Jeffrey Sonnenfeld and Steven Tian write:

Nearly 18 months into the Russian invasion of Ukraine now, amidst last week’s failed coup attempt, battlefield setbacks, and global diplomatic condemnation, Putin is coming under increasing strain to finance his increasingly-expensive war—and there’s a history lesson for how this will all end.

Far from the prevailing narrative on how Putin funds his invasion, Putin’s financial lifeline has [been] his merciless cannibalization of Russian economic productivity. He has been burning the living room furniture to fuel his battles in Ukraine, but that is now starting to backfire amidst a deafening silence and dearth of public support. That is far from the prevailing narrative on how Putin funds his invasion. Ample western commentators posit that Putin is pulling in billions from trade to finance the invasion thanks to high commodity prices, weak western sanctions, and sanctions evasion.

But energy prices across both oil and natural gas are now cheaper today than before the invasion, as are grain, wheat, lumber, metals, and practically every commodity that Russia produces. Amidst lower commodity prices across the board, thanks in part to the effective G7 oil price cap, Russia is now barely breaking even on oil sales with unwanted Russian Urals oil trading at a persistent discount but continuing to flow in ample volumes – exactly as it was designed. In short, the world has now largely replaced Russian supplies so commodity exports are no boon to a desperate Russia right now. [Continue reading…]