Most of you will already know that the go-to book that best explains the significance of Ukraine in the global geo-political system is Zbigniew Brzezinski’s 1997 masterpiece: The Grand Chessboard.
Brzezinski was no dummy. The Polish born émigré to the US became a prominent professor of American foreign policy at the School of Advanced International Studies at John Hopkins University and also President Jimmy Carter’s national security advisor. Brzezinski was also the author of the seminal book on the topology of America’s influence over the global system: Between Two Ages.
As Brzezinski explained in The Grand Chessboard about Ukraine (my emphasis):
Ukraine, a new and important space on the Eurasian chessboard, is a geopolitical pivot because its very existence as an independent country helps to transform Russia. Without Ukraine, Russia ceases to be a Eurasian empire. Russia without Ukraine can still strive for imperial status, but it would then become a predominantly Asian imperial state, more likely to be drawn into debilitating conflicts with aroused Central Asians, who would then be resentful of the loss of their recent independence and would be supported by their fellow Islamic states to the south. China would also be likely to oppose any restoration of Russian domination over Central Asia, given its increasing interest in the newly independent states there. However, if Moscow regains control over Ukraine, with its 52 million people and major resources as well as its access to the Black Sea, Russia automatically again regains the wherewithal to become a powerful imperial state, spanning Europe and Asia. Ukraine’s loss of independence would have immediate consequences for Central Europe, transforming Poland into the geopolitical pivot of the eastern frontier of a united Europe.
Later on he warned:
US policy toward the vital geopolitical pivots of Ukraine and Azerbaijan cannot skirt that issue, and America thus faces a difficult dilemma regarding tactical balance and strategic purpose. Internal Russian recovery is essential to Russia’s democratisation and eventual Europeanisation. But any recovery of its imperial potential would be inimical to both of these objectives. Moreover, it is over this issue that differences could develop between America and some European states, especially as the EU and NATO expand. Should Russia be considered a candidate for eventual membership in either structure? And what then about Ukraine? The costs of the exclusion of Russia could be high – creating a self-fulfilling prophecy in the Russian mindset – but the results of dilution of either the EU or NATO could also be quite destabilising.
Other observations included the fact that without Ukraine’s Slavic population, relatively explosive birth rates among central Asian populations would see Russia inevitably become less European and more Asiatic with each passing year.
This was why, as Brzezinski noted, Ukraine’s declaration of independence in December 1991 proved so catalytic for Russia. It was also, he noted, Ukraine’s insistence on the looser commonwealth of independent states structure as well as its “coup-like” imposition of Ukrainian command over the Soviet army units stationed on its soil that prevented the CIS from becoming a mere doppleganger of the USSR.
That independence move shocked Moscow. But it also provided a precedent for other central Asian states to follow.
What are the proper frontiers of Russia in that case?
Should Ukraina — which literally means borderland — be considered a temporary aberration? According to Brzezinski, as far back as 1997, the answer for many Russians was yes.
As he went on to predict:
In this regard, Ukraine was critical. The growing American inclination, especially by 1994, to assign a high priority to American-Ukrainian relations and to help Ukraine sustain its new national freedom was viewed by many in Moscow even by its “westernizers” – as a policy directed at the vital Russian interest in eventually bringing Ukraine back into the common fold. That Ukraine will eventually somehow be “reintegrated” remains an article of faith among many members of the Russian political elite*. As a result, Russia’s geopolitical and historical questioning of Ukraine’s separate status collided head-on with the American view that an imperial Russia could not be a democratic Russia.
The footnote referenced in the text names Dmitryi Ryurikov, one of Yeltsin’s top advisors. It also cites Moscow’s Obshchaya Gazeta as predicting that “in the foreseeable future, events in eastern Ukraine may confront Russia with a very difficult problem.” And that “Mass manifestations of discontent… will be accompanied by appeals to Russia, or even demands, to take over the region. Quite a few people in Moscow would be ready to support such plans.”
Finally, it explains how Russia would troll the West by including Sevastopol in Russian television’s nightly weather forecasts for “Russian cities”.
Pandora’s Box of Claims
Other than the above tehre is also the question of who else might be about to lay claim to past territories if Russia’s assault on Ukraine is successful. Taiwan is what everyone has their eye on. But there are other contentious zones to be mindful of too.
The first comes in the shape of Japan, which has been making noises about reestablishing its rights over the island archipelago that separates the Sea of Okhotsk and the Pacific Ocean. On February 15th, the day after Russia announced it was pulling back troops it had amassed near Ukraine’s border, five days before its actual invasion of Ukraine, it was reported that 24 Russian warships had been operating in the southern part of the Sea of Okhotsk since February 1st.
North Korea, meanwhile, is already on its ninth missile test of 2022.
A Middle-East of Europe?
We should also be concerned about the nationalities of the private militias and volunteers who are currently descending on Ukraine to take part in the conflict. Ukraine’s President Zelenskiy, who is Jewish, has publicly appealed for foreign volunteers to join the fight against Russia. Will fellow Jews pick up the call to arms too?
According to the Guardian, Ukraine is home to at least 43,000 people who identify as Jewish and tens of thousands more with Jewish ancestry. This makes it one of the world’s biggest Jewish communities. It is also the location of some of the worst atrocities against Jewish people, including the deaths of up to 1 million Ukrainian Jews during WW2.
After the collapse of the Soviet Union, some 500,000 of the remaining Ukrainian Jews migrated to Israel.
According to the Guardian there is evidence Jewish volunteers are coming together (my emphasis):
The Ukrainian embassy in Tel Aviv did not respond to a request for information about how many people have signed up, but one Israel Defence Forces (IDF) soldier told the Walla news website on Sunday he was planning to fight in Ukraine after his demobilisation.
“I came across the post and I couldn’t remain indifferent to what’s happening to the country that my grandfather, grandmother and parents lived in, a beautiful country that I toured less than three years ago,” said the soldier, who was identified as L.
“The footage coming out of there has left me frustrated…I felt a burning desire to help.”
Vladimir Putin’s own domestic propaganda has been promoting the idea that he is leading a denazification campaign, ridding Ukraine of its extremist paramilitaries. Some of this is not untrue. Ukraine’s own Azov battalion is fairly described as a Neo-Nazi outfit, with uncomfortable linkages to WW2. It is also true that Ukraine’s history is blighted by collaboration with Hitler.
Yet Putin’s use of the extremist paramilitary Wagner Group – that’s Wagner as in Fight of the Valkyries — makes his overall claim baseless. Perhaps the logic is that it takes a Nazi to fight a Nazi. In that case both sides may be drawing on the unique skills of the least humane demographic in the world to further their own aims. For now Jewish Ukrainians are fighting alongside their Ukrainian “neo-Nazis” brothers in the name of Ukrainian nationalism. Let’s just hope then the Nazis don’t decide to branch off into their own opposition movement.
We should also be worried any physical harm coming to President Zelenskiy. The man has been built up to such a larger-than-life hero level, that if he were to become a casualty, one can already anticipate the mass outpouring of grief and international rage that would follow suit. It would surely surpass anything experienced in the wake of George Floyd’s death or even that of Princess Diana’s. What then? Would the emotional response see the international community be cornered into avenging his death?
Jewish groups are already appalled by the supposedly “accidental” bombing of the Babyn Yar memorial complex, a ravine where Nazis killed approximately 33,771 jews in 1941. Some $720m for Jewish holocaust survivors in Ukraine has already been raised.
The Times of Israel reports that the Ukrainian Embassy in Israel on Saturday “began actively recruiting people in Israel to fight against the Russian military as its country is facing a full-scale invasion.”
From the report (my emphasis):
“The Embassy has begun the formation of lists of volunteers who wish to participate in combat actions against the Russian aggressor,” the embassy wrote in a public Facebook post written in Ukrainian.
In the post, the embassy asked those who wish to “participate in the protection of Ukraine from the Russian military aggression” to send an email with their personal information, including any “military specialty” they may have.
On Friday, before the Facebook post was published, the Ukrainian ambassador to Israel told journalists that it was legal for Israelis to volunteer for the Ukrainian military.
However, Israeli law does have a provision forbidding citizens from joining a foreign military – with a potential punishment of up to three years in prison. This is not applicable if the State of Israel has an agreement with the foreign country in question, though it was not immediately clear if this was the case with Ukraine. Curiously, while it may be illegal for Israelis to volunteer for a foreign military, it is not illegal for a foreign country to recruit people in Israel.
This would be the second time an official call for volunteers has clashed with internal laws about such matters. Another example occurred in Britain, where by Liz Truss, the UK secretary for Foreign, Commonwealth and Development Affairs of the United Kingdom, encouraged British volunteers to head to Ukraine. No.10 is now distancing itself from the comments.
Whatever happens next, it’s worth considering the broader territorial implications if any significant number of foreign nationals die in such conflicts.
Restitution claims by Jewish diaspora for land seized from them during the War or under communism have for years been clogging Eastern European courts. In Poland, a bill was even passed to set limits on the ability of Jews to recover such property in August last year, igniting heavy criticism from Israel.
None of this is good for regional stability. One can imagine that any territorial gain by Poland of Western Ukraine, which some analysts see as a plausible scenario if Putin’s attempts to seize the country are cut off at the Dnieper river, will open a new can of worms on Poland’s Western front. The Dnieper divides Ukraine neatly through the middle, a natural new front between East and West. The main reason for Poland to absorb western Ukraine, meanwhile, is both to achieve NATO membership through the back door, but also to resettle the expected 1 million refugees that are likely to arrive across its border in the next month.
If that were to happen, and nothing is off the table at this point, the de facto expansion of Poland’s borders to the East could open the door to contests to its Germanic boundaries in the West. And so on, and so forth.
Pestilence, War and now Famine…
I’ve mentioned a number of times that the gas shortages are likely to lead to fertiliser and grain shortages. This is now becoming self-evident.
Look at today’s wheat prices:
European crop yields are already expected to be down as much as 10 per cent on the back of delayed planting due to farmers holding out for a fall in fertiliser prices. That has not transpired. With Ukrainian crop yields also likely to be impacted by wartime instability, any surplus grains across Europe are likely to be bid up by richer Western countries. In commodities, all that higher prices do is divert supplies from poor countries to rich ones. In the case of grain, that leaves countries like Tunisia, Egypt, Indonesia, Thailand and Morocco most exposed of all. Can we afford famines in these countries?
In short it’s likely to get worse before it gets better. And anyone who thinks otherwise is living in a small state of denial.
I would dare say it’s not implausible that we will see rationing back in Western Europe.
Meanwhile in Financial Markets…
If you’ve not seen plumbing expert Zoltan Pozsar’s gloomy prediction about what is likely to befall funding markets when the full impact of Russian sanctions, inflation and food shortages hits public perception…you should (my emphasis):
We are not saying that we are about to have another Lehman moment, only that things can get much worse than you realise. When you rip $500 billion of FX reserves from the system, sanction and de-SWIFT banks (which goes live March 12th), and force Western banks and commodity traders to self-police and not trade commodities from the single-largest commodity producer of the world (Russia), unforeseen things can happen and do happen. If you believe that the West can craft sanctions that maximise pain for Russia, while minimising financial stability risks in the West, you could also believe in unicorns. Yes we were also wrong on Sunday about the trigger of funding pressures – it’s not the Bank of Russia’s inability to roll FX swaps or de-SWIFTing that caused funding pressures to date, but rather the market’s self-imposed unwillingness to buy, move, or finance Russian commodities that’s driving the current massive bid for cash. Bloomberg called the commodities rally “historic,” and so the margin calls must be historic too.
Not everyone agrees with Zoltan, but my thinking tends to be more aligned with his than not. Also, Zoltan is Hungarian. He understands Eastern Europe. And what he says about commodity markets is true. I’ve likened this corporate self-harming phenomenon to the one we experienced in the early days of Covid. Back then it wasn’t government policy leading lockdown action, it was public hysteria followed by the health and safety division of almost every single Western corporation. Btw – isn’t it amazing how Covid has been completely forgotten?
As Zoltan continues:
Who is getting the margin calls? Market participants that are long commodities either in the ground or in transit and want to lock in a price by shorting futures. These include every commodity producer in the world including Russia, and every major commodity trading house, respectively. Again, we do not know if this is the case, but it’s reasonable to wonder if Russian commodity producers are experiencing margin calls now, and if they have the resources to pay – could they choose not to pay because their sovereign’s FX reserves were seized? We are not saying they will, but this is a risk one needs to consider. As for the commodity traders, which are suffering a correlated surge in commodity prices (Russia and Ukraine export pretty much everything imaginable), margin calls can be funded by drawing on credit lines from banks, issuing CP, or swapping FX.
This is not untrue. But it neglects that commodity markets are very good at working their way through sanctions, because over-regulation or the introduction of new barriers to trade usually equals pain in the short-term followed by arbitrage and profits in the long-term.
Interestingly, the Vix is yet to surpass its March 2020 high:
Although the term structure is very backwardated: