There is no way Vladimir Putin can freeze Europe and the US could not freeze Putin

There is no accounting for the final destination of any goods. This is a statement of the obvious which unfortunately remains elusive in a commentary that arrogantly believes that everything is obvious.

The latest evidence that logic escapes deep thought concerns Vladimir Putin, the president of Russia. Gathering 100,000 Russian troops on Ukraine’s border, the crowd is pouring a lot of ink on what to do, what could be done, and what Putin might do in response to what could or could not be done in theory.

One way for the free world to prevent Putin from taking Ukraine would be to cut off the United States and other economically prominent nations from Russia “in the global banking system.” Everything sounds so simple. Take away Russia’s access to hard currency only for Putin to slowly order Russian troops to withdraw from the country’s long border with Ukraine.

Except that there is no reasonable way for the US or anyone else to cut Russia off from global funding. This is because the US dollar and other reliable world currencies are giving new meaning to exchange, as is financing itself.

Looking at all this on relatively no-gift terms, Russia does not have access to the “global banking system” or the “dollars” because the United States defines it as much as Russia has access to global finance and dollars simply because its economy is strong enough that sources of funding are actively seeking to liquidate the economic activity taking place in Russia. Assuming that the US was able to freeze Russia’s access to US funding sources or US “dollar” sources, we can not forget that more than half of all US dollars in circulation today do so outside the United States. The money goes where it is well received, and if it is considered safe inside Russia, it will circulate there without taking into account the wishes of the American political and foreign policy classes.

To use just one example, it is not unreasonable to assume that President Biden could claim Goldman Sachs from JP Morgan
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and Morgan Stanley
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to stop operating in Russia. The government’s perception of financial institutions is important. But such a demand from Biden would be much less weighty with the financial institutions with which the aforementioned work.

All of the above ignore how competitive the finance sector is. Market share is hard to gain. Stop and think about the previous truth. Assuming Morgans and Goldman stop financing economic activity in Russia, can any reader reasonably assume that all other global sources of funding will not align themselves to do in Russia what the GS and others did? The question is answered by itself. In the “closed economy” which is the world economy, there is no way to stop the financial flows. Those who lose the business will be replaced, not to mention that those who freeze certain customers can not control what their counterparts do to the same customers.

The only real obstacle to monetary financial inflows is the lack of production. In the absence of this, economics always and everywhere find productive economic activity.

That brings us back to Putin. One of the most frequently removed obstacles to “sanction” (suspension of access to banking services) is the large amount of gas reserves in Russia. The thinking of the political and foreign policy elites seems to be that a possible response to the banking sanctions imposed on Putin’s Russia would be for Putin to respond by “cutting off gas supplies to the European Union in the middle of winter”, as these countries receive more than 40 percent of their natural gas from Russia.

The problems with the above case are many. First, market share is again hard earned. As it is, the belief that the Russians would so kindly leave such a valuable market is a begging. Most importantly, the Russians are unlikely could give up access to such a valuable market. The reason they could not is basic: they need the money.

Some will say that the Russians could simply stop selling to EU countries. See above. Then just use your common sense. Assuming an extremely unlikely scenario in which Russian producers lose a profitable part of the business just to sell gas to “others”, there is still no accounting for the final destination. Just as the “United States” continued to import “Arab” and “OPEC” oil in the midst of the 1973 embargo, so would EU countries continue to import Russian gas. The embargoes are symbolic.

In fact, all the financial sanctions intended to solve foreign policy problems are symbolic. They are given the basic truth that as producers we all, in the end, all trade and invest with everyone whether we like it or not. In other words, there is no way to cut off banking access to Russia, and likewise there is no way for Russia to cut off access to its gas.

What does all this mean for Ukraine? There is no answer here, as there is no presumption of foreign policy expertise. What can be answered is that the efforts of experts, politicians and foreign policy types to play economically to curb Vladimir Putin’s ambitions will be far less than anything.