04 Mar War What Is It Good For
As the Edwin Starr Song “War” from 1969 so eloquently puts it – Absolutely Nothing !!!
After an uprising last month jettisoning a Russian leaning President, Ukraine had given the Russians the belief that they were going to lead to greater ties with Western Europe rather than with their traditional ally Russia. There is a fair percentage of inhabitants of both Crimea & Ukraine who are ethnic Russians & effectively side with the Russians. It is with this broad parameter that the Russians have “inhabited” Crimea on the pretext of protecting Russian citizens. Russia has virtually annexed Crimea at this point of time without a shot being fired & is telling the international community that they do not recognize the new Government of the Ukraine.
Actions taken by Russia in Crimea will put an interesting spin on international political diplomacy. Crimea was “gifted” by the Russians to Ukraine after the end of the 2nd World War, but was effectively under USSR control until the Soviet Republic broke up in the early 1990’s. The Americans, Western European nations, the remainder of the G8 Nations (now slyly referring to themselves as the G7) have condemned Russia’s move & there has been a bit of “huff & puff” of sanctions against the Russians. This process may be a bit like the “irresistible force meets the immovable object”. Putin will no doubt have considered the Georgian crisis of 2008 in which Russian troops moved into Georgia after the central government sought to confront separatist elements in South Ossetia. After the French mediated over the matter this effectively entrenched the de facto independence of Abkhazia and South Ossetia under Russian control (Note that this wasn’t front page news here in Australia at the time).
The Ukraine control Crimea’s electricity, so they could effectively “turn out the lights” & the West could introduce sanctions including freezing Russian assets in Western banks, etc.. Russia however supplies Ukraine & the majority of Western Europe with gas, so it could increase gas prices or even turn off the taps if pushed.
The USA needs Russia’s help to further progress on nuclear arms control and a peaceful end to Iran’s nuclear ambitions, find some solution to Syria’s ongoing civil conflict & have access to Afghanistan via Russia to provide supplies to troops. Russia has frozen a $15bn aid program for Ukraine who are now looking to seek such funds from the IMF. The Ukraine is not formally part of NATO, so it begs the obvious question could this standoff lead to military conflict between NATO & Russia. No one can forecast this with any accuracy, but you would be hard pressed to not believe that cooler heads will prevail & that a negotiated outcome will be pursued. Perhaps they need to employ Kevin Spacey in his role in the wonderful series “House of Cards” (Spoiler ALERT for those who haven’t seen it) as the new American president Frank Underwood in the way that he can negotiate tricky diplomatic situations.
On the sidelines is China who have their own issues with Taiwan & the so-called “autonomous” regions of Mongolia, Tibet & Xinjiang. The Chinese Foreign Ministry whilst noting their concerns, haven’t denigrated the Russians, but have made a cryptic comment that there have been reasons for the situation in the Ukraine. We should all take note of this in the future, as the vested interest is certainly one powerful motivating force.
I will never hold myself out to be a Foreign policy expert of any kind. In the short term however investment markets like everybody else don’t like uncertainty so the profit takers have moved in & prices have dropped over the last couple of days.This is common practice in times of uncertainty. History has shown time & time again that once an outcome is likely that asset prices tend to bounce back. Longer term prices of businesses have always revolved around economic growth. At this stage there are no signs that this commotion in the Ukraine will derail world Economic growth (and not certainly in the 3 major economies of USA, China & Japan).