Vladimir Putin appears poised to escalate the conflict in Ukraine.
Following a string of embarrassing setbacks on the battlefield, and amid speculation the Kremlin intends to use hastily arranged referendums in occupied territory as a justification for nuclear threats in the event Ukrainian forces attempt to retake those areas too, Putin on Wednesday ordered a partial military mobilization.
In a prerecorded address to the nation, Putin accused the West of “nuclear blackmail.” He was visibly agitated. The West, he claimed, is encouraging Volodymyr Zelensky to “transfer military operations” to Russian territory, in order to “completely plunder our country.”
As is often the case with both official Kremlin messaging and state media in Russia, Putin projected his own behavior on his adversaries. NATO, he told Russian citizens, has raised “the possibility and admissibility of using weapons of mass destruction against Russia — nuclear weapons.” In fact, it’s Putin who’s repeatedly made veiled threats about the prospect of deploying nuclear arms, and not just in the context of the war in Ukraine. He does it habitually.
Some Western observers worry referendums in Luhansk, Donetsk, Kherson and Zaporizhzhia, scheduled to begin later this week, set the stage for Moscow to defend the occupied territory as though it were a part of Russia, which, in a worst-case, could entail the use of more destructive weapons against Ukrainian cities. Russia recognized the “independence and sovereignty” of Luhansk and Donetsk in February, just days before the invasion. The West regards all Russian-held territory in Ukraine as illegally occupied. Russian losses in Kharkiv threaten supply routes for the Russian frontlines in Donetsk and Luhansk, which likely explains the sense of urgency in Moscow.
Putin on Wednesday repeated his own narrative about the war. Russia, he insisted, is in Ukraine as a liberator for those who don’t wish to live “under the heel” of the Zelensky government, which he again called a “neo-Nazi regime,” bent on pursuing a “policy of intimidation, terror and violence” against its own people. Putin (ludicrously) accused Zelensky of perpetrating a “massive, horrific, barbaric” campaign against Ukrainian citizens.
Putin’s assertions have no basis in reality. None whatsoever. His remarks on Wednesday were pure, unadulterated fiction, and reflect a man lost in his own historiographic fantasy. Unfortunately, many Russians are likewise lost, unable to distinguish between fact and fiction, in part because Russian state television is, as Masha Gessen put it in a great piece published in May, “an army, one with a few generals and many foot soldiers who never question their orders.” Consider the following excerpt from Gessen:
The Russian state and its propaganda machine form a feedback loop. Putin watches his own television and quotes it back to itself, the television amplifies the message, and so on. Messages can originate anywhere along this closed loop. On February 12th, Maria Baronova, a former opposition activist who went to work for RT’s Russian-language service in 2019, wrote a long, unhinged post on her personal Telegram channel, arguing that NATO and its allies should be “de-Nazified.” She soon heard from a senior editor who praised her post and encouraged her to write more like it. 12 days later, Putin announced the beginning of Russia’s invasion of Ukraine and declared that its goal was the “demilitarization and de-Nazification of Ukraine.” Baronova couldn’t find an instance of the term “de-Nazification” being used by Russians (not in reference to Germany) that preceded her Telegram post. The propaganda machine had been calling Ukrainians Nazis for years, but this word was novel; it had come to her following a fight with a Russian-speaking friend in the United States. “I pulled it out of my ass for that post,” she told me. “And then, when they were scraping together verbiage for Putin’s speech, they picked it up.”
That’s pretty astounding, albeit hardly surprising if you know anything about the feedback loop Gessen described. Note that a handful of popular web portals in the US are, willingly or otherwise, part of that same feedback loop.
Putin continued. “The majority of the people living in the territories freed from neo-Nazis are in the first place historical Novorossiya land,” he explained, veering off into a history lesson of his own construction. “We have no right,” he said, leaning forward in his chair, brow furrowed, glowering, with both hands on his desk, “to hand our loved ones to the executioners.”
To call this dangerous would be to materially understate the case. Putin made it clear that he’ll support the effective annexation-by-sham-referendum of around 15% of Ukraine’s territory over the next week, and he also suggested that Russia is indeed prepared to use weapons of massive destruction. “I want to remind you that our country also has various means of destruction, and in some components more modern than those of the NATO countries,” he warned.
Obviously, the Kremlin is concerned that Russia might lose the war outright absent a more concerted effort. Putin’s partial mobilization calls up 300,000 reservists to fight in the war. His allusion to deploying Moscow’s nuclear arsenal is also indicative of panic, but more importantly, the West should consider the distinct possibility that Putin is no longer a rational actor.
Over the past two weeks, I attempted, on several occasions, to communicate the risk of an imminent escalation from Putin in consideration of factors market participants don’t fully appreciate. With that in mind, I’ll leave you with two passages from an article published here just 10 days ago:
It’s important that market participants seeking to make sense of the conflict understand that Putin is in the final stages of a decade-long transformation from cynical KGB kleptocrat to delusional ideologue. This descent began in earnest sometime around 2012, and although Putin’s deep suspicion of the West and profound distrust of NATO is routinely cited (including by Putin himself) as a justification for Russian military projection, the quest to conquer Ukraine is a manifestation of an imperialist fever dream cobbled together from various sources ranging from the wholly legitimate to the lunatic.
Zelensky claims Ukraine’s aim is to liberate the entire country from Russian occupation. If, against the odds, such an outcome began to seem even a semblance of likely, it’s difficult to overstate how psychologically devastating that would be for a man (Putin) experiencing a kind of identity crisis disguised as a cultural awakening. That poses significant escalation risk, and I’m quite sure markets aren’t priced for it because virtually no one who operates in them (markets) understands the nuance.