Russia’s European Goodbye
The Ukraine conflict in terms of its unexpected suddenness and violence was not generally anticipated at the beginning of the year. What many hoped for was a gradual recovery from Covid and the beginning so of a resurgence to economic growth and stability. Right now, 2022 is shaping up to be even worse than the two 2020/21 pandemic years.
Hard questions as to why this has happened need to be asked. Hard analysis of what will happen next – not necessarily popular – needs to be discussed. In this article we ask some of these questions.
Western Media Rules Global Thinking
An interesting angle to the Ukraine conflict in particular has been the coming together of the West’s media en bloc against Russia, with very little detailed analysis. Rhetoric has been exclusively anti-Moscow (and partially anti anybody who take an opposing view, including China). That has extended not just from anger at Putin but to Russians everywhere. Oligarchs may be selfish, and greedy, but they made their money under Russian laws. The sanctions upon to take away the trappings of wealth – without due process – themselves seem legally dubious, even if the average man in the street occasionally likes to see those on pedestals taken down (think: Harry & Megan). The deliberate intrusion into the personal politics of Russian artists – or face dismissal or condemnation are more the arena of the rabble than considered debate on individual rights. The hatred whipped up has been enormous – on both sides.
Western media has undoubtedly won the ‘Big Brother’ award of media influence upon the masses. The telling absence of alternative views and discussions should be a warning. The telling society acceptance that whatever Western media suggests is true is in fact a damnation.
History too has been abused in the media, with a preferred storyline of Ukraine being a specific sovereign identity and culture separate to that of Russia. That is being told as a complete story, whereas it is not. The original centre of ‘Kievian Rus’ as a concept was destroyed by the invading Mongols in the 13th century, where briefly what was then the Ukrainian region was a vassal state to Ogedei Khan, meaning taxes were paid to the ancient city of Karakoram, way out in the steppes of Central Asia.
Over the next 600 years, the Ukrainian area was contested, divided, and ruled by external powers, including the Polish–Lithuanian Commonwealth, the Austrian Empire, Austria-Hungary, the Turkish Ottoman Empire, and following Russian-Ottoman conflicts, annexed by Catherine the Great, the Russian Tsarina in the late 18th century. Russian direct influence over Ukraine, both under the Tsars, and the USSR, continued until the collapse of the Soviet Union in 1991. Ukraine, apart from a very short-lived period between 1917-22 has been a sovereign state for just over thirty years. This is why Russian President Putin has been heard to describe it at ‘not a real country’. Ukraine’s history, borders and rulers have constantly changed – for over 600 years.
While it remains true that Ukraine has adopted certain facets into its culture during that time, Russia’s experience has been very similar. It suits Western (and Ukrainian nationalist) agendas to promote the idea of a Ukrainian identity, but in reality the defining culture in the country for the past 229 years has been Russian. What hasn’t been mentioned is that in actual fact, the Ukraine conflict is far more akin to a civil war than a war between differing sovereign states. It is a throwback to the breakup of the Soviet Union in 1991, and a divisive wound that has now been picked open – with horrifying results.
Clearly, the current crop of EU politicians has lost the plot when it comes to dealing with Russia. There has been peace, even when the USSR collapsed no European battles were fought. What has happened since then has been a gradual whittling away of the larger EU perception by, largely, the smaller, ex-Soviet states, with Lithuania’s Foreign Minister chief among those whose use their position within the EU to loudly criticize anything not Western. Sanctions on China for Uyghur issues? Check. Noises about Russia using chemical weapons? Check.
Brussels has lost perception, with the traditional great, rather more experienced powers paying far too much attention to smaller states, and treating them with equal voting powers and political gravitas. This has changed the balance of relations with Russia and ultimately led to the Ukraine conflict.
It should never have got to this stage. EU politics and policies have completely failed when it comes to dealing with Moscow. So too, has the EU’s concept of itself. It has become arrogant, rather bloated, and unable to admit mistakes. (The author was once told by an EU official, in a discussion that took place in Beijing, that Brussels was ‘never wrong’). Yet clearly, there have been massive failings.
Quite apart from the now fully apparent lack of understanding between the EU and Moscow is the current train of thought – EU sanctions will cut Russia off, and in being cast adrift, Russia will change back to a more suitable direction. But will it?
Several academic and data driven analysis (including on this website here) appear to suggest that Russia, because of its new Asian trade ties, could absorb the impact of the West’s sanctions in as little as 3-4 years. Brussels, and European businesses seem to think that regime change will happen and a later re-engagement with Moscow (under a new, more pliable regime) will be ushered in. Business ties, some energy, and developing Russian market access will reemerge, phoenix like, from the flame of Kiev. Liz Truss, the British Foreign Secretary, said at the end of March that ‘sanctions could be lifted if Russia withdraws from Ukraine’ suggesting that the UK and possibly the EU are willing normal service, albeit with some restrictions, be resumed. There doesn’t appear to be any longer-term realization that a more likely scenario is that Russia has closed its door on the EU and Europe for good.
Sergey Lavrov, Russia’s Foreign Minister, has stated the opposite to Trusses comments ‘Russia will never trust Europe again.’ While that doesn’t explicitly rule out trade, his comments on any rapprochement between Moscow, Brussels and London seem rather less optimistic.
The Savagery Of War
Symptoms that this is so can be seen in the manner in which Russian forces have dealt with Ukraine. Civil wars are always the most brutal, and this one is no exception. Make no mistake, Ukraine is being totally trashed. A point being missed here is that Russia would not do so if it felt there was any way back to relations with the EU, or the West in general. Instead, it is making a point: ‘Mess with Russia and this is what happens’. It remains at this juncture uncertain whether Kiev will ultimately fall, and Ukraine re-enter Russia’s orbit, or whether Russia will withdraw, and leave the EU to pick up the pieces. Regardless of the rights and wrongs, Moscow already understands that there is no going back after this. It appears a point that the EU hasn’t fully understood. Russia’s trade with Brussels is completely dead, and it isn’t coming back.
Ukraine In Europe
There is also a parallel dimension between descriptions of Ukraine from Brussels as being ‘brothers’ and ‘the same as us’ and the harsh reality. Ukraine’s GDP and per capita income is the lowest in Europe (the per capita GDP is even lower than Belarus) while corruption levels, and mafia involvement within Government and business are at very high levels. According to the 2021 Global Corruption Index, Ukraine ranked at 122 out of 180 countries, and fell 32 places in the past year alone. Countries such as Albania, Kazakhstan, and Colombia, the heart of Latin American drug-smuggling, all ranked as less corrupt than Ukraine.
A measure of mafia involvement – as well as corruption – can also be measured in the murder rate per capita. Ukraine comes out at 6.18 out of every 1,000 population, meaning there is a higher risk of being bumped off in Ukraine than in Sudan, Angola, and Timor Leste amongst other world nations. Given the huge number of weapons imported into Ukraine by the West the past three months, it is a fair bet that figure will continue to deteriorate.
Neither the European Union, nor Western media have mentioned the possibility, but Ukraine could in fact be Putin’s parting gift. A Ukraine in the EU would probably do more to split the concept of a united European federation that anything else anti-EU supporters could manage.
What Next For Europe?
Much depends on the ultimate outcome of the Ukraine conflict, although one suspects the possibility of the Ukraine joining the EU will be much deferred. While the images being shown across Western media are undeniably horrific, ultimately one suspects cold hard logic will prevail. Ukraine will remain a buffer state, caught in a twilight zone of promises and threats. It is hard to say this, but nothing much has changed in its past 600 years. Zelensky may appear a hero to many, but it should still be recognized he has led his country into this situation.
The EU though has completely aligned itself to the United States. There is now no Russia to lend any semblance of trade and supply balance. Inexpensive consumer goods will still continue to come onto the market from Asia, but these will be more expensive as delivery costs – and risks – have just increased.
Energy and other goods, such as agricultural produce – and entertainment – will be sourced from the US. This will ultimately lead to higher, not lower living costs, while the loss of Russian culture – and much of its pro-European history and culture will be replaced by Americana such as Netflix and so on. The European identity will be slowly diminished. In the not small matter of trade, the EU needs to replace an export market worth €99 billion in 2021. These included machinery and equipment (€19.5 billion, 19.7%), motor vehicles (€8.95 billion, 9%), pharmaceuticals (€8.1 billion, 8.1%), electrical equipment and machinery (€7.57 billion, 7.6%), as well as plastics (€4.38 billion, 4.3%). In total EU trade terms, Russia represented just 5.8% of its total volume. Nonetheless, it is paradoxically the EU nations closest to Russia that will be impacted the most as they have the strongest trade ties, and ethnic, or pro-Russian populations. That despair of losing decades worth of trade built up could create social and certainly business bankruptcy problems down the line.
What Next For Russia?
Russia’s symbolic double headed eagle, one facing West, the other East, has perhaps irreversibly changed to both facing East. If correct, then Russian efforts will be towards developing these markets. As this article illustrates, Russia’s trade with the Eurasian Economic Union, China, and ASEAN has significantly increased over the past few years. From 2020 to 2021, Russian trade with the EAEU and China increased at rates in excess of 30%. If those two markets can be maintained at even half those rates, Russia will have completely absorbed the loss of its complete EU exports by 2025-26, while cities such as Vladivostok, Magadan, Blagoveshchensk, Ulan-Ude, Irkutsk and Omsk will grow in stature.
These are hard facts. Based on the assumptions that no regime change will occur in Russia – and given what could become a long-lasting animosity between Russia and Europe – EU businesses with strong Russian trade ties need to look for new markets – or invest in Joint Ventures in Russia itself, a phenomenon that occurred after the sanctions imposed after the annexation of Crimea. (To get around bans on various EU exports, some manufacturers moved instead to Russia to keep their businesses alive). Other markets likely to develop tastes for Russian consumables are in Azerbaijan, Iran, Central Asia and South and Southeast Asia, as well as parts of North Africa and Brazil.
The only certain take-away in this time of uncertainty is that supply chains are moving. For Europe, the sense is that the Russian market has now left and isn’t coming back. Adjustments need to be made to cater for these new, harsh, but very real European trade and investment traumas.
During these uncertain times, we must stress that our firm does not approve of the Ukraine conflict. We do not entertain business with sanctioned Russian companies or individuals. However, we are well aware of the new emerging supply chains, can advise on strategic analysis and new logistics corridors, and may assist in non-sanctioned areas. We can help, for example, Russian companies develop operations throughout Asia, including banking advisory services, and trade compliance issues, and have done since 1992.
We also provide financial and sanctions compliance services to foreign companies wishing to access Russia. Additionally, we offer market research and advisory services to foreign exporters interested in accessing Russia as the economy looks to replace Western-sourced products. For assistance, please email firstname.lastname@example.org or visit www.dezshira.com