Geopolitical considerations at the beginning of the year

by Bruno Bandulet*, Germany

When seeking to explain the Russian politics of foreign affairs and geopolitics in the era of Putin, one inevitably encounters two different versions. The first regards Russia as an aggressive power that wants to furl the European order as it was established after the fall of the Berlin Wall, and get back to what has been lost with the collapse of the Soviet Union. The other version is that Russia under Putin does not behave differently than any other great power including occasional violations of international law, that the leaders in Moscow are not mistaken in feeling encircled by the United States and NATO and that they essentially represent the national interests of a sovereign state. To anticipate the result of my analysis: I am convinced that the strategic offensive in the new East-West conflict proceeds from the United States, that the conflict was deliberately provoked by Washington and that Russia operates in a position of strategic defensive.

“The United States are a typical maritime power”

The actual balance of power is in contrast to the assertion that Russia was a dangerous aggressor. With an area of 17 million square kilometre, Russia is the largest country in the world and also a natural resources giant with the world’s largest natural gas reserves, and with thousands of nuclear warheads a nuclear power of the same calibre as the United States and also the strongest military power in Europe in terms of conventional weapons. Still, to risk a war against the United States would be suicidal. Military strength is always dependent on  economic strength. A simple calculation: in 2013, the Gross Domestic Product of the United States amounted to 16,800 billion dollars, the Russian GDP to 2,100 billion. As the share  for defense spending is at about 4.4 percent and more or less the same for both countries, the United States can accordingly afford an eight times larger defense budget. The United States are a typical maritime power with hundreds of military bases around the world, with an insurmountable strong Navy and with the ability to intervene militarily at any point. Russia is a typical land power, which lost its influence with the defeat in the cold war and had to retreat to its own territory. Russia is invincible just for geographical reasons; the United States are not even vulnerable.

“Such a real great Empire dissolving itself so quickly and so peacefully”

But have the Europeans got at least reason to be afraid of the Russians? The facts do not justify hysteria, which is obtrusively fuelled in particular by the German newspaper “Bild”. The annual economic output of 13,000 billion euro of the 28 EU States exceeds the Russian one many times over. Even the military expenses of the Europeans are significantly higher than those of the Russians: more than annually $ 200 billion versus 85 billion. Here the question arises why 505 million EU-Europeans have to be protected by 316 million Americans against 143 million Russians and what  the American military bases in Western and Eastern Europe are actually for.
The tale of Russia as the eternal aggressor is by no means new; it was undisputed especially in the era of Adenauer in Germany. At that time a book titled “The perpetual mobile” was published, which presented the entire Russian history as a history of violent expansion, interrupted only by occasional weakness. Adenauer himself had a high opinion of the book. Apparently this thesis has been refuted, as the Soviet Union paved the way for the reunification of Germany in the second last year of its existence – and when in 1990 it granted independence not only to the Eastern bloc, but also to large parts of its own territory including the Baltic States. Never before had such a great Empire dissolved itself so quickly and so peacefully. Realistically the Red Army could have retained its position in Germany and in the Eastern bloc for a few years more.

“Oligarchs plunder the state”

In return, US Secretary of State Baker assured the Russians that NATO would not move to the East. Gorbachev and after him, Yeltsin, who at the turn of the year 1991/92 dissolved the Soviet Union and took on the post of Russian President, became favorites of Western media. This probably, because in particular Yeltsin represented a country militarily powerless, economically ruined and non-influential in global politics – a  completely harmless Russia, apparently integrating comfortably into the West. For the Russians Yeltsin’s term and thus the entire 1990s turned into a nightmare. Privatization as recommended by Western consultants allowed a small group of oligarchs, as they were later called, to plunder the state and to amass billions of assets. The people became impoverished and pauperized, inflation galloped, the birth rate collapsed, the life expectancy of Russians sank rapidly, and on 17 August 1998, Russia was insolvent. However, it didn’t go that far to make the leaders in Moscow forget their geopolitical traditions and interests and give up at that stage of decline. When Poland, the Czech Republic and Hungary were taken on board the NATO in a first round of enlargement in 1999, there was quite some indignation by the Kremlin. Yet Yeltsin was too weak to oppose.

“The phenomenal comeback of Russia”

The tide turned when Yeltsin announced his resignation on 31 December 1999 and handed the duties over to Wladimir Putin, who had been Prime Minister since August 1999 which was compliant with the constitution. In March 2000, Putin was elected President of the Russian Federation with 52.9 percent of the votes. This phenomenal comeback of Russia would certainly not have been possible  without the rise of crude oil prices. End of 1998 the price of WTI was down to 10.65 dollars, until 2008 it climbed up to 147 dollars, and washed a lot of money in the state coffers which allowed the Russian renaissance. In the same period, the Russian stock market index RTS exploded from 38 to 2,498.
“The enemy is Moscow”, headlined the consistently pro-American “Neue Zürcher Zeitung” in its lead of 6 September 2014, but that Russia was no longer a hopeless case on its way to become a second Bangladesh, but it became again a mid-sized power with a reconditioned deployable army, a balanced budget, a government debt ratio of only 12 percent, foreign exchange and gold reserves at an amount of $ 470 billion and with a controllable Western foreign debt in spite of the sanctions. And there was a Russia that defined its interests self-confidently and increasingly without scruples  and that tried to enforce them.
We do not at all insinuate that Moscow took the Western sanctions lightly. The United States opened a financial and economic war against Russia, in which the Europeans were involved, like it or not. Washington is perhaps working towards the naive final goal to topple Putin and to replace him by a government willing to be led by the Americans. Responsible for this war in Washington is the “Office of terrorism and financial intelligence”, one of the 16 American intelligence agencies. For all of these the United States spend more money than Germany for its armed forces in total. It is administered by David S. Cohen, an Under Secretary of the Treasury, i.e. the Ministry of Finance.
The “Office of foreign assets control” is one of the subdivisions of this authority. There you can retrieve the list of sanctioned Russian individuals, banks, oil and gas companies. The effect of the list is due to the fact that American citizens acting against it are chargeable.  These sanctions are either taken over by the EU, or in case not, even non-American companies stick to them in anticipatory obedience, because they fear the revenge of Uncle Sam. That was for a long time the way  with the sanctions against Cuba and Iran, for example. The case of BNP Paribas is the most recent example of that kind of power abuse.

“The Saudis are driving the oil price down”

It would be particularly bad for the Russians if they were excluded from Swift, the clearing centre for international money transactions in Brussels. Iran has been excluded for years. This would make substantial parts of the international financial system inaccessible [for Russia]. Would the Europeans support this? So far, the sanctions are directed towards the Russian oil and gas industry and banks. Depending on the individual case, the financing of corporations on the foreign capital markets would be obstructed or restricted and additionally western oil corporations like Exxon or Royal Dutch might be prevented from contractual cooperation with Russian companies when exploring the ressources, especially in Siberia and the Arctic.
At the same time, the Saudis, America’s allies, are driving the oil price down. This probably was agreed on when Secretary of State Kerry visited the Saudis in September. The fundamentalist monarchy has its own agenda. It is harming its arch-rival Iran which requires an oil price of more than $100 per barrel. It is harming the Shia in Iraq, but also Russia whose diplomatic intervention has saved the Syrian ruler Assad – and possibly also Iran – from an American military strike.
It is estimated that Russia needs an oil price of $ 100 for a balanced budget. This fall it fell, based on the American oil grade WTI, below $ 80 because Saudi Arabia and Kuwait opened the tap. It is also true that oil production in the US, especially that of shale oil, requires relatively high prices for its profitability – maybe  some
$ 80 on the average. Also in the US, the pain barrier is close. It seems like this is currently taken into account because low oil prices are a powerful weapon in the conflict with Russia and also work as an economic stimulus package for the US economy. The question is just who will last longer. If next year the price of oil fell by another third or half, the Russian budget would become very tight, but also the Americans would be facing company failures and – in  the long run – also a sinking oil production.

“Comprehensive and equal European collaboration”

Putin cannot be reproached of hiding his ambitions. His geopolitical “grand design” is pretty transparent. On 25 September 2001, he spoke in the German Parliament, courting, in German language, Europe and, most emphatically, the Federal Republic, “Russia’s most important trade partner” and its “most significant foreign political dialogue partner”. “Today we need to declare clearly and conclusively”, he proclaimed to the parliamentarians, “the Cold War is over!”. In the “Bundestag” he pleaded for a “comprehensive and equal cooperation including all Europe”. In the following year he went one step further, invoking the spirit of Rapallo in Weimar.
Putin had underestimated how tightly Germany was pegged into the alliance with America and how narrow Germany’s foreign political leeway is. In spite of several approaches it was not possible to realise the idea of a German-Russian partnership or even axis. The imminent confrontation with the US loomed when on 10 February 2007 Vladimir Putin spoke at the Munich Security Conference – a  speech that was not even understood  by the German media in its consequences.
Putin reproached the US of “having transgressed their national borders in every respect.” He rejected the “unipolar model”, his wording for the American dominance, as “not just inacceptable but also impossible in today’s world.” He spoke about the American plans for a missile-defence system in Europe which would “inevitably” alarm the Russians, about US bases in Bulgaria and Rumania, about the lack of western interest in further disarmament and about the NATO expansion in Eastern Europe which meant a “serious provocation”: “We have the right to ask: who is the object of this expansion?” And the Russian President reminded of NATO General Secretary Wörner’s affirmation on 17 May in Brussels that the alliance would not deploy any troops outside the territory of the Federal Republic of Germany.
Putin’s Munich speech suggested that the Kremlin might have  more or less accepted  even the second round of NATO expansion, that is the accession of the three Baltic states in 2004, but that it would put up severe resistance against a further Western advance. On another occasion, Putin stated that an admittance of Ukraine or Georgia to NATO would be considered a “direct threat” for Russia.

“Installing the Prime Minister favoured by the Americans”

In Munich, Putin laid his conditions for an Entente with the West on the table. The Americans did not respond. With a formal or unofficial accession of Ukraine, NATO would win the strategic depth that Russia would lose. Since Berlin and Paris stepped  on the brakes, the April 2008 NATO summit in Bucharest refrained from starting the formal accession process for Ukraine and Georgia however still declaring: “These countries will be members of NATO.”
Four months later, in August 2008, Georgia attacked the rebellious South Ossetia, with American support. Russia intervened and won the war – prelude  to a much more dangerous conflict over Ukraine which had been smouldering for years and escalated when in November 2013 the Ukrainian President
Yanukovych rejected the EU while accepting the gas price deductions offered by Russia and a $ 15 billion credit.
The consequences are known. After weeks of bloody demonstrations in Kiev, the opposition and Yanukovych agreed on 21 February 2014 on a compromise and new elections. Just one day later a kind of a coup d’état was staged in Kiev, with Western support, Yanukovych fled to Russia and a Premier favoured by the Americans was installed in Kiev. In March Russia annexed the Crimean; in July a Malaysian airliner was shot down over eastern Ukraine; there was a third round of Western sanctions against Russia and, also in summer, the EU and Ukraine signed the economic agreement that had blown in November 2013.
Intermediate result: a stalemate. The Kremlin withdrew the Crimean and hence the Black Sea from  NATO’s grip; the reduced, financially bankrupt Ukraine  now depends on support from EU and IMF; NATO membership is, in spite of a tight, also military, cooperation, pending, and with the rebelling eastern part of Ukraine Moscow has secured itself a dead pleadge in order to be included in  the negotiations on the final status of the country and the rights of the Russian minority.

“Discrimination of the Russian minority”

Before the Americans, the Germans, and last not least the Poles massively intervened in the Ukrainian domestic politics to enforce a regime change, there was no indication that the Crimea was endangered. Not only that Moscow had accepted even the unpleasant treatment of the Russian minority in the Baltic States. Latvia and Estonia had decided in 1990 – the year of their independence – that Russians who had immigrated after 1940 were no longer automatically granted citizenship. Even today 13 percent of the Latvian population possess neither the citizenship nor the right to vote or stand for election. In addition, they are excluded from the public service. Last, in March 2014, the UN Human Rights Council criticized Latvia for discriminating the Russian minority. Similarly, in Estonia there live Russians who are classified as non-citizens and thus are not granted any rights.
Some newspapers speculate that Russia might consider to attack and conquer the Ukraine; this is utter nonsense. The political consequences and the financial costs would be enormous, not to mention a lengthy, guerrilla warfare supported by the Americans which the invading army would have to counter. In reality, it is Putin’s goal to achieve the best possible deal with the West and with Kiev – ideally a neutral status of the country, following the example of Finland. Moscow had said that it would also help relieve the financial burden in that case. The pro-Russian territories Lugansk and Donetsk were up for disposition, but not the Crimea, which had already tried unsuccessfully in the Yeltsin area in 1992 and 1995 to leave the Ukraine and to declare themselves independent.
It is hard to say whether the Americans will agree to a deal. However, a state of permanent stress  associated with long standing sanctions would from US perspective  have its advantages: the existence of NATO would be justified, Western-Europe and Germany would remain under control, and every temptation of a pan-European co-operation could be stopped. Nothing cements an alliance better than the definition of an enemy.