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Russia’s invasion of Ukraine: a tragedy foretold?  

There are, as Ronald Suny points out, two contending narratives on the brutal Russian invasion of Ukraine and the humanitarian catastrophe that it has created. The dominant version familiar to many in the West is that Ukraine is the hapless victim, and perhaps the first of many, of Russian neo-imperialism. The architect of neo-imperial intent is Vladimir Putin. Such a narrative is enunciated as a morality play, with a cast of characters that range across victims, villains, and heroes. It is a story in which the victim, a morally righteous David (in the form of President Zelensky of Ukraine), is pitted against a vile and villainous Goliath (manifested in the Russian President Putin). US-led Western heroes of NATO are aiding and abetting David with weaponry, financial assistance, moral support, UN-led condemnations, and crippling sanctions on Russia. They are protecting liberal democracy in Ukraine in particular and East Europe in general. They are defending a ‘rules-based’ global order.  

https://www.britannica.com/biography/Goliath-biblical-figure

At the same time, the US and its Western allies are exercising restraint because they are ruling out any attempt to engage in a direct confrontation with a nuclear-armed Russia. The expectation is that this strategy will pay off as Russia concedes defeat and decides to end its invasion of Ukraine. Any attempt to seek a negotiated settlement with Russia is seen as appeasement which will only embolden Putin. It will entail a betrayal of the aspirations of the Ukrainian people to remain a sovereign nation and embrace the liberal democratic West through eventual EU and NATO membership. 

The alternative view is that the perfidious Russian invasion of Ukraine is a tragedy foretold, especially by foreign policy experts and scholars of international relations in the US. Its roots lie in egregious errors of US foreign policy, and it has to do with NATO.

It was under President Bill Clinton that the project to expand NATO ‘eastward’, that is, to incorporate the ex-Soviet Republics in Eastern Europe, gathered pace. Bill Clinton and his cheerleaders celebrated such expansion. Then-Senator Joe Biden played a pivotal role in this cheerleading exercise proclaiming that ’50 years of peace’ was within the grasp of humanity. Much more knowledgeable observers were alarmed.  

https://www.nato.int/cps/en/natohq/topics_110496.htm

On June 26, 1997, a group of 50 prominent US foreign policy experts that ‘..included former senators, retired military officers, diplomats, and academicians, sent an open letter to President Clinton outlining their opposition to NATO expansion’. They considered a ‘…US-led effort to expand NATO (to the former Soviet Republics) ‘ as a ‘…policy error of historic proportions’. They highlighted the fact that ‘In Russia, NATO expansion…continues to be opposed across the entire political spectrum’ which will ‘…bring the Russians to question the entire post-Cold War settlement’. They proceeded to argue that Russia, struggling to recover from the political and economic calamity of the dissolution of the Soviet Union, ‘…does not now pose a threat to its western neighbours and the nations of Central and Eastern Europe are not in danger’. This warning was duly ignored and the US Senate ratified NATO expansion starting with Poland, Hungary, and the Czech Republic in April 1998. 

In the same year, in an interview with Thomas Friedman of the New York Times, the late George Kenen, widely regarded as the doyen of the US foreign policy establishment, and the architect of the ‘containment strategy’ pursued by the West during the Cold War with the former Soviet Union, observed:  

‘I think it is the beginning of a new cold war. I think the Russians will gradually react quite adversely and it will affect their policies. I think it is a tragic mistake. There was no reason for this whatsoever. No one was threatening anybody else. This expansion would make the Founding Fathers of this country turn over in their graves. We have signed up to protect a whole series of countries, even though we have neither the resources nor the intention to do so in any serious way. [NATO expansion] was simply a light-hearted action by a Senate that has no real interest in foreign affairs.’ 

https://www.britannica.com/biography/George-F-Kennan

In 2007, Vladimir Putin gave a much-noted speech at the Munich Security Conference (MSC) where he expressed his clear disapproval of a US-led ‘unipolar model’ that emerged after the end of the Cold War proclaiming that ‘I consider that the unipolar model is not only unacceptable but also impossible in today’s world’. Most importantly, he observed:  

‘NATO expansion … represents a serious provocation that reduces the level of mutual trust. And we have the right to ask: against whom is this expansion intended? And what happened to the assurances our western partners made after the dissolution of the Warsaw Pact? Where are those declarations today?’  

https://blogs.prio.org/2017/02/the-munich-security-conference-focuses-on-russia-and-reflects-on-putins-speech-10-years-ago/

Yet, in April 2008, the US and its NATO allies welcomed Georgia and Ukraine to be members of NATO, although when it was likely to happen remained unspecified. The irony is that, as Stephen Walt points out, Ukraine was a non-aligned country until then.  

https://www.gettyimages.ae/detail/news-photo/summit-2008-in-bucharest-romania-on-april-03-2008-news-photo/113957252

One could argue that Russia’s response to the ‘serious provocation’ (Putin’s words as uttered in 2007 – see above) of NATO expansion entailed the use of military force and the use of pro-Russian proxies to protect its security concerns. The Russo-Georgian war of 2008 is consistent with this interpretation. The annexation of Crimea in 2014 and a grinding conflict in Eastern Ukraine led by pro-Russian separatists might be seen as responses to the so-called Maidan revolution that led to the ouster of a pro-Russian Ukrainian President. Sadly, in this contentious affair, the US was not an innocent bystander. As Ted Galen Carpenter notes, US politicians openly aided and abetted the progenitors of the Maidan revolution in which unsavoury far-right political forces played an important role. 

Those who support the view that NATO’s reckless eastward expansion and its offer to incorporate Ukraine as a member of NATO at some point in the future provoked Russian aggression also point out that the US would react in much the same way if faced with similar circumstances. Suppose Mexico was to seek a security alliance with Russia or China and allowed its territory to host foreign army bases. The US would react aggressively. This, Peter Beinart explains, would be a re-affirmation of the Monroe Doctrine formulated nearly 200 years ago in which the US states that it has the unique right to exercise its sphere of influence in its own hemisphere and any attempt by ‘foreign powers’ to tamper with this right will be perceived as ‘dangerous to its peace and security’. Hence, Putin’s 2007 proclamations appear to be a Russian version of the Monroe doctrine. 

It is impossible to prove the veracity of this interpretation of the historical context to the current tragedy that is unfolding in Ukraine today. It is entirely possible that Russia would have invaded Ukraine even in the absence of NATO enlargement. This counterfactual cannot be dismissed, but those who subscribe to it do not have a tangible solution other than seeking the comprehensive defeat of Putin’s Russia. Short of this seemingly unattainable goal, what is a way forward?  

Sanctions are certainly likely to cripple the Russian economy, while indirect military support to Ukraine would sustain this highly uneven conflict between David and Goliath. Despite sanctions, Russia will probably continue its brutal military interventions in Ukraine simply because sanctions, while causing a great deal of pain borne by ordinary people, do not lead to changes in the core strategy of a particular regime (think of Cuba, North Korea, Iran, Venezuela and similar examples). As the IMF has warned, the longer the crisis in Ukraine persists, the greater the adverse consequences on the global economy. This is primarily because of adverse energy and food price shocks caused by further disruptions to supply chains already reeling under the impact of COVID-19. The poor and vulnerable in parts of the world far removed from Ukraine are likely to bear the brunt of adverse price shocks.

Those who subscribe to the view that NATO’s eastward expansion is a central part of the narrative on the war in Ukraine suggest it ‘could really be ended with a diplomatic solution in which Russia withdraws its forces in exchange for Ukraine’s neutrality’ (Jeffrey Sachs). There are small, prosperous countries in Europe, such as Finland, that peacefully co-exist with Russia without being members of NATO. Henry Kissinger, perhaps the personification of the US foreign policy establishment and leading scholars of international relations – such as Stephen Walt, John Mearsheimer, and others – fully concur with this prescription of ‘Finlandization’ of Ukraine.

Micheal Mandelbaum, one of the 50 who raised formal objections to the NATO enlargement project in 1997, has wistfully reflected on an alternative scenario. ‘Imagine, he says, a different global configuration, with Russia aligned with rather than opposed to the United States’. Indeed. Imagine!

Durable global and regional peace is likely to happen when the US and its Western allies move away from treating Ukraine as a morality play in which they, and they alone, are the defenders of a rules-based international order in a multi-polar world. Will they have the humility to acknowledge that the NATO enlargement project has probably led to unintended, but tragic, consequences? Will they embark on the delicate task of persuading the current regime in Ukraine that its best future lies in being a non-aligned nation buttressed by mutual security guarantees from Russia and the US and its allies? Will the West, in cooperation with Russia, be prepared to offer a massive reconstruction package to enable Ukraine to move beyond the ruins of war? Only time will tell.

Profit? Yes! But Must be Clean

The Royal Commission Report into Misconduct in the Banking, Superannuation and Financial Services Industry will be released to the public this afternoon (4 February 2019). The Commission had already published an Interim Report in September 2018.

The Interim Report had hardly anything good to say about the industry. Rather, the Commission used the word “greed” to describe the industry’s behaviour and how the industry largely treated the ordinary customers. Otherwise, how can one explain fees charged for services not provided? Fees charged to dead people?

The Australian banking industry had been politically very successful for decades. In the post-GFC years, the industry used the excuse of  ‘rising costs of funds’ in international markets for raising their interest rates asynchronous to the RBA’s rate decisions. Nobody raised an eyebrow when the major four banks reported record profits year after year while still crying poor about rising costs of funds. The crux of the matter is the banking industry fell into a culture of profit at any cost and bank executives’ remunerations were linked to profit and revenue.  Thus, the bank executives in Australia all they cared for was whether they were contributing to the bank’s revenue and profit. Bank leaders did not care enough whether their employees were doing the right thing for their customers. If the bank management were thinking that they were more focused on creating shareholder wealth, shareholders thought differently.   ANZ, NAB,  and Westpac – all received a ‘first strike’  2018 under Australia’s ‘two strikes’ rule.  CBA  received a ‘first strike’ in 2016.

So, the bottom line is: yes, we want our banks to be profitable and financially strong. Yes, we need strong banks for a strong economy. But the profit must be clean.

Bangladesh and IMF

I reflect on the background of the recent request by the Bangladesh government to seek financial assistance from the IMF. As other South Asian countries – Sri Lanka and Pakistan – have sought support from the Fund under economic duress, there is a tendency to regard Bangladesh as a country in distress. I argue that this is not the case. Bangladesh appears to have sought support from the IMF as a precautionary move to safeguard its sustained macroeconomic success, despite being saddled with deeply entrenched microeconomic inefficiencies. Whether Bangladesh will take this new engagement with the IMF as an opportunity to craft an inclusive reform agenda remains to be seen.

Read more here….https://blogs.griffith.edu.au/asiainsights/bangladesh-seeks-support-from-the-imf-why-and-what-lies-ahead/

Economic consequences of the Russia-Ukraine war: A grim outlook

My recent blog for the Griffith Asia Institute draws on the latest evaluations by IMF, World Bank, and UN agencies. Ukraine is destroyed as a viable nation. Russia is expected to suffer its steepest recession since the early 1990s before a rather modest recovery in 2024. The economic reverberations of the war will be felt in Europe and the rest of the world.

Has the international community really turned against Russia?

Russia’s brutal invasion of Ukraine that began in late February 2022 has unleashed a humanitarian catastrophe. Early indications were that the international community turned decisively against Russia. This was reflected in the UN-led condemnations of the Russian invasion of Ukraine upheld by the majority of UN member countries.

The US and its NATO allies instituted a severe sanctions regime against Russia making it, as Al Jazeera puts it, ‘the most sanctioned country in the world’. It seems that the ‘international community’ no longer displays the apparent unity that was reflected in supporting UN resolutions against Russia.

Here is a summing up of the state of play with respect to the participation of countries in the sanctions regime. According to a tally maintained by Al Jazeera, 45  countries are involved in the sanctions regime: all 27 EU countries, other European countries, three Asian countries (Japan, Korea, Taiwan), the UK, USA, Canada, and antipodean outposts of the West – Australia and New Zealand.

See the very instructive map attached below.

There are 193 UN member states. Hence, the countries that have sanctioned Russia represent about 23% of UN membership.

When virtually all of Africa, and Asia are included plus South America, these regions did not mimic the sanctions regime of the USA and Europe. These regions represent more than 79% of the world’s population. So, the vast majority of the rest of the world outside the ‘West’ and some non-Western allies have not turned against Russia. They seem to be following a policy of non-alignment. They do not wish to be part of a ‘us vs them’ framework and succumb to the vicious Russophobia (as well as conspicuous Sinophobia) that is masquerading as the collective foreign policy of the West. There is a self-serving narrative that the Western leaders are dedicated to upholding a ‘rules-based’ international order against a rogue, nuclear-armed state. This self-indulgent view is not enticing the rest of the world to join the anti-Russia bandwagon. It might well be the beginning of a genuinely multipolar world.

Map of the sanctions regime against Russia

Source: ‘A picture is worth a thousand words’

India’s ‘inequality problem’

In a recent piece, Maitreesh Ghatak, Professor of economics at London School of Economics, reflects on India’s ‘inequality problem’. The graph above shows trends in Indian inequality (based on the income share of the top 1%) relative to its Asian peers, while the table reported below highlights the inexorable rise in income inequality based on different cohorts in India since the 1980s.

Ghatak, is, of course, not the only one worried about the rise in inequality in India. The widely noted World Inequality Report offers a dismal account of inequality in India. Cited below is its account of India.

Extreme income inequalities in India

…The top 10% and top 1% hold respectively 57% and 22% of total national income, the bottom 50% share has gone down to 13%. India stands out as a poor and very unequal country, with an affluent elite.

Income inequality in the long run: a historical high

Indian income inequality was very high under British colonial rule (1858-1947), with a top 10% income share around 50%. After independence, socialist-inspired five-year plans contributed to reducing this share to 35-40%. Since the mid- 1980s, deregulation and liberalization policies have led to one of the most extreme increases in income and wealth inequality observed in the world. While the top 1% has largely benefited from economic reforms, growth among low and middle-income groups has been relatively slow and poverty persists.

Wealth inequality

The bottom 50% own almost nothing…The middle class is also relatively poor …as compared with the top 10% and 1% who own respectively 65% of the total …and 33%

Gender inequality

Gender inequalities in India are very high. The female labor income share is equal to 18%. This is significantly lower than the average in Asia (21%, excluding China). This value is one of the lowest in the world, slightly higher than the average share in the Middle East (15%).

Oxfam has also released a report (‘Inequality Kills’) and notes that there are now more than140 billionaires in India, up from just over 100 in recent years. This group more than doubled its wealth during the pandemic …while 84% of Indian households experienced a decline in their income. There are now more than 46 million ‘new poor’  that emerged during the pandemic.

Labour market distress amidst rising inequality

These disturbing trends are occurring at a time when India is experiencing acute labour market distress – rising unemployment, declining labour force participation rate, falling real wages. According to media reports, in recent days one has probably witnessed India’s ‘first large-scale unemployment riots’.

Protests against lack of jobs….

Students protest against unemployment at the Banaras Hindu University in Varanasi Thursday | Photo: ANI

Government response

How is the government reacting to these challenges? The latest budget has indicated very little by way of tackling both rising inequality and emerging labour market distress.The concern is that the government is much more concerned about enacting its majoritarian agenda rather than dealing with deep-seated economic problems. Whether this mindset will change depends upon how the current government fares in the 2024 elections.