Friday, 21 March 2014

How to contain Crimea's logistics threats

It might seem incredulous that Crimea's unpleasant brouhaha should pose a significant threat to Europe's logistics or that the obvious solution to the problem is not being pursued. Yet it does pose a significant threat, albeit of a knock-on kind, if allowed to get out of hand, but the solution is dependent on goodwill from all parties.

Imposing trade sanctions without prior moves to defuse the problem through political compromise with honour upheld for all invites enormous upheaval for Europe and Russia, in which everybody loses. Russia, for example, supplies up to 40% of Germany's gas needs and 1% of Britain's, while the figure for the whole of Europe is between 25% and 30%. Despite healthier European gas stocks than usual, any total cut in supplies would send European gas supply costs soaring at a time when Europe is still struggling to recover from the banking crisis. This would not only affect national output in many countries in various ways, it would also mean more consumer belt tightening. In Britain, as explained in my last blog,* cash-strapped consumers are migrating to deep, cut-price food retailers, forcing the leaders to make price cuts as they lose market share. That, in turn, will adversely impact Britain's global food supply chain through further squeezing of suppliers, as if they were not squeezed enough already. This is an example of the knock-on effect referred to earlier.

The hit Russia would take from any gas supply interruption would be massive, too. Its gas supplies to Europe are worth about US$100 million a day and around half of Russia's total budget revenues comes from oil and gas. Any gas cut off would send a potent message to European buyers that alternative, less politically endangered supplies must be sought as soon as possible, and they are already, in fact, being developed. That development could prove a body blow for Russia's skewed economy so overwhelmingly dependent on natural resource exports. That is one good reason why Russian should refrain from further military moves.

It  seems that the most desirable solution to the Crimea problem would be a return to the former status quo, but with certain changes. Crimea already has a level of autonomy with its own Parliament but subject to Ukrainian law. Its people are predominantly Russian-speaking and prefer closer ties to Russia than Europe. The western half of the Ukraine, predominantly non Russian speaking, prefer closer ties with Europe, while the eastern half is more ambivalent. It was the former Ukrainian president's act to initiate closer ties with Russia instead of Europe, and apparently against the western half's majority wishes, that sparked the civil unrest and overthrow of the President and his government, technically an illegal putsch, which Western leaders should remember before casting stones about Russia's illegal invasion of the Crimea.

                                                   Russian motives

Russia' avowed motive for invading the Crimea was to protect the interests of the majority, Russian-speaking and leaning inhabitants. It is, of course, about more than that, but at least Russia has been accommodating enough to allow a referendum on what the majority want by way of future external relationships, however unrecognised that may be by certain Western nations. The situation is not so dissimilar from Britain hanging on to Gibraltar and the Falklands Islands because the overwhelming majority of their citizens prefer closer union with Britain rather than elsewhere.

Russia's other motives for Crimean action are probably just as much to do with access to a year-round, ice-free naval port for its Black Sea fleet and access to reportedly rich oil and gas reserves. Certain elements of the West's gutter Press also demonize President Putin as a vainglorious demagogue bent on a posthumous,
glorious legacy in Russian eyes, a free Press price any democracy must pay however odious its opinionated writers may be. What is disturbing, however, is certain members of the Russian Parliament reportedly agitating for a recapture of former Russian-annexed states like Kazakhstan, and if  Putin truly wishes a glorious epitaph he would do well to scotch such military madness.

A return to Crimea's former status as part of the Ukraine should involve certain conditions to help ensure a just and lasting accommodation. First of all, there should be cast-iron guarantees that the rights of the Russian-speaking inhabitants are in no way oppressed or otherwise disadvantaged. Secondly, there should be international recognition of Russia's legitimate right to have unfettered access to its Black Sea naval port for so long as it wishes. This, after all, would not be much different from America's occupation of the military base on Guantanamo, Cuba. Thirdly, the Ukraine must play its part by cleaning out its Augean stables of intractable corruption and start to adopt good governance. The fact is, the Ukrainian economy has been in a mess well before the Crimean crisis erupted, and many of its politicians are in the unwholesome thrall of billionaire oligarchs. Some Russians are rightly incensed that certain Ukrainian politicians evince a hard-right (fascist) interest and we have the recent televised incident of just such a disgraceful example when a group of far-right politicians broke into the Ukrainian state TV company to assault the head of the station, Olexandr Pantelymanov. Under a group battering he was forced to resign because the bullying intruders took offence after a ceremony was broadcast from the Kremlin showing Putin signing a bill to make Ukraine's Crimea region part of Russia. It is shameful incidents like that which the Ukraine cannot afford if it wants to earn the respect of the outside world.

An example of the Ukrainian financial delinquency is Kiev's outstanding debt of $1.5 billion for gas supplies in 2013 and so far in this year, and it shows little evidence of paying up. A whole Ukraine, including the Crimea, should also try harder to court closer economic ties with both the West and Russia. Meanwhile, Russia bashing by the West's gutter Press and even its more respected media does not help. Europeans should never forget that they enjoy much of their freedom today thanks to Russia's heroic and appallingly high human sacrifice in World War 2 to rid the world of the 20th century's greatest political scourge -- Nazi tyranny.
*Google my blog: "Food retail price wars threaten supply chains"

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