The China/Russia-led grouping has taken actions that have shocked the advanced democracies, led loosely by the US. The western strategy of inviting China into the World Trade Organisation and other global bodies to socialise communism with a more free-enterprise approach has been hit badly by recent events. Russia, one of five permanent members of the United Nations (UN) Security Council with a veto, has made the UN look weak and ineffectual by the violent invasion of Ukraine.
With few direct friends of its action, Russia has used its veto to avoid UN formal sanction or intervention. Both China and Russia claim to be upholders of the global rules-based international order, but they both now have a very different interpretation of those rules compared with the democracies.
China argues countries should not interfere in the affairs of others – and wants to assert Taiwan is part of “One China” for these purposes. Russia seems to regard Ukraine as still part of a greater Russia it wishes to recreate, whilst trying to shell and bomb its people into submission against their will. The world recognises Ukraine as an independent country, with most countries appalled by the Russian attacks on its sovereignty.
Autocracies can change the world
Most autocracies drive their rulers into a lonely suspicion-ridden life. They usually move from rational calculations to extend their own and their country’s power to policy mistakes which damage their country’s interests and may ultimately end in their own demise. Today and tomorrow, we need to consider the impact of President Vladimir Putin and President Xi Jinping on the world, as we have seen their actions have big consequences for people and economies far beyond their own borders.
Both rulers have now made bad policy mistakes that we all must live with. President Putin’s use of unacceptable force in Ukraine has so far united NATO and led to it strengthening its forces against him, the opposite of what he wished. His aim to “liberate” the pro-Russian part of Ukraine has encountered stout resistance to his army and hostility to the threat of Russian rule.
Russia hoped for many pro-Russian locals to welcome them. None of this worked.
President Putin seems to blame the intelligence services for incorrect information he claims to have received to make his decision to invade Ukraine. He blames his army for its failure to use its superior force to capture more territory more quickly. The original idea seemed to be a massive display of force, a quick drive of tanks into the capital city to be followed by the collapse of the current Ukrainian government and its replacement with local politicians of a pro-Russian disposition.
At the same time, Russian forces would sweep through the south adding all the coastal ports to the Donbas territory in the east, which Russia already held through local pro-Russian officials. Russia hoped for many pro-Russian locals to welcome them. None of this worked. The desperate sieges that are taking place dragged Russia deeper and deeper into conflict with growing supplies of weapons to Ukraine from many countries. It also led to a simultaneous economic war with the West, who turned out to be tougher in resolve than Mr Putin probably envisaged.
Real economic damage in Russia
It is true Germany has kept the European Union (UN) from cancelling Russian gas its economy depends upon, allowing Russia to finance its war for longer. Russia will nonetheless take a bit hit to economic output from the extensive sanctions imposed. The impact of sanctions will grow over time as the EU and US find alternative suppliers and tighten the reach of these controls further.
The longer Mr Putin fails to make large gains of territory through his punishing shelling and bombing campaigns, the more difficult it is for him to find a way out. Wars end when either one side overwhelms the other completely, or when both sides make sufficient compromises to reach a truce and peace treaty. As Russia has so far discovered so much more Ukrainian resistance than it expected, the terms of the truce have got worse for Russia.
It is difficult to judge if or when political forces in Russia will seek to change the president’s policy and remove him.
A rational policy for Moscow would be to cut its losses and start to rehabilitate Russia's very damaged reputation. President Putin may fear a worse domestic reaction to any sense that he had given in. Someone who has built his climb to power on an image of toughness will find it difficult to practice the flexible arts of diplomacy.
It is difficult to judge if or when political forces in Russia will seek to change the president’s policy and remove him. There is no democratic way of securing his removal, so there is no guarantee anyone strong enough to topple him would be any better to deal with than the outgoing autocrat. For the time being, we need to assume that the barbarous war will grind on, with more unwelcome deaths and destruction in Ukraine. This will have knock-on effects to world energy and food supplies and further disruption to trade. It would be good news if Mr Putin decided to find a pretext for a truce, which markets would rightly celebrate.
It will take time for Germany and other EU countries near to Russia, to replace Russian oil and gas. As they do so, it will distort world energy markets more. Ukraine is finding it difficult to export the grains from its last harvest, as shipping is prevented from leaving its southern ports. This year’s plantings and harvest will be hit by the impact of war on the land and the availability of farmworkers, as well as by the limits on available storage capacity and uncertainties over how to get output to international markets. Russia is an important supplier of fertilizer and grains in its own right, which is also worrying for investors.
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