In 2017, Vladimir Putin claimed the nation that mastered artificial intelligence “will be the ruler of the world”. He wanted Russia to be an AI superpower by 2030. After invading Ukraine, he may have to wait rather longer to achieve such supremacy – if he ever does. Sanctions mean Moscow cannot easily access the high-end chips that AI requires. Homegrown substitutes will not cut it. Russia’s leading chip-maker is only capable of mass producing semiconductors last used in computers a decade ago.
After being sanctioned, Russia finds itself exposed to geopolitical systems controlled by others. Western nations are tearing up treaties and ending foreign investment. Multinational companies are leaving, often because of reputational concerns rather than any ban. On Thursday, the UK and US announced further sanctions on Russian lawmakers and state-owned companies.
Russia’s importance to the globe goes beyond its size as the world’s 11th-largest economy. Reorienting Russian oil, gas and coal exports away from the US and EU to Asian importers would be a big economic shock. Moscow weaponised its gas exports this week by demanding rouble payments from unfriendly European nations. But high oil and gas prices will shift investment back into extractive industries, risking a reversal of the planet-saving trend towards clean energy.
Closing off the Black Sea’s Eurasian land bridge would also add pressure to congested sea trade routes. Russia is the source of many essential minerals. About 25 African countries import more than one-third of their wheat from either Russia or Ukraine. The UN’s development arm, Unctad, warned on Thursday that poorer nations face if not unrest then a “profound social malaise” and “a downward spiral of insolvency, recession and arrested development”.
Globalisation has been moulded in the interest of big economies. For two decades, powerful nations have treated the internet, finance and industrial supply chains that stretch across the world as webs in which to trap one another. In 2019, the Bank of England reportedly froze $1.2bn of Venezuela’s gold to cut off the regime from its overseas assets – foreshadowing American and European authorities’ actions that have rendered more than half of Russia’s $630bn cash reserves inert. China and India – with $3.4tn and $632bn in reserves – will be paying close attention.
Washington’s leverage over the global financial system rests upon banks’ Swift messaging system and dollar dominance. The US has the means to hurt its enemies, but frequently has been undecided on the ends. With Iran’s nuclear programme, Washington wavered between wanting to change the country’s behaviour and wanting to change its regime. In Russia’s case, the latter option becomes more appealing the longer the war in Ukraine lasts.
Russia could develop new technologies to break out of this geopolitical cage. Before the first world war, Germany attempted to escape the UK’s stranglehold on the undersea cable network by developing new wireless technologies. Today, Russia may accelerate its “sovereign internet” plans to evade US web surveillance.
Wars reshape political – and economic – orders. Mr Putin’s opponents are aiming to apply as much pressure as they can with as little fallout for themselves as possible. They are seeking to manage the risk of a domestic political backlash against their Russian sanctions. Poorer nations will need help or they risk being immiserated. Russia is also not isolated. Unless Mr Putin is no longer Russia’s president, he will probably attend this year’s G20 summit in Indonesia. Nations can – unwittingly or deliberately – turn a blind eye to bans. When Roman Abramovich’s superyacht sailed into a Turkish port this week, it epitomised how reluctant even a Nato member might be in applying sanctions.
By acting against Russia, the US and its allies are playing for high stakes. This week, many Muscovites felt the sanctions bite. There have been widespread reports of panic buying in the country’s supermarkets. President Joe Biden’s warning of possible Russian cyber-attacks in response to sanctions might be the beginning of a much more dangerous phase of the economic war.
