David Warsh: Ukraine and 'Planning Armageddon'

SOMERVILLE, Mass.

So German Chancellor Angela Merkel and French President François Hollande succeeded.   They traveled to Moscow and persuaded Vladimir Putin to pledge to pause and perhaps eventually end Russia’s military support for the Russian-speakers in the Ukrainian civil war – more than 5,000 dead and 1 million refugees so far.

So the pressure on President Obama from U.S.  hawks to begin a proxy war with Russia by supplying weapons to the Ukrainians will ease, at least not now. For a sensible opinion, see Bloomberg View in the days before the bargain

''[T[he law that president Petro Poroshenko signed in December  to end Ukraine’s neutral status and set a course for membership in NATO has created a diplomatic obstacle to peace.  The US and its allies should make clear to Ukraine that its NATO ambitions are unrealistic.  Right or wrong, the alliance doesn’t want Ukraine, and Russia sees its membership in NATO as a red line.''

The Washington Post afterwards took a more pugnacious view

''[T]he deal brokered by German and French leaders with Russia’s Vladimir Putin does little to restrain his ambition to create a puppet state in eastern Ukraine that could be used to sabotage the rest of the country…. By going along with the Europeans’ desperate diplomatic gambit, [Mr. Putin] ensured that not even minor sanctions would be adopted at a European Union summit Thursday. He also provided President Obama with reason to overrule those in his administration seeking to supply arms to Ukraine. Mr. Putin can resume military aggression at will, while the push for new sanctions or weapons could take weeks or months to regain momentum.''

So did the The Wall Street Journal:

''[W]hat better time for Vladimir Putin to agree to another cease-fire that consolidates his military gains, extracts additional political concessions from Kiev, puts off further Western sanctions, and gives President Obama another diplomatic alibi not to supply Ukraine’s demoralized and ill-equipped military with desperately needed defensive weapons?… Mr. Putin will consolidate his latest victory, survey the European landscape for weak spots, and make another move before America gets a new President who might do more to resist his conquests.''

But it was The Economist, in its first major outing under new editor-in-chief Zanny Minton Beddoes, that went over the top. On the cover, a sinister Putin manipulates strings attached to gullible European marionettes, figures who are not shown. Chancellor Merkel and President Hollande?  No, only Europe’s emergent populist parties, including Syriza in Greece, at least if you believe the sidebar. The editorial, “The View from the Kremlin: Russia’s War on the West,” begins:

''He is ridiculed for his mendacity and ostracized by his peers. He presides over a free-falling currency and a rapidly shrinking economy. International sanctions stop his kleptocratic friends from holidaying in their ill-gotten Mediterranean villas. Judged against the objectives Vladimir Putin purported to set on inheriting Russia’s presidency 15 years ago – prosperity, the rule of law, westward integration – regarding him as a success might seem bleakly comical.  But those are no longer his goals, if they ever really were. Look at the world from his perspective, and Mr. Putin is winning….His overarching aim is to divide and neuter that alliance [NATO], fracture its collective approach to security, and resist and roll back its advances.''

Then in a long essay, “What Russia Wants:  From Cold War to Hot War.”

''Nearly a quarter-century after the collapse of the Soviet Union, the West faces a greater threat from the East than at any point during the cold war. Even during the Cuban missile crisis of 1962, Soviet leaders were constrained by the Politburo and memories of the Second World War. Now, according to Russia’s chief propagandist, Dmitry Kiselev, even a decision about the use of nuclear arms 'will be taken personally by Mr Putin, who has the undoubted support of the Russian people'. Bluff or not, this reflects the Russian elite’s perception of the West as a threat to the very existence of the Russian state

''In this view Russia did not start the war in Ukraine, but responded to Western aggression. The Maiden uprising and ousting of Viktor Yanukovych as Ukraine’s president were engineered by American special services to move NATO closer to Russia’s borders. Once Mr Yanukovych had gone, American envoys offered Ukraine’s interim government $25 billion to place missile defenses on the Russian border, in order to shift the balance of nuclear power towards America. Russia had no choice but to accept.''

In fact, many sophisticated Europeans and Americans share the basic Russian view of the situation.  They see the campaign to expand NATO to Russia’s southern borders as the fundamental cause of Ukrainian civil war.  Essentially this seems to be the Bloomberg View. Subsequent editorials (you have to know where to look)  here, here, and here take a sterner but still sensible view. )

Whence the dissonance between Bloomberg and The Economist?

As it happens, I have been reading Planning Armageddon: British Economic Warfare and the First World War, by Nicholas A Lambert (Harvard, 2012). Towards the end of the book, an idea tumbled out.

Planning Armageddon has been making the rounds in national security circles since it appeared, for obvious reasons:  If plans for an economic blitzkrieg were first developed a hundred years ago, based on British recognition that that international trade had become so important it might be possible to cripple and collapse as rival’s financial system by a series of swift moves in the event off war, how much greater must be the field for mischief in the present age?

It turns out such plans were developed – and even put into action.  Historians have long known that all sides expected a war in 1914 to end quickly.  Lambert shows why.  The Germans had their Schlieffen Plan, led off by a quick march through the neutral Low Countries to capture Paris, based on Prussia’s earlier triumph in the Franco-Prussian War, in 1870.  The Brits, it turns out, had the Desart Committee’s plan for all-out economic war.

Worked out in considerable detail by the Admiralty between 1905 and 1908, the British plan involved using all possible means to disrupt Germany’s trade, chiefly its  food supply, including instigating a banking panic.  A Committee on Imperial Defense refined the plan.  In 1913, the government approved it.  And on Aug. 4,  1914, two weeks after Austrian government  made  an unprecedented threat to government of Serbia, it was put into action.

Immediately the economic war plan began to crumble, The panic touched off by the news that was imminent was worse than had been expected.  The ban on trading with the enemy affected not just but neutral nations, especially the United States, but powerful groups in Britain, too.  The British Board of Trade and the Foreign Office turned immediately against the government’s plan.

By the end of August the British cabinet had begun to dilute it in favor of a very different policy they called “blockade” – and sent an expeditionary force to the Continent instead.

Protected by wartime censorship and secrecy until official histories could render it all but invisibility, the aborted economic blitzkrieg disappeared from view – until Lambert, with access to previously secret archival materials, brought it to modern attention.    Here are three expert reviews of his book, and a response from the author.  It’s as good a story as Erskine Childers’s 1903 classic novel, The Riddle of the Sands, with the added virtue that it’s true.  .

One thing I took away from Planning Armageddon is that military strategists in capitals around the world can be counted on to be doing with computers and present-day financial communication systems what their Edwardian counterparts were doing a hundred years ago – laying plans to disrupt their foes’ economies as thoroughly as possible if it comes to war,.  When Russia’s Kiselev says Putin  will use nuclear weapons if the existence of the Russian state is threatened, economic Armageddon is the kind of thing he’s got in mind – an all-out attempt to starve the Russian government into submission.

The other thing I took away is that, just as market interests swamped the British plan for all-out economic war in 1914, probably they will disrupt the clamor for U.S.  proxy war with Russia in 2015.  There’s a reason that Bloomberg View takes a calmer stance towards the Russian bullying of Ukraine than does The Economist. Its subscribers have more skin in the game.

David Warsh, a long-time financial journalist and economic historian, is proprietor of economicprincipals.com.