A version of this story appeared in CNN’s What Matters newsletter. To get it in your inbox, sign up for free here.
When the Communists and Vladimir Lenin took over Russia in 1917, they repudiated old czarist debts and the country defaulted on its foreign obligations – the largest sovereign default in history.
Now, with much of the world economy repudiating Russia after Vladimir Putin’s invaders stormed into Ukraine, the country is again on the cusp of a default on its foreign obligations.
While the West has made very clear it will not do anything that could be construed as joining in firefights against nuclear-armed Russia, its economic blockade and sanctions of an unprecedented scale are clearly having an effect.
Russia has sought economic and military help from China, which has stayed notably aloof during the Ukraine invasion, according to conversations CNN had with two US officials. White House national security adviser Jake Sullivan told CNN’s Dana Bash on Sunday that China providing Russia with support is a “concern.”
It’s not clear whether China intends to provide Russia with that assistance, and both countries denied that Russia had made the request. Sullivan flew to Rome on Monday to meet with Chinese officials and discourage help for Russia.
Here, have rubles
Russia is threatening to repay foreign creditors from “countries that are unfriendly” in badly devalued rubles, according to a report from CNN’s Charles Riley.
Either nonpayment or payment in rubles for more than $117 million in interest payments on dollar-denominated government bonds due Wednesday would mean Russia had defaulted on its debt.
Russia has money to pay, but half of its foreign reserves are frozen by Western sanctions.
The default itself could end up being an endnote, according to Riley, since Russia has relatively small amounts of foreign debt. But it could cause major problems for any US firms that are exposed to losses, and it would surely further isolate Russia from Western companies.
Potentially seizing what remains
Separately, Russia is threatening the growing list of companies pulling out of Russia, saying their assets could be seized by the state.
Russia’s richest businessman, Vladimir Potanin, president of metals giant Norilsk Nickel – who despite his company losing most of its value is still worth about $22.5 billion – implored Russia not to take the assets of Western companies.
“Firstly, it would take us back a hundred years, to 1917, and the consequences of such a step — global distrust of Russia on the part of investors — we would experience for many decades,” he said in a message posted on Norilsk Nickel’s Telegram account on Thursday.
The only way this really ends
The question will ultimately be whether Russians are willing to accept their new status as global pariahs and give up the Western comforts some had grown used to.
Putin is obviously willing to accept these things.
“Nothing will stop Vladimir Putin,” said Vladimir Kara-Murza, the Russian dissident politician who survived two poisoning attempts. He appeared on CNN on Monday from Washington and said Putin has already erased 30 years of political gains since the Cold War ended.
“The only strategic endgame to this is for Vladimir Putin to no longer be in power in Russia. This is the only strategic solution. … Needless to say, only Russians can do that. Only Russian cans affect political change in our own country,” he said.
He argued the US and other countries should redouble efforts to get creative with technology and push information to Russians in the same way they did with radio networks during the Cold War.
What do Russians think? We don’t entirely know
What effect the sanctions are having on everyday Russians and whether their minds are being changed seems unknowable at the moment. Draconian new laws essentially ended the independent press in Russia, and Western news organizations have removed reporters from the country.
Valerie Hopkins, a Moscow-based New York Times correspondent who has left the country, told CNN on Monday how difficult it is to gauge public opinion, although the fact people are willing to risk arrest to protest is notable.
A woman crashed Russia’s state TV news broadcast Monday holding a “no war” sign and interrupting the diet of propaganda fed to most Russians by the state-run media.
“I have been reporting myself about Russians who don’t believe their own Ukrainian families that there’s a war,” Hopkins said. “But as this has been going on, I think people are possibly finding out more information. The problem is it’s illegal to even do a poll or ask a question, ‘Do you support the war?’ “
Watch this: CNN’s Brian Stelter interviewed Yevgenia Albats, editor in chief of the liberal, independent New Times, who has stayed in Russia despite the new law that forbids critical reporting.
The West is running out of sanctions
It seems now like this will turn into a test of wills. The West is running out of sanctions since its response to Russia was so swift and severe.
“The US has done practically everything it can to sanction all parts of the Russian economy, which will have a devastating effect as time goes on,” said Angela Stent, a former national intelligence officer for Russia at the National Intelligence Council, appearing Monday on CNN.
“The Europeans would have to forswear purchasing Russian hydrocarbons, and they’re not ready to do that yet,” she said. “They can only do that if they’re assured they have other supplies of oil and gas. There’s not that much left to sanction.”
Oil prices fall
In the US, there are new indicators suggesting a domestic recession as a direct result of higher commodity prices expected due to the Russia invasion – although the price of oil fell briefly below $100 per barrel on Monday, which means most of the price bump attributed to the Russia invasion has now been erased and should trickle out to gas prices, according to CNN’s Matt Egan.
What exactly can sanctions accomplish?
The sanctions imposed on Russia are unique in that they are pinching off a country that had been so enmeshed in the global economy.
But there is some fear that sanctions often don’t ultimately lead to a capitulation – and these sanctions, so severe, are not tied to a specific goal, according to Nicholas Mulder, a Cornell University professor with a new book, “The Economic Weapon: The Rise of Sanctions as a Tool of Modern War.”
In a Q&A with The Atlantic, Mulder argued sanctions need a more specific purpose.
“If there is a perception in the world, or on the part of Russia, that these are going to be permanent and they’re going to be there no matter what Russia does, they will just be a weapon to wreck Russian society and the economy with. I don’t think that will lead to the kind of longer-term international situation that we want to pursue.”
Total sanctions that damage people as well as governments are “morally fraught,” he said.
“If we embark on policies premised on the idea that bad governments and their people are one, then we have bought into a way of thinking that comes perilously close to how ultranationalists and fascists see the world,” Mulder said.
War on Russia’s economy
That sanctions are now the key tool of war in the globalized society is not up for dispute.
Retired US Gen. David Petraeus appeared on CNN’s “New Day” on Monday and said there will come a time that Russians get fed up.
“At some point, again, the people are going to realize, you know, the stock market is never going to reopen. We aren’t getting much for our ruble anymore. Various products that they used to take for granted are just not going to be on the shelves at stores. Again, this is starting to happen, and it will escalate in the weeks that lie ahead,” he said.
Meanwhile, in Ukraine the war gets worse
As those economic frustrations mount for Russians, the military horrors of Russia’s invasion keep coming out of Ukraine:
- Shocking images of a pregnant woman struck down and later killed in the bombing of a maternity hospital in the city of Mariupol.
- Russians are primed to lay siege to Kyiv and targeting civilians in a residential apartment building.
- The refugee crisis is growing. More than 2.8 million people have fled Ukraine, including more than 1.7 million to Poland alone.
- And missile strikes just miles from the Polish border brought the war closer to NATO’s borders.