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No Longer Quiet On The Eastern Front (Part 3)

Submitted by Kevin Virgil of Emerging Frontiers,

This is the final installment in a three-part series that explores the ongoing economic standoff in Greece and the Ukrainian civil war, and how these events are converging to launch what will soon become known as the Second Cold War.  - By Kevin Virgil, CEO of Emerging Frontiers

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Writing a short series of articles about geopolitics carries some risks - namely, that current events can unfold faster than I can hit the ‘send’ button on my next edition.  It appears that I am releasing this missive in the nick of time, as the coming days promise more dramatic developments in the Greek economic crisis and, of particular interest, that country’s growing closeness with Russia.

Let us quickly review what has been covered thus far in this series.  In part one, we focused on economic tensions between the European Union and Greece, and how the past five years of austerity and hardship may compel the new Greek government to seek stronger ties with RussiaPart two reviewed last year's disintegration of Ukraine, and the chain of events that sparked its ongoing civil war.

Civil unrest in Kiev.  Photo courtesy: The Times of London

In this final segment, we will attempt to view both of these conflicts from the Russian perspective, and to provide some insight into (if not a defense of) the Greek point of view.  I do not consider myself to be a “Kremlinologist”, or even an expert on Russian political affairs.  That being said, I do believe that I can offer a relatively informed perspective that comes from living in both Athens and Moscow over the past ten years, at times when both countries were facing economic crises.  I also believe that mainstream Western media outlets have thoroughly and utterly failed in their duty to provide a balanced perspective on the causes behind the growing chasm between Russia and the West.

We will begin with a look at the Russian point of view on Ukraine, and then shift our focus back to Greece in an effort to better understand what both Athens and Moscow stand to gain from the perception of closer cooperation against the EU.  We will then quickly review other potential flashpoints along the EU’s eastern borders, and show how Europe is rapidly losing its appetite for US-led sanctions against Russia.  Finally, we will wrap up this adventure tour with an upcoming event that might provide a prophetic glimpse into Russia’s future sphere of influence.

With that in mind, let’s get started.  

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Any casual watcher of CNN or Sky News is familiar with the Western narrative on Ukraine’s last 12 months.  Here is a brief summary; for a bit of entertainment, try to imagine Wolf Blitzer’s droning voice reading this next paragraph from his teleprompter:

"The Ukrainian people, yearning for democracy in their troubled land, launched the spontaneous Maidan protests to bring down the evil Yanukovych regime.  The people succeeded, but Russian President Vladimir Putin exploited the ensuing chaos by waging a propaganda war in Crimea, and a military offensive in the separatist regions of Donetsk and Lugansk, to take back what Russia lost in the Soviet Union’s collapse.  And of course, this is only the first step in Putin’s grand plan to re-unite the former Soviet Union."

 

Contents of the previous paragraph resonate well with the American people, who are strangely comforted whenever their media does its best to scare them out of their wits.  Which, distressingly, is a constant and unrelenting process these days; I can’t watch the first ten minutes of my local six o’clock news without feeling the impulsive need to pack atropine injectors and distress beacons in my kids’ school lunches.  

Now let’s look at events from the Russian perspective. 

But first, let’s set some ground rules before we take this any further.  My intent for this column is neither to defend nor apologize for the Russian government, its foreign policy or its president. To that end, please suppress any indignant references you might want to make regarding the Boris Nemtsov assassination, Flight MH17Sergei Magnitsky, the invasion of Georgia, Moscow apartment bombings, Pussy Riot, Sochi’s twin toilets, or any other (alleged) Russian transgressions.  This is not a nomination essay for the Nobel Peace Prize, but a column about geopolitics.

With that out of the way, let’s move on...

 

Ukraine

It will most likely come as a surprise to Westerners, and particularly Americans, that Russia maintains that it was forced to take action in Ukraine in response to US provocations in Kiev.  For the past twenty years Moscow has watched the US attempt to lead NATO expansion into former Soviet satellites such as Ukraine and Georgia, an affront that Russia considers to be a serious threat.  

With regard to Crimea, Moscow maintains that the region - which houses an ethnic Russian majority - has repeatedly sought annexation from Russia since Soviet Premier Nikita Khrushchev bequeathed it to Ukraine in 1954.  The Crimean regional parliament has voted for and announced independence in 1992, again in 1994, and of course in 2014.  Yet Russia has ignored all previous requests for annexation - a fact which has been well-documented - and only took action in 2014 when the Yanukovych government was overthrown amidst credible evidence of foreign (US) influence. 

The Russians maintain that they have also exercised restraint with the breakaway regions of Donetsk and Lugansk in eastern Ukraine.  Even though both regions - which also contain significant Russian populations - announced separation from Ukraine in April and May 2014, Moscow has refused to officially recognize the sovereignty or independence of these regions even though many of Russia’s political elite are calling for that, and even for the annexation of those regions.  

Russia has always bitterly opposed any Ukrainian bid for membership in NATO.  Recall that in the previous segment of this series, we discussed how the US had pushed for accession of Georgia and Ukraine into NATO in 2008, but were rebuffed by European partners - notably France and Germany — who had absolutely no interest in deploying military forces into a possible confrontation with Russia.  At the time, tensions between the US and Russia were high (though not nearly as high as they are today) because the Bush administration was planning to emplace interceptor missiles in Poland and an advanced radar system in Poland.  Though these weapons were ostensibly installed to address the threat of long-range missile strikes from Iran, the Russian government clearly saw their installation as a direct threat to their security and sovereignty, and warned Kiev that any move to join NATO would be met with Russian missiles targeting Ukraine. 

In a joint Russian-Ukrainian news conference, held in Moscow in 2008, Putin stated that Russia would be forced to respond if Ukraine joined NATO.  "Russia could target its missile systems at Ukraine," he said. "Imagine that for a second. It's horrible to say and even horrible to think.”  That threat certainly gave pause to Ukraine’s attempts to court NATO, but even Putin’s rhetoric paled in comparison to the sledgehammer that Russia wields over Ukraine and ultimately most of continental Europe — namely, Gazprom.  Eighty percent of Russia’s natural gas supplies to Western Europe are transported along pipelines through Ukrainian territory, elevating Ukraine to the vaunted and much-desired status of ‘energy transit country’ with estimated revenues of nearly US$ 2 billion per year (equivalent to 3% of its national budget).  Consequently, neither Ukraine nor Western Europe have felt any particular need to poke the Russian bear any further on this issue, and even the US chose to drop plans for its ‘missile shield’ as part of the Obama administration’s much-vaunted (and, plainly by now, failed) “reset” with Russia.

US diplomat Victoria Nuland, providing snacks to anti-Yanukovych protestors in Kiev. Russian media exploited this image to further portray the US as the aggressor in Ukraine. Source: US Department of State

The Russian position is that the US has been the aggressor nation in Ukraine from the outset.  Russian media outlets have honed in on US attempts to influence and strengthen the Maidan protests and remove Yanukovych from power.  They have been particularly effective at painting US diplomatic envoy Victoria Nuland (featured in part two of this series) as the villain and chief architect of American covert influence in Ukraine, in order to insert a more Western-friendly government that has been seduced by the allure of NATO and the West.  From their perspective, movements to annex Crimea and deploy military forces in the Donbas region of Ukraine were necessary to stop the Kiev government’s offensive against ethnic Russians in those regions. 

From Moscow's perspective, US indignation over its actions in Ukraine is deeply hypocritical.  Russian news and propaganda outlets have very effectively portrayed US efforts to establish a missile shield, to implement economic sanctions, and the toppling of the Yanukovych government as a long-term containment strategy designed to limit Russia’s influence in eastern Europe.  Consequently, anti-American sentiment is higher in Russia today than it has been since the first Cold War.  Recent polls indicate that 87% of Russians distrust or carry negative opinions of the United States, and that as many as 62% believe that their country is ‘on the right track’.  

Most Russians see little reason to negotiate with, or even engage in dialogue with, the Obama Administration which seems to have little interest in Russia other than to marginalize the country or insult their leader.  A quick perusal of recent Western stories on Putin seems to confirm this (examples here, here and here); mainstream newspapers regularly portray Putin as a thuggish buffoon whose grip on power is at risk of collapsing any day now. 

I will point out the obvious here.  Love him or hate him, Vladimir Putin has outmaneuvered and outwitted the Obama Administration at nearly every turn since it first occupied the White House in 2009.  Whether in Libya (by refusing to support the United Nations coalition that destabilized that country), Syria (forcing the Americans to back down from planned military action, and driving a wedge between the UK and US), his refusal to extradite Edward Snowden, and now in Ukraine where that country has virtually disintegrated, Putin is proving to be the USA’s most accomplished adversary on the global geopolitical stage.

Joy and revelry amongst attendees at the 2013 G-8 conference. Source: Huffington Post/Getty Images

Over the past year I have begun to notice an unmistakable trend amongst both politicians and the general public: there are an increasing number of Putin admirers in Europe, and even in the US.  This clearly is not attributable to any newfound sympathy or support for Russia, or Putin’s geopolitical agenda.  Instead, I believe his rising popularity is driven by a grudging admiration that is naturally felt for a strong leader who gets things done and protects the interests of his people.  Nigel Farage, a UK politician and prominent Eurosceptic, caused a stir last year when, asked which current world leader he most admired, replied: "As an operator, but not as a human being, I would say Putin.”  

Nearly every country in Europe now has at least one political party that is broadly pro-Russian.  In Greece’s case, Syriza is now in power while Podemos, another left-wing party in Spain, has become a credible threat to Madrid’s political establishment even though it was only formed last year.  Close ties with Russia are not restricted to socialists; France’s National Front is making waves with a far-right nationalist agenda, and its leader Marine Le Pen is an admirer of Putin, stating that "I admire his cool head…because there is a cold war being waged against him by the EU at the behest of [the] United States, which is defending its own interests."  

Even Poland, probably the most hostile country toward Russian influence in the EU, now has a party whose primary stance is the condemnation of Western sanctions against Russia.  Zmiana (“change”) claims it will win as much as 12% of the popular vote ahead of general Polish elections later this year.  It is easy to marginalize such parties as fringe extremists – though some caution might be required here as that is exactly what the Spanish establishment said about Podemos a year ago.

A quick look at other events on the EU’s eastern borders further supports this point of view.  Throughout the region, governments are increasingly voicing skepticism on continued sanctions against Russia, and openly doubting US motives and intentions behind their use.  

Let’s take a quick tour of some other potential hotspots in the region:

Hungary

EU officials are objecting to a recent decision to award a €10 billion contract for construction of two nuclear reactors to Rosatom, the Russian state-owned company.  Hungarian President Viktor Orban, formerly an active anti-Soviet dissident in the 1990s, has recently begun to pursue closer relations with Russia.  Hungary has stopped short of objecting to EU and US sanctions against Moscow, but was the first EU country to invite Putin for a bilateral summit since Flight MH17 was shot down over Ukraine last year — a disaster for which the West blames Russia, and Russia denies.  Until recently Hungary had put the bidding process up for tender, but awarded the contract to Rosatom after Russia offered attractive financing terms for 80% of the project over 21 years.  US-Japanese construction giant Westinghouse was previously considered the front-runner and is lobbying aggressively with the EU to be awarded the contract.

Czech Republic

Last September Czech President Milos Zeman caused a diplomatic stir when he openly voiced opposition to EU and US sanctions against Russia, referred to the Ukrainian conflict as a “civil war” and refused to denounce Russia’s actions in that country.  Earlier last year he proclaimed that sanctions against Russia would work no better than those that had been enforced against Cuba for the past fifty years, and called for them to be dropped altogether. His predecessor Vaclav Klaus has gone even further, calling for the EU to be scrapped and stating that Western lies about Russia are ‘monstrous’.  

Events in Prague took an even more interesting turn last week when the US Ambassador told Czech television that it would be "awkward" should Zeman attend the upcoming Russian Victory Day celebrations in Moscow as the only head of state from an EU country.  (Which is untrue, since both Alexis Tsipras of Greece and Nicos Anastasiades of Cyprus also plan to attend — more on that a bit later).  Zeman is not known for his soft-spoken diplomacy, and has now barred the US ambassador from further access to Prague Castle.

Greece

Ah, Greece.  The country offers so much low-hanging fruit for geopolitical bloggers and late-night comedians that it’s impossible to resist talking about it again, even though the entire first installment of this series focused on their ongoing crisis.  We seem to be approaching an endgame and a potential ‘Grexit’; as of this writing the Greek government has made a €458m (US$ 503m) payment to the IMF that was due on 9 April.  However, with another €1.2 billion coming due within the next month it is increasingly difficult to see how Athens can meet both its foreign and domestic obligations.

Meanwhile, new Greek President Alexis Tsipras has just returned from a visit to Moscow where, on 8 April, he and Putin agreed to “restart and revive” bilateral relations in a calculated move that was surely intended to put the world on notice that their two countries are at least considering a collaboration against their mutual adversary in Brussels.

The Greek drachma: Athens printing presses may soon be brought back online.

Over the past few weeks rumors have increased that Greece and Russia may reach some sort of accord that provides the former with critical financial assistance, and the latter with increased leverage against the European Union.  The EU is due to debate and vote on continued Russian sanctions in June of this year, and renewal will require a unanimous vote from its 28-member bloc.  As already mentioned above, support for continued sanctions is increasingly shaky and both the Greeks and Russians have much to gain by using these much-hyped overtures as leverage against the West. 

It is increasingly clear that Tsipras has little to lose as a ‘Grexit’, or Greece’s exit from the Eurozone, becomes more likely.  Regardless of whether an exit is forced or voluntary, the result will almost certainly be a move away from Europe and toward Moscow’s sphere of influence.  Greece shares an Orthodox religious heritage with Russia and cultural ties are arguably stronger between the two countries than any affiliation that Greece shares with northern Europe.  Their increasingly adversarial relationships with the EU will only serve to strengthen that relationship.

As with Ukraine, when analyzing the Greek financial crisis it is important to contrast the Western narrative with the Greek point of view.  It is nearly impossible to defend Greece’s fiscal policies since joining the Euro; in hindsight, it was plainly a mistake to admit a country that had no chance of fulfilling the economic guidelines required for admission.  However, the EU’s strategy to resolve the crisis — to punish its people for the profligacy of its ruling class — is clearly doomed to failure.

Last week I came across the following column from the Daily Telegraph’s Ambrose Evans-Pritchard, which very effectively describes the flaws in the EU’s approach toward Greece:

"IMF minutes from 2010 confirm what Syriza has always argued: the country was already bankrupt and needed debt relief rather than new loans. This was overruled in order to save the euro and to save Europe’s banking system at a time when EMU had no defences against contagion"

 

Finance minister Yanis Varoufakis rightly calls the EU austerity plan ‘a cynical transfer of private losses from the banks’ books onto the shoulders of Greece’s most vulnerable citizens’...Marc Chandler, from Brown Brothers Harriman, says the liabilities incurred – pushing Greece’s debt to 180% of GDP - almost fit the definition of “odious debt” under international law. “The Greek people have not been bailed out. The economy has contracted by a quarter. With deflation, nominal growth has collapsed and continues to contract,” he said."

 

The Greeks know this. They have been living it for five years, victims of the worst slump endured by any industrial state in 80 years, and worse than European states in the Great Depression. The EMU creditors have yet to acknowledge in any way that Greece was sacrificed to save monetary union in the white heat of the crisis, and therefore that it merits a special duty of care. Once you start to see events through Greek eyes – rather than through the eyes of the north European media and the Brussels press corps - the drama takes on a different character."

Mr. Evans-Pritchard also points out that no developed country has ever defaulted on a payment to the IMF.  Given the arduous path being forced upon Greece by its EU creditors, I believe that the IMF’s ratio of ‘non-performing loans’ (banker-speak for ‘default’) is about to see an increase.

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The next twelve months are going to be a defining era for the European Union, which is dealing with several crises in parallel — a significant downward move in the euro’s value, its potential (and in my opinion, inevitable) eviction of a member country, and a pending decision on whether to further extend Russian sanctions.

Those first two problems are difficult enough to deal with, but it is the third that may ultimately drive a wedge between the US and the EU.  As mentioned in the second part of this series, the US is indifferent to Russian sanctions — trade with Russia comprises less than 0.3% of US GDP.  Yet Russia is normally a significant importer of EU agricultural goods — which Moscow banned in response to last year’s sanctions.  Loss of that market is proving catastrophic to several large European agricultural and industrial companies, leading many politicians - including the Italian foreign minister - to call for an end to sanctions.  This transatlantic divergence of economic interests may prove to be the ultimate undoing of America’s anti-Russian containment strategy.

I also believe that another factor may prove to have even more of an impact — namely, America’s plummeting reputation in foreign policy circles when it comes to hot air and broken promises.   Putting aside its incompetent and capricious foreign policy in the Middle East -

- the Obama Administration is making no friends in eastern Europe.  Take Ukraine, for example, where US Secretary of State John Kerry pledged to “stand by” the Ukrainian government even though less than half of the aid it promised last year has been delivered.  Instead of the aid promised, the Ukrainians received a speech from Kerry with a long list of platitudes and tough talk, but no commitment to action or clarity on when or whether promised aid will actually be delivered.  

“Trust me, Petro...when have we ever let our partners down?”  Source: Getty Images

European governments are increasingly employing ‘realpolitik' when it comes to their dealings with America, as evidenced by widespread interest in joining China’s new infrastructure investment bank despite strong US lobbying.  This new reality is also playing out in eastern Europe, where decision-makers are comparing historical US and NATO commitment against Putin’s resolve and track record.  

Given the past year’s events, it is perhaps not surprising that Europe’s eastern periphery is rapidly becoming more pragmatic in its dealings with Russia.

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The best way to wrap up this series does not involve further analysis of the past.  Instead, we should search for indicators that provide any insights for what the future holds with relations between Russia and the West.

One event worthy of a close look is the upcoming Victory Day celebrations in Moscow, as mentioned earlier.  This will be the 70th anniversary of the end of World War II, and the Russians - who absorbed more of the burden in defeating the Nazis than any other country - take the event seriously.  In past years the event has been well-attended by Western heads of state, to include US President George W. Bush and German Chancellor Angela Merkel.  This year, nearly all Western leaders will boycott the event - with the exceptions of Greece, Cyprus and the Czech Republic.  Twenty-six other heads of state are reportedly on the confirmed attendee list, to include Indian President Pranab Mukherjee, President Xi Jinping of China, and Kim Jong Un of North Korea.  The latter two are particularly interesting in light of Russia’s increasing focus toward the opening of new export markets and alliances in North Asia — which as I have previously commented, will see a greater economic transformation in the next twenty years than any other region on Earth.  On 9 May, the VIP reviewing stand in Red Square will provide a telling glimpse into Russia’s expanding sphere of influence.

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Less than three years ago US President Obama mocked his political opponent Mitt Romney for citing Russia as the USA’s primary geopolitical threat, stating The 1980s are now calling to ask for their foreign policy back. Because the Cold War has been over for 20 years.” 

Politicians are not known for issuing mea culpas, and this particular President is certainly not known for speaking with journalists who ask tough questions — but I would gladly buy a ticket to any studio broadcast today where the interviewer played that sound bite for the President and asked him whether he still believes that to be true.

Russia certainly has many flaws and weaknesses — some of the world’s worst demographic statistics, its “one-trick pony” export economy, and frequent hostility toward foreign investors — but its near-monopoly on natural gas supplies, nuclear arsenal and military force projection capabilities shall ensure that it retains a position of strength relative to the European Union for the foreseeable future.

If Western leaders want to contain a resurgent Russia and limit the damage of another Cold War, they would be well-advised to drop unhelpful rhetoric, seek an immediate end to anti-Russian sanctions, and adjust economic policies that are pushing periphery EU countries into Moscow's orbit. 

The Middle East’s ongoing descent into chaos and China’s impending ascendancy to the status of global superpower are just two of the many threats that the US, European Union and Russia all share.  Each of these issues should certainly occupy a higher position on their respective agendas than the breakup of Ukraine or the insolvency of Greece.  Leaders of all three governments would be well-advised to set aside their differences, or at least to prevent those differences from obstructing cooperation on more important issues.  Unlike its predecessor, the Second Cold War will not be bilateral.  Today’s world is far more chaotic, kinetic and dangerous than it was fifty years ago.