The Moral High Ground When Everyone’s Immoral

“Saddam Hussein wasn’t an especially good guy.”

That’s about all anyone who still defends America’s decision to invade and occupy Iraq has to offer these days. Every other excuse was exhausted a long time ago, and the original rationale was either a total fabrication (pure pretext) or one of the most disastrous intelligence failures in modern military history.

Vladimir Putin doesn’t have a Saddam Hussein in Ukraine. He has Volodymyr Zelenskyy, a career comedian who once won his country’s version of “Dancing With The Stars.” Thanks to a rare stroke of strategic brilliance from the Biden administration (which preemptively released intelligence warning of Putin’s intent to conjure a rationale for war), the Kremlin wasn’t able to establish any pretext either. So, years from now, anyone in Moscow clinging to the notion that invading Ukraine was a good idea, will need to lean entirely on Putin’s incoherent, historically inaccurate, messianic ramblings and his equally ridiculous contention that Zelenskyy, a Jew, is a “Nazi.”

In conversation, the only thing I despise more than false equivalences is “Whataboutism,” a technique that propagandizes false equivalences. Whataboutism relies on non sequiturs to excuse objectively inexcusable acts. Russia is famous for it. Notwithstanding George W. Bush’s inadvertent comparison of the two, there’s no connection whatsoever between America’s historically tragic misadventure in Iraq and Putin’s war of conquest in Ukraine. One doesn’t excuse, or in any way ameliorate, the other.

I say all of that because Americans, and particularly those interested in macroeconomics and finance, are becoming desensitized to the conflict, and thereby even more vulnerable to counternarrative and “Woe is me!” analysis related to the ongoing imposition of financial penalties against Putin’s regime by Janet Yellen’s Treasury.

Yellen has endeavored for months to force a Russian default. Eventually, she’ll succeed (restrictions have already triggered a failure-to-pay CDS event). In the meantime, she’s effectively made it illegal to buy Russian debt on the secondary market. Updated guidance, released earlier this week, includes restrictions on corporate securities, including stocks. US citizens can sell, divest or facilitate the sale of debt or equity securities issued by Russian entities, but can’t buy them, with some carveouts for fund investments and the conversion of ADRs.

Americans who own Russian securities aren’t required to sell their existing holdings, but even if they wanted to, it’d be tough to find buyers. As one former Treasury advisor put it, in remarks to Bloomberg, “Probably no one will buy the debt but it’s still good policy to let folks offload if they can, rather than sticking them immediately with a worthless asset.”

In case it’s not clear enough: The US government is engaged in an effort to place pretty much anything and everything to do with Russia somewhere on the illegality continuum, where one end is labeled “Subject to scrutiny” and the other “Biohazard: OFAC designated.”

A cacophony of voices ranging from the usual suspects to the otherwise sane, continues to suggest that this effort is somehow out of bounds, or unfair. At the least, critics argue, it could be counterproductive in the long run to the extent it undermines faith in the dollar and the dollar-based global financial system.

As regular readers are well apprised, I’ve long argued that the capricious weaponization of the currency through Treasury sanctions presents a bigger risk to dollar hegemony than any domestic “money printing” or fiscal imbalances. But what Yellen is doing to Russia isn’t capricious. What’s capricious is breaking with post-War precedent when it comes to swearing off wars of conquest.

I’ve been over this before, but it bears repeating, so I’ll recycle some familiar language. Russia has committed war crimes in Ukraine and by most accounts, in a systematic way. Putin is now destined to be enshrined in the history books alongside a handful of extremely unsavory characters. But Putin isn’t being ostracized for brutality. He’s being ostracized for breaching decorum.

You can send your air force to Syria and help prop up a regime that used chemical weapons on civilians in the Mideast. That’s your “right” as a card-carrying member of the “gentleman’s” club that gets to treat the world like a giant Risk board, a club to which Russia belonged until February. What you can’t do is start a war in Europe on NATO’s doorstep with the intent to conquer a nation and absorb it.

China understands the importance of observing decorum. The Party explicitly considers Taiwan to be its property, but Xi knows that seizing it would mean shattering a world order which, for now anyway, continues to benefit China in its quest to rival the US economically and politically.

In addition to breaking with decorum, Putin is jeopardizing living standards in the developed world, and in particular in Western economies. The figure (below) illustrates the point.

Not all of 2022’s inflation is Putin’s fault, but the war has exacerbated the surge in food and energy costs. “If the war escalates or becomes more protracted, the outlook would worsen,” the OECD warned on Wednesday, in the course of slashing their outlook for the global economy and raising their forecasts for global inflation.

China ships low-cost goods to the West, thereby allowing Americans to indulge their penchant for consumerism (blissfully ignorant to the fact that in doing so, they’re perpetuating their own demise by incentivizing outsourced labor, but that’s another story). Putin, by contrast, is facilitating rampant inflation in the developed world. With rampant inflation comes discomfort and, eventually, discontent, which in democracies manifests in angry voters. Angry voters jeopardize the careers of comfortable politicians.

That, to quote the other Bush, speaking to the same Saddam, when both men were still alive, “will not stand” (“man“).

And so, Putin will pay. And pay, and pay, and pay, until there’s nothing left of the Russian economy or until voters in Western democracies stop paying. Whichever comes first. Putin thinks this is a staring contest he can win. Maybe he’s right. Maybe he’s wrong. But for someone with a reputation for being shrewd, he’s miscalculated every step of the way in 2022. He was forced to scale back his plans for Ukraine after failing to take Kyiv. His army suffered massive casualties. He lost the Moskva, the flagship of his Black Sea Fleet. He lost his hard currency reserves. He lost his SWIFT access. He even lost his McDonald’s. Even the ruble’s engineered strength ended up being a liability (hence the unscheduled rate cut late last month).

As ever, lower-income countries and emerging markets are collateral damage. The figure (below) underscores the sheer blatant absurdity in Putin’s contention (from an interview with state television late last week) that the Russian blockade of Ukraine’s ports doesn’t jeopardize global food security.

Ukraine’s Agriculture Minister, Mykola Solskyi, on Wednesday again warned of impending calamity in the event Russia doesn’t lift port blockades. Turkey is negotiating with Putin for the safe transport of grains from Ukrainian ports, but Kyiv is understandably skeptical.

Putin wants shipping sanctions on Russia lifted, ostensibly to facilitate the delivery of increasingly scarce fertilizer to farmers around the world. The US won’t countenance the idea, especially not when it’s presented (explicitly or otherwise) as a quid pro quo for allowing Ukraine to ship its trapped grain.

Putin also insists Ukraine is part of the problem — if only they’d remove mines from ports they control, it’d be easier to transport crops, he claims. Ukraine says removing the mines and other obstacles put in place to prevent Russia from attacking the ports would… well, clear the way for Russia to attack the ports.

At the end of the day, it’s important we don’t lose the plot in an era when too many intelligent people are unable to differentiate between being a so-called “contrarian” and being an unwitting accomplice in counternarrative, Whataboutism and propaganda disseminated by authoritarian regimes seeking to justify their atrocities by reference to the many unforgivable sins of the world’s democracies.

No one should make excuses for Russia. Putin’s Russia, I mean. Whatever Putin gets, he surely deserves.

Of course, you might say the same of the US, a nation forged in a bloody revolution cynically justified by reference to a set of purportedly “self-evident” truths, all of which explicitly forbade the genocide and slavery on which the country was subsequently built.

Long live George Washington, and may he forever reign through the almighty, green scrip that bears his pale, colonial visage.