid a deep
financial crisis,” said Elina Ribak-
ova, deputy chief economist at the
Institute of International Fi-
nance, an association of banks
and finance companies. “We were
concerned that bank runs as a
result of sanctions could bring
down some of the more systemic
[state-owned] banks. It appears
that it has not happened.”
In the days after Russia’s inva-
sion began on Feb. 24, the ruble
fell from about 80 to the dollar to
a low of 120 to the dollar. It has
now climbed back to 84, accord-
ing to the central bank’s official
rate.
Russia’s economy is still ex-
periencing a lot of pain that is
likely to intensify, economists
say. They forecast that inflation
could reach at least 20 percent
this year, and that gross domestic
product will shrink by 15 percent,
wiping away years of economic
growth.
Some imported goods are dis-
appearing from store shelves as
global shipping companies halt
deliveries, and some manufactur-
ers are suspending production
because sanctions are preventing
them from buying electronic
components.
Hundreds of Western corpora-
tions have stopped operations in
Russia, depriving the country of
consumer goods and thousands
of jobs. And tens of thousands of
young professionals have fled the
country out of opposition to the
war or fear of sanctions, causing a
devastating brain drain.
Amid all of this instability, the
ruble’s recovery, even if manipu-
lated by currency controls, helps
the state convey an image of
control, said Janis Kluge, an econ-
omist at the German Institute for
International and Security Af-
fairs in Berlin.
“The psychological effect is
very important,” he said. “It’s very
important what the population
thinks about the health of the

RUSSIA FROM A

Oil helps aid r ecovery of Russian ruble

Source: Bank of Russia ALYSSA FOWERS/THE WASHINGTON POST

Official ruble exchange rate recovers after plunge

Rubles per U.S. dollar

Nov.

2021

Dec. Jan.

2022

Feb. March April

120

110

100

90

80

70

84

Russia invades

Ukraine

Russia invades

Ukraine

Russia invades

Ukraine

120

75

“I think the key signal

is that, for now, it

appears the Bank

of Russia managed

to avoid a deep

financial crisis.”

Elina Ribakova, deputy chief

economist at the Institute

of International Finance

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