How to bankrupt Russia and protect our supply chains
Morgan Ortagus
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The West’s campaign against the Russian invasion of Ukraine has been plagued since the beginning with a series of contradictory policies and half-measures. Western countries impose sanctions on Russian companies and people while simultaneously funding President Vladimir Putin’s war machine with massive purchases of Russian natural resources. The West is failing at reducing Russia’s oil revenue and has yet to make a dent in reducing another major source of Russian export income: its prolific metal and mineral resources.
Russia’s monthly oil export revenue in September 2022 reached $15.2 billion, higher than all but three months in 2021. This summer saw even higher Russian exports. As a result, Russia’s currency remains stronger today, at around 60 rubles to the dollar, than it was before Russia invaded Ukraine, when the exchange rate was 75 rubles to the dollar.
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Western efforts to reduce Russian oil revenue have been insufficient and need to be addressed with tougher sanctions. Meanwhile, the West also needs to look at another Russian export: titanium. Russia’s second-largest category of exports is metals and minerals, which counted for 11.2% of Russian exports in 2021. In 2020, Russia exported $471 million of titanium, with Germany and the United States accounting for $280 million of the figure.
Why is it important to sanction Russian titanium? First, titanium is used for most advanced airplanes but also marine hardware and military armor, as well as more anodyne chemical processes and pigments. Thus, sanctioning Russian exports of titanium would serve a dual purpose: to continue to hold the Russians accountable for their invasion of Ukraine by hindering their revenue from oil and natural resources and as a forcing mechanism for the U.S. to address the depletion of American titanium mining and substitution of foreign metals in our own supply chain before our enemies cut off Western supplies unilaterally.
We didn’t always import titanium; we used to produce it ourselves. In another myopic supply chain failure recently documented by the Commerce Department, U.S. production of titanium metal was decimated by the closure of domestic mines, with production falling from 24,000 tons in 2016 to under 500 tons today. In 1984, there were five plants producing titanium sponge — today, there are zero. There are still ample supplies in the U.S.; we just let foreign nations kill off our domestic industry through their own domestic price subsidies.
And it’s not just the Russians who are exploiting homegrown titanium: Chinese production of titanium sponge increased by over 1,000% from 2004-2018, from 9,500 to 110,000 metric tons, while Russian production increased by 66%, from 37,000 to 68,000 metric tons. Together, our two biggest geopolitical competitors controlled 61% of the world’s titanium sponge production in 2018, according to the U.S. Geological Survey. This means to produce aerospace hardware, marine hardware, and armor and facilitate chemical processing, the West is ultimately dependent on Russia and China to play ball with their titanium exports.
Dealing with the Russian and Chinese metal and mineral threat requires both a supply-side and demand-side solution. We should rapidly increase the production of titanium and other metals in the U.S. and Canada before the base of workers skilled in the processes move to other industries for good. Tax credits and aggressive government support are merited in this case. On the demand side, Congress should prohibit U.S. and allied governments from using Russian metals to supply their militaries.
Since the financial crisis and the COVID-19 pandemic, there have been robust warnings and discussions regarding securing America’s supply chains for critical items to protect our national security interests. We must begin by looking at the companies that supply our national defense base. For example, one of the biggest consumers of Russian titanium is Airbus, which sources 65% of its titanium from VSMPO for use in its aircraft. Instead of developing alternate supplies for the metal in the past several years, Airbus (a foreign-owned company) aggressively and successfully lobbied against European sanctions for titanium and other Russian metals. In September, Airbus CEO Guillaume Faury said, “A world without Russian titanium is not a world as good as it is today in aerospace” and that sanctions on Russian titanium would be a “pure lose-lose situation.”
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If these companies had been banned from relying on Russian metals years ago, we wouldn’t have paralyzed ourselves from acting against Russia today. As the saying goes, the best time to fix the problem was when it emerged, but the next best time is now. In the coming Congress, policymakers should expand restrictions for its hundreds of billions in defense acquisition projects from using Russian and Chinese metals and critical minerals, rapidly phasing in the requirement if absolutely necessary. Leaders need to work feverishly with like-minded allies and partners to fill in the gaps. Achieving a complete decoupling of America’s entire economic supply chain from China and Russia may not be viable, but the military supply chain for metals and minerals must be protected and sourced exclusively from American and allied nations.
The lessons learned today regarding Russia sanctions will prove vital to the coming fight with China. We must not wait until the day China launches a war or cuts off our access to critical metals and minerals to act. We can’t mine or process every resource ourselves, but we certainly shouldn’t be relying on our foes.
Morgan Ortagus is the founder of POLARIS National Security. She previously served as the spokeswoman for the U.S. Department of State under President Donald Trump and Secretary of State Michael R. Pompeo.