Tag Archives: Ukraine

Economic, Financial Markets, Government, Politics, Society

The global economy and the threats it faces…

FLASHPOINTS AND THE GLOBAL ECONOMY

Never has the world been subject to a constant flux of shifting alliances as it is in modern times. The world is once again in turmoil, from Iraq to the West Bank and from the Ukraine to the South China Sea. The geographical stakes and risks are extraordinarily high leading some strategic thinkers to compare the global landscape to that which preceded the First World War a century ago.

When the International Monetary Fund (IMF) produced its April 2014 forecast of 3.6 per cent global output for the current year it added an important caveat. It warned that geopolitical factors, at the time mainly thought to be the turmoil in Ukraine, posed a potential threat to its projections.

There are, however, five major geopolitical flashpoints which currently pose a threat to economic stability:

  • The ISIS advance in Iraq

That a small ragtag of some 30,000 jihadists born out of Syria’s civil war could be a threat to Iraq, with its American trained forces and weaponry, would have seemed inconceivable just a few weeks ago.

But ISIS is well funded, as a result of wealth created from kidnappings on the Turkish border, secret donations from Sunni Gulf states and the seizure of bank deposits in Mozul. It is also battle hardened from Syria.

Its seizure of refineries in Northern Iraq threatens the country’s oil production of 3.4m barrels a day or 11 per cent of the world’s current supply.

Brent Crude has exceeded, once again, $113 a barrel. So far the valuable fields of Baghdad, including those operated by BP, remain in operation. But that cannot be guaranteed even with any form of US-led intervention.

  • Middle East peace process

The recent unification deal between Hamas and the Palestinian Authority led by Mahmoud Abbas led to deadlock with Israel over future negotiations. Then came the kidnapping of three Israel youths from a bus stop on the West Bank; murdered in haste after being wrongly identified as Israeli soldiers. Tit-for-tat followed which has ultimately led to high level tensions in the Middle East with the Government of Binyamin Netanyahu amassing 40,000 troops who appear ready for a land invasion and incursion into the Gaza Strip.

The risk now is of Israel escalating the current difficulties into a much wider conflict with the threat, for example, to Middle Eastern oil lanes and production.

  • Iran nuclear talks

The July 20 deadline set for Iran to relinquish its nuclear ambitions fast approaches.

Despite some rather conciliatory language from President Rouhani of Iran, intelligence suggests little ground has been given on vital issues such as reducing the numbers of centrifuges and ending experiments with intercontinental ballistic missiles.

The US tilt at diplomacy with Iran has been met with heavy resistance in Congress. President Obama has been finding it hard to persuade Capitol Hill to ease the financial and economic sanctions that brought Tehran to the bargaining table in Geneva.

Western oil and banking interests are champing at the bit for an end to sanctions that could re-open Iran as a lucrative market.

  • Ukraine-Russia

Flashpoints continue on the borderlands of Western Europe. President Putin shows no signs of backing down from his efforts to infiltrate and recolonize Russian speaking enclaves in Eastern Ukraine.

The so-called ‘Putin doctrine’ – the idea that Moscow is planning to retake areas of vital Russian interest reaching into the Baltics – is almost certainly a myth because that would mean directly confronting NATO.

But the threat to gas supplies following cut-offs to Ukraine is a clear and present danger that will become worse as time moves on.

The crisis already has led to a Russian pivot towards Asia in the shape of the Chinese natural gas deal in which London-based Glencore is involved in financing.

Creating a secure environment in Ukraine, in which Western assistance is co-ordinated by the IMF (where monies can be released), is proving extraordinarily difficult to enact.

  • South and West China Seas

Many strategic experts see this as the theatre for the next great strategic rivalry with China and the US – that has moved much of its navy into Pacific waters – eventually clashing.

At present the dispute is manifesting itself in proxy stand-offs between Japan and China and Vietnam and China.

There are overlapping claims to islands such as Senkaku in the Okinawa Sea that are claimed by both China and Japan.

Similarly, South Korea and Japan have clashed following large scale Korean naval operations in the region.

There are fears that a collision of war ships, an attempt to run blockades or guns fired in error could provoke an all-out war.

The tensions, serious as they are, could be unexpectedly good news for BAE Systems and other defence firms as surplus Asian nations rebuild their rundown defences.

Nevertheless, a conflict in the region – the locomotive of manufacturing output – could be devastating for Western economies.

General Western Outlook

The immediate highest risks for Western economic output come from an interruption of oil supplies in the Middle East and gas supplies from Russia via the Ukraine.

However, America’s increased oil and gas fracking activities together with new gas finds – such as those off the coast of Israel – make the world a little less vulnerable than it was after the Yom Kippur war in 1973 and the first Iraq war of 1990-91.

More serious long-term threats come from the China seas where a battle for hegemony, not dissimilar to that which caused two world wars, looks to be underway.

Globalisation has produced rich rewards in terms of fast economic development, industrialisation and prosperity.

But it has also brought with it profound new strategic concerns that could damage confidence and crush output at a time when the West is still recovering from the financial and Eurozone crisis.

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Economic, European Union, Government, Politics, Russia, Society, Ukraine, United States

Ukraine and its future stability…

Intro: For Ukraine to have a stable future it is imperative that Russia, the European Union and the US work together in collaboration if that stability is to be assured

Despite all the tumult of recent weeks, the crisis in Ukraine is just at the beginning. Europe’s seventh most populous country will be without a fully-elected government until at least May, a situation that has arisen following its former president who was stripped of his power and who has been on the run since being forced out. It is believed Viktor Yanukovych has found safe haven in Russia, Ukraine’s closest ally in the region.

The underlying mood appears to be one of score settling. Separatism in the east is stirring, especially in Crimea, which is predominately Russian by culture and history. Ukraine is strategically important for Moscow: the Russian’s maintain a major naval base at Sevastopol, allowing the Russian navy to deploy quickly into the Black Sea as the need arises.

Ukraine is broke, precipitated by the immediate origins of the crisis which was economic. The currency, the hryvnia, has depreciated by 12 per cent since the start of the year, and the public finances are teetering on the verge of collapse. According to the interim-government in Ukraine, one which is attempting to aid transition to a newly elected government, the country needs £21 billion between now and the end of 2015 simply to pay its bills. Mr Yanukovych is widely reported as having taken bribes in accepting Russian aid and membership of the Moscow sponsored Eurasian Union, rather than entering into trade deals and agreements with the EU.

The West needs to be careful in any vainglorious attempt of portraying or by assuming it has won following the overthrow of Mr Yanukovych. The geopolitics, best seen as a tug-of-war, is fraught with difficulties. For Ukraine to have a stable future it is imperative that Russia, the European Union and the US work together in collaboration if that stability is to be assured. The danger is that any one of these superpowers treats the country as the prize in a zero-sum game.

America’s approach has been cautious. President Obama has, thus far, shown no desire for a full-scale showdown with Moscow. But this attitude is shared by his European allies, too, as they strive to put together an economic rescue package in which Russia would ideally be involved. In reality, though, the real uncertainty surrounds how Moscow will react to the fate of its southern neighbour. Where culture and history are so closely interwoven, Russia is likely to be wary of any western driven agenda.

The initial response of the Kremlin to events in Kiev was one of ferocious outrage. Dmitry Medvedev, the Prime Minister, accused Europe of turning a blind eye to the dictatorial and ‘sometimes terrorist methods’ used by the new authorities to suppress dissent in eastern Ukraine – the area of the country which is particularly sympathetic to Russian ideals. Mr Medvedev has also declared that the opposition had seized power by an ‘armed mutiny’, a belief which could still lead to direct military action by Russia in the Crimea. A request by the Crimeans for Russian protection would be the pretext for the worst possible outcome.

However, since that outburst, the tone from Moscow has been more restrained. Earlier this week, Sergei Lavrov, the Russian Foreign Minister, indicated that the policy of ‘non-intervention’ would continue. He said, rather curiously, that it was in Moscow’s interests for Ukraine to be part of a ‘broad European family’. However, the Kremlin has an array of options of how it might influence events such as how it will control vital gas exports to all parts of the Ukraine.

Gauging how the crisis will end is no easy task. A form of partition is one possibility, but that can only happen if the considered consent is given by all interested parties. Demarcation along similar lines to the 1993 ‘velvet divorce’ between the Czech Republic and Slovakia is one model that might prove helpful if negotiators are looking for historical references in bringing about an ordered and peaceful outcome in Ukraine.

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European Union, Politics, Russia, Society, Ukraine

Ukraine, Russia and the wider issue of morality…

TUG OF WAR

Many Ukrainians are now so desperate to join the European Union that they are prepared to protest in ways not seen before in the country. They run the risk of brutality from President Viktor Yanukovych’s security forces, for whom the concept of community policing remains alien and an anathema. Mass anti-government protests in Ukraine have brought large swathes of the country to a standstill, largely prompted by Moscow’s strong-arm and bully-boy tactics aimed at halting Kiev’s attempts to improve the country’s trading ties with the EU. This fervour stems from a particular theory of Ukrainian nationhood, where many of its electorate believe the country should be an equal partner in the European Union, rather than remaining little more than a Russian satellite.

International opinion has, at times, questioned the morality of Russian decisions, such as that in 2009 when Moscow turned off the gas supplies to Ukraine in the middle of winter to dissuade it from forging closer ties with Brussels. The arrogance of Russian ambitions towards Ukraine could hardly have been laid barer. Continued threats over the continuity and supply of gas, as Russia continues to apply its power over Ukraine, underlies more cynical Russian ambitions. Mr Putin’s plan is for Ukraine to join Belarus and Kazakhstan in a political trading bloc to be known as the Eurasian Union.

For many Ukrainians, though, that is not only a poor substitute for the EU, but also an uncomfortable reminder of Ukraine’s position as a member of the Union of Soviet Socialist Republics.

Russia is seeking to capitalise on how Eurasian integration will likely generate increased interest from its other neighbours through the usual warm rhetoric of international diplomacy. But, in truth, the West would be right to assume a more menacing aspect to it. As Mr Putin is the dominant partner in this new Eurasian Union, it is worth examining and putting into perspective some of his recent comments and actions. For example, what of his attitude to the legitimate interests of other nations in the Arctic and his unnecessarily harsh treatment of those seeking to preserve the environment there? Russia is motivated by the rich new oil wells recently located in the Arctic and the huge benefits that exploration will bring to the Russian economy. Mr Putin’s rather indifferent attitude to human rights doesn’t bode well, either, for the Eurasian Union becoming a model template of tolerance and openness.

However, not all people in Ukraine are worried over Russia’s attempt to wrest control over its affairs. Many Ukrainians do support President Yanukovych’s decision to ditch his negotiations with the European Union and seem undisturbed about the record of human rights in their own country or in Russia.

The tragedy of Ukraine being forced to choose between traditions and that of regional power blocs is its nemesis. Geography dictates that fate, at least to some degree, is inevitable. Ethnic, economic and cultural ties do naturally tug in the opposite direction when a country is caught between two bigger powers. Yet, in all practicalities Ukraine should not have to make such a choice and would not need to if Russia would allow her to develop her links with Europe.

Conceivably, Ukraine could do that as well as being closely aligned to Russia. Ukraine should be allowed to maintain her trading and other relationships, but as part of a wider settlement between the EU on one hand and Russia, Kazakhstan and Belarus on the other.

Mr Putin’s stance between his own nation and that of his close neighbours is generally perceived and accepted as a zero-sum game – the EU’s gain, for instance, must be Russia’s loss. But persisting with such a position will leave Ukraine at best in a state of uncertainty or limbo, and at worst a target for permanent bullying.

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DURING last week’s annual state of the nation address, Vladimir Putin emphasised his belief that Russia takes a morally superior world-view to the West. It is hard to credit Mr Putin with that surprising claim considering the level of violence taking place on a daily basis in countries such as Syria and Ukraine.

Moscow’s staunch and unrelenting support for the dictatorial regime of Bashar al-Assad has been a prime reason why diplomatic efforts to stem the bloodshed have been thwarted in a raging civil war that has now claimed the lives of more than 100,000 people and displaced millions more.

Mr Putin claims that there is a clear moral compass behind his government’s domestic policies. But where is the evidence? Modern day Russia is a country where political opponents are killed or dispatched to Siberian labour camps, where gangsterism is rife, and where free speech is actively discouraged. Widespread and endemic corruption has persuaded Russian businessmen to flee the country in their droves to escape the constant threat of state-sponsored violence and extortion.

Mr Putin’s personal ambition of reviving Russia’s fortunes as a world power is a self-evident prophecy. He may well believe that, by resisting the tide of what he refers to as the West’s ‘non-traditional values’, his aspirations will be realised. In truth, so long as the Russian President remains intent on crushing political dissent at home and intimidating his enemies abroad, no one is going to be endeared to his sense of moral teaching.

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