Eight sobering realities about Putin’s invasion of Ukraine | Robert Reich

We must do what we can to contain Vladimir Putin's aggression in Ukraine. But we also need to be clear-eyed about it, and face the costs. Economics can't be separated from politics, and neither can be separated from history. Here are eight sobering realities:

1. Will the economic sanctions now being put into effect stop Putin from seeking to take over all of Ukraine? No. They will complicate Russia's global financial transactions but they will not cripple the Russian economy. After Russia annexed Ukraine's Crimean peninsula in 2014, the US and its allies imposed economic sanctions which slowed the Russian economy temporarily, but Russia soon rebounded. Since then, Russia has taken steps to lessen its reliance on foreign debt and investment, which means that similar sanctions will have less effect. In addition, the rise of cryptocurrencies and other digital assets allow Russia to bypass bank transfers, which are the control points for sanctions. Bottom line: the sanctions already imposed or threatened could reduce Russia's gross domestic product, but only by a few percentage points.

2. What sort of sanctions would seriously damage Russia? Sanctions on Russia's enormous oil and gas exports could cause substantial harm. Russia produces 10 million barrels of oil a day, which is about 10 percent of global demand. It ranks third in world oil production (behind the United States and Saudi Arabia). It ranks second in natural gas (behind the US), according to the US Energy Information Administration.

3. Then why not impose sanctions on them? Because that would seriously harm consumers in Europe and the US - pushing up energy prices and worsening inflation (now running at 7.5% annually in the US, a 40-year high). Although the US imports very little Russian oil or natural gas, oil and natural gas markets are global - which means shortages that push up prices in one part of the world will have similar effects elsewhere. The price of oil in the US is already approaching $100 a barrel, up from about $65 a year ago. The price of gas at the pump is averaging $3.53 a gallon, according to AAA. For most Americans, that gas-pump price is the single most important indicator of inflation, not just because they fuel their cars with gas but because the cost is emblazoned in big numbers outside every gas station in America. (The biggest beneficiaries of these price increases, by the way: energy companies like Halliburton, Occidental Petroleum and Schlumberger, which are now leading the S&P 500. Anyone in favor of putting a windfall profits tax on them?)

4. Will stronger sanctions weaken Putin's control over Russia? Possibly. But they could also have the opposite effect - enabling Putin to fuel Russia's suspicions toward the west and stir up even more Russian nationalism. The harshest US measures would cause the average Russian to pay higher prices for food and clothing or devalue pensions and savings accounts because of a crash in the ruble or Russian markets, but these might be seen as necessary sacrifices that rally Russians around Putin.

5. Any other foreign policy consequences we should be watching? In a word: China. Russia's concern about the west has already led to a rapprochement with China. A strong alliance between the two most powerful world autocracies could be worrisome.

6. What about domestic politics here in the US? Foreign policy crises tend to drive domestic policy off the headlines, and weaken reform movements. Putin's aggression in Ukraine has already quieted conversations in America about voting rights, filibuster reform, and Build Back Better - at least for now. Large-scale war, if it ever comes to that, deadens reform. The first world war brought the progressive era to a halt. The second ended FDR's New Deal. Vietnam stopped Lyndon Johnson's Great Society.