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Kremlin Photo
A high-level EU meeting over Russia is to be held in Brussels. Prior to the meeting, US Secretary of State John Kerry has pressed for Russia to face toughened sanctions, unless it takes concrete steps to stop armed separatists in eastern Ukraine. European leaders, also, are expected to consider imposing more economic sanctions on Russia and to sign a free-trade accord with Ukraine.
Deadly fighting in eastern Ukraine must end “this week,” Ukraine’s new President Petro Poroshenko has pledged. He was speaking at talks involving an envoy from the Organisation for Security and Co-operation in Europe and Russia’s ambassador to Ukraine. Meanwhile, fighting has continued in and around the rebel-held city of Sloviasnk.
Associated Press
British Field Marshall Bernard Montgomery had three laws of war. One, never march on Moscow. Two, never get in a land war in Asia. And three, never march on Moscow. So why are the U.S., the European Union (EU), and NATO on the road to the Russian capital? And exactly what are they hoping to accomplish? Like all battlefields on the Eastern front, this one is complicated.
For beginners, there are multiple armies marching eastward, and they are not exactly on the same page. In military parlance that is called divided command, and it generally ends in debacle. In addition, a lot of their weapons are of doubtful quality and might even end up backfiring. And lastly, like all great crisis, there is a sticker price on this one that is liable to give even fire breathers pause.
Throughout the Ukraine crisis, European Union (EU) leaders have become more vocal about their interest in reducing Europe’s consumption of Russian natural gas.
Liquefied natural gas (LNG) tanker. Source: Bloomberg
As a result, Qatar — the world’s number-one provider of liquefied natural gas (LNG) — is well positioned to play a more influential role in Europe’s energy landscape. Although unlikely to replace Russia as Europe’s top natural gas provider, Qatar could assist in significantly decreasing the EU’s reliance on Russian energy resources while at the same time obtaining greater diplomatic leverage over European governments. Fortunately for the EU, Ukraine’s crisis did not erupt several years earlier. In 2006, 80 percent of Russia’s natural gas sales to the EU transited Ukraine. This was reduced to 50 percent by 2013 (two years after the Nord Stream pipeline came on line — connecting Vyborg, Russia to Sassnitz, Germany via the Baltic Sea).
In 2013, the EU and Russia began construction on the South Steam project, a planned gas pipeline connecting Russia to Bulgaria via the Black Sea, which would increase EU-Russia energy trade while bypassing Ukraine. However, the chilling of EU-Russia relations may jeopardise the South Stream project’s future. European firms involved in the project have reacted differently. While the CEO of Italy’s ENI called the project’s future “gloomy,” some Bulgarian and German firms have remained optimistic, as have their Russian partners. Naturally, each EU member faces unique geopolitical challenges and varying degrees of geographic proximity to alternative natural gas providers and corridors. National interest will therefore dictate how each participating European nation reacts to the project in the future.
Gazprom
The German energy giant RWE has begun to “reverse flow” supplies of gas from Europe back to Ukraine via Poland, a process first arranged in 2012, with an agreement to deliver up to 10 billion cubic metres of gas per year. The question for the Ukrainian interim government and state-owned energy firm Naftogaz is how this gas will be delivered, how soon, and whether it will be enough. Hungary has the capacity to deliver 5.5 billion cubic metres (bcm), Poland could deliver 1.5 bcm, and Romania could potentially provide 1.8 bcm capacity, but not before 2016-17 at the earliest.
Talks between Ukraine and Slovakia have renewed in an effort to tap into its capacity to deliver 9 bcm of gas, but the Slovak government and pipeline operator, Eustream, are anxious to ensure that feeding gas back to Ukraine does not breach its contracts with Russian state-owned energy giant Gazprom. Given that Ukraine imports around half of its annual 55 bcm of gas consumption, even with these new suppliers it will remain dependent on Russian gas.
Escalation of the Crimean conflict and the risk of an invasion by Russian troops further into Ukraine have raised a concern about international mechanisms of deterrence, economic sanctions being among them.
Secretary of State John Kerry and Russian Foreign Minister Sergey Lavrov in Paris, France
Although Brussels and Washington made rather harsh statements at the outset of the crisis, it is quite improbable that they will impose heavy sanctions on Moscow. This means that the international community lacks an adequate response to Russia. The Russian Federation is the third largest trading partner with the European Union (next to the US and China) with $417.4 billion in trade in 2013. Therefore economic sanctions could have an adverse effect on Europe. Considering the current state of several European economies, the results would be grave.
Russia is one of the world’s biggest oil producing countries and the world’s second largest oil exporter. It supplies most of its oil and gas to the European Union. The only way to affect the Russian economy and deter Putin would be to target Russia’s energy sector. The European Union would have to refuse to purchase Russian natural gas, which presently they are not be able to do. In 2013, Russia’s earnings from oil and natural gas exports amounted to $229 billion.
It set a trend, but the Crimean referendum has the discussion on separatism tittering away.
Rallies in Scotland, Crimea and Spain. Photos: David Moir, Baz Ratner and Gustau Nacarino
As ever, the narrative of the national compact, bound by mystical unity and statehood, powers the narrative, while separatist movements seek to draw parallels and sketch contrasts. Movements from as far as Catalonia in Spain and Scotland in the UK have taken heed of the referendum. The Spanish case is significant – Spain, along with four other European Union members, have not recognised Kosovo’s 2008 declaration of independence from Serbia. Crimea’s new information minister, Dmitry Polonsky, was happy to throw some fuel on the simmering flames of secession across Europe. “It’s the same situation as we will see in Scotland and then Catalonia. So Crimea is the first and we will be happy to share our experiences with them.”
Catalan officials have been on the defensive after the Crimean vote. The desire for independence there, they have argued, can hardly be compared to the heavy handed engineering that took place in Crimea. There was no case of Putin moving his forces into place before the force of the ballot. “The basic difference,” suggests Alfred Bosch, congressional deputy for the Catalan Republican Left party, “is that you can’t compare a process that’s about bullets with a process that’s about ballots. We don’t have any weapons here in Catalonia.” But there is, however, no love lost with Madrid, and the Crimean temptation, by way of comparison, remains strong.
It is important to understand the stakes and Russia’s determination to move forward in the Crimea.
Pro-Putin rally in Moscow. Eugeniy Biyatov/RIA Novosti
I think the West is gravely miscalculating Russia because Vladimir Putin views Ukraine as vital to its security. For the Russian Federation, an independent Ukraine is a source of extreme unease because it is an historical path of invasion, the soft underbelly of Russia. Ukraine is a place that armies can live off the harvests and stay warm in the depths of Russian winter. The world saw how mild it is by the Black Sea during the Sochi Olympics. Where else in Russia were temperatures balmy?
Ukraine is a place with a huge coastline – 2300 miles of it, 300 miles longer than America’s Atlantic coast. Invading armies can be supplied by sea quite easily. No other Russian region except Saint Petersburg and Vladivostok has this feature. Ukraine has many port facilities. It is where Russia’s main fleet is berthed. And Ukraine is the 3rd leading exporter of grain. When Europe overtly pulled Ukraine into its orbit, Russian unease became grim resolve. Russia cannot and will not allow Ukraine to escape its control and become part of Europe. To do so is, in Russian eyes, tantamount to national suicide.
After Russia’s President Putin sent his military into Ukraine in a clear violation of the country’s sovereignty, the White House released a statement that Russia now faces “greater political and economic isolation.” But how exactly would the United States enforce this?
Dmitry Medvedev at an opening of a natural gas pipeline. Source: Kremlin Press Office
The main method discussed in the news has been sanctioning Russia’s all-important energy sector. The problem is, many of America’s allies in Europe are heavily reliant on Russian gas and would be unwilling to accept any sanctions. Take Germany as an example. A whopping 40% of German gas comes from Russia. Without Europe, any potential bite in energy sanctions is significantly hampered.
This is what brings Iran into the picture. With 18% of the world’s proven gas reserves, Iran has the most proven natural gas reserves in the world. Iran already leads the world in the number of natural gas vehicles on the road, at about 3 million. This remarkable ranking is due to Iran’s realization that the country is overly-reliant on its oil sector after years of sanctions. At the same time, Tehran’s pollution problem is served well by having more natural gas vehicles on the road instead of gasoline powered ones.
A generation ago the Chicago Boys and their financial supporters applauded General Pinochet’s anti-labor Chile as a success story, thanks mainly to its transformation of their Social Security into Employee Stock Ownership Plans (ESOPs) that almost universally were looted by the employer grupos by the end of the 1970s.
Street in Riga, Latvia. Photo: Pablo Pecora
In the last decade, the Bush administration, seeking a Trojan Horse to privatize Social Security in the United States, applauded Chile’s disastrous privatization of pension accounts (turning many over to US financial institutions) even as that nation’s voters rejected the Pinochetistas largely out of anger at the vast pension rip-off by high finance.
Today’s most highly celebrated anti-labor success story is Latvia. Latvia is portrayed as the country where labor did not fight back, but simply emigrated politely and quietly. No general strikes, nor destruction of private property or violence, Latvia is presented as a country where labor had the good sense to not make a fuss when faced with austerity. Latvians gave up protest and simply began voting with their backsides (emigration) as the economy shrank, wage levels were scaled down, and where tax burdens remained decidedly on the backs of labor, even though recent token efforts have been made to increase taxes on real estate. The World Bank applauds Latvia and its Baltic neighbors by placing them high on its list of “business friendly” economies, even though at times scolding their social regimes as even too harsh for the Victorian tastes of the international financial institutions.
The predominant narrative about Russia and China’s relationship is one of a cash-strapped energy rich country meeting the needs of a cash-ready energy hungry country.
Vladimir Putin with Hu Jintao in Beijing, China. Source: Kremlin Press Office
China is the largest energy consumer in the world, and Russia, hoping to diversify its energy export market away from Europe, has been more than happy to satisfy Beijing’s needs. As mutually beneficial as this relationship may seem, however, there have been signs that both countries are looking over the other’s shoulders at new potential partners.
The evolving energy relationship between Russia and China has brought into sharp relief a number of their security issues. For China, stability is found in securing a variety of steady and reliable energy supplies for its voracious economy. And for Russia, a more secure future of it oil and gas market is to expand energy sales into East Asia, away from its traditional and often problematic European market.
Russia has recently emerged as an important ally of the United States. Not only does the United States need Russian assistance in dealing with uncooperative states and in a supporting role in Afghanistan, but Europe is also finding Russian cooperation to be extremely useful. As the United States and NATO seek Russian assistance in several global regions, these states and institutions are recognizing that Moscow is no longer as dependent on their support as it once was.
President Obama talks with Dmitry Medvedev in France. Pete Souza/White House
However, these states and institutions are learning that relying on Russian assistance around the globe does have a price. For example, due to Russian objections, the United States canceled its land-based missile defense system in Poland and the Czech Republic, in favor of a sea-based system. Europe is paying more for natural gas from Russia, and in some cases access to natural gas is limited in the wake of payment disputes between Russia’s Gazprom and Ukraine.
Since 1945, Russia has been an important global player, due to its immense size, nuclear arsenal and permanent membership on the U.N. Security Council. While Russia endured severe growing pains following the collapse of the Soviet Union, it has since rebounded; and, in some situations, directly challenges the supremacy of the United States and NATO. Failed economic transition, along with the weight of IMF and World Bank loans, created the stage for a structural economic policy implemented in the 1990s by Boris Yeltsin, which involved the state selling off managing shares or whole industries, in order to add liquidity to the Russian economy. This policy had far-reaching ramifications. The oligarchs gobbled up nearly all state industries.
How to Rein in Putin
Sebastian Derungs
Last week, the Obama administration yet again imposed fresh sanctions on Russia. This time it targeted seventeen Russian institutions and seven individuals, two of whom are known to be from Russian President Vladimir Putin’s inner circle. Nonetheless, many Russia-watchers believe this latest round of punitive measures fails to match the escalating rhetoric of the White House. President Obama, however, signaled that there is room to maneuver should the Putin regime fall short of the universal expectation to leave Ukraine alone. Yet, the question remains: will this sanction regime effectively deter Putin?
It does not appear promising. Rather, it can backfire and therefore put U.S. President Barack Obama in a conundrum. Vladimir V. Putin, a former KGB agent who is obsessed with reclaiming Russia’s rightful niche in the post-Soviet unipolar world, has pursued a revisionist policy since he assumed power on New Year’s Eve, 2000. As a result, Putin has been able to solidify mother Russia’s image, in the global political landscape. Syria, for example, is a latest success of team Putin’s relentless effort in this regard. At the eleventh hour, Moscow’s chief diplomat, Sergei Lavrov, tabled the proposal to get rid of Syria’s chemical weapons in order to bypass an imminent American air strike on Syrian military installations. Putin checkmated Obama’s war plan so deftly that its ripple effects soured the U.S. friendship with Saudi Arabia. The Obama administration is still trying to mend the troubled relationship with the Saudis.
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