I had been planning to write a piece on the Ukraine (with its revolution and all), but then I saw the following article on “Truth & Beauty […And Russian Finance].” I cannot equal this piece, so I will not try.
For that matter, few websites have been more uniquely adept at demystifying Russia, while remaining prescient in calling investable global macro trends. I very highly recommend that you add Truth & Beauty to your blog-roll and then remain patient as this site will make my leisurely publishing schedule seem rushed.
In any case, here’s the piece, please read it twice—then ignore your favorite Western media outlet’s coverage of the Ukraine. I have found almost all coverage of Russia to be highly biased by Western views of Putin—which is a big mistake for those looking to understand Russia.
For that matter, if you have a deeper interest in Russia, read the older issues of Truth & Beauty. Russia’s ability to impact the global macro world, will remain important to investors, yet it is one of the most misunderstood countries out there.
With that preamble out of the way, here is the article in full.
How do wars begin?
Wars begin when, first, politicians lie to journalists, then they believe what they read in the press!
Karl Kraus, 1912
The nationalist uprising in Kiev, at least in part stage-managed from Washington and Brussels with that accustomed mixture of arrogance and duplicity last seen in the build up to previous imperial exercises – from the invasion of Iraq and Libya to Saakashvilli’s disastrous attack on South Ossetia as encouraged by the Washington Neocons – is culminating in a crisis that will be felt far beyond the confines of Eastern Europe. It seems safe to assume that this will ultimately be seen as a Western own-goal of historic proportions, resulting in the partition of Ukraine, a split across the European continent, as well as cementing a new Russo-Chinese alliance to the detriment of the NATO countries.
The risks of miscalculation and uncontrolled reaction have been severely aggravated by “Pravda-on-the-Potomac” (d.b.a. The Washington Post) and other corporate-owned press organs which have actively sought to stir up war hysteria. With a few brave exceptions, Western media coverage has put out a single, unitary message – a fable of brave, freedom-loving Ukrainians striving to break the Russian yoke – while ignoring the numerous inconvenient truths: that Russians form the second largest ethnic and linguistic group in Ukraine, and that Yanukovich, as distasteful as he might be, remains the democratically-elected president of Ukraine – driven into exile by a violent opposition, funded from abroad and infiltrated by openly neo-fascist parties.
Carried away with a sense of triumphalism, among the first acts of the new regime was to revoke the laws granting linguistic equality to Russians and to announce the subservience of the Eastern regions to Kiev. Predictably, the Russian provinces of the Eastern moiety have appealed to Moscow for protection against the Banderite factions of Kiev (whose alignment with the Nazis – on whose behalf they perpetrated some of the worst savagery seen in WWII Ukraine, and for whom they continued to fight until 1949 – has not been forgotten in Crimea). Indeed, one encounters hardly a mention of the sentiments of the Ukrainian East in our famously “free and fair” press, which has abandoned any pretense of neutrality or objectivity, competing for the most outlandishly manipulated “human interest” stories; posting selected quotations from anti-Russian Ukrainians, they are simply airbrushing out the Slavic majority in the East, which has pleaded for Russian protection.
Once again, we watch as Western governments manipulate their tame media to create a virtual reality that subsequently goes almost totally unchallenged – at least until the failure of the policy becomes too obvious to ignore. Those countries now angrily condemning the “violation of international law” by Russia are the same ones who the week before last actively encouraged the violent overthrow of an elected Ukrainian government. While there is still little evidence of any Russian invasion (it is predominantly the Russian-speaking Crimean forces who have taken power in Crimea), US mercenary companies (Blackwater/Academi, Greystone) have been photographed supporting Right-wing forces in the West of the country, while US and EU diplomats have made little secret of their support for the insurgency.
Having nothing to fear from the US media, John Kerry can angrily fustigate countries for “invading other countries on trumped-up pretexts” without fear of ridicule – conveniently ignoring the fraudulent Iraqi WMD dossier, the invasions of Cambodia and Nicaragua kept secret from the US Congress, or indeed, dozens of other military interventions, covert or overt, on equally flimsy grounds. As Ukraine fractures, Washington is demanding the respect for international boundaries – a consideration politely ignored during the NATO operations in Kosovo; if Catalonia or Scotland can hold referenda to split from their respective countries, then the principle of self-determination has equal legitimacy.
Yes, the reader will argue, raw power remains the basis for international law – but then why not drop the hypocritical discourse and simply assert that they do it because they can do? And, especially, why does the press not challenge its own camp – rather than simply carry water for those in power?
Democracy, in the absence of a properly and objectively informed populace, and a political process that allows said public to effectively influence policy, is a sham. The mainstream media have been clearly complicit in the steady decline in the level of US political discourse – and with the series of disastrous policy errors resulting. Perhaps the best remaining hope is the rise of social media and of alternative media sources – internet blogs, RT Television, Telesud, etc. While, of course, these alternatives to the tame mainstream media have their own agendas too, they play a vital role by re-injecting a note of pluralism into a landscape which, given the ownership of mass media by corporate interests, would otherwise be totally monochromatic.
Ukraine Splinters as East meets West
As shown by the leaked tape of US Assistant Secretary Victoria Nuland talking with US Ambassador Pyatt, the Ukrainian uprising was openly stage-managed from Washington. What is most extraordinary about the notorious “Fuck the EU” tape, is not that she contemptuously dismisses Europe as unworthy of her time, but that it clearly enunciates Washington’s plan to dictate the composition of a new Ukrainian government, dismissing one of the most popular of Ukrainian politicians – Klitschko – as unsuitable; so much for their concern with “democracy”. Meanwhile, over the past three months, a never-ending stream of US and EU officials including Ashton, Nuland, Van Rompuy and McCain have all come to Kiev to support the violent demonstrations; the reader is invited to imagine how the US would have reacted to a series of visits by Russian politicians encouraging the Occupy movement to storm the State Department and burn the Senate building.
Like Czechoslovakia or Yugoslavia – artificial creations cobbled together in the wake of World Wars – there is in fact no “Ukrainian” nation; modern-day Ukraine is split more-or-less equally between Russian and Ukrainian linguistic groups, with 40% of the population ethnic Russian, speaking Russian at home, and moving freely back and forth across the border for reasons of family, work or study; President Yanukovich’s win in the last presidential elections confirms this inconvenient truth. Hailing from the Russian-speaking East of the country, he was elected by a majority of Ukrainians opposed to the Western-sponsored Orange coalition. Although Yanukovich proved to be a bumbling and corrupt fool, and clearly deserved to be voted out of office, he currently happens to be the lawfully elected president of Ukraine. Regular presidential elections were scheduled within 12 months, and it was by no means certain that he would lose – thus, the coup d’état.
The portrayal of Yanukovich as Putin’s puppet is a convenient fiction – in fact, Putin was well aware of Yanukovich’s incompetent thuggishness, but could do little to prevent his election; it is enough to see Mr Putin’s body language in the company of the Ukrainian President to sense his ill-disguised contempt. Putin’s preferred presidential candidate in the last election was, in fact, Orange Revolution heroine Yulia Tymoshenko – a famously corrupt billionaire oligarch known locally as the “gas princess”. Deeply pragmatic and concerned primarily with the economic interests of her own business faction, and despite some past frictions with Russia, she had always proved amenable to negotiated solutions and maintained reasonably friendly relations with Putin. Unfortunately, Tymoshenko was associated too closely with the abject failure of the Orange Revolution – which collapsed into public feuding between the various oligarchic factions against a background of growing economic distress; Viktor Yanukovich thus emerged triumphant in an election described as “free” by international observers.
It proved a short-lived victory. Given Ukraine’s increasingly dire economic situation, Yanukovich faced a series of equally-distasteful options: either 1. the politically catastrophic reforms demanded by the IMF, which would compound the already severe social distress; 2. accession to the Customs Union with Russia and Kazakhstan, which would expose his oligarchic faction to competition with the far more powerful Russian oligarchs; or, 3. signature of the free-trade agreement with the EU, which, given the extremely meager financial package on offer, would have decimated the weak, post-Soviet Ukrainian industrial fabric, no match for German exporters, reducing Ukraine to a third-world agricultural exporter dependent upon the West for its manufactured products.
The Phantom of Accession
A deeply impoverished country of 50 million, Ukraine is also one of the most energy-inefficient states on earth, requiring huge quantities of Russian gas for households and industry alike. Given the gaping current account deficit and an antiquated industrial plant entirely dependent on the Russian and Kazakh markets, it requires continual inflow of foreign capital to survive. With the EU struggling to integrate the far-smaller Eastern European accession states, while also propping up the bankrupt PIGS – Ukraine has slightly less chance of joining the EU than does even Turkey – i.e. precisely nil – Germany would never bankroll it.
Knowing this, and in an attempt to retain power, Yanukovich long sought to play off Europe, Russia and China against each other, hoping to gain enough from each to keep the others at bay – a three-way game of liars’ poker for which he signally lacked the requisite political skill. Early in his presidential term, he further antagonized Putin by jailing his defeated rival Tymoshenko on charges of abuse of power for having signed an unfavourable gas supply deal with Russia.
His Chinese initiatives left him almost empty-handed (although Beijing did provide $3bn in pre-export finance for agricultural products – for which it is now suing in international tribunals). Meanwhile, for several years he engaged in painstaking negotiations with Brussels for an EU “Association” Agreement, possibly as a scarecrow to frighten Russia into providing a more generous bailout package. Only this last initiative encountered some success – having rejected a humiliatingly low offer of financial assistance from Brussels, Yanukovich turned to Russia, which duly offered Ukraine a much-needed $15bn in financial aid, along with a 35% discount on its gas imports. That offer has now been superseded by events, leaving Ukraine on the brink of economic collapse and default.
Into the Maelstrom
Disappointed with the EU offer, Yanukovich delayed signing the Association Agreement and turned to Russia for assistance, this after having misled the Western Ukrainians into believing that they were about to be issued with EU passports. Large-scale demonstrations broke out in Kiev. While these were initially peaceful, as the neo-fascist right quickly gained a leading role in the movement, they became increasing violent, culminating in some 100 deaths, largely among the badly trained and ill-equipped riot police. It seems likely that Yanukovich could have prevailed, either by allowing the demonstrations to gradually die down in the cold Kiev winter, or by the sort of firm policing regularly seen in European countries facing violent protests. Instead, he fell squarely between two chairs, using just enough force to provoke the demonstrators – while allowing them to maintain their camps at Maidan Square and gradually acquire weaponry, as well as military training from their Polish and US advisers.
Yet, despite regular battles with the Berkut riot police, the situation on the ground reached a stalemate, with the Maidan coalition coming under severe time pressure to bring the crisis to a head before the end of the Sochi Winter Olympics – during which time Russia’s hands would presumably be tied. Indeed, from the first days of the Winter Games the Kiev riots suddenly turned violent – with live gunfire claiming an increasing number of victims on both sides. Finally, on the last days of the Games, otherwise-unidentified snipers began firing indiscriminately, killing scores of demonstrators and police alike.
Who were these snipers – and what did they seek to achieve? Perhaps some clarity is provided by the recently leaked tape of an intercepted phone call between Estonian Foreign Minister Urmas Paet and EU policy chief Catherine Ashton, the authenticity of which has been confirmed by the Foreign Ministry of Estonia (not a country otherwise suspected of pro-Russian sentiments). In this conversation, Mr Paet, having just returned from Ukraine, informed Ashton that during his trip to Kiev he had learned that the snipers who killed protestors and police alike had been paid for by the far-right faction of the EuroMaidan anti-government camp. What is perhaps most striking about the conversation is Ashton’s reaction – she was neither surprised nor did she seem at all put out: perfectly indifferent to the treachery of the faction the EU was backing, she appeared concerned only with political positioning. (It is best to listen to the original tapes rather than relying upon media spin – they are available on http://youtu.be/UiS8IxRXYfI or Google: Paet, Ashton, snipers, YouTube.)
Although an investigation has been called for, in the current political climate it is most unlikely that the truth will ever be known; support for Paet’s claims would be viewed as treachery by the heavily armed far-right factions in Kiev. In any event, the snipers clearly achieved their aim. As the violence climaxed and civil war threatened, rebuffed by Russia which refused his request for military assistance and under intense pressure from the US and the EU, Yanukovich signed an agreement promising a return to the 2004 constitution, set up a government of national reconciliation, and agreed to early presidential elections.
All was in vain. Encouraged by US backers who now smelled blood, and with the Ukrainian police demoralized by the government’s constant vacillation and in disorderly retreat, as Yanukovich fled Kiev an ad hoc government took power, with four ministries going to the neo-fascist parties.
As we go to press the Crimean parliament has seceded from Ukraine and has asked for incorporation into the Russian Federation – a referendum will be held on 16 March and anyone even vaguely familiar with Russian history will know how unlikely it is that Moscow will back down under pressure from the West. The fate of the other Russian-majority Ukrainian regions remains to be determined.
A Lose-Lose proposition
Three months ago Vladimir Putin declared that there was no reason to cast the fight for Ukraine as a winner-takes-all exercise; both Europe and Russia had legitimate interests and three-way negotiations were called for. Economic participation in the Customs Union and ties with the EU were not mutually exclusive. Given the political dysfunctionality of the EU, the moderate European states with a substantial economic and diplomatic stake in maintaining good relations with Russia, in particular Germany and Italy, were outmanoeuvred by hardline factions nostalgic for the certainties of the Cold War – European foreign policy was again hijacked by hardline Polish and Swedish diplomacy supported by Washington (see the leaked Nuland tapes).
Confronted with the spectre of immediate default, and unable to pay for vital imports, the new Ukrainian regime has requested an emergency aid package of $35bn – this essentially to cover debt service and to keep the lights on. Add to this an end to the discount on Russian gas and the loss of Russian export markets, and it quickly rises above $50 bn. Given the fact that Europe allowed Cyprus and Greece – members of both the EU and Eurozone – to default, it seems politically untenable to now provide massive financial support to Ukraine, especially since there is no indication that anything will stop the haemorrhage. Ukraine may be important for Europe, but it is not vital – Russia is the only country with sufficient skin in the game to be willing and able to provide meaningful support. Despite the triumphalist rhetoric, a Western-orientated Ukraine cut off from Russia is likely to more resemble Albania than Poland.
Unlike the United States, which has trivial trade flows with Russia, mostly in a direction favourable to itself, Germany has vital economic, political and energy relationships with Russia, and seeks to play a more constructive role – its freedom of action is seriously constrained by its alliance with Washington and participation in NATO. With the de-facto partition of Ukraine now established beyond any reasonable doubt, and with the Western press engaged in a campaign of outright defamation, economic guerrilla warfare will ensue: US-based banks are being pressured to cut lending, Russian accounts will be closed, joint projects will be frozen. Russia will likely retaliate by closing off the Northern Corridor through which the US supplies its forces in Afghanistan, seriously disrupting American attempts at exiting its most recent quagmire, as well as by obstructing US initiatives in the United Nations.
While US sanctions will be painful, it should be borne in mind that Beijing is currently Russia’s largest trading partner and main source of external finance; cooperation in the energy, financial and diplomatic spheres will be increased to the benefit of China. Given the contempt with which Russian interests are treated by the West, Putin is left little choice but to reset Russia’s alignment, not in his preferred position as a bridge between Asia and Europe, but as a part of the new Chinese geopolitical bloc. Russian military technology and diplomatic support will prove invaluable to China as she extends her influence in the Pacific basin.
Defeat – Snatched from the Jaws of Victory
The Ukrainian Putsch will prove a tactical victory but a strategic defeat. Even a cursory glance at Russian history suggests that the West is repeating the errors of Napoleon and Hitler – Russians are idealists, and there is simply no amount of pain that will force them to concede when they are convinced of the rightness of their cause; negotiation would have been a far more productive option. Crimea will certainly secede and rejoin Russia, from which it was arbitrarily separated by Khrushchev with his 1954 decree gifting it to the Ukrainian Soviet Socialist Republic. This redrawing of maps will create a break with the West that will not be easily bridged.
Despite some obfuscation in the media, Beijing’s position is crystal clear: In a recent policy statement, Xinhua, seen as the official organ of the Chinese Government, wrote:
“… Shortly afterwards, Russia struck back. Now, with Russian military personnel deployed in eastern Ukraine to protect Russia’s legitimate interests and pro-Russian regions clamoring for secession from Kiev, Ukraine is teetering on the brink of total chaos and disintegration.”
The Foreign Ministry of India has opined similarly. Mr Kerry’s statement that no other country supports Russia is demonstrably false.
Future historians will no doubt puzzle long and hard over the extraordinary incompetence of Western diplomacy in the decades following the fall of the USSR. Rather than seeking to draw Russia into a community of equals, the old, Cold-War reflexes proved irresistible – Western triumphalism has sown the seeds of the next crisis. A fundamentally conservative power, Russia in fact threatens no one – with the threat to the preeminence of the Atlantic Alliances coming from another quarter altogether: China, a rising power an order of magnitude, more populous and far more dynamic than Russia, and which now seeks to assert her preeminent global role. Rich in all the resources that China requires – and with a powerful nuclear arsenal and diplomatic heft – Russia constitutes an ideal ally for Beijing.
Given the historical misunderstandings and mutual suspicion between the two giants as late as the mid-1990s, an alliance between the Bear and the Dragon was an avoidable nightmare for the West, for which it will prove endlessly troublesome. When today’s Neocons sneer at Russia as a spent force, they are merely repeating the errors repeatedly committed with disastrous consequences by Western powers since the 18thCentury – and for the West to have driven Russia into the arms of China was utter folly.