Wednesday, 28 May 2014
Putin on the ropes, and what this means for China.
Loath as I am to agree with Tom Friedman, but I have to say that he is correct in this piece to say that it appears that in the Ukraine Putin finally appears to be backing off, and that if the Ukranian government's offensive in eastern Ukraine succeeds (and it appears to be succeeding) this will make the outcome of the Ukrainian crisis an overall setback for Putin and his political model.
Whilst there are no doubt still those deluded enough to deny that Putin was behind the take-over of Luhansk and Donetsk Oblasts by militias comprising a mix of local ethnic Russians, Russian Cossacks, and Chechens claiming to be acting on the orders of (Putin ally and ruler of the Chechen region) Ramzan Kadyrov, no-one in their right mind can really believe now that it was not Putin who was calling the shots. This was especially the case after Putin firstly admitted that Russian soldiers had been involved in his earlier invasion and annexation of the Crimea - a territory on which Russia had basing rights that obviously did not stretch to occupying all government buildings and airports, overthrowing the local government and annexing the territory - and then his spokesman claimed that he had "lost influence" over the militias, implying obviously that they had been under Russia's influence.
The link between Putin and this takeover being obvious, the defeat of the pro-Russian militias in eastern Ukraine, and Putin's apparent abandonment of his proxies there, therefore becomes a defeat for Putin. This is quite a revolution given that a couple of weeks ago many (including myself) were afraid that Putin's strategy of first infiltrating a region with "self-defence" militia, then holding a referendum of highly dubious validity, and then annexing that territory would be applied to all Russian-speaking parts of the Ukraine just as it had been applied to the Crimea.
There was, in reality, no difference at all between the situation in Crimea and that in the eastern part of the Ukraine. Putin's claim to have merely been intervening in the Crimea to defend ethnic Russians against "fascists" makes no sense if it does not also apply to eastern Ukraine, since they were both subject to the same supposed risk. The votes "inviting" Russian troops into Luhansk and Donetsk were of the same dubious validity as that in the Crimea, the same is true of the referenda held in each territory.
Why, then, haven't Donetsk and Luhansk - industrial, resource-rich areas with a combined population of 6.5 million - been occupied and annexed? My guess is that Friedman is right when he points to the response of the markets in this crisis, and the economic sanctions imposed by the EU, the US, Canada, Australia, and other countries. The Russian economy, after a decade of relatively high growth, is predicted not to grow at all this year. For a country which, like China, is ruled by an autocratic government whose main pillar of support is the promise of delivering economic growth in exchange for curbed democratic freedoms, this is a definite cause for concern.
Observers in China may well reflect that it exactly the depth of Russia's engagement with the global economy that makes them so vulnerable to economic sanctions and a negative response from the markets. Unlike the China Yuan, the Russian Ruble is a currency traded on the world markets, an arrangement that ensured its rapid decline in value at the outbreak of Russia's involvement in the Ukrainian crisis. Russia has spent more than 40 billion USD defending the Ruble so far this year.
Similarly, Russia lacks the kind of controls on capital flow that China has. As a result of the risky atmosphere brought about both by Russia's involvement in the conflict and the risk of sanctions, it is predicted that roughly 85-90 billion USD will flow out of the Russian economy this year - the equivalent of the entire Russian defence budget.
It seems unlikely that the P.R.C government would wish to leave themselves open to such a backlash in the form of economic sanctions and market response by further opening their economy to the extent that Russia has any time This is especially so in the light of the "bad" crises that have arisen around China's regional and internal conflicts this year.
As long as the P.R.C. remains a power that wishes to keep the use of force against neighbours like Taiwan on the table, further opening up to global markets therefore seems unlikely. Indeed, this would suit the faux-leftist ideology of some in the Chinese leadership for whom "neoliberalism" (a nebulous and vague term whose meaning rarely seems to vary from "capitalism") is considered a "threat".
[Picture: Spent shell-casings litter the road in Karlovka in eastern Ukraine after fighting between government troops and pro-Russian militia. Via Wiki]
Posted by Gilman Grundy at 06:23