Finland and Sweden have stepped up their preparations to join the North Atlantic Treaty Organization (NATO) over the past two months, with Finnish Prime Minister Sanna Marin saying last month that the two countries could join in unison in a matter of weeks. Both countries have ramped up cooperation with NATO by attending summits on the Ukraine crisis and participating in NATO-led war exercises. They have also received security assurances from the United States (US), Germany, NATO, and the United Kingdom (UK).
In response to these rapidly escalating developments, Russia has threatened the two Nordic countries with severe “military and political consequences” and warned that it could be forced to deploy nuclear weapons in the Baltics, citing a disruption of the regional balance. In fact, in mid-April, it moved its military equipment, including coastal defence systems, towards its 1,340-kilometre-long border with Finland. In addition, it recently violated Sweden’s airspace in a clear act of intimidation.
🇫🇮 Finland's Prime Minister Sanna Marin says that she expects the country's decision on whether to apply for NATO membership to come "within weeks, not within months".
— euronews (@euronews) May 5, 2022
Both Finland and Sweden have considered joining the alliance since Russia invaded Ukraine. pic.twitter.com/TPAUzFJXwQ
While the threat of Russian retaliation has previously dissuaded Finland and Sweden from joining NATO, the fear of becoming the next Ukraine has now emboldened them to formalise new alliances, with public support on their side. Reinforcing this point, Finnish PM Marin has said, “Russia is not the neighbor we imagined.”
However, is the threat of a Russian invasion being overstated?
Both Finland and Sweden are already members of the European Union, which makes them beneficiaries of the bloc’s mutual defence clause, acting as a significant deterrent to Russian aggression. Indeed, this is one of the primary reasons why Ukraine is seeking EU membership.
U.S. would be able to provide more military aid to Sweden and Finland ahead of accession to the NATO alliance if they are threatened by Russia: Pentagon
— Jack Detsch (@JackDetsch) May 5, 2022
Article 42(7) in the Treaty on the European Union (TEU). The Article says, “If a Member State is the victim of armed aggression on its territory, the other Member States shall have towards it an obligation of aid and assistance by all the means in their power, in accordance with Article 51 (right of self-defence) of the United Nations Charter.”
Moreover, despite Ukraine not currently being a member of the EU, the bloc and its allies have provided the country with significant financial and military aid. So far, the EU has announced humanitarian aid worth $888 million. At a summit with Global Citizen, an international movement and the Canadian government, the EU further pledged $632.36 million for Ukraine. Similarly, the United States has announced a military and humanitarian funding worth $13.6 billion for Ukraine.
The Russian ruble hit a 52-week high of 66.43 RUB/USD while trading today. Yet, media coverage of the strong ruble recovery remains non-existent. One thing is clear: the Central Bank of Russia Governor Elvira Nabiullina has the right stuff. She is weathering the storm. pic.twitter.com/7UQvub1DdD
— Steve Hanke (@steve_hanke) May 3, 2022
Russia has also been slammed with ever-increasing Western sanctions, which have targeted government officials, oligarchs, and key economic sectors, particularly its oil & gas exports. Russian banks have been removed from the SWIFT international payment system, and up to 1,000 multinational companies—including McDonald's, Shell, Unilever, Ikea, H&M, Nike, Shell, Bloomberg, Netflix, Disney, Nokia, and Intel—have suspended or severely reduced operations in the country.
As a result, the ruble has crashed to record lows, forcing the central bank to hike the interest rate from 9.5% to 20%. Although Russia has been able to slightly rebound its economy by creating artificial demand for its currency by forcing countries to pay for gas imports in rubles and banning foreigners from selling their stocks, the Russian economy is nonetheless hurtling towards a recession. According to the World Bank, Russia’s economic output is set to decrease by 11.2% this year. Similarly, the International Monetary Fund (IMF) has predicted that Russia’s GDP will contract by 7%, with a permanent output loss of 15-20%.
These are the indicative estimates of Russia’s combat losses as of May 5, according to the Armed Forces of Ukraine. pic.twitter.com/csx1IqVgnA
— The Kyiv Independent (@KyivIndependent) May 5, 2022
According to Tim Ash, a senior strategist at BlueBay Asset Management, the immediate financial cost of Russian President Vladimir Putin’s war in Ukraine stands at $1.4 trillion. The figure considers the falling value of the Russian stock market, the freezing of assets owned by Russian oligarchs and the central bank, and the impact of Western sanctions on the overall economy. “This adds up to less investment, less growth, lower living standards, probably a brain drain, higher inflation and an overall undermining of Russia’s productive capacity,” said Ash.
Moreover, its economy is only set to weaken even further as European countries and other Western allies move away from Russian oil, gas, and coal. The EU, for instance, which currently imports at least 40% of its energy requirements from Russia, has committed to becoming independent of Russian fossil fuels by 2030, with the majority of members getting behind an oil embargo.
🇪🇺 EU announced the 6th sanctioning package against Russia pic.twitter.com/jqPzRJOFpw
— UkraineWorld (@ukraine_world) May 4, 2022
Apart from economic costs, Russia has also sustained overwhelming military costs, with a material loss of up to $5 billion for just the first two days of the war. Additionally, according to the Ukrainian armed forces, as of May 5, Russia has lost 24,700 troops, 196 planes, 155 helicopters, 1092 tanks, ten boats, and 89 cruise missiles, among other things. A new study by the Centre for Economic Recovery, CIVITTA, and EasyBusiness has revealed that the daily cost of Russia’s war in Ukraine could exceed $20 billion.
Taking all of this into consideration, Putin is highly unlikely to sign off on two more expensive wars that could send the Russian economy beyond the point of no return, especially considering that many within the Russian armed forces and the elite are already questioning the current war in Ukraine. However, given the evidently self-destructive nature of the Ukraine war, it remains unclear whether Putin can still be considered to be a rational actor.