Joe Biden made it clear this week, NATO will not go to war with Russia to defend Ukraine. "We are going to provide more support but we will strive to prevent a direct clash [with Russian forces]."
He went on to say, direct confrontation would lead to World War Three, something we must strive to prevent. However, the US would defend every inch of territory of its NATO allies if attacked, no matter the consequences.
It was a clear evidence of the resolve of western allies to resist further Kremlin aggression. It's also confirmation, the West needs a little more time to prepare for conflict.
World War III is also something President Putin will strive to prevent. Putin knows this would be a war, which he could not win. The numbers just do not add up for Mother Russia.
In 2021 the IMF ranked the Russian economy as eleventh largest in the world, squeezed out of the ten by South Korea and Canada. A GDP estimate of $1.6 trillion dollars for the Russian economy, contrasts with a combined NATO GDP estimate of almost $45 trillion dollars.
In military spending, it is estimated the Russian economy spent some $48 billion dollars in 2021. That compares with an estimated $750 billion in the same year for Uncle Sam. Germany has now vowed to increase spending to over $80 billion. Combined NATO spending last year on military defense was over $1 trillion dollars. That's twenty to one out spend for the would be aggressor.
Ukraine is demonstrating just what can be achieved with a more modest $5 billion spend. The beleaguered country will continue to receive substantial support in funding and military supplies as the war drags on. Russian military has demonstrated the vulnerability of infantry and armed vehicles to drone and anti tank attacks. The importance or air superiority critical to support of ground forces. In Putin's world, tanks are used in World War III, as cavalry was initially employed in World War I, with US jets as escort.
EU leaders have announced their intention to collectively rearm and become autonomous in food, energy and military hardware in a Versailles declaration that described Russia’s war as “a tectonic shift in European history”.
Putin and Russia face a period of Moscow on ICE. Isolation, Containment and Exclusion. The Iron Curtain is closing, albeit with a gas leak for now. Slowly but surely the leaks will be plugged. More importantly, in the short term, the future of the people of Ukraine is in the balance.
We continue to be deeply shocked and saddened as the terrible events unfold ...
The Ukraine Battle Map ...
So how will events develop in Ukraine"" Putin has made it clear this is not a war, it's a "Special Military Operation". Foreign Minister, Sergey Lavrov, stated this week, "We did not attack Ukraine". Of course not, presumably it was more of a joint military exercise with close neighbours.
It was a process of invasion, annexation and installation of a puppet regime. The process has failed.
Lavrov also went on to say, if there is a World War III, it will be nuclear. Putin has made several threats of nuclear force in recent weeks. He would consider wielding atomic weapons if NATO forces got directly involved in defending Ukraine.
Russia run a similar playbook in 2014. As Putin invaded Crimea and eastern Ukraine’s Donbass region, he said, “Russia is one of the leading nuclear powers. It is best, not to mess with us.” Russian officials relayed similar threats to Western leaders. Russia did not put its nuclear forces on high alert. Putin later bragged that he almost did.
So how will this end? Annexation of Ukraine unlikely. Partition of Ukraine possible. The lines may be drawn between Kyiv and Odessa or East of the Dnipro River or a reversion to the "Status quo ante bellum". Ukraine independence assured, Moldova Sweden and Finland may then seek security with NATO.
The Cold War returns. Europe develops an alternative energy policy. Energy costs rise, food costs rise, metal costs rise. Inflation rises, growth slows, recession avoided, perhaps not for Putin. This will be the last in our trilogy on Putin. Next week we really will try to put some numbers on growth and inflation ...
Thanks for Reading ...
Don't miss our Monday Morning Markets update out on Monday. Markets steadied this week, European stocks rallied. Most moved into oversold territory. Hang Seng had a "buy in bundles" sign as markets fear the worst for China tech.
Gold slipped below $2,000, Oil Brent Crude closed at $111 dollars. Sterling slipped further against the Dollar.
Have a great weekend,
The Saturday Economist
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