Getting Putin out of Ukraine: the strategic solution.

Russia has invaded its peaceful democratic neighbour Ukraine. Meeting unanticipated resistance their forces are now turning to illegal use of force. They are already committing war crimes. It will be no surprise if these evolve soon into crimes against humanity. Nato rules out direct military confirmation. So how do we get Putin, quickly, out of Ukraine? This is how.

The solution is not the power of guns but the even greater power of the law. What is required is for every parliament of every Western nation and of their allies to immediately pass legislation that bans Russia from global economic and financial activity for the next 20 years. Let me explain why this needed, why it is so powerful and how it can help end the crisis before the worst happens.

The Western sanctions response so far is of little concern to Putin: we need our own version of shock and awe

The West has offered a united response, but thus far both cautious and limited. Military aid yes, but any direct intervention such as enforcing a no-fly zone is ruled out. Economic and financial sanctions, yes, but these are “calibrated”: aimed primarily at Russian businesses and wealthy Russian citizens and seeking also to limit any magnification of the troubling cost of living crisis that has emerged globally post-pandemic. Dramatic initial impact on markets and trade with Russia, yes, but nothing that impacts the military campaign.

This is all exactly as Putin will have expected. Yes, his military campaign is not going particularly well, but he knows no limits to the exercise of violence. The Russian economy has been restructured over the past decade to make it almost entirely self-sufficient from a military point of view – they need import neither food nor energy. He will use increasingly savage military tactics until victory is achieved. To him the sanctions are substantial, but temporary, problems. He knows that we are naïve to expect anything other than the crushing of Ukraine. Then, gradually, sanctions will be wound down. Putin is on course to win.

We have a potent weapon that can prevent this outcome: the rule of law. It is a weapon that Putin does not have. Bizarrely enough Putin, before he joined the KGB, was a student of law. It is something he understands. We must write into our laws, a complete 20 year ban of Russia from the global economy and of any country that seeks to facilitate evasion of that ban.

How can this be done?

Our legislatures all across the Western world can in the coming days pass into domestic law a comprehensive sanctions framework, making illegal any and all economic or financial transaction with any Russian business, Russian citizen or the Russian state. This must specify substantial financial penalties for any natural or legal person who supports evasion. It must also impose the same ban on any person or business e.g. from Asia that that assists in any Russian external financial or economic transaction.

The sanctions should be put in place for the next 20 years.

We do not have to worry about all the details now. No doubt it will not be perfect, but revisions of the legislation can be made . Some aspects though are fairly clear. The executive arm of government then plays a key but different role from that it has adopted so far, not playing the act of war leaders, but implementing a range of specified exemptions, as approved in the legislation, for example approving transactions for humanitarian or environmental reasons or for the purpose of ensuring domestic energy security. It can also be appropriate to welcome cultural and sporting exchange with individuals who clearly distance themselves from the Russian government.

The ban must be for 20 years. This does mean it has to last 20 years. Once Russia has left Ukraine and is prepared to made good the damage it has caused, then parliaments around the world can readmit Russia to the global economy. The purpose of 20 years is to make Putin know that regardless of what he does in Ukraine he has lost.

Why is this so powerful?

Legislated sanctions of this kind are far more powerful than the sanctions created by executive order — i.e. by the command of presidents and ministers — whether now or in the future. This is for three reasons.

First, legislated sanctions provide a clear legal basis for punishing infractions. Executive orders are limited because they must focus on specific types of transaction. Typically there are easily available workarounds (there are for example many alternatives to SWIFT for payments messaging, so exclusion of Russian banks from SWIFT is more symbolic than meaningful). Even asset freezes such as those on the Central Bank of Russia, while powerful, are also leaky. Russian entities can still share foreign exchange with one another on the promise of eventual settling of balances through the central bank once the freeze is ended.

Second, legislated sanctions are morally and politically preferable. Executive sanctions are essentially playing Putin’s own autocratic game. We then, in order to avoid criticisms of being autocratic or inhumane or ignoring the problems or our own citizens and also of ordinary Russian citizens, implement “calibrated” sanctions that are hedged with all sorts of qualifications and limitations. For example asset freezes on the Central Bank of Russia are it appears limited only to those related to the military activity in Ukraine. We must also allow for the weakness of our leaders (a virtue, not a flaw, of democracy). The political incentives are for our democratic leaders to talk loud but to do as little as possible in practice (for fear of losing votes). Also, we must be honest with ourselves, no wishful thinking. Effective sanctions maintained for years will impose substantial costs on our own citizens. Therefore they must be debated and passed by parliaments. This way then when passed we make clear to Putin that we the democracies are united and far stronger than his fragmented, divided polity.

The third reason and critical reason why we need legislated sanctions is their strategic rationale. As an economist I can refer here to the theory of games. This teaches us a crucial lesson for ending the Ukrainian crisis: precommitment. Putin is playing a precommitment game. By introducing a comprehensive, global legislative framework for the imposition of sanctions that completely exclude Russia and Russians from the global economy we will play this game many times harder than he does. He then has little rational choice other than backing down.

The strategic rationale

Putin’s version of precommitment is known as “the mad man strategy” , or more colloquially, playing the playground bully. In the chaos of the school playground, the most powerful child is the one who knows no limit to their use of violence. You strike me, I strike you back three times as hard, with nuclear warheads if necessary.

Our stronger version of precommitment is the rule of law. Once our legislatures have passed these laws, (i) declaring Russia a terrorist state (as Zelensky accurately stated this week) whose status can be ended only by undoing of the harm in Ukraine (ii) and further stating that it will be illegal for the next twenty years for any resident, citizen or business in the west, or any third party, to conduct any economic or financial transaction with a Russian resident, citizen or business (with specified and substantial fines for evasion).

By setting out our sanctions regime in a clearly stated legislative framework for the next twenty years we have tied our own hands. We have in effect locked Putin in a jail and thrown away the key when and until he fully backs out of his folly. By making it law across all the civilised nations of the world we make it a precommittment from which we cannot back down.

Putin cannot match this precommitment. He only has two choices. Cave in, withdrawing his forces from Ukraine. Or go down in history as the man who ruined Russia. I believe it is clear what he will do and it will work in a matter of days. He is after all just a playground bully. If this indeed happens then what follows, when his forces have crawled back to Russia with their tails between their legs, is no longer our business. The further consequences for Putin and his entourage can be left as a sovereign decision of the Russian people.

It is possible even in the face of this our ultimate economic weapon that Putin will still push forward, leading to a million or more deaths. In this case a 20 year commitment to sanctions is even more important, to ensure such a crime is adequately punished. Yes, there will push back. Russia will attempt and succeed in part in replacing trade with the West with trade with the East. Jobs and incomes in the West will suffer. These are further reasons for tying our hands with legislation. Only this way will we be able to resist calls to be pragmatic and start trading again with Russia in a relatively few years. Only this way will our own electorates understand and accept the sacrifices required of them to defend democracy. Only this way will be able to maintain the pressure required so that Russians eventually admit to themselves the inhumanity of their own actions.

Shakespeare said it first and said it best.

Time for our legislatures to pick up their most potent weapon the law and prepare it for immediate and meaningful action. Ignore the siren voices of economic crisis and financial instability. The end can come quickly after this overwhelming blow. Even if it does not, still we do the right thing. As Lady Macbeth said to her lily-livered husband , so we can say to our parliamentarians, time to screw your courage to the sticking post, you have the powers to defeat the Russian autocrat so use them and use them now.

Alistair Milne

Professor of Financial Economics
School of Business and Economics
Loughborough University
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