Wednesday, July 30, 2014
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Cold War or Cool Calculation?

NEW YORK – With escalating violence in southern and eastern Ukraine and no solution in sight, the Ukraine crisis has become the world’s most turbulent geopolitical conflict since that triggered by the terrorist attacks against the United States in 2001. The US-led sanctions strategy will neither deescalate the tensions between the West and Russia nor bolster the imperiled pro-Western Ukrainian government. But, even with tightening sanctions against Russia and growing violence in Ukraine, there is little chance that Cold War II is about to start.

The US approach has been to ratchet up sanctions in response to Russian aggression, while ensuring that America’s allies remain united. At a recent joint press conference, President Barack Obama and German Chancellor Angela Merkel announced a new, lower threshold for additional sanctions. Previously, that threshold was a direct Russian military invasion; now, as Merkel explained, if Russia disrupts Ukraine’s May 25 elections, “further sanctions will be unavoidable.”

But Merkel and Obama also lowered the bar for what those “further sanctions” would be. Instead of launching sweeping sectoral measures that would target vast swaths of the Russian economy – a big step toward “Iran-like” sanctions against Russia – it now seems that the next round will be only incremental. The elections threshold makes another round of sanctions virtually certain, but allows the tightening to be more modest and gradual.

Why slow down the sanctions response? The Americans understand that if they go too far too fast, Europe will publicly break with the US approach, because the Europeans have a lot more at stake economically. Whereas the US and Russia have a very limited trade relationship – worth around $40 billion last year, or roughly 1% of America’s total trade – Europe’s financial exposure to Russia, as well as its reliance on Russian natural gas, make it far more hesitant to torpedo the economic relationship.

More important, dependence on Russia varies immensely across the European Union, impeding substantial coordination – and limiting the EU’s alignment with the US. That is why, when the latest sanctions were announced, the Europeans issued a modest expansion of their existing list – primarily focusing on military and political officials – while the US went further, adding several Russian institutions. When the sanctions were announced, Russian markets rallied, a clear indication that the West’s response fell far short of expectations.

Indeed, though the sanctions are having a real economic impact on Russia (particularly in spurring capital flight), tightening the screws further will not materially change Russian President Vladimir Putin’s decision-making. Putin’s Russia has too much at stake in Ukraine, and his actions have been overwhelmingly popular at home.

But, even as tensions escalate, with no hope of Russia backing down, the world is not headed toward anything resembling a new Cold War. For starters, America’s interests in Ukraine do not justify putting troops on the ground, while Europe has been dragging its feet in supporting America’s diplomatic position.

Moreover, Russia is in long-term decline. The economy and the government budget have become increasingly reliant on oil and gas; the wealthiest 110 Russians control more than one-third of the country’s wealth; and Russia is far less capable militarily than it was in the Soviet era, with a defense budget roughly one-eighth that of the US. The demographic picture is bleak, with an aging population and a low fertility rate.

In order to form a coherent bloc that could oppose the US-led global order, Russia would need powerful friends, which it sorely lacks. When the United Nations General Assembly voted on the legitimacy of the Crimea annexation, only ten countries – neighbors in Russia’s orbit (Armenia and Belarus), traditionally sympathetic Latin American countries (Bolivia, Nicaragua, and Venezuela), and rogue states (Cuba, North Korea, Zimbabwe, Sudan, and Syria) – sided with the Russians.

The one country that could tilt the balance and establish a Cold War dynamic is China. But the Chinese have proved completely unwilling to pick one camp or the other, as they stand to benefit from more purchases of Russian energy exports and new opportunities as Western firms become more squeamish about doing business in Russia.

China can reap those rewards without angering its largest trade partners, the EU and the US. And China is hesitant to support a Russian effort to create turmoil within Ukraine’s borders, given that its own restive provinces, such as Xinjiang and Tibet, could learn the wrong lesson from the Ukraine precedent.

So the good news is that we are not heading toward any kind of global war, cold or hot. But the consequences of a misguided Western policy are becoming more apparent. The US cannot successfully isolate Russia for not adhering to international law and seizing another state’s territory. While other major emerging countries may not be rallying behind Russia, they are not subscribing to the US approach. Pushing for tougher sanctions will lead to a rift with Europe, while pushing Russia further toward China economically.

Meanwhile, the Ukrainian government is at risk. It lacks the military capacity to halt the separatist forces in the south and east but will face mounting domestic pressure and illegitimacy if it does not act.

The best path forward for the US is to offer more carrots for Ukraine, rather than more sticks for Russia. Thus far, the US has put up $1 billion in loan guarantees, which is far too little. The fledgling pro-Western government is losing ground to Russia on a daily basis; the West should focus on supporting it.

Obama and Merkel’s press conference was symbolically useful in establishing a united front toward Russia, despite the two leaders’ evident disagreement about how – and how much – to punish the Kremlin. But rallying around the Ukrainian government and putting their money where their mouths are – even when Ukraine fades from the headlines and new crises erupt – is more important for US and European interests, and represents a more viable path forward for both sides.

Read more from "Cold War II?"

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  1. CommentedStephen Mack

    For a wide ranging and revelatory observations on the Ukrainian Crisis, see this Youtube video of a FEEM Lecture by Anatol Lieven, King's College London.
    https://www.youtube.com/watch?v=H4YTpvEhb-I&feature=youtu.be
    It casts Mr. Bremmer's palled apologetics for American Imperial adventurism, disguised as shopworn strategic thinking, into the domain of conformist policy chatter.
    StephenKMackSD

  2. CommentedStephen Mack

    Mr. Bremmer was once described by The Economist as a 'rising guru' in 2011. America has not enough strategic thinkers, who have abandoned morality. (The excess, indeed cumbersome, baggage of a Republic transmogrified into Empire, as an encumbrance to the exercise of their field of expertise?) In his opening paragraph he recites the American Exceptionalist Party Line on the American/EU manufactured crisis in Ukraine. Framed in the dependable hysteria of 9/11 as the defining Imperial Moment, capped by the even more reliable hysteria of the Cold War, in it's second historical iteration.
    'With escalating violence in southern and eastern Ukraine and no solution in sight, the Ukraine crisis has become the world’s most turbulent geopolitical conflict since that triggered by the terrorist attacks against the United States in 2001. The US-led sanctions strategy will neither deescalate the tensions between the West and Russia nor bolster the imperiled pro-Western Ukrainian government. But, even with tightening sanctions against Russia and growing violence in Ukraine, there is little chance that Cold War II is about to start.'
    Despite Mr. Bremmer's bland assurances the New Cold War is just hitting it's stride, in Western news outlets. And this conference in Kiev makes utterly plain it's ability to attract intellectuals, led by the notorious Bernard-Henri Levy, and a host of Neo-Cons and their R2P Neo-Liberal allies: a link to the conference public program and 'Manifesto': Ukraine: Thinking together Kyiv, 15-19 May 2014
    http://www.eurozine.com/UserFiles/docs/Kyiv_2014/Programme_Public_EN.pdf
    A link to a Global Research essay by David North is revelatory and refreshingly polemical, in a political climate dominated by the bombastic moralizing pronouncement :
    http://www.globalresearch.ca/in-the-service-of-imperialism-right-wing-intellectuals-gather-in-kiev/5382512
    Gone from Mr Bremmer's essay are the actors( strategic thinking is historical in only a self-serving and self-exculpatory way) who set this crisis in motion: Neo-Con Victoria Nuland and her ten year quest to bring the Ukraine into the American/EU orbit, aided by five billion dollars. NGO, The Foundation for the Defense of Democracies, and front groups like Svoboda and Right Sector acting as murderous thugs for the New Order in Ukraine.
    Mr. Bremmer's essay continues to pursue the strategic foreign policy rhetoric, at some length, that only provides a window on the vacuous moral/political character of this literary genre, that Project Syndicate plays host to. In sum, strategic policy chatter within the confines of the stunted politics of the present: the Neo-Conservative/Neo-Liberal political propinquity.
    StephenKMackSD

  3. Commentedj. von Hettlingen

    Indeed, Mr. Bremmer, "there is little chance that Cold War II is about to start", as the US has no appetite to intervene in Ukraine and confront Russia militarily. President Obama has to keep a cool head, resort to fiery rhetoric without being seen as bellicose and impose "sweeping sectoral measures that would target vast swaths of the Russian economy", to show that he is not a faint heart.
    Unfortunately the US is far away from Ukraine and does not feel the security threat that Russia creates, like Poland and the Baltic states do. Besides trade ties between Russia and EU countries are strong. Their "reliance on Russian gas" makes them "far more hesitant to torpedo the economic relationship". Germany is by far the biggest importer of Russian energy supplies and exporter of industrial goods to Russia. The US is in a lucky position that its trade with Russia is limited - "worth around $40 billion last year, or roughly 1% of America’s total trade".
    Obama is adopting the kind of foreign polices that Dwight Eisenhower conducted in the 1950s. Yet the outcry from America's allies in Europe, calling for help can not be ignored. He is shrewd enough to engage Angela Merkel, who is the only Western leader to be on good terms with Putin. She seems to know Putin's mind better than anybody else. Having grown up in East Germany during the Cold War, she knew how useful it was to identify and know one's enemy.
    If one analyses Putin's tactic in annexing Crimea, one tends to believe that he had read "Sun Tzu's Art of War". The Chinese military strategist advised a leader to lead by example not by force. The wisdom that "opportunities multiply as they are seized" is quite true about Putin after absorbing Crimea. If one reads further, one learns that "victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win. Build your opponent a golden bridge to retreat across. All warfare is based on deception." Sounds familiar?
    It is true that "Russia is in long-term decline". It is a plutocracy and its "economy and the government budget have become increasingly reliant on oil and gas". Russia's military capabilities lag behind those of the US and its "demographic picture is bleak, with an aging population and a low fertility rate". It explains why Putin and his cronies focus on short-term gains. He has created "the world’s most turbulent geopolitical conflict" since the 9/11 attacks. His unilateralism has alienated the international community, even though it is not "subscribing to the US approach".
    Putin might want to see himself as Russia's Otto von Bismarck. The problem is that he does not seem to have a clear divide between personal and public interests. He puts his ego ahead of Russia's wellfare. This could one day prove his undoing.

  4. CommentedPaul Daley

    Economic sanctions were mainly useful in signaling that we were not interested in a military confrontation in Ukraine. Since that message seems to have been received, it's probably time to see if we can work in cooperation with Russia on the problem of establishing a legitimate government in Ukraine through presidential and parliamentary elections over the next several months. If that works out, we can join with the EU and Russia in a stabilization and development program for Ukraine. Then, as tensions ease, the EU can re-open negotiations on long term economic relations with Russia, Belarus and Ukraine as a group, just as it did with the Central European states back in the 1990s.

    Throughout the message should be that we want Russia as a partner, not as a foe.

  5. CommentedJim Nail

    The elephant in the room here is that the kind of systemic reform Ukraine needs would actually be much more feasible in a mono-ethnic context. No economic initiative based solely on additional funding is likely to work. Yet Russia has succeeded in straining Ukraine's social compact sufficiently so that the challenges of reform are unlikely to be manageable going forward, due to ethnic chauvinism and populist regional recriminations, distrust, hostility, etc, even if by some miracle all sides were to find agreement today on a new constitutional settlement that preserved the country's statehood within existing borders. Sadly, I am beginning to think that the wisest course for Kiev at this point would be to agree to - indeed insist upon - secession of the Eastern territories, provided only that those heavy-industrial regions accept their GDP-weighted share of Ukrainian debt. At that stage, the West could perhaps step in with massive aid to rump Ukraine. Even such a program, focusing purely on the West and South of the country, would have the best chances if based on a referendum, in my opinion. If in other words the public makes a conscious choice of a period of transitional sacrifice as was embraced for instance in the Baltic states. A national consensus of this type might well rely (as it did in the Baltics and most of Central Europe) upon precisely the sort of anti-Russian nationalism that Putin ostensibly wants to combat.

  6. CommentedAndriy Yastreb

    One area where US and EU could help Ukraine is energy efficiency. Ukraine is one of the most energy inefficient countries and it consumes approximately 50bcm of natural gas per year. Approximately 20bcm is produced in Ukraine and the rest comes from Russia. If Ukraine were to modernize its energy and housing sectors to improve efficiency, it could realistically cut gas consumption by half. Moreover, domestic gas production can also be boosted as it has not received adequate investments for decades. These two approaches, increasing energy efficiency and growing domestic gas production, have the potential to make Ukraine independent of the Russian gas imports. EU and US already posses the necessary technologies that could be implemented to achieve these goals over the next few years. The added benefit to the EU would be an extra 25-30bcm of Russian gas that would need to be sold in Europe (as Russia lacks infrastructure to sell it on LNG market and its pipeline network with China is too small for such volume of gas), thus driving energy costs in the EU lower. EU, US and IMF are pledging over $30B of financing to Ukraine, which will be mostly used to pay off previous debts and finance current account deficit. If they were to provide similar assistance to boost Ukrainian energy efficiency, Ukrainian current account would turn positive, energy prices in the EU would drop and punishment for Russia would have been more effective.

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