On the eve of World War II, many companies in Allied countries with economic interests in Germany pressured their governments to take a soft line on Nazi Germany’s aggression. Well-known companies— among them Kodak, Coca-Cola, and Ford Motor — were deeply embedded in the German market and had close ties with the Nazi regime. The cozy relationships that existed between various American businessmen, such as Henry Ford, and Nazi officials are well-known by historians and laypeople alike.
The policy of appeasement towards Nazi Germany, enshrined in the Munich Pact, sought the stability that many citizens and businesses desired. However, the Munich Pact and earlier lackluster responses towards the Anschluss of Austria only encouraged further German aggression. Hitler thought the Allied countries soft and compliant, hardly a match for the German war machine.
In twenty-first century Europe, Western businesses are making the same mistakes. Only this time it’s with Putin’s Russia. Businesses in the European Union and the United States continue to pressure their respective governments to restrict or put an end to the threat of sanctions on Russia for its annexation of Crimea and for its ongoing support of armed terrorist groups in eastern Ukraine.
The U.S. Chamber of Commerce and the National Association of Manufacturers recently ran joint ads in the New York Times, the Wall Street Journal, and the Washington Post opposing further sanctions against the Russian government. The ads claimed that sanctions on Russia will achieve little and will only succeed in hurting American workers.
Western corporations, such as France’s Total S.A. and America’s ExxonMobil, continue to deepen their commitment to the Russian market, lobbying against stronger Western sanctions that might deter Putin’s aggression in Ukraine but that may also hurt their business interests. ExxonMobil, in an especially flagrant display, failed to heed the Obama Administration’s warnings not to attend the St. Petersburg Economic Forum in May. Instead, the company signed a significant agreement with Russian company Rosneft that enhances the company’s role in exploration for natural gas and oil in the Arctic.
Western companies apparently believe that Russian-sponsored instability in Ukraine is an isolated and temporary turn of events, one that will likely fade away over the coming months. The Russian invasion of Georgia quickly faded into a distant and hazy memory. Why not Ukraine, too? Following the downing of MH17, this Western mentality may change, as the conflict has taken on a more tragic and global character. It’s unfortunate that it took an international catastrophe to bring greater European urgency to a Kremlin-supported war raging in the heart of Europe. It’s possible that the business community might acquiesce to greater sanctions. However, businesses and European governments will still likely prefer to turn a blind eye to the effects of Putin’s Russia on international instability.
The truth is that Putin’s aggression in Ukraine is likely just the beginning of what will evolve into even more hostile behavior from Russia. Putin is more than just a corrupt and narrowly self-interested autocrat. The current Russian president sees himself as the newest installation of a long list of storied Russian leaders—Peter the Great, Catherine the Great, and even Stalin— who brought territorial expansion and glory to Russia. If Peter and Catherine were “Great,” then the Russian president sees himself as “Vladimir the Great,” a leader who restored Russia’s prestige after the Soviet collapse and returned Crimea to Russia.
Putin’s thirst for more control and expansion is not easily satiated. Although it is still too early to predict the outcome of the MH17 tragedy on Putin’s calculations, in the long term Putin’s goals will remain unaltered. It is possible that pressure from Putin’s inner circle and his oligarchic supporters will necessitate a more cautious Russian approach in the coming days. Some reports have indicated that Russia’s billionaires are deeply troubled by their government’s role in the tragedy. But given the aggressive posture and wild conspiracy theories emanating from Russian media, it’s more likely that Putin is not about to back down. In the long term, as international anger gradually subsides, Putin’s political visions and plans for the former Soviet Union will only continue.
In addition to Putin’s own sense of grandiosity, there are other reasons that Western businesses should be wary of deepening their ties with the Russian government. Businesses rely on stability, and hope that Russia will be a reliable partner in the future. There are many reasons to believe that this is unlikely to happen. The IMF and economists agree that Russia’s short to medium-term economic forecasts are bleak. Russia’s economy is uniquely vulnerable to shocks in energy prices. Furthermore, an increasingly authoritarian Russia and the corruption that accompanies Putin’s system are straining domestic innovation and competitiveness, driving Russia’s best and brightest abroad. Maintaining an image as “Vladimir the Great” is rather difficult when the Russian president is governing a country with a poor economy, an impending demographic crisis, and widespread mistrust in government institutions. In this environment, continued aggression is more likely, as the Russian government distracts the Russian people from pressing domestic woes.
Western businesses would do best to learn the lessons of Europe’s past. Prioritizing short-term interests at the expense of the long-term is ultimately not a sound strategy. Putin’s aggression towards Russia’s neighbors, Ukraine included, are unlikely to subside anytime soon, even in the wake of an international tragedy. In this environment, long-term stability in the Russian and neighboring markets is far too optimistic. Western businesses and governments should instead emphasize a long-term strategy that encourages good behavior and punishes aggressive behavior in the region, thereby altering Putin’s immediate calculations and the views of Russia’s political and financial elite.
Chris Dunnett for Ukraine Crisis Media Center