Perfect Storm: Russia’s Failed Economic Opening, the Hurricane of War and Sanctions, and the Uncertain Future, by Thane Gustafson, Oxford University Press, 2025
In the final decade of the last century, the end of communism in Europe and the collapse of the Soviet Union left three developments in their wake. Together the three promised to bring about an unprecedented era of peace and prosperity all across Eurasia, from the Atlantic coast of Europe and the British Isles to the Pacific coast of Russia and the Japanese archipelago.
The end of the Cold War removed the leading cause of war on the planet. The Russian Republic installed, for the first time, a nascent democratic political system. After decades of serious economic interaction only with other communist countries, Russia opened itself economically to the rest of the world. These three features of the post-Cold War world would, it was widely believed in the West, reinforce one another. Peace would underwrite Russian democracy and foster economic engagement with the West; democracy, as many academic studies argued, would entrench peace since democratic countries tend not to go to war with each other; and commerce would also bolster peace: since the nineteenth century, it had been article of faith among some students of international affairs that countries don’t go to war with their trading partners because all have too much to lose from the interruption of commerce that war invariably brings.
Things did not, of course, work out that way. The outbreak of the war in Ukraine, on February 24, 2022, put an end to the hopes to which the end of the Cold War had given rise. Even before then, however, the three pillars on which the new golden era of Eurasian history was expected to rest had become extremely shaky.
The United States bears some responsibility for the end of peaceful relations between Russia and the West because of its gratuitous expansion of the North Atlantic Treaty Organization (NATO), the Western security alliance, eastward to the Russian border. It did so in the face of the Russians’ belief they had a Western promise that this would not take place and while making it clear that Russia itself would never be allowed to join NATO. The American government thereby turned public opinion in Russia against the West. As he transformed Russia from a proto-democracy to a dictatorship after coming to power in 2000, Vladimir Putin used the anti-Western attitudes that NATO expansion had engendered to justify both his repression at home and his aggression abroad. Even before the attack on Ukraine, political reconciliation between Russia and the West had failed.
What became of the third pillar of the new Eurasia, Russia’s economic engagement with the West? That is the subject of Perfect Storm by Thane Gustafson, a professor of government at Georgetown University in Washington, DC. He has impressive credentials for addressing the subject, having written a number of books about Russian economic affairs with an emphasis on the country’s most important economic sector, energy. In this book he describes and analyzes in depth the past, present, and future of Russia’s economic relations with the West.
Extensive economic engagement between the two could not take place in the Soviet era because of the incompatibility of their respective economic systems. The communist centrally planned economy offered few opportunities and fewer incentives for trade with and investment from the free-market economies of the West. Central planning disappeared with communism, but it took time to establish the institutions, the practices, and the skills that operating free markets requires. Ultimately, however, Russia did manage to establish them. In the first post-Soviet decade (the last decade of the twentieth century), it did build a rough-and-ready market economy. Corruption permeated it at every level. The government had a large role in economic decisions. Some sectors were off-limits to foreigners. Russians came to resent the Western economic experts who arrived knowing nothing about the country but who nonetheless lectured them on how to organize its economic life.
Still, Russia did take advantage of Western expertise and adopted Western practices in some areas, notably finance. It attracted some foreign investment, the automobile industry being a good example. Russian consumers gained access, via the West, to a far wider variety of consumer goods than they had ever before enjoyed. While hardly as significant as China, Russia became a part of the global economy. Although Russia’s economic ties with the West were not as extensive as those the Soviet Union’s former communist-ruled satellites in central and eastern Europe forged, such ties did exist. Though not especially robust, the third – economic – pillar of the hoped-for new Eurasia, unlike the other two, remained in place on February 24, 2022. Then came Putin’s attack on Ukraine, and the economic relationship itself became part of the battlefield.
In response to the assault, the United States, the European Union, and other countries proceeded to impose economic sanctions on Russia. A good part of Perfect Storm is devoted to their history and to their impact – and lack of it. Sanctions, along with their close cousins, blockades and embargoes, are familiar features of armed conflict, as warring parties seek to injure each other economically as well as defeat each other militarily.
Three features of the sanctions on Russia distinguish them from those of the past. First, they have a wider scope than any previous ones. Second, they encompass not only goods but money: financial sanctions are a singular feature of the economic response to Russian aggression against Ukraine. Third, because of the sanctions’ scope, and because so many countries are involved in them, the system of sanctions as a whole is extremely complex, which creates difficulties in enforcing them.
They have not compelled Russia to halt its war of conquest against Ukraine. Like sanctions in the past, these have proven to be less than wholly effective. Russia has managed to get around many of them because not all countries observe them: China is the most important country that refuses to do so but far from the only one. In addition, the Russians, like other peoples under sanction in wartime, have found ways to produce things at home that they previously imported but can no longer buy from abroad.
Despite this, Gustafson concludes, the sanctions will exact a significant price from Russia over the long term. Without access to Western expertise and technology, its industries will fall ever-further behind those of the rest of the world. It has lost, moreover, many of its most creative people who, not wishing to live indefinitely in a state of wartime siege, and seeing economic opportunities vanish and political repression increase, have chosen to leave the country. The exodus predated February 24, 2022, but accelerated thereafter, making Russia, as a liberal economist put it, “a country that exports oil, girls, and future Nobel Prize laureates.”
The close relationship with China that the war has produced does not compensate Russians for what they have lost in the West, but it does push their country into an increasingly subordinate partnership with a much larger power with which its people have historically had little sympathy and one with recent claims on its territory that the Chinese government could choose to revive. All in all, therefore, Vladimir Putin has sacrificed his country’s long-term economic interests in pursuit of his personal short-term political goals.
As long as the war continues, Gustafson argues, the economic rupture between Russia and the West will endure. When the conflict ends, however, an effort at economic re-engagement is likely. It will not be easy either to begin or to sustain. Western businesses will bear in mind the unhappy fate of the first post-Soviet period of engagement, while the suspicions of and hostility to the West that Putin has been at pains to sow, and on which he has capitalized, will not disappear overnight. Still, the end of the war in Ukraine can offer a second chance for the economic cooperation that seemed to have such bright prospects in the 1990s; and such cooperation can, if it flourishes, help to fulfill some of the political as well as economic hopes that the end of communism, of the Cold War, and of the Soviet Union initially engendered.
Whether such a transformation comes to pass will depend, however, on how the war ends. To put it bluntly, Putin must not win. An independent and secure Ukraine is the necessary condition for a resumption of mutually beneficial Western economic ties to Russia. That, in turn, depends on continuing, indeed expanding, Western military assistance to the Ukrainian armed forces. Such an outcome would benefit not only Ukraine and the West, but ultimately Russia as well, giving it a chance to fulfill its considerable economic potential. It is thus a truth of twenty-first-century history that economic success for Russia in the future requires Russian military failure now.
