People need to stop the knee-jerk reactions to any statement made by German leaders. The crisis in Ukraine, and implicitly the one between Russia and the West, is a serious crisis that worries a lot of people. The reasons cover the full spectrum of strategic, political and economic fallouts not to say anything about the huge human cost and real potential for downward spiralling.
People are right to be worried. Regardless where one stands on the issues there is little doubt that Russia is now directly fuelling the war in Eastern Ukraine. And that is something the West needs to address both immediately and on the longer term. But lets be clear, however bad this looks, Russia is not the Soviet Union and this is not a New Cold War. Not at this stage at least. It can turn into that without vision and leadership. It can also turn into that without a very careful coordination of the Western allies in NATO and of the EU member states with the US.
This is why, however convoluted and puzzling here statements may be at times, what Merkel says does not make for a Stalin Hitler pact. The twisted wording is part of the signalling and positioning that precedes a few very difficult multi side negotiations. Germany is committed to Europe and NATO but flexible on Ukraine. To call this a Ribbentrop Molotov moment is preposterous and no different than the Russian hysterical discourse and blatant propaganda about “fascists Ukrainian authorities threatening/attacking Russian ethnics in Eastern Ukraine”.
In fact, Germany, Ukraine and Russia are all under the pressure of the NATO summit in Wales that opens on September 4th. They all have incentives to find a compromise till then. If not, they each risk very different but equally unpleasant outcomes. Germany, as the largest economy in Europe is the most exposed in Russia and on its markets (and making most money there too). It has the most to lose if EU-Russian economic and political relations really go sour. They are already at the lowest point since the end of the Soviet Union. A stronger NATO response may accelerate that but Germany risks being isolated if it appears to block that. It is also the most interested in having a stable and manageable partner in the east on the long term.
This is a matter of national security and national strategy for Germany. At times this may be at odds with the perspective and preferences of other NATO and EU states and also the US. But Germans are neither naive nor having any illusions about Russia and its current regime. Also Germany needs to contend with its EU partners and their very different and diverging views and interests on the crisis and the solutions. As much as Germany cherishes its relationship with Russia it is foolish to think it will jeopardise its relations with the West and in particular its excellent trade and investment relations the US and EU over this.
However big Russia is and however important its gas is to Germany’s economy it only comes 11th as trade partner for Germany. Russia ranks a bit higher as export destination for German goods. The US imports almost three times as much from Germany than Russia does. And Germany’s EU partners ten times as much! To put it in some context, Germany trades less with Russia than it does with Poland, less than it does with Switzerland and almost on a pair with what it does with the Czech Republic. Germany exports less to Russia than it does to countries like Belgium and imports more from Italy or the Netherlands and another five countries individually, including the US, than it does from Russia. Germany’s overall trade with the EU is above 57% of its total trade while about 4% with Russia. Now this may be little but it is not the entire story. Imports in particular show a pattern of dependence from Russia. While only affecting 1% of German companies these imports are critical as mostly they represent energy and raw materials.
Economically important as it is, this “dependence” on Russian raw materials pales compared with the huge interdependence in investment, technology and other links between Germany and its EU and American partners. But there are also less palpable but not less evident links between Germany and Russia, including the “historical burden”. Twenty three million Soviet citizens died in WWII many of these Russian. This is not lost on either side. It may have been many decades ago but as shown by the discourse on Russian TV these days, the “enemies” of Russia and Russians living abroad are still “the fascist”. At the heart of the EU and inside NATO, Germany is very much a civilian power. It is part of its legacy and DNA as a post war and post totalitarian state.
Last but not least today’s Germany is a country and a society vested in a space of norms and principles, a democratic power at core. Its own citizens bear the legacy of the twentieth century’s most criminal dictatorships. All this does not come in contradiction with Germany’s astute grasp of power politics and its ability to get a lions share in particular in manufacturing and trade. German policymakers, businessmen and politicians understand the transactional nature of international politics and want out of a zero sum situation in Europe’s East. Actually less than zero as all parties are registering net losses today. So does Washington but it is far less pressed on Ukraine. Partly for these reasons, the West largely succeeded in staying convincingly coherent if not terribly effective on Ukraine.
It is a fair bit more complex in Moscow. To some extent because Russian decision-makers appear caught in their own rhetoric and propaganda – with all the “fascist” labels systematically attached to anything having to do with the authorities in Kiev and blaming the West for causing the crisis in the first place. For Moscow this only happens because “the West has stepped into Russia’s most intimate sphere of interests threatening its interests and security”. At the end of the day, they may appear egger to play a game of poker or roulette over this, but the decision makers in Russia, like the Germans, understand business too. Because they act as spoilers they have the advantage of playing a more flexible game in Ukraine and the region but also globally. They also think they are getting their message across forcefully and successfully! One still expects the Russians to suspect that they are perceived as the aggressor even by those that to some extent sympathise or understand the Russian position.
This is why leaders like Angela Merkel think that to stop the war in Ukraine and move the crisis in a different realm, there needs to be some accommodation of Russian interests (however fanciful, illegitimate or egregious some of these may be). And who can blame her? Stoping the bloodshed in Eastern Ukraine is a priority. So is ensuring the East-West flow of gas and trade for Europe. Finally, whatever some may actually think in Moscow (or Berlin) nothing can be truly done over the head of the Ukrainians. They can be pressured and cajoled and Poroshenko means business and is ready for compromise (at home and abroad).
Kiev is at the receiving end from both its friends in the West and Russia but Ukrainian leaders cannot accept something the Ukrainian street will not tolerate. At the same time, they will have to find a way out of the crisis as there simply is no military way out of it. Ukraine appears to be lacking the capability and organisation to withstand even the limited Russian onslaught in the East.
Economically, Ukraine, or rather any government in Kiev, depends on Russia to survive. There needs to be some sort of negotiated solution. It’s almost certain it will be one nobody will be happy with. It will be a sort of compromise regarding Ukrainian relations with both the EU and Russia.
That being said, there is not turning back. No path is possible to status quo ante but maybe a new normal is possible following a real climbdown. The opposite appears still the more probable path. Unless Russia also learns something out of this criss they will only have to contend with some limited accommodation to than learn slowly that they are increasingly isolated and strategically corralled at a high cost. They will pay for Crimea’s huge overhead while loosing money left and right and having to contend with an economic slow down and loss of revenue.
Europe will be less willing to invest and buy Russian products including energy. This should not be underestimated. Making good money in Russia and buying its historically reliable gas is one thing. Depending strategically from Russian energy and cooperation in today’s circumstances is a totally different one. What the current criss has achieved is shatter all illusions. Russia may believe it sent a strong signal of its willingness to “defend a red line” and act as a power and to some extent that is part of the story. However, as was the case after the 2009 gas crisis, the West and Europe will only increase the myriad of legal and institutional steps that ween Europe of its strategic and energy dependence on Russia. That is not in Russia’s advantage but the policy planers in Moscow do not appear concerned about this at this stage. They think in different terms and are obsessed with the US-Russian dynamic.
The new Russian National Strategy document presented in August 2014 is a clear signal in this respect. It needs to be treated as seriously as the blatant propaganda on Russia’s increasingly controlled media. The policymakers in Moscow think the substitution of western goods and investments will revive the ailing Russian economy. They also think emerging economic powers will make for reliable and dependable business and strategic partners less concerned with human rights and other domestic issues and more aligned with Russia on its world view. At the same time the current and coming western policy decisions may lack the punchy effect and scale of the sort advocated systematically by minister Sikorsky and other EU and US voices and that create an illusion of immunity to their effects.
Moscow also appears to have reached the conclusion that Europe is a spent force politically and economically destined for slow but inevitable sidelining and overall strategically irrelevant because of its divisions. However the effect of EU policy and economic decisions regarding Russia should not be underestimated. NATO is back and it will be a more serious presence and one that does not treat Russia as a “parter”. It cannot under such circumstances. In the medium term, this will create a direct cost that Moscow policymakers may consider acceptable but Russia’s budget and elites may not. If this extends to the strategic level (as it appears to) the cost will mount rapidly for Russia with a relatively limited impact for Europe and the US. Even a small increase in defense spending and posture in Europe is of such magnitude that Russia’s current GDP cannot sustain. Moscow gambles this will not happen however.
In any case, EU’s energy policy will continue to develop alternatives to Russian gas and ensure the capabilities for increasing resilience to stoppages in normal flows via interconnections, reserves and alternative sources. Also, investment in Russia from the West in non energy sectors will diminish as will trade beyond current reciprocal sanctions. Overall the de-structuring of relations between Russia and the West will mean direct and indirect costs that will leave Russia increasingly dependent on willing but not necessarily more pliable partners. Russia appears to be thinking that mercantile European and US interest will prevail. In the long run, betting against the West may prove costly for Russia. Unfortunately also for the West. The biggest loss is to the “liberal idea” of a peaceful normative space Europe. We will increasingly have voices like Hungary’s Viktor Orban and other strident pragmatic populists or just uber pragmatic politicians ready for deals.
It remains to be seen if the crisis will lead to a strengthening of the trans-atlantic link and force Europe out of its strategic numbness. As for Russia, however big the public support for Putin appears today, Russia will see an increase in its own centrifugal forces and loss of talent and capital. In part this is because under current nationalistic and orthodox-centric trends its domestic policies are bound to become more repressive too. Its own domestic problems are not going away anytime soon simply because it forcibly occupied Crimea or it has eventually retained some degree of control over Ukraine.
The only dependable way out of this crisis would require a reset of the sort neither side appears prepared for. We also appear to lack the vision driven leaders that can plot a successful grand strategy for the West’s relationship with Russia that includes a forceful, credible and balanced response to this crisis. We are forced to contend that for the near future the realistic scenario appears to lead to a moderate accommodation in Ukraine doubled by a longer term frozen relationship with Russia. This may change with a deepening of the current crisis or a new one impacting both the West and Russia. AT