Putin took a gamble and lost. The bet: Ukraine would fall once Russia invaded. They would meet scant resistance. It was supposed to be so easy that Russian soldiers brought their victory parade uniform. What fueled that thinking was that Russia had a secret network of pro-Russian agents that infiltrated the Ukrainian state at different levels. Putin believed that, aided by these agents, Russia would require only a small military force and a few days to force Ukraine to capitulate. But the agents overstated their influence. The problem in a dictatorship is you always say what the leadership wants to hear because otherwise you won’t get paid, or you will be out of the job. And with bad intel comes bad decisions. We know the rest of the story. Zelenskiy did not capitulate. Zelenskiy said something that will go down in history as one of the most gangster things ever said by a leader. Once offered by the US to get out of Dodge, Zelenskiy reportedly said “I need ammunition, not a ride.”
If Putin would have won his bet, the ultimate payoff would have been the revival of the USSR. A victory would have fuel that idea that Putin is the only one who can restore the greatness of Russia. We would have a very different conversation today. An easy victory would have made Putin overconfident, pump up his ego, the approval of the Russian people, and the smaller countries in Russia’s orbit would have followed like fallen dominoes. What are you going to do? Take on a nuclear power over Moldova? The thinking was the US lost its way and Europe is too dependent on Russia’s gas to do anything. Nobody has the stomach for a fight. I can’t blame Putin for thinking that. That’s what everybody thoughted. But the Ukrainian’s will to fight for their land and sovereignty convinced everybody otherwise.
Quick detour: Food for thoughts, let’s say, theoretically speaking, that everything Putin said about Ukraine was true, that Ukraine was a country full of Nazis on drugs that needed to be eliminated, don’t you think he would have support of the the whole planet? He wouldn’t have to do any convincing. Israel would have been the first to invade. Anyway…
Putin lost the gamble. Instead of being the next Peter the Great, he’s looking more like Nicholas II. He was the last Czar of the Romanov family. Long story short, it didn’t end well, and history is not too kind to Russian rulers that don’t deliver, and Putin is a historian.
Putin’s powerbase is fuel by the social contract he made with his people. Give me power and in exchange I will stabilize the country. That contract is now broken. He destabilized Russia. The economy is taking a hit, the war in Ukraine is not going well, the losses are heavy, Russia is losing young people, mothers are losing their sons, and his mobilization is a total mess. Some reports estimate 75,000 to 80,000 dead Russian soldiers. That’s a lot of grieving parents. For what? The future looks bleak. They have taken young men off factories and farms. Many talented people left the country. Inflation will hit Russia hard. Instead of turning Ukraine into a failed state, it’s Russian that’s turning into one.
Putin totally discredited himself in the eyes of his own people when he said that his “special military operation” was going to plan to then call for a mobilization. Because now the war hit home. Putin now finds himself in a protracted, full-scale war, fighting for every inch of territory at huge cost. Putin is not making any gains in Ukraine and domestic dissent to Putin is growing more vocal by the day. I’m pretty sure the Russian elite, its bureaucrats, the establishment and inner circle are thinking about life after Putin.
Putin lost the gamble and he’s trying to cut his losses. Putin is probably trying to hold on to as much occupied territory as possible to turn it into a Russian state. My guess is that he’s looking for a way to bring the big power (USA+NATO+Europe) to the table to negotiate some kind of deal. Putin needs to save face. The threat of nuclear weapons will bring the powers to the table, like they did in 1963 during the Cuban Missile crisis. Unless Putin is removed from power, his only leverage is edging closer to brink. I hope it doesn’t get to that, but he doesn’t have a lot of cards left to play.
Putin can’t pull out of Ukraine. Doing so will shatter is strong leader image. It would make him look so weak a home. A defeat might well lead to the collapse of the Putin regime. Remember Putin built his brand around being a source of stability and strength. So he can’t get out and he can’t win. And Ukraine said they want all their land back. My guess the best option for Putin is statis, a long gradual losing war of attrition.
If Russian soldiers keep dying, with the failure of the war, with the economy is disarray, with the sense of failure and imminent disaster everywhere, Russia will be on the verge of total collapse of morale. You need one major regiment to mutiny and other regiments will follow. Why not? The troops in Ukraine are poorly motivated, poorly trained and undersupplied, and their officers had no reason to be loyal to the regime. The biggest threat to Putin is not the West or Ukraine. It’s inside Russia.
I’m no foreign policy expert. So the opinion below is just my 2 cent and is probably worth as much.
As I am writing this, the White House is taking every step possible to avoid a direct Biden-Putin encounter at G-20 (link). I’m not just talking about a scheduled meeting here. It means avoiding any contact like potential hallway run-in.
I’m not suggesting they should take a photo, smile, and shake hands. But when you are on the brink of a nuclear war, maybe a side chat wouldn’t hurt?
These are two nations with a lot of problems on the table. Russia is constantly reiterating the nuclear threat. Part of the problem, leading up to the Russian invasion of Ukraine, is the lack of communication between both countries. There’s a lot of misunderstanding that I feel could be solved by communicating. For example Russia says NATO expansion is a threat. Then US/NATO says countries voluntarily apply because they see Russia as a threat.
The main reason why they should talk is to bring the temperature down a couple of notches. Diffuse some of the tension. Do you really want to start a nuclear war because of a misunderstanding?.
What’s the point of the G20 meetings if you are not going to talk? Isn’t the value of these summits the meeting with leaders and figuring things out? Improving relations? Addressing problems? Finding common ground? Finding a way forward? Negotiate?
Meeting with rivals and enemies is not going to flip them into friends. The US and Russia are not going to see eye to eye on many things. The meeting might not solve anything. But if they can sit down and diffuse some of the tension, that’s progress and maybe out of that a way to move forward.
During the Cuban Missile Crisis, President Kennedy and Soviet Premier Nikita Khrushchev established a “hotline”. They communicated. The Russians had nuclear missiles in Cuba pointing at the US. The US had nuclear missiles in Turkey pointing at Russia. They came to an agreement that each side would remove their missiles. They remained enemies and the Cold War didn’t end. But at least I exist to write about it because they communicated.
We had a similar situation in the 80s. The Soviets were extremely paranoid at the time and the US under President Reagan was increasingly “assertive” of their military power. Relations between both nations were low and they didn’t communicate. The Soviets were convinced that the US would nuke them. The US thought that was insane. A misunderstanding almost sparked a nuclear war. We know that because the US/UK had a source deep inside the KGB that said that the Soviets seriously thought the US were prepping for a nuclear war and the US was like “really?” President Reagan, in March 1984, asked Arthur Hartman, his ambassador to the Soviet Union, “Do you think Soviet leaders really fear us, or is all the huffing and puffing just part of their propaganda?” Robert Gates, then the CIA’s deputy director for intelligence, said “we may have been at the brink of nuclear war and not even known it.” Because of that double agent, the US backed down from over-aggressive posturing. Soon after this near-crisis, Soviet Leader Andropov died and in 1985 Reagan met with Mikhail Gorbachev. There are many books and articles on the episode.
I’m sure a little communication would have helped with the nuclear war “misunderstanding”. During times of crisis, channels of communication are important. If the two rivals actually talked they would have a better feel of each other’s position. The same goes for China. I bet it’s even more complicated because of the massive cultural differences. It’s obvious that China isn’t too happy with the way things are going in Ukraine. The US can use that to drive a wedge between China and Russia. They should use communication to build something constructive.
I hear a lot of discussion around “What is the right response from the West if Putin does detonate some sort of nuclear weapon?” The right response is why does it have to get to that?
As for the nuclear threat, I think the chances are low that it will happen. But even if the chances are low, you have to take it very seriously. Putin using the nuclear threat is the worst thing he could have done. First the Russian people are not going to go down in flames with him. There’s no loyalty here. He will also lose the little support left he has from India and China.
When we are talking about the nuclear threat, we are not talking about what Putin is doing in Ukraine. Putin is using pure nuclear blackmail. There can’t be a compromise based on him not setting off a nuclear weapon if we hand over Ukraine.
I don’t have the solutions. But I’m confident that if the US and Russia start talking, we might avoid a nuclear war.
Did the Russia-Ukraine conflict ignited WW3 and we are just slow to realize it? I think we are fighting a proxy war with Russia.
We all heard of Albert Einstein saying: “I know not with what weapons World War III will be fought, but World War IV will be fought with sticks and stones.”
Everyday it seems we are getting deeper, more involved, one inch at the time into the Ukraine-Russia conflict. We are providing more intelligence, more heavy weapons, more sanctions, more money, more strong statements, more secret politician visits.
I saw videos of bombed out hospitals, schools, train stations and corpse on the street of executed civilians. Babies are getting blown up. What did they do? We should be doing everything we can to help Ukraine. We are punching below our weight. We have the resources to ensure a Ukrainian victory. The international community has a moral obligation to defend Ukraine’s democracy and freedom.
How do we answer attacks on hospitals, schools, shelters? The Bachu massacre? The Mariupol siege? Genocides? There are claims of chemical weapon use. Now Russia is threatening nuclear escalation if Sweden and Finland join NATO. How do we answer that?
Much more could be done. We have provided weapons and some economic aid to Ukraine. Confiscation of any Russian assets and foreign reserves abroad would be a good place to start, with the proceeds used as a resource to help Ukraine. More weapons and support to the Ukrainian army. In addition, we should make plans for rebuilding Ukraine after the war. Talking might feel good, but it’s time to get it done.
We have this weird balancing dynamic. One foot in, one foot out. Our hearts and minds are with Ukraine. But let’s not help them too much because it might make Putin angry. Biden called Putin a war criminal and the media wondered if he crossed the line.
Russia has to be defeated. Ukraine has to win. Ukraine’s fate matters beyond Ukraine. A decisive Ukrainian victory could transform the security of Europe and by extension, North America. A Ukrainian victory would deter another Russian invasion. Victory would also be the best basis for launching a post-war democratic state that is less corrupted. The Ukrainian victory could invigorate the cause of democracy around the world.
Our slow pace in arming the Ukrainian army/people has only let more innocent people die. What more do the Russians have to do for us to really help Ukraine? If not now, when?
I don’t want war as much as the next guy. I have a family and kids. I want a better future for them. But for some reason, for that better future, it seems you have to fight for it. In a twisted logic, you need war to get peace. WWII was an example. Nobody is arguing that letting Hitler do his thing would have been beneficial. Letting Putin do his thing is not a solution.
I understand that we don’t want to provoke a madman with nuclear weapons. I wish they could hash out a peaceful deal. But like I said in my opening, there’s a real war and maybe we are slow to recognize it. The line has been crossed. The ugly conflict is about to get uglier. The Ukraine government has raised its ambitions from mere survival to the recovery of all its territory, including land lost to Russia in 2014, such as Crimea.
Russian Energy
It seems that Europe is inching closer to banning Russian oil. It won’t be easy. Each EU nation is different when it comes to dependence on Russian fossil fuels. If Europe wants to win a proxy war with Russia it needs to cut off the oil & gas imports. It needs to. Despite broad disapproval of the war it’s Russia’s fuel that’s fueling their war machine.
The EU needs Russia’s energy to power its factories, cars, and heat. The faster it can find alternatives, the faster it can cut its ties to Russia. And weaken Russia in the process. Russia might find an alternative buyer, but it might get less for its energy and there are logistical issues (shipping vs pipeline). LNG shipping terminals are being built or expanded across Europe, which would allow the continent to be less reliant on pipeline gas from Russia.
As for the Russian oil industry, it’s an open question how long Russia can maintain current production levels without the Western companies who have now left. Schlumberger and Halliburton have left Russia. These were the brains, the know-how. How do you keep your wells operating, let alone drill without them? Look what happened to Venezuela after the Western companies left. Russia pumps out about 10 million barrels of crude oil a day. This amount will slowly decline overtime (or maybe fall dramatically? I don’t know how you operate without them, they are vital to world oil production). Russia doesn’t have that expertise, let alone the equipment. This will be a slow-moving development, and sadly, it means energy prices will keep rising.
Putin’s Health
There are a lot of rumors surrounding his health. They are just rumors as far as we know. But it’s hard to deny that photographs and pictures suggest poor health. Something is off. His face looks puffy, his walking doesn’t seem natural, he seems to be limping. He covered his lap with a blankey during his May 9th parade. I don’t know about you, but covering your lap with a blankey during a military parade takes away some of the strength you are trying to project. On their own either incident would be easy enough to dismiss. But taken together they will do little to dispel persistent rumors that Putin is suffering health issues.
Putin is going to turn 70 in the fall. Being 70 in Russia is like being 100 years old in the West. Russians are not known for their long-life expectancy. I know it’s not precise but I do know with precision that Putin is mortal.
Foot to the Throat
After reports of atrocities in Ukraine (killing of civilians, sieging, rape…), I notice a change of tune amongst top Republicans and Democrats.
I believe that even if Putin departs, sanctions and export control will stay. Why? Because you will have another Putin. It’s an autocratic country where succession has always been an issue.
Even if the new guy (or girl, they had Catherine the Great after all) comes in and ends the war, promises freedom and democracy, and all that good stuff, nobody will believe it. It’s a country with no rule of law. It’s a country with no credibility. Why bother? The world doesn’t need Russia.
The US has their foot on Russia’s throat and they are not taking it off. Russia has been a pain in the ass for years and now the US has Russia exactly where they want it. A weak Russia works in the West’s favor. It’s better in the interest of everyone, except Russia. Unfortunately, it’s the Russian people that will bare the cost.
If Rocky IX was made today, he would be wearing an Ukrainian trunk.
There’s been six days of fighting and Russia has made a serious mistake. Russia severely underestimated the capability and fighting spirit of the brave Ukrainian people. The Ukrainians have the heart of a lion. This war is a heartbreaking study about what people will sacrifice in the name of their country.
Russia also didn’t expect the massive display of solidarity behind Ukraine. There’s a real coming together of the global community that we haven’t seen in decades.
Seven days ago felt like a different world. The world has turned on its axis. Since the invasion started there’s been a massive global paradigm shift:
We forgot about Covid. Two weeks ago I was watching people cry and protest over having to wear a mask. Now I’m watching husbands and fathers say goodbye to their loved ones, their children, not knowing if they will ever see them again.
Putin killed Swedish and Finland neutrality and German pacifism in a single weekend.
Russia has moved from a sullen, revisionist state to a clear and present danger to its neighbors, and has directly threatened countries beyond Ukraine.
Governments have no trust in or tolerance for the Putin regime. They tolerated Putin as a nuisance to live with. That’s over.
Switzerland announced they will join the EU sanctions against Russia. They are banning entry to five oligarchs close to Putin. Significant, considering Switzerland’s traditionally neutral stance.
The world’s major economies, save China, have combined to foment a financial crisis in Russia, casting aside the previous worries about systemic economic risk. That, in turn, may provoke domestic unrest with unknown implications.
The sanctions response has been global.
Economic and geopolitical implications stretch well beyond Europe.
The EU is providing weapons to a country at war. A first in its history.
Denmark becomes the first European country to let volunteers join foreign brigade in Ukraine.
Various multinationals are cutting ties to Russia. Shell and BP are dumping their Russian assets. BP is taking a $25 billion hit as it is offloading its 20% stake in Rosneft.
Germany is making a u-turn on nuclear energy. Germany mulls extending nuclear plants’ life.
The Russian central bank was hit with sanctions. Limiting the use of some of their foreignreserves.
The swift response from the global community is way beyond what Putin or anyone could have predicted. Yes, sanctions were being discussed. But practically destroying the Russian economy overnight? I didn’t see that coming.
Ukraine Identity
If there were any doubts about Ukrainian identity as a people, they are forging one now. War does that. Standing together in the trenches does that. Fighting and sacrificing for a cause that’s much bigger than you does that. They are fighting for their land, the people before them, their family, their values, for their children and their children’s children.
Despite being founded in 1867, it’s been said that being a Canadian wasn’t really a thing until the Battle of Vimy Ridge (1917), during the First World War, when strangers from across Canada with not much in common stood and fought together in France. A Canadian sense of pride was born in that battle.
For the Ukrainians, win or lose, they are forming an identity hammered out of fire. There’s not a single passport that can replace that.
But that sense of Ukrainian pride was not born last week. The seeds were planted a while ago.
In 1991 an overwhelming majority of 92% of voters approved the declaration of independence from the Soviet Union.
In 2004 there was the Orange Revolution.
Late 2013-Feb 2014, the Maidan Revolution followed by a civil war
If there’s a takeaway here, it’s that the Ukrainians will fight for what they believe in. What do they believe in now? Ukraine as a democratic sovereign country. How do I know it’s democratic? They elected a comedian that played piano with his private parts in front of a live audience as their President.
Volodymyr Zelenskyy – The Hero
Win or lose, he’s going down as a legend.
The President of Ukraine is a real leader. A President of the people. The world needs more of him and he has the world behind him. Can’t recall the last time I complimented a politician.
Watch this speech. Even with English subtitles, it’s hard not to be moved.
Zelensky decided to stay with his people and fight instead of being evacuated. His people and the world have rallied behind him.
It’s hard not to take a shot at Trudeau. The contrast with the Ukrainian leader is astounding. One is risking his life to fight and while the other disappears when a bunch of trucks roll up honking. Ukraine is lucky that Trudeau is not Ukrainian.
Vladimir Putin – The Beginning of the End
This is the beginning of the end for Putin. I believe his days are numbered. He wanted to play Czar (or is it Tsar?) and it’s leading to the collapse of Russia. He miscalculated and the Russian people are going to suffer. Because this is Putin’s war, he’s exposing himself to personal blame.
Russian history is not on his side.
In September 1915, with the Russian Empire losing World War 1, the hapless Tsar overruled his cabinet; demoted his cousin, sending him to Transcaucasia; and took supreme command. That suddenly, and rightly, exposed the Tsar to personal blame for Russian war performance, which worsened. In March 1917 a republican revolution deposed the Tsar, who abdicated, which did not save him or his family some time after a second, communist revolution in November. (Thanks to Brian Erskine for the info)
Putin looks like a one man ruler surrounded by “yes men”. The video captures it. It’s basically Putin destroying his spy chief on television for his failure to “speak directly”. The chief spy demeanor says everything. The whole thing is uncomfortable and terrifying.
Putin looks isolated and out of touch. What’s with these strange meetings where Putin sits at one end and the others seated far down the table. Putin is always a healthy twenty feet away from anybody. Is that paranoia or just playing it safe with Covid?
Putin meeting with his advisors. All the meetings are like that lately.
With much of the world moving against him, economic sanctions piling up and a military campaign less successful than he expected. He miscalculated the economic cost, the political cost, and the challenge of invading Ukraine.
Putin also enters a special club. He gets to join a small number of leaders to be hit by personal sanctions. That club includes Mr. al-Assad of Syria, North Korea’s Kim Jong Un and Venezuela’s Nicolás Maduro. I wonder if these guys get their own special section at the U.N.
Miscalculation
By pilling up troops on the border and having a show of force, Putin was hoping to take Ukraine without firing a shot. But hoping is bad planning. This was a mistake. Kiev is not Kabul where the Taliban just rolled in. Putin underestimated the capability and fighting spirit of the brave Ukrainian people. I don’t know if Putin expected to be welcomed as a liberators meeting scant resistance from the Ukrainian, but he made a serious miscalculation.
It’s understandable. This happens all the time. The US has made the same mistake in Vietnam, Afghanistan, and Iraq. These mistakes led to drawn out conflicts that depleted finance, resources, materiel and the most precious resource of all: lives.
Russia’s plan clearly is to reach Kyiv as quickly as possible and force Zelensky to surrender, including Ukrainian forces across the country. If Russia can’t take Kyiv quickly or if Zelensky refuses and resistance continues across Ukraine, Russia’s costs and problems multiply.
Putin wanted a weaker NATO, it will be stronger.
Putin wanted a weaker EU, he made it stronger.
Putin wanted to rebuild the Russian empire, it’s now weaker.
Miscalculation Part II
I think the West miscalculated too. With Afghanistan fresh in people’s minds, I think the West didn’t want another foreign policy disaster. The common narrative was that if Russia invaded, this would be a quick war, and Putin would force everyone to the negotiating table. This probably explains the lack of weapons and support provided to Ukraine. They didn’t want the equipment to fall into the enemy’s hand. The US looked ridiculous after the Afghanistan fiasco. They didn’t want a repeat, especially against Russia. Imagine the humiliation of videos of Russians parading around US military equipment.
Ukrainians rallied by Zelensky, have displayed unexpected resilience in their defense of the capital. They might not have the numbers, the military equipment, or the weapons but they do have more heart. After six days of fighting, the narrative is changing. Recognizing the will of the Ukrainian people to fight for their land, the US, the EU and NATO have been shoring up their support and providing weapons.
What For?
Hypothetically speaking, even if Putin conquers Ukraine, I don’t know how that works out for him. First he’s going to meet heavy resistance, insurgency/guerilla warfare. Second, the international community will never recognize the conquest.
So what will Putin achieve? He will temporarily own the regime in the Ukraine, something reversible since it’s not recognized by other countries. And he impoverished his population.
I don’t know how Putin wins. The more this drags on, the more the higher the cost to Putin. What do you tell the mothers of dead soldiers?
There won’t be peace with Putin in power. The world is done. One country can’t take on Putin because the cost is too high. Together Putin has no chance.
The US and allies need to approach Russia the same way the US approached Germany and Japan after WWII. Rebuild and invest in your former enemies to make them partners and better nations. The world benefited and still does today. Japan and Germany are strong allies.
Economic Fallout
When Putin came to power in 1998, Russia was at its lowest point. The country was falling apart. He rebuilt Russia. It’s far from perfect, but compared to where it was when he took over, it’s much better.
Then in four days he destroyed it.
He had a social contract with his people: Back me as your ruler and in exchange I will make your life better. Putin predicated his entire rule domestically on bringing ‘stability’ and ending ‘the chaos of the 90s’, and in the space of four days he’s managed to completely destroy the Russian economy. It’s insane. I’m still trying to wrap my head around that.
Here’s Putin legacy:
The Wiped Out of the Middle Class
What’s the difference between a Ruble and a Dollar? Answer: A Dollar. The value of the ruble against the US dollar is worth less than a cent (1 ruble = 0.0087 USD).
Most headlines are focusing on the oligarchs getting hit. But nobody expected sanctions that hard and that fast. The people that will suffer the most are the Russian middle class. They are about to get crushed. The ruble is falling like a rock. It took a 40% hit while I’m writing this. As the ruble is crashing, crippling hyperinflation could be on its way. I know that the Russian people have a great capacity to suffer. They understand sacrifice. But they didn’t ask for this, are pitchforks next?
1 USD = 105 rubble on XE.com. That’s the midmarket rate. I’ve seen some sites quoting 150 rubles for a U.S. dollar. I don’t know how accurate it is. But during a panic and people are rushing to convert their rubles, I wouldn’t be surprised.There’s a bunch of pictures showing Russians queuing outside banks waiting to withdraw their life savings. Will the bank system hold up? The Russians will need to print more rubles to fill the ATMs. That’s going to fuel further inflation. And then the currency crash is going to fuel further inflation. It’s a vicious circle.
The run on banks for rubles has led to a run on expensive high-end goods. Expecting their currency to be worthless, Russians have converted their cash into high quality hard goods. Maybe that will absorb the inflation shock.
Organic Sanctions
When the Moscow Stock Exchange crashed 70% on the first day of the war, combined with the collapse of the ruble, you don’t need sanctions to cause economic damage. The massive wealth destruction is emporishing the Russians.
This week the Russian stock market didn’t open. Russian ADRs fell 70%+. So much wealth has evaporated. Nobody wants to hold Russian assets. There’s a run on banks to get cash.
In a desperate attempt to stop the bleeding the Russian central bank is trying to save their currency by raising interest rates from 9.5% to 20%. That won’t do much. Nobody wants rubles.
Central Bank Asset Freeze
A very targeted and clean sanction says I cannot do business with you. The sanction that hurt the most is Western powers hitting the Russian central bank with sanctions. The US and other powers cut off Russia’s central bank from US dollar transactions. This will prevent Russia from accessing their “rainy day” fund that they were expecting to rely on for the invasion of Ukraine. The reserves were supposed to buffer the plummeting ruble. The $630 billion in reserves only matters if you can use it to defend his currency, specifically by selling those reserves in exchange for buying the ruble. Much of the reserves are deposited with foreign institutions in the form of euros, US dollars and government securities. Fortress Russia no more.
Since the country cannot access its forex reserves abroad, the government will have no choice but to seize all the deposits in order to get out of the situation.
Energy Non-Sanctions
Russia is the world’s second-largest exporter of oil and natural gas. Russia and Ukraine are also called the world’s breadbasket, as together they represent more than a quarter of the global wheat export and a significant slice of the world’s corn market. A commodity price spike would mean that we will likely have to pay more at the pump and for groceries.
Gazprom and Rosneft are not targeted by major Western sanctions, a sign of their importance in the global energy markets.
The message is clear. The world needs Russia’s energy and Russia needs the cash.
China – It’s Better to Stick with the Devil You Know
I don’t buy the Russia-China “friendship”. China and Russia have forged close ties in recent years, often aligning to oppose what they view as interference by the US and its allies. The two leaders met earlier this month and declared that friendship between their countries had “no limits”. No limits friendship? That status is about to be changed from “friends” to “it’s complicated”.
China and Russia might have common enemies, but they are not natural allies (Sino-Soviet border conflict). China has been quietly distancing themselves from Russia’s beleaguered economy. That “friendship” is more a transactional relationship. They are partners. China is a manufacturer and Russia has the resources. China needs the commodity and Russia needs the cash. And both countries can do business together without addressing human rights issues and ESG concerns.
China is rational about this. They don’t want to anchor themselves to a weaker power, especially one that’s sinking. Yes, China and the US have their differences. They don’t see eye to eye on many subjects. They are rivals. Their issues are not about to be solved anytime soon. But China needs the US and Europe. And China cares about one thing: China. So it’s better to stick with the devil you know best.
There are hint of China distancing itself from Russia. China state-owned enterprises restricted financing for purchases of Russian commodities. It’s a balancing act. China’s attempts to comply with US sanctions while continuing to support the Russian economy through the Chinese financial system (transactions in Yuan). China’s future is in engaging and competing with advanced countries, not with sinking Russia.
And with Russia in a tough spot, wouldn’t China take advantage of that to squeeze them out?
Nuclear
Putin invoked Russia’s deadly nuclear capability. He’s trying to take down the entire world order. It’s scary to think about.
For the moment we just need to relax. It’s postering.
Yes, Putin is crazy. Yes there’s been many “he can’t be doing this” moments. I don’t know what it’s in his head.
But I know he also wants to live.
Why Does It Matter?
Yes, Ukraine is far away. But sometimes your national security depends on the national security of your neighbor. Ask Poland, what happens once Ukraine falls? And the Russia shares a border with Canada at the North and the US with Alaska.
Ukraine has become the front line in a struggle, not just between democracies and autocracies but in a struggle for maintaining a rules-based system in which the things that countries want are not taken by force. We should be paying close attention to this.
The defense of Ukraine is not about oil. It’s not about money. It’s not about religion. It’s about right and wrong and those are the wars that we should fight. I’m not advocating for boots on the ground but there’s a lot we can do to help Ukraine. The whole world is behind Ukraine. If that’s not enough to win, I don’t know what does.
We need to stand up for what is right. Sitting back and watching what will transpire is not enough. I don’t want the Ukrainian and Russian people consumed by the devastation of war. This madness needs to be stopped. We needs to find a way to negotiate a peaceful agreement between Ukraine and Russia that also addresses both country’s concerns. We also need to support action that will rebuild their economy and infrastructure like we did with Germany and Japan after the Second World War.
The world and Russia can work together. It’s possible. The US and Russia stood side by side to defeat the Third Reich.
We need to focus on an agreement that brings peace and prosperity to the world. There’s a real coming together of the global community that we haven’t seen in decades. This gives me hope of a better, safer, more stable future.
Today feels like history is being made. When a day makes history, it’s usually never for a good reason. It’s official. Russia is invading Ukraine. A war that many considered unthinkable has begun. Conditions in Ukraine are rapidly deteriorating. It will reshape European security. This is a very concerning situation. How the international community responds is crucial. Ukraine cannot succeed alone against Russia. The U.S. and Europe must find ways to come to Ukraine’s defense.
Russia’s actions have brought the world to the brink of a new war on a scale we haven’t seen since WWII.
Russia was not threatened by NATO or Ukraine. NATO is a defense pact.
After years of wondering if NATO still had a purpose, it had found one now.
The invasion of a sovereign state is a war of choice. Conjured by Putin.
NATO and the West have failed to put forth a single, uniform position since the crisis began escalating.
The West’s inability and ineffectiveness works in Russia’s advantage.
Ukraine is not part of NATO. It’s intention to join NATO is written in its constitution but that won’t happen. On paper, NATO has no obligation to Ukraine. But it’s bigger than.
The conflict has planted the seeds to re-shape the world order. What it means for Europe. What it means for the rest of the world.
What if Putin succeeds in Ukraine?
We need to ask serious questions. Do we have a moral obligation to help weaker countries under attack from a dictator? Don’t we have a higher purpose to answer to? Do we just stand by and watch this?
If Western countries impose heavy economic sanctions, as they have promised, Russia may hit back in ways that further raise the temperature. An eye for an eye type of thing.
Biden has the domestic and international support to act against Russia. In a rare show of unity among Republicans and Democrats, Biden has broad support in Congress for tough action.
Expect a wave of Ukrainian refugees.
Also expect higher inflation.
It’s hard to have accurate news of the situation. The Russian propaganda machine is on full throttle.
By looking at Russian news, they are working hard at changing the narrative in their favor (they are the victim, acting in self-defense, they are protecting the people from Ukrainian genocide ethic Russians, the West wouldn’t engage in diplomacy, accusing the U.S. of crossing its “red line” by expanding NATO).
Putin doesn’t care about international law. Putin’s actions are based on some sort of concept of rebuilding the Soviet Union. In his eyes Ukraine is part of Russia.
The short-term goal is to “demilitarize” Ukraine, make it capitulate and replace it with a pro-Russia government.
Ukraine’s confidence in the West, which dragged it into the conflict and then abandoned it, is shaken.
Russia doesn’t care about sanctions. They are used to them and don’t fear them. They also took the last few years to sanction proof their economy.
It’s hard to measure the exact effect of the sanctions, even the most severe ones. The wild card is China. If nobody is allowed to buy natural gas, China will buy it. So there’s a market.
Russia has over $600 billion foreign reserves.They are built to take a hit.
Gaz: It’s still flowing into Europe. It has not been disrupted. But once they see the sanctions we can expect the energy situation to change.
Russia holds Europe by the balls because they are so dependent on Russian energy.
In normal times Russia supplies 30-40% of Europe’s gas. It’s higher in Germany. Although that share has fallen in recent months as Europe has increased LNG imports.
It’s mind-blogging how Germany bungle their energy security to be so dependent on Russia’s gas. Germany’s decision to phase out nuclear power is a historic strategic error. Even former German Chancellor Gerhard Schroeder sits on the board of Gazprom and Rosneft. Is it any surprise that he initially sought to exclude energy explicitly from any sanctions on Russia if it invaded Ukraine?
The pipelines between Germany and Russia started in the late 60s. The idea was that energy interdependence would produce peace. Instead it empowered Russia.
Energy: America and its allies need and can wean Europe off its dependence on energy imported from Russia.
High energy prices hurt Europe and help Russia. The higher the oil price, the more it helps Russia and makes them stronger.
High energy prices fund Russia’s foreign policy, including its armed forces. Energy is the foundation of Russia’s power.
Energy: It’s the long-term source of Putin’s power. Sanctions need to hit that. But that might come at a tremendous cost to Americans and Europeans.
Reducing reliance on Russian gas will require substantial investment and political will.
European gas currently trades at around $26 per MMBtu. The price of American gas is a little over $4.
Right now there’s no war between Russia and NATO. But NATO members and former Soviet republics like Estonia, Latvia and Lithuania are on high alert. I would also include non-NATO members like Finland, a former Russian possession.
Neutral Finland is arming up. They bought 64 U.S. F-35 jet fighters in December. They are close to NATO.
Russian absorption of Belarus, puts considerable Russian firepower on the border of Poland and Lithuania.
If a single NATO serviceman is killed, Article 5 is invoked. War against one member of NATO is a war against all NATO members.
NATO outmatch Russia in terms of forces and military equipment. But…Russia has a massive nuclear arsenal and has not ruled out using them. But I don’t think he wants to start a war with NATO.
Now the war has begun and it is no longer just about whether Russia will receive a guarantee from NATO anymore.
NATO will need to make clear to Russia that such moves to reinforce eastern Europe are not a prelude to NATO military intervention in Ukraine.
China: China is not 100% in Russia’s camp. Yes China has beef with the US. But I’m not sure China really wants this. I don’t think China wants to further deteriorate their relationship with the US and Europe. I also don’t think they want to anchor themselves to Russia, a weaker power.
China: Citing concerns over questions of territorial integrity has shied away from endorsing Putin’s invasion.
China: Sometimes it’s better to stay with the devil you know best.
Taiwan: This could be the first chess move in re-organizing the world order established after WWII. If the West (mostly the US) doesn’t do anything, what is stopping China from taking Taiwan?
Taiwan: The Ministry of National Defense of Taiwan tweeted that 9 Chinese fighter jets entered Taiwan airspace. I don’t want to read too much into this because China does this all the time, but considering the timing and the geopolitical situation, I wouldn’t discount anything.
90s History: In the 90s, under the Budapest Memorandum of 1994 Ukraine gave up its nuclear weapons in return for security assurances. So much for that. Some 1,800 nuclear weapons returned to Russia.
This is the beginning. The beginning of a situation that could get very ugly. I’ve no clue on it will play out. We are talking about confronting a nuclear power with Putin at its head. But we do know that Ukraine cannot succeed alone against Russia. This is an opportunity for the world to forget about its little problems and come together for a greater cause.
I feel that the threat of Russia invading Ukraine doesn’t get the attention it deserves. There’s headlines but the importance of the threat seems discounted. If a war breaks out tomorrow and we get dragged into it, most people would be surprised. This could get ugly really fast. If I was living in Europe right now, especially Eastern Europe like Ukraine or Poland, I would be freaking out.
I know, there’s a pandemic and I heard Kim Kardeshian has a new boyfriend. I’m kidding a little bit. Look I get it. Who has the time to be on the top of everything. It’s impossible. I’m at home, with two young kids, trying to be a teacher, a daycare, a dad, a husband, an IT technician, a cook, a cleaner, and there’s work to be done (update: kids are back at school this week).
This is serious. Ukraine is far away. The story is complicated. There’s history. There’s propaganda. Everybody is trying to spin the news in their favor. I’ve been reading mostly from Western sources. It’s possible that I’m being fed garbage. But I also looked at Russian news and it’s basically a PR tool for the government. If somebody has good independent sources feel free to share. The problem with this situation is that it’s hard to know what’s going on. Is it the truth or propaganda?
I’m in Canada. I’m lucky and grateful. It’s definitely not perfect. It’s easy to find things to complain about. But I traveled enough to recognize that we have it good. We have never been invaded, well not really if you include the War of 1812. Canada has been involved in military conflicts overseas but never once we felt a foreign power could invade us. So my views might not grasp the reality of what’s going on.
If you are from a country where there’s a constant threat of war, a history of war, where people have died and lost everything, it changes your psyche.
What’s Going On?
Russia has over 100,000 troops on the border of Ukraine. Russia has also moved troops south of Belarus.
The civil war that started in 2014 already claimed the lives of 13,000 people. That year Russia annexed Crimea, a region that the Soviet Union ceded to Ukraine in 1954. Russia says they have no intention of invading and that they are responding to West aggressiveness.
Background
We can go way back in time but I think there’s two key period that led to this mess. Pre-2014 and 2014 to now.
According to the prevailing wisdom in the West, the Ukraine crisis can be blamed almost entirely on Russian aggression. The US and its European allies share some of the responsibility for the crisis. At the center of the trouble is NATO enlargement, the central element of a larger strategy to move Ukraine out of Russia’s orbit and integrate it into the West. At the same time, the EU’s expansion eastward and the West’s backing of the pro-democracy movement in Ukraine. Basically the West had been moving into Russia’s backyard and threatening its core strategic interests.
At the end of cold war (1945-1989), Russian leaders wanted assurances that U.S. forces remain in Europe and NATO stays intact, an arrangement they thought would keep a reunited Germany pacified (can’t blame them, historically speaking an angry Germany is not good).
But Russia did not want NATO to grow any larger and assumed that Western diplomats understood their concerns. Secretary of State James Baker assured Gorbachev that NATO wouldn’t expand one inch to the east. But after a while I guess the West didn’t care. The first expansion phase took place in 1999 when Czech Republic, Hungary, and Poland joined NATO. Russia agreed to the enlargement in exchange withdrawing huge numbers of troops from Europe.
But it didn’t stop there. In 2004 NATO brought Bulgaria, Estonia, Latvia, Lithuania, Romania, Slovakia, and Slovenia.
In 2008 President Bush supported admitting Ukraine and Georgia. Not everybody was on board fearing it would antagonize Russia. Long story short, Russia invaded Georgia. Putin had made his point.
NATO expansion continued marching forward, with Albania and Croatia becoming members in 2009. At the same time the EU was expanding east and promoting democracy. Ukraine joining Europe accelerates the demise of the ideology of Russian imperialism that Putin represents. Basically all these policies added fuel to the fire and Russia worried that they might be next.
Here’s the spark:
In 2014 protests led to an overthrow of the elected government for a pro-Western one. Protests were sparked in part by then President Viktor Yanukovych’s rejection of a pending trade treaty with the European Union and his embrace of more aid from Russia. You can add corruption to the list of grievance.
The deal that Yanukovych rejected would have opened up Ukraine to greater trade and investment from the EU, but it would have also required Yanukovych to fight corruption and make democratic reforms. Instead, he pivoted and made a deal with Putin. Russia lent Ukraine $15 billion. It’s giving a big discount on the price of natural gas that the country relies on for most of its energy. And probably didn’t require any reforms like tackling corruption. Protesters claimed that the deal made Ukraine so deeply indebted to Russia that it will never get out of Moscow’s orbit.
Yanukovych fled to Russia and the new government in Kiev was pro-Western and anti-Russian to the core.
Russia claims the U.S. is behind toppling the regime. Details are murky but it is clear that Washington backed the coup (leaked phone records). Who knows but I wouldn’t be surprised. Both governments are playing games. Nobody will admit it publicly. Under the former pro-Russian leader there was talk of bringing back Ukraine under Russia.
For Putin the time to act against Ukraine arrived. Russia took Crimea from Ukraine. Easy target considering there’s a Russian naval base and the region is mostly Russian. Most of them wanted out of Ukraine. Then Russia supported Russian separatists in eastern Ukraine which led the country toward civil war. Putin said that if the government cracked down on the separatists he would invade. And he raised the price of natural gas, of course.
What does Russia want?
Russia wants a ban on Ukraine’s future membership to NATO. Russia wants the Western alliance to pull back its forces to where they were in 1997, before eastern European members joined.
Of course it won’t happen. These are sovereign nations. There’s also a game being played. Russia knows that such demands won’t be met and might give them a pretext to invade.
Also if you peel the onion. There are other motives at work.
Throughout history Russia benefited from big open spaces. Owning Ukraine provides a security buffer in case of invasion. Napoleonic France, imperial Germany, and Nazi Germany all crossed to strike at Russia itself.
Putin wants to stem his country’s decline in global influence: Moscow’s leverage in places like Ukraine is one way to preserve that influence. Putin wants to bring Russia’s former glory back.
But there are other reasons why Ukraine is of deep interest to Russia — reasons that have more to do with history, faith, economics and culture.
Yes Ukraine is a sovereign country…but it’s more like an estranged family member. They might not see eye to eye but share the same blood. Those ties date back to before the Soviet Union and even before the days of the Russian empire that began in the 18th century. Ukraine has a strong Russian heritage. It’s been part of Russia in the past. They share a special relationship. They share the Russian language. Russian media is omnipresent. And there’s also deep economic ties. Russia still holds influence over the country.
Despite that, Ukraine increasingly sees itself as part of the West. You could split the country. The Western parts of Ukraine, especially the ones that border Poland, are the most vocal against Russian aggression (there’s a lot of history behind why (i.e. famine, Chernobyl). Parts of the East are more sympathetic to Russia.
Putin wants Ukraine to fail becoming a thriving democracy because it will support his claim that Western values are unworkable in Orthodox, Slavic Russia. If the Ukraine social engineering experiment succeeds, and the country modernizes, it might become an attractive model for Russians who live on the other side of the border.
Putin benefits from the aggressor. He controls the scope of attack and timetable should there be an attack. And Ukraine matters more to him than any NATO country.
Ukraine in NATO?
Not anytime soon. This risk of war with Russia is too great. This is a blow to Ukraine’s reformers who have even written their aspiration to enter NATO into their constitution.
The same goes for Georgia. But NATO would inherit another open conflict.
Solutions
In an ideal world Ukraine should have the freedom to decide on its own if it wants to join NATO and the EU without external influence. But the world we live in is not ideal, it’s real.
Avoiding armed conflict through constructive diplomacy is always preferable. Ending the stand-off without bloodshed is the goal. There’s still room for diplomacy and both countries need to maintain dialogue. They need to ease tension. If they don’t talk the risk of miscalculation is growing.
Because the West is unlikely to meet Russia’s extravagant demands, a real war is now a distinct possibility, which would have far-reaching consequences for everyone involved, especially Ukraine’s citizens.
They have had similar situations in the past. The U.S. and the Soviet Union came close to nuclear war on two occasions, The 1963 Cuban Missile Crisis and the 1983 war games come to mind when the U.S. and the Soviet Union came close to nuclear war.
Meanwhile you have to raise the cost of the invasion. Make it so unattractive to invade Ukraine. Make sure you put Moscow in a weaker strategic position. If Russia invades the responde the U.S. and the rest of the world needs to be robust. Do not be ambiguous. Make it clear what the consequences are.
If Ukraine looks weak, Russia will take it. I doubt Russia’s menacing of Ukraine will induce NATO to retreat. It will have the opposite effect. Russia’s aggression towards Ukraine has created a chance to enhance the security of Europe. It will reinforce current NATO members. Make Finland and Sweden NATO members (both neutral during the cold war).
The West can apply the most severe sanctions they can, like they have done to Iran. Take aim at the country’s economy. Measures against the top Russia officials, Putin and Mishustin, banks and important industries. You would be isolating Russia from the world. Putin hates sanctions.
Russia says his country is threatened. It is not. NATO is a defensive alliance. Russia can be an empire or a democracy, but it cannot be both. If Russia was a democracy it might have worked with Ukraine.
The optimist in me sees an opportunity. The crisis could help stop the long decay of relations between Russia and the West. A chance to reset and rebuild.
However it plays out, the region will remain unstable for the foreseeable future.
I just saw this excellent map of the Ukraine/NATO vs Russia conflict on Business Insider. If you feel a little lost and confused with conflict, the map below can help sort things out. Another cease fire agreement was reached today, let’s how long this one last.
Voilà a detailed map with conflict zone, military bases, nukes and troops.
Repost from Business Insider
By Armin Rosen, Mike Nudelman AND Amanda Macias
The Wall-Street Journal had a section mapping the conflict from different angles. Very interesting. In a previous post I had a map of the gas supplies to Europe via Ukraine.
I’m more of a visual learner, so I think it was worth sharing.
This is a big game of bluffing and politics. I don’t think there will be a war (unless some drunken Russian soldiers accidentally hit the trigger on the AK47). If there’s a war, it will be a civil war.
To date I have listen to Western media and Russian media and the difference in coverage between the two is the equivalent to the difference between black and white. The views are heavily slanted and biased based on the reporter’s motives and background. In the Western media, Russia is an aggressor is illegally occupying Crimea. In the Russian media, Crimea is protected by Russian Peacekeepers because it’s Russia’s moral duty.
It’s hard to have the “full picture” coverage of the event. So far the media seems to be covering the day to day events without filling the big picture. They don’t really dig beyond the surface to understand the sources and motives behind the conflicts. I think the real war is economically. Russia could use Gazprom has a weapon. The Russian state owns a controlling 50% stake in Gazprom, the largest natural gas company in the world. Gazprom is an important source of revenue for the Russian government. Ukraine and parts of Europe relies on Gazprom for most of its energy. Without Gazprom Ukraine would not be able to heat their homes and fuel their industries. The Ukraine-Russia dispute could affect gas supplies to Europe as it did in 2006. It might also be in Putin’s interest to control a very strategic warm-water port. And finally, Ukraine would not be eligible to join NATO because the charter prohibits new members from having territorial conflicts. Russia certainly doesn’t want a NATO country in their backyard.
Crimea is very important to Ukraine and Russia. It’s located on the warm Black Seas and is an important source of tourist income for the Ukraine government. Crimea is also a hot source of future energy. The conflict is threatening Exxon Mobil and other companies’ prospects for oil and gas drilling in the Black Sea. It also derails Ukraine’s wish to detach themselves from Russian gas imports.
The media has labeled the conflict to simply Russian spoken people vs non-Russian spoken people. But beyond language, there’s a lot of money at stakes and that’s where the real game is played.
Brian Langis 