The Cost of Freedom

By David Nelson, CFA CMT

Half a world away freedom is dying tonight. Ukraine citizens represent what America used to be more than a half century ago. I guess the reckless shelling of the Zaporizhzhia nuclear power plant in Lviv was my breaking point forcing me into a Network Character Howard Beale moment screaming “I’m mad as hell and I’m not going to take it anymore.”

Ukraine power plant mapWorld leaders are outraged and have taken the sanctions route effectively sending the Russian economy into a depression. The blocking of access to foreign currency reserves, attaching the assets of Russian oligarchs and an endless list of further economic and social sanctions will have the desired effect of collapsing the Russian economy and someday maybe a mentally disturbed ex KGB officer.

Even here in the United States former President Bush National Security Advisor Condoleeza Rice has said Putin is “increasingly erratic and delusional.” Add a list of multi-national corporations pulling out of the country and refusing access to goods and services is another patriotic move that should be applauded.

Freedom Dies Quickly

However, time is the operative word here. Freedom dies quickly. In 1939 it took Hitler just 35 days to take Poland. Europe and the United States are both hiding behind Article 5 of NATO where member states agree that an armed attack against one or more of them is considered an attack against them all. We’ve held out the prospect of eventual membership to Ukraine in fact just last month Secretary of State Blinken said NATO has not changed its open-door policy. However, our actions of just giving arms to Ukraine is akin to tossing a handgun to the neighbor being attacked next door and turning back to watch the latest episode of This is Us.

If our intention was to not to do more because there is no current membership, it was a foreign policy strategic error to offer it. It was a known trigger for Putin a dictator we don’t seem to have the stomach to confront. The reasons are obvious. We didn’t want to put U.S. soldiers in a position of direct contact with the Russian military. If the intent is to avoid World War III let me remind you Putin raised the alert status of his nuclear forces with no direct U.S. involvement.

U.S. military forces come in contact with Russia constantly. How many times has a Russian pilot come within feet of a U.S. military aircraft potentially triggering a full-scale geopolitical event?

The only thing a thug or dictator understands is overwhelming force. Americans and Europeans don’t seem to have the appetite for confrontation because of past mistakes or mission creep. Our enemy knows American leaders govern by polls and take full advantage of that dynamic.

What’s the Difference?

Prior to the invasion which had been building for months held off only because China didn’t want to upset their precious Olympics, the U.S. and NATO should have gone into the Ukraine with a massive military presence. What’s the difference? Either we’re facing them on the eastern front of the Ukraine or the border on Poland. Our soldiers would have been safer because Putin would have been forced to back down. It’s called Mutually Assured Destruction for a reason and it’s the only thing that’s worked since the dawn of the nuclear age.

Russia will likely eventually take Ukraine but will never win the war. It will go on for decades in a new guerilla war led by Ukrainian patriots and their heroic leader President Zelenskyy.

Russian ActivistThe picture of a brave 77 year old Russian activist who survived Nazi Germany’s siege arrested in St. Petersburg protesting the war in Ukraine will be the front page of every newspaper in the free world. She may be the tip of the iceberg of many outraged Russian citizens.

What follows in the United States and Europe will be telling. How long will it take for American and European sentiment to change. I suspect as the slaughter of innocent civilians continues, and images of Ukrainian children funerals hit your favorite news channel or social media page, emotions will finally takeover and polls will start to change.

Watch the Polls

I said earlier polls govern American politics and they will here too. There will be a sudden demand to do more and now you have a real geopolitical screw up with U.S. and NATO forces going into direct contact with the Russian military already entrenched in fortified positions. A foreign policy 101 student could have seen what’s coming long before our world leaders did.

As of 5AM this morning it appears Russian forces have taken the power plant that supplies 25% of Ukraine’s power grid. For now, maybe the China Syndrome moment has passed and some of the overnight fears will subside but the damage has been done.

The China Factor

The back door diplomatic option for us now is to find some way for Putin to save face. The only other option is to turn to China who is rapidly realizing they made a bad choice when the said their friendship with Russia “has no limits.” Look for them to carefully walk back those statements after witnessing the economic damage of sanctions and the power of the dollar as the world reserve currency. In the end China will do what is in their best interest.

There’s a cost to freedom and it’s more than just the extra dollar you might pay at the pump or the value of your 401k. The world needed a President John F. Kennedy moment. We got something else.

*The post above is my personal viewpoint and not necessarily the view of anyone at this organization.