Clem Sunter

The spectre of war

2014-04-17 12:11

I remember in the late 1980s that one of the key events leading up to the new thinking about South Africa’s future was the imminent fall of the Soviet Union. In South African government circles, “Reds under the beds” had been a worst-case scenario that might accompany any transfer of power from whites to blacks. With that threat diminished, after Glasnost and the fall of the Berlin Wall in 1989, the idea of change could be handled in a more relaxed manner. So the gate opened and the rest, as they say, is history.

Russian resolve

Now Russia is back in the headlines with its annexation of Crimea, ‘mission creep’ into Eastern Ukraine and Putin’s remark about the tragedy of the Soviet Union’s dissolution. In a sense Ukraine is Russia’s window on the West, as all the other former members of the Soviet Union on its Western border (except Belarus) have joined the European Union and are members of Nato. If Ukraine were to do the same, it would just about complete Russia’s loss on its Western front. Hence, from a Russian perspective, the stakes are very high and it is unlikely that it will go into reverse on its policy – whatever the economic cost of sanctions.

Western response

The USA is leading the charge against Russia because it has nothing to lose in economic terms. America’s total exports only constitute around 10% of its GDP and a fraction of those go to Russia. On the import side, fracking will make it self-sufficient in energy and, other than platinum, Russia has virtually no product of note to make America wince by withdrawing it from the market. American assets in Russia are minimal.

Europe is a different kettle of fish and, amongst other things, relies on Russia for a quarter of its energy needs. Germany, particularly, has a close trading relationship with Russia, and all European countries (including Britain) have financial links. Europe has to think twice about ramping up sanctions since, in a tit-for-tat game, its fragile economic recovery can be dealt a serious blow. Russia will suffer too; but Russians - as history shows - have generally got a much higher tolerance level for hardship than Europeans who potentially have a lot more to lose.

Putin’s ultimate ambition

Putin meanwhile is riding a growing wave of popularity in his home country by restoring national pride and putting Russians back on the map, literally and metaphorically. Some people see parallels to Germany in the 1930s when Adolf Hitler took advantage of the economic misery caused by the Treaty of Versailles, followed by hyperinflation and on its heels the Depression. The question then becomes one of the range of Putin’s ambition and whether it encompasses other ex-Soviet Union states; or whether he will restrict himself to Ukraine.

While America outspends Russia enormously in the military sphere, the latter is a mean military machine with a nuclear arsenal rivalling that of the Americans. In the ultimate scenario of a flat-out exchange between the two countries, I doubt whether America’s anti-ballistic missile shield will offer complete protection for its major cities. The full military option therefore has as much downside for America as it does for Russia – if not more since America is a much wealthier nation.

Sadly Ukraine, besides being an ethnic smorgasbord, is an economic mess and has been ever since its independence. At least when it was in the Soviet orbit everybody had a job. Now, like Russia, society is divided between the oligarchs and the rest, many of whom are unemployed. Inequality and corruption have shot up. A civil war will only worsen the situation and raise the risk of widening the confrontation beyond Ukraine to the supporters of both sides. It will be Russia versus America and Europe, including Britain.

China remains neutral because it does not want to anger the Russians with whom it shares a border (they were allies during the Korean war and shared the ideology of Communism until the late 1980s). On the other hand, it needs access to America’s market to continue to grow at 7 to 8% per annum. Walking on egg shells is probably the appropriate term for China’s diplomatic strategy on the Ukranian issue.

Conclusion

I will end up by using the language of a fox. The flags are rising on some pretty extreme scenarios with an increasing possibility of the unleashing of the dogs of war. Never rule out the law of unintended consequences where some chance happening changes the destiny of the world – particularly when nobody is in the mood to back down. Maybe for once we should feel lucky as South Africans to be in the Southern Hemisphere, a long way away from the immediate area of the conflict.

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