Deeper and Deeper ...
At the NATO summit last year, the West gave encouragement to Ukraine to join the Alliance. Little thought was given to the reaction of Moscow to such a potential tectonic shift in the balance of power in the East.
In November last year, the U.S. and Ukraine signed the Charter of Strategic Partnership. America affirmed Kyiv's right to pursue membership of NATO. It was a step too far for Putin.
We outlined last week, the importance of buffer states from the Black Sea to the Baltic, from Crimea to Kalingrad, to an increasingly threatened Mother Russia. For Putin, the Charter was indeed a step too far. Preparations immediately began for Russia's so-called "Special Military Operation" in Ukraine.
Ukraine has long held a special place in Putin's buffer zone. In 2007 at the Munich conference, Putin had made it clear, his speech was a rant against Ukraine ever joining NATO. In 2021 he wrote "Ukrainians and Russians are one people", never to be separated.
Let's face it, the Ukrainians have long held a special place in Mother Russia. Millions were allowed to die from starvation in the early 1930s as Stalin imposed his authoritarian, agrarian adventure, at the cost of so many innocent lives.
Putin believed war could be avoided simply by the show of force along the Ukrainian borders to the North, South and East. Zelensky's government would bow to the threat of invasion by such a great global power. Kyiv would reach an accommodation with Moscow to avoid large scale destruction. Putin's ring of steel would be guaranteed. His reputation inscribed in history along with Ivan the Terrible.
Special Thanks to Robert Service "The Two Blunders That Caused the Ukraine War" Interview with Tunku Varadarajan Wall Street Journal 5th March 2022.
The Great NATO miscalculation ...
Putin underestimated Zelensky. He seriously underestimated how the leaders of the "Free World" and NATO would react.
Perhaps it was an easy mistake to make. Putin had enjoyed four years of laissez-faire with Trump. The U.S. President had demonstrated his disdain for democracy and the admiration of President Putin. A President in power twenty years had a certain appeal, especially with the bonus of a little crony corruption on the side.
Trump had also demonstrated indifference to the NATO Alliance. He berated close allies with long over due debts to Uncle Sam. More votes were on offer at home from an aggressive stance with China. Trump was struggling with the Thucydides trap. The rise of Sparta ensured war with Athens was inevitable. So too it was said, the rise of China would lead to inevitable war in the South China Sea.
Joe Biden appeared to offer even less of a threat. Walk tall and carry a big stick. Biden struggled to walk tall carrying a walking stick. In Germany, the retirement of Angela Merkel would create a leadership vacuum. The Germans were hooked on Russian Gas. Nord Stream two would guarantee a permanent fix. The European Union had been dealt a serious blow with the abdication of Britain from the economic alliance. Putin would have been unimpressed by Defence Secretary Williamson's, now Sir Gavin Williamson's remarks that Russia should go away and shut up.
The Tanks Rolled over the Border
The Tanks Rolled over the Border and into the abyss. Zelensky held firm. The Ukrainian people defiant. The invasion stalled. The Russians upgraded the levels of civilian attacks and large scale destruction. It is like watching a 1930's news clip. The annexation of a sovereign state, millions of refugees feeling across Europe, a dictator unchallenged at home, the West prepares for war, the threat of nuclear detonation returns.
Sanctions imposed on Russia and the Oligarchs. Russian central bank assets frozen. Putin achieved what Trump could not. The Germans vowed to increase spending to meet the NATO commitment. Georgia and Moldova apply for EU membership. Sweden and Finland may join the alliance.
Higher inflation and lower growth in prospect. Oil trades at $120 dollars his morning. Commodity prices are soaring. Russian stock markets are collapsing. The Russian economy will be badly damaged in the process.
In our next update, we will try to pull together the forecasts for growth and inflation in the year ahead. Meanwhile the tragedy in Ukraine continues ...
The Saturday Economist
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