Musk versus Putin: Fists and Bytes

In one of those truth-can-be-stranger-fiction events, two weeks ago Elon Musk tweeted this challenge to Vladimir Putin: “I hereby challenge Vladimir Putin to single combat. Stakes are Ukraine,” adding in Russian, “Do you accept this fight?”

I am not aware of this challenge affecting the course of Russia’s war on Ukraine, but Musk has made a significant contribution in another area. Modern warfare is all about rapid, voluminous information gathering, processing, and dissemination. The internet has become the backbone of much communication. In areas like Ukraine with less-developed cable and fiber infrastructure, internet access is commonly via cellular service.

Ukraine’s cellular service was significantly degraded by the first week of the invasion by loss of territory and widespread bombing of infrastructure. What could be done? It turns out that Elon Musk’s Starlink swarm of low-orbit satellites is designed to provide internet service for areas of the globe that are underserved by standard methods like cable and cellular. Ukraine’s Vice Prime Minister and Minister of Digital Transformation, Mykhailo Fedorov, tweeted  to Musk, “While you try to colonize Mars – Russia try to occupy Ukraine! While your rockets successfully land from space – Russian rockets attack Ukrainian civil people! We ask you to provide Ukraine with Starlink stations and to address sane Russians to stand.”

Musk responded within days by launching and/or repositioning satellites and providing thousands of ground-based Starlink terminals, providing much-needed communications for the beleaguered Ukrainians. Starlink is now the most-downloaded app in Ukraine,  and is used to direct Ukrainian attacks on Russian tanks. Such is the power of private enterprise. One wonders if the U.S. governmental agencies would have been able to provide such service so quickly.

As reported by The Wire, the Russians have complained that Musk’s actions constitute interference: “When Russia implements its highest national interests on the territory of Ukraine, Elon Musk appears with his Starlink, which was previously declared purely civilian.” Musk’s ironic reply: ““Ukraine civilian Internet was experiencing strange outages – bad weather perhaps? – so SpaceX is helping fix it.”

Truth As a Casualty of Wars

The saying that “The first casualty of war is the truth”  has been credited to anti-war Senator Hiram Warren Johnson in 1918  and also to the ancient Greek dramatist Aeschylus. We have seen this played out dramatically with Russia’s invasion of Ukraine. From the Ukrainian side have come the predictable overinflated estimates of the enemy’s losses, and perhaps understated reporting of their own casualties. Also, on the first day or two of the war there was a raunchy defiant response of Ukrainian defenders to a “Russian ship” that was demanding their surrender; as far as I know that exchange was for real, but the initial report by Ukraine that all the heroic defenders were killed was not true. Maybe I am biased here, but these sorts of excesses are stretching some core truth, not trampling over it roughshod.

On the Russian side, perhaps because there is no even vaguely legitimate justification for their invasion, the lies have been simply ludicrous. Apparently, the Russian troops have been told that they are going there to rescue Ukrainians from the current regime which is a bunch of  “neo-Nazis”.  If Putin’s thugs had a sense of humor or perspective, they might have discerned the irony of characterizing the Ukrainian regime as “neo-Nazi” when the president (Zelenskyy) is a Jew, whose grandfather’s brothers died in Nazi concentration camps.

And the Russian lies go beyond ludicrous, to revolting and inhuman. Russian Foreign Minister Sergey Lavrov has dismissed concerns about civilian casualties as “pathetic shrieks” from Russia’s enemies, and denied Ukraine had even been invaded.

The Associated Press snapped a picture in the besieged city of Mariupol a few days ago which went viral, showing a pregnant woman with a bleeding abdomen being carried out on a stretcher from a maternity hospital which the Russians had bombed. The local surgeon tried to save her and her baby, but neither one survived. The Russian side put out a string of bizarre and contradictory stories, claiming that they had bombed the hospital because it was a militia base (a neo-Nazi militia, of course) but also that no, they didn’t bomb it, the hospital had been evacuated and the explosions were staged by the Ukrainians, and the bloody woman in the photos was a made-up model. Ugh. I find it chilling to observe a regime in operation where there is absolutely no respect for what the truth actually is; rather, lies are manufactured to serve whatever purpose will suit the regime.

I know that some of that goes on even with Western democracies, but we are still usually ashamed of outright lying, and stand discredited when exposed. But with hardcore authoritarian regimes, there does not seem to be even this minimal respect for integrity.  

Freedom of speech becomes even more critical as cynicism about truth becomes more widespread in the world, even in our own political discourse. Putin is trying to suppress the truth within Russia, now with very harsh penalties (fifteen years in prison) for those disseminating information contrary to the party line. All he needs to do is deem such talk as “treasonous”, and into the clink you go.

I do worry about similar trends towards censorship within the West. In our case, it is not so much governments (so far) doing the censorship, but Big Tech. If Google [search engine and YouTube] / Facebook/Twitter disapprove of your content, they can label it “hate speech” or whatever, and your voice disappears from public discourse. But what gives the high priests of big tech the authority and the powers of moral discernment to rule on what discourse is permissible? Also, the algorithms of social media sites usually direct you towards other sites that reinforce your own point of view, so you rarely get exposed to why the other side believes what it does. However annoying it may be to see various forms of nonsense circulating on-line, the time-tested democratic response is to allow (nearly) all points of view to be fairly stated, and to trust in the people to figure out where the truth lies. Otherwise, the truth can become a casualty of culture wars, as it is in shooting wars.

Russia, The US, and Crude Data

Overall, I’ve been disappointed with the reporting on the US embargo against Russian oil. The AP reported that the US imports 8% of Russia’s crude oil exports. But then they and other outlets list a litany of other figures without any context for relative magnitudes. Let’s shine some more light on the crude oil data.*

First, the 8% figure is correct – or, at least it was correct as of December of 2021. The below figure charts the last 7 years of total Russian crude oil exports, US imports of Russian crude oil, and the proportion that US imports compose.  That 8% figure is by no means representative of recent history. The average US proportion in 2015-2018 was 7.8%. But the US share as since risen in level and volatility. Since 2019, the US imports compose an average of 11.9% of all Russian crude oil exports.

As an exogenous shock, the import ban on Russian crude oil might have a substantial impact on Russian exports. However, many of the world’s oil importers were already refusing Russian crude. The US ban may not have a large independent effect on Russian sales and may be a case of congress endorsing a policy that’s already in place voluntarily.

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How Overzealous Green Policies Force Europe to Bankroll Putin’s Military

There is a difference between healthy zeal for a basically good cause like reducing CO2 emissions, and unbalanced myopia. Back in September I wrote about the European power debacle (skyrocketing gas and electricity prices):

Shut down your old reliable coal and nuclear power plants. Replace them with wind turbines. Count on natural gas fueled power plants to fill in when the breeze stops blowing. Curtail drilling for your own natural gas, and so become dependent on gas supplied by pipeline from Russia or by tankers chugging thousands of miles from the Middle East. What could possibly go wrong?

Well, now we know what can go wrong.

In January I noted more specifically, “This energy shortage also makes Europe very vulnerable to Russia, at a time when Putin is menacing Ukraine with invasion.” Now it has come to pass. All the huffing and puffing about economic sanctions on Russia is mainly just hot air. Because Europe is utterly dependent on Russian gas, massive “carve-outs” have been made in sanctions in order to continue these purchases to continue. The vaunted SWIFT restrictions on Russian banks have been carved down to practical irrelevance. While sanctions may impact the lifestyles of oligarch playboys, this flow of euros to Russia ensures that Putin will not run short of money for his war.

Ecomodernist Michael Shellenberger writes that behind the Ukraine military drama “is a story about material reality and basic economics—two things that Putin seems to understand far better than his counterparts in the free world and especially in Europe.” Shellenberger asks, “How is it possible that European countries, Germany especially, allowed themselves to become so dependent on an authoritarian country over the 30 years since the end of the Cold War?” and then answers this question in his trademark style:

Here’s how: These countries are in the grips of a delusional ideology that makes them incapable of understanding the hard realities of energy production. Green ideology insists we don’t need nuclear and that we don’t need fracking. It insists that it’s just a matter of will and money to switch to all-renewables—and fast. It insists that we need “degrowth” of the economy, and that we face looming human “extinction.” (I would know. I myself was once a true believer.)

… While Putin expanded Russia’s oil production, expanded natural gas production, and then doubled nuclear energy production to allow more exports of its precious gas, Europe, led by Germany, shut down its nuclear power plants, closed gas fields, and refused to develop more through advanced methods like fracking.

The numbers tell the story best. In 2016, 30 percent of the natural gas consumed by the European Union came from Russia. In 2018, that figure jumped to 40 percent. By 2020, it was nearly 44 percent, and by early 2021, it was nearly 47 percent.

…The result has been the worst global energy crisis since 1973, driving prices for electricity and gasoline higher around the world. It is a crisis, fundamentally, of inadequate supply. But the scarcity is entirely manufactured.

Europeans—led by figures like Greta Thunberg and European Green Party leaders, and supported by Americans like John Kerry—believed that a healthy relationship with the Earth requires making energy scarce. By turning to renewables, they would show the world how to live without harming the planet. But this was a pipe dream. You can’t power a whole grid with solar and wind, because the sun and the wind are inconstant, and currently existing batteries aren’t even cheap enough to store large quantities of electricity overnight, much less across whole seasons.

In service to green ideology, they made the perfect the enemy of the good—and of Ukraine.

There we have it.  It’s not just the Europeans. As I write this, shells are raining down on Ukrainian cities but the U.S. is not restricting its imports of Russian oil, lest our price of oil go even higher. The present oil shortage (even before the Ukraine invasion) is what happens when a president on his first day in office signs an executive order to cancel a pipeline expansion which would have enabled increased oil production from Canada’s massive oil sands, and the whole ESG movement hates on investing in projects for producing oil or gas.

All that said, what the West gives with one hand it may take back with the other. Although energy exports from Russia are theoretically permitted, Western private enterprises, including finance arms, are pulling back from any dealings with Russia. This means in practice, lots of wrenches are being thrown into the machinery of international finance, such that energy exports from Russia are being slowed, though not stopped. But in turn, the Russians are getting higher prices per barrel for the oil that does get exported. There are many moving parts to all this, so we will see how it all shakes out.

The War on Ukraine

1. Read this letter from a young woman inside of Russia. Her despair is not sadder than the Kindergarten getting bombed, but it helps explain why people are resisting Russian rule. Ukrainians’ lives would be like hers except worse.

2. ‘My city’s being shelled, but mum won’t believe me’ With loyalty like this, I don’t understand why Russian state TV is bothering to cover up the shelling. Mum’s personal loyalty to Putin already transcends her love of her own daughter. Is lying itself a flex and a form of psychological warfare against the opposition within Russia?

3. Read on the End of History, and my blog about circular history.

4. Social media changes sieges.

5. President Putin speaks his truth, embraces his identity, and blocks his haters. With a trifecta like that, I have no doubt that he practices self-care. And now people are upset that they can’t get through to rattle him. Now people wonder: why can’t we reason together anymore? Yet, this is what Americans are encouraging each other to do. We are out of practice when it comes to discovering and debating The truth.

Previously I wrote about Americans blocking each other on social media. Now when we want to get through to someone on the other side, we have less channels of communication open. Americans don’t get enough practice seeing the world through someone else’s eyes. We have gotten into a bad habit of curating our sources of information to insulate ourselves from the facts and opinions that would force us to learn or argue with someone who holds a different point of view.

Also, we are seeing many people cut ties with Russians. I understand, initially, why there was a blitz on all Russian people, as we tried to get through the news of what was happening with urgency. However, this next week might be an opportunity to reach out to an economist on the inside of Russia, if you know one. Should they be protesting on the street, instead of checking emails? At this point they have already made their decision. You could start a research project with them about some banal uncontroversial topic. They are going to suffer, regardless of whether they have a foreigner to talk to or not. This opens a channel.

(The faculty at Kyiv School of Economics is probably getting behind on their research. They would probably love it if you would look up their previously published papers. )

The percent of Russians who don’t agree with the war should be a concern to the Kremlin. Most of them will not openly say what they think within the borders of Russia, so it creates uncertainty. On paper, Russia is favored to be able to inflict more casualties, but this aspect of Russian society makes the future hard to model. Any young men who are sent to the front lines will learn what is actually happening from the Russian speakers in Ukraine. How will that affect them?

How Volodymyr Zelenskyy Went from Playing the Ukrainian President in A Sitcom to Actually Being the Ukrainian President

The man of the hour is Volodymyr Zelenskyy. Russia underestimated the amount of resistance they would face in their invasion of Ukraine, and Zelensky is the heart and face of that resistance. The usual pattern in countries like Ukraine with a history of corrupt leadership is that when hostile armies close in on the capital, the leaders stuff money and jewels into suitcases and disappear to some safe haven (think: Afghanistan). Zelensky has chosen to stay and fight against Vladimir Putin, a man with a fearsome reputation for brutal military tactics (see: Chechnya and Syria) and for political assassinations.

Where did Zelenskyy come from? American politicians are nearly all lawyers or businessmen. Zelenskyy was a professional comedian. He did get a law degree, but then went into stage and film comedy. He starred in a number of lightweight films such as Love in the Big City,  Office Romance, and the zany Rzhevsky Versus Napoleon:

In 2015 the actor created, produced and starred in a comedic television series, Servant of the People:

In this political satire, a young high school teacher happens to let loose with a rant about corruption in Ukraine. One of his students captures this rant on his phone and puts it out on the internet. That YouTube video goes viral, and (to his complete surprise) the teacher gets elected president of Ukraine. He then proceeds to govern honorably, amidst various comedic situations.

In a case of life-mimics-art, the real Zelenskyy ran for the presidency of the country in 2019. Fueled by the popularity of the TV series, Zelenskyy’s campaign was almost entirely virtual. It succeeded in unseating the incumbent candidate, with Zelenskyy receiving a landslide 73% of the vote.

Although his Ukrainian presidency began on a whimsical note, it has turned into a global epic. However, it is difficult to envisage an ending to this epic that is not tragic. Drawing on his acting skills, Zelenskyy has been a master of internet communications in the present crisis, but there is only so much that can be done in the face of hard military realities. While the images of Ukrainian resistance are inspiring, the Russians have far greater military might and have the will to employ it as needed. And as long as Europe continues to fund Russia by guzzling Russian natural gas, sanctions can only bite moderately hard.

Economics of the Russia-Ukraine Conflict

Russia launched a full invasion of Ukraine last night. Most of the discussion I’ve seen has naturally focused on the fighting itself- what is happening, what is likely to happen, how did it come to this.

Since there are plenty of better sources to follow about that, I’ll simply offer a few observations on the economics of the conflict:

  1. Russia is not only more than 3 times as populous as Ukraine, it also more than twice as well off on a per-capita basis. This means its overall economy is more than 6 times the size of Ukraine’s. This gap has been growing since the fall of the Soviet Union, as Russia’s per-capita GDP growth has been much stronger, while its population has shrunk much less than Ukraine’s. Putting this together, Ukraine’s measured real GDP is actually smaller than it was in 1990, while Russia’s is larger.

2. Russia’s much larger economy allows it to spend much more on its military. Russia spends $60 billion per year, the 4th most of any country (after the US, China and India). Ukraine spends only $6 billion per year on its military. So Russia is starting with a big economic advantage here, though Ukraine has some of its own advantages, like fighting on their own ground and receiving more foreign support.

3. War is bad for business. Russian stocks are down 33% in a day, their biggest-ever loss; Ukraine shut down trading entirely, and their bonds are being hit even worse than Russia’s. Regardless of which side “wins” the fight for territory, both countries will be economically worse off for years as a result of the war.

4. Russia, though, expected that the war would lead to sanctions from the West that would harm their economy, and prepared for this by building up hundreds of billions of dollars worth of foreign reserves over many years.

5. US markets are down only slightly, much less than they would be if traders thought the US would get involved directly in the fighting. But this slight overall decline conceals huge swings. Companies that do business in Ukraine or Russia are big losers. But those that compete with Russian exports see their value rising given the expected sanctions. Because Russia’s biggest exports are oil and natural gas, the value of US-based oil & gas companies is rising, while alternatives like solar are also up substantially.

6. There is still some hope for Ukraine to expel Russian troops, but its not looking good, and even a victory would involve huge costs. This leaves people all over the world wondering, how did it come to this? How might future conflicts like this be avoided? There is of course a lot to say about military preparedness, nuclear umbrellas, and ways the West can impose costs on Russia as a deterrent. But what stands out to me is that a stagnant economy and shrinking population make a country weak and vulnerable. Ukraine has a worse economic freedom score than Russia; this combined with its relative lack of natural resources explains much of the stagnation. Political elites often focus on grabbing a large share of the pie, rather than growing the pie and risk empowering domestic opponents. But we’re now seeing how stagnation carries its own risks. A growing economy, and especially growing energy sources that don’t depend on hostile nations, is the path to independence and survival.