Sanctions War and Exodus of Peoples
Western sanctions against Russia are unprecedented in terms of scope, severity and consequences for the world economy and order. At the same time, these are the most undeveloped, ill-conceived and poorly predicted sanctions in terms of possible consequences. It is still not clear who will suffer from them more. However, it is clear that after the war of sanctions, the world will be new, and we will see this world very quickly.
In order to predict the possible economic and social consequences of sanctions for Russia, as well as for other countries, including the West, it is necessary, — strange as it may seem, — to start with analysis of some mistakes made by the Russian political leadership and military command at the initial stage of the invasion in Ukraine. These mistakes determined the entire subsequent course of events.
Mikola, easy money floats in your hands!
Before the Russian invasion, information appeared that was later confirmed by active participants in the events, that for a long time Moscow had been preparing a pro-Russian “fifth column” in Ukraine that was supposed not only to resist ultranationalists and pro-fascist Ukrainian groups and movements, but also to block resistance of the Armed Forces of Ukraine and nationalist army and para-military units immediately after the start of the invasion to ensure a quick transition of power in the regions and in the capital of Ukraine to pro-Russian political groups and parties.
Moscow’s confidence that the invasion would be supported by the majority of the Ukrainian people and influential groups of Ukrainian politicians, businessmen and bureaucrats, primarily in the Russian-speaking regions, was based not only on messages and reports by Russian intelligence services and their sources in Ukraine, who reported to the Kremlin and the Ministry of Defense about the readiness of the pro-Russian “column” fed on the generous flow of money from Moscow, but also on the fact that by the beginning of 2022, Zelensky had become the most unpopular president in the short history of independent Ukraine, the economic situation in Ukraine was deteriorating rapidly and without any hope for the best, the majority of the population understood that they had no chance to get out of poverty, and a new “Maidan” and change of power, caused by the collapse of the Ukrainian economy, was expected in 2022 even without the invasion of Russian troops.
The pro-Russian “fifth column” included not only officials in the administrations of the Russian-speaking regions of Ukraine, including the capitals and largest cities, but also a significant part of the so-called oligarchs and business elite, as well as the command of the Armed Forces of Ukraine. That is why, in one of his first speeches after the start of the military operation, Vladimir Putin appealed to the command of the Armed Forces of Ukraine and senior officers to take power in Ukraine into their own hands.
Moscow believed the stories of Ukrainian “friends” and the reports of those who provided funding and breading of the pro-Russian “fifth column”, that it was enough for Russian warships to appear on the roadstead of Odessa, tank columns to approach Kharkov, and paratroopers to land near Kiev and seize the airfield, the Zelensky regime will fall, nationalists and pro-fascists will flee to Europe, Canada and the USA, and the Armed Forces of Ukraine will stand tall to support new pro-Russian government.
After regime change, power in most regions of Ukraine should have remained in hands of those who governed regions and cities in recent years. Flags of Ukraine and its laws, including the Constitution, were to be preserved after changes were made that would ensure neutral status of Ukraine, restoration of the status of the Russian language as a state language on a par with the Ukrainian language and prohibition of the ideology of fascism and radical nationalism to be followed by purges, lustration and trials of nationalists responsible for the death of people in Donbass.
This was a strategic mistake, although not fatal for Russia, and this mistake was caused by several factors including three:
- Underestimation of integration of the Ukrainian elite and state structures into the Western financial, political, business and military systems.
One example. In the Russian media or papers of political scientists and economists, I have never seen any analysis, however brief and shallow, of management and personnel of departments in transnational corporations and big Western companies, as well as public organizations and think tanks that oversee and operate in the former Soviet states.
I was surprised by the fact that no one in Moscow cared about or knew the fact that over the past 20 years in those corporations, companies and think tanks, 99% of managers and employees were Ukrainians, Kazakhs, Poles, Lithuanians, Jews… Nowadays, there are practically no ethnic Russians working in Western corporations or companies. Most of those who came from Russia, had left it before Putin came to power. And all of them had to loudly denounce Putin and his regime to get a chance.
That was not done on purpose. That came as a result of the process that started in 1990-s. The corruption of the state system and business in Russia pushed Western businesses and public organizations to make such decisions and select such personnel.
However, as a result of that process, for twenty years, the policy of Western transnational corporations and political decision-making centers was built as anti-Russian and was aimed at supporting everything anti-Russian in the post-Soviet territories.
- Underestimation of the corruption of the Ukrainian elite, its ability to cheat, kid and fool any “sucker”, let it be European, American or Russian “Moskal”, who is ready to offer money for future services or oaths of allegiance.
Over the past decades, Ukrainians have acquired such a knack and ability to get big money by promising everything in future while doing little. They trained on using and kidding officials from Brussels, London and Washington and getting millions of euros and dollars over thirty years, providing hundreds, thousands of «analytical notes», «reports», «narratives» and «recommendations» on development of democracy, rule of law, fight against corruption and oligarchy, development of the economy of Ukraine, and so on, reinforcing all this with conferences, symposiums and «meetings». Most of those events had no consequences and those papers were not read, but stored in the archives of the EU and the embassies of the donor countries at the costs of the budgets of Brussels, London or Washington.
Russian officials and intelligence officers knew that well, but they could not even imagine that Ukrainians, all those agents of influence and just agents, including oligarchs, business elites, mayors and politicians, as well as the Ukrainian and Western intelligence services could kid Moscow “guys” and the Russian special services, forgetting and discarding the law of the Soviet youth gangs that Dmitry Peskov, Press-Secretary of the Russian President Vladimir Putin, likes to remind so frequently: “The guy said, the guy did!”.
Dmitry Peskov:»The guy said, the guy did!» In Ukraine, it did not work out…
Crisis of nationalism
However, the most important factor that determined the nature of the Russian military operation in Ukraine was Moscow’s overestimation of the “closeness” of the Ukrainian modern elite to the “Russian world”, as well as pro-Russian sentiment among the Ukrainian people, and underestimation of the strength and influence of nationalism in Ukraine as state ideology.
Decades of domination of Ukrainian radical nationalism and its development as a state ideology with the connivance of Moscow, the worthlessness, extreme weakness and inefficiency of the Russian propaganda machine, especially its foreign policy component, the misunderstanding of the processes that have taken place and are still taking place in the post-Soviet space in the public and ideological spheres, where nationalism in all FSU countries became state ideology, could not but lead to the real dominance of nationalism, including its radical variants, in the minds of tens of millions of citizens of states on the territory of the former USSR.
In Ukraine, radical nationalism became so strong that it took control over the minds of millions of citizens. Ukrainian nationalism originated and developed primarily in the regions of Western Ukraine, Galicia, that for centuries were part of states, where the rights of Ukrainians were severely suppressed, for example, in Poland, and that was the ideology that supported for centuries the Ukrainians’ faith in an independent state.
Galicia was taken by the USSR in 1939, and Ukrainian radical nationalism was stifled by the machine of suppression and ideological control, as well as by the fact that the policy of the socialist state was aimed at developing fraternal, friendly relations between peoples. Nationalism was suppressed regardless of the people that this ideology began to promote. Suffice it to recall the «Russian Case» or «Jewish Case» of the last period of Stalin’s rule. The emergence of nationalism in any political form was suppressed with the utmost cruelty. However, it was Ukrainian nationalism that was imported, introduced and planted in Soviet Ukraine along with the annexation of Western Ukraine. It was that gene, that germ that created modern Ukraine in the beginning of the 21st century.
Having gained independence, the post-Soviet states abandoned the ideology of communism, not because the peoples and their elites had rejected Marx’s ideas, but because at the end of the 20th century, Marx’s ideas did not explain what was happening in the world and how to build communist society, how to overcome contradictions that were growing in the socialist camp, and how to overcome growing inefficiency of the economic and social model. There were no new Marx and no new Lenin, and if they were, then no one heard them and their ideas. The communist bureaucracy crushed everything new and reasonable, leading the socialist countries to privatization of state property that were under control of the same communist bureaucrats. They didn’t need new Marx, they needed “new reformers” like Gaidar and Chubais. The bureaucracy raised them and controlled them.
For a short time, Western democracy became the basis of state ideologies in the FSU countries. However, the ideas of Western democracy could not take root and develop in civilization based on communal, tribal and clan mentality and worldview. In 1990-s, it became obvious that copying the US, the UK or the EU economic and political models could not work in the civilization of the former Russian Empire and the USSR. Moreover, in the West, contradictions began to grow that developed into a systemic crisis. The Western democratic idea has lost its appeal among the elites and peoples in the post-Soviet territories.
The only ideology that met the needs of the ruling elites in the FSU states, including Russia, was the ideology of nationalism in various variants acceptable to their elites. It should be taken into account that most of the peoples that gained state independence never had statehood in their history before, and nationalism was the only possible ideological basis for the development of states in those conditions. This applied to Ukraine most of all.
Modern Ukraine is a unique state where Russian-speaking peoples, including ethnic Russians and Jews, are not considered indigenous peoples under the Constitution of Ukraine. At the same time, the Jews have concentrated in their hands a significant part of political power, economic potential and finances resources. That happened in the state with radical Ukrainian nationalism being state ideology that appeared as an ideology directed against Poles, Jews and Russians, the same Russians who now consider themselves Ukrainians and have been fighting for eight years against pro-Russian Ukrainians and now fighting against Russia with the firmness and cruelty that are typical for Ukrainians and Russians.
The rise of nationalism in the FSU states has led to growing contradictions between peoples and countries, and it was Russia that found itself under the main blow and threat. It is nationalism as the state ideology of the peoples that has become important component of the general crisis in the former USSR, it is nationalism that hinders the development and integration of economies, destroys seemingly inviolable ties between the republics and peoples of the former USSR, and poses a strategic threat to the security and integrity of the Russian Federation.
Putin and his inner circle saw that threat too late. By that time, Russia was surrounded by nationalist states, and it was Ukraine that made the ruling elite in the Kremlin understand and see the threat. By that time, the Ukrainian nationalism began to take on a pronounced anti-Russian and anti-Putin character.
Putin has no other choice but to create a new ideological basis for the system of interactions between Russia and the countries surrounding Russia. The Kremlin is trying to create such a model of relations within the framework of the Collective Security Treaty Organization (CSTO), including building a new model of relations between Russia and Belarus. That model is based on principles of equality and friendliness of peoples, independence within the country, unity in foreign and defense policy. However, there is one more principle that ruling elites in all states are to observe and comply with: “Do what you want, but don’t create problems to the Kremlin.”
That new model of relations cannot be built with the existence of nationalist anti-Russian Ukraine under the security umbrella provided to Kiev by the West and NATO. That Ukraine blocks the entire process of restructuring the system of relations between the states of the former Soviet Union. That Ukraine is an existential threat to Russia, it undermines the authority of the Kremlin and struggles to create an alternative variant of political development.
The beginning of the exodus of the Ukrainian people
In this article, I do not intend to review in detail the course of the military operation in Ukraine. I would like to concentrate on the analysis of the consequences of the sanctions adopted against Russia, but it needs to note that the above mentioned factors and mistakes in the military operation led to unplanned losses of both military personnel and civilians, to the fact that Russian troops faced resistance that was unexpected in its cruelty and stubbornness.
Russian troops could not capture large cities, since the capture of cities with fierce resistance from the defenders led not only to losses in the Russian army, but also to the death of a huge number of civilians, to the destruction of cities and infrastructure that Moscow tried to avoid. After the regime change in Ukraine, Moscow will have to participate in the restoration of Ukraine, and Moscow wants to avoid spending extra resources on restoration of the Ukrainian cities under the tough anti-Russian sanctions regime.
Moreover, the local authorities not only did not support the invasion of the Russian army, but also took a tough anti-Russian position, actively creating local self-defense and resistance units. The war, unexpectedly for the Russian authorities, acquired protracted and cruel character that forced the command of the Russian army to change its strategy and led to a huge and constantly growing flow of refugees who not only moved within the country, but also en masse left Ukraine.
The flows of refugees from Ukraine were directed to Europe and Russia, moreover, the flow to Europe turned out to be much larger and amounted, on average, to a million refugees a week. The total number of refugees in Ukraine reached 11 million, of which about a million moved to Russia, and more than 4 million went to Europe. According to experts, up to 10 million Ukrainians may leave Ukraine within two months.
For Europe, this is only the beginning of the humanitarian catastrophe. The invasion of Russian troops into Ukraine launched the largest exodus of peoples in the history of Europe, but Ukraine is only one of the countries that will generate the flow of refugees to Europe in the coming months. The sanctions introduced against Russia by the United States, Great Britain and, most of all, by the EU, have played and will continue to play major role in generating this humanitarian catastrophe.
Man does not live by bread alone, but bread comes the first
According to Western politicians and economists, the ban on the transportation of Russian goods, including by sea and rail, is one of the most effective sanctions aimed at undermining the Russian economy. However, every action has a reaction, and every sanction hits not only the country against which it was taken, but also causes a chain reaction of consequences that must be evaluated and considered in advance before taking action and then watching with joy and then with surprise and later with horror how those sanctions generate destruction and tragic chain of events.
Blocking the transportation of Russian goods has dealt a blow to Russia’s trade with foreign countries and will continue to do damage for some time to come. However, these sanctions did not block all trade, did not lead to a halt in transportation of goods, but diverted them to those countries that refused to impose sanctions. These sanctions make money for those countries that have retained loyalty to the Kremlin and Putin personally.
Grains occupy important place among the export goods of Russia. In fact, grains are the third most important, including from political point of view, product of Russian export after oil and gas. After the adoption of sanctions against Russia, the importance of grain exports has increased even more.
The main grain exporters are Russia and Ukraine. Russia is the third largest grain producer in the world after China and India, but the first in terms of export, because the population of Russia is 10 times smaller than the population of China and 8 times smaller than the population of India. Ukraine was the fifth exporter of grain in the world.
It should be taken into account that Russia has been selling grain for export under quotas for several years, limiting supplies in order to eliminate the shortage of grain within the country. This is due to the fact that the price on the world market is nearly ten times higher than the price of grain within Russia.
The share of Russia and Ukraine in the grain trade was up to 30% of world exports, and three-quarters of the supply was wheat. Most of the exports are hard varieties that are used for production of cereals and pasta. Moscow confirmed that grain exports from Russia will not decrease in 2022. However, because of sanctions the grain from Russia will go now to Europe via China, and that will increase prices in Europe significantly.
The world’s second grain exporter, Ukraine, is unable to guarantee its supplies. Moreover, Ukraine itself may become a grain importer if agricultural work is disrupted as a result of the war.
The destruction of infrastructure, including granaries, can also lead to a reduction in the production and export of grain from Ukraine. For example, the largest granary in Ukraine, with 3 million tons of grain, is located in Mariupol, where Russian troops have been fighting fierce battles for a whole month against the nationalists of the Azov Regiment, recognized even in the United States as a fascist organization. The Azov that consists not only Ukrainians, but also Georgians, Poles, and even Russian citizens, no longer count on surviving and saving their lives and are fighting with one goal — to kill as many Russian special forces as possible.
Russian troops seek to preserve necessary infrastructure, including supply lines, port facilities, granaries that will be required by the new pro-Russian Ukraine after the end of the war, but the war is so fierce that there is little chance of preserving the necessary facilities.
Huge problems arise with the sowing. In territories occupied by Russian troops in southern Ukraine, for example, in the Kherson region, sowing is already beginning. The Russian military and local authorities are introducing payments in Russian rubles, including paying salaries to local officials, and supplying Ukrainian farmers with the necessary fuel. However, in the regions where the fighting is going on, agricultural work related to grain crops is not carried out.
Where the fighting has not yet begun, but may begin in the coming days and weeks, the situation is also critical. The need to carry out sowing work is one of the reasons for the «sluggish» movement of the Russian armed forces on the territory of Ukraine. The Russian Forces are focused on destroying military installations, warehouses, military factories and fortified areas with rockets and air bombs, trying to avoid shelling agricultural infrastructure and allowing local producers to carry out the work necessary to obtain a new crop.
The war dramatically increased the price of grain in the world. Since the beginning of the invasion of Russian troops into Ukraine, the price of wheat increased by 40% in the first ten days, but then decreased slightly when Russia confirmed that it did not intend to impose retaliatory sanctions and was ready to export grain in the volume that it had previously planned. Now the price of wheat is 30% higher than the price in February 2022. However, this is only the beginning…
Countries that are grain importers are now rapidly increasing their imports. Iraq announced an increase in grain imports by 3 million tons. China lifted all restrictions on grain imports from Russia. The grain harvest in the world, including in the US, China, Argentina, Canada and India, is expected to drop this year.
The exporting countries, realizing that prices will continue to rise, fear that this price increase may lead to a shortage of grain within the exporting countries themselves. That is why they are suspending their exports.
At the beginning of March, in Russia, orders for the export of grain were five times higher than the volume available for export. World grain prices were many times higher than prices within Russia. This led to some panic and an increase in demand within Russia for goods that require grain to manufacture. Prices in shops went up sharply, and the Russian government was forced to ban export of grain until August 31, 2022, that is, until the new harvest. The only exceptions are Belarus, the republics of Donbass, as well as Abkhazia and South Ossetia, regions that separated from Georgia and are now under Russian protection.
Russia supplied Europe with up to 25 million tons of mineral fertilizers per year. As a result of the sanctions, mineral fertilizers from Russia and Belarus will not be supplied to Europe, or to be supplied from Russia to China and then from China to Europe. Domestic production of mineral fertilizers in Europe is in crisis. Russian gas was used for the production of fertilizers, and prices for gas have skyrocketed five times compared to last year and continue to rise. The EU and the UK will have to pay for the Russian gas in rubles that Europeans have to buy from Russia, selling to Russia what it needs, or buying rubles at the prices of the Central Bank of Russia that was rather offended by Europe for blocking its foreign exchange reserves in the amount of $ 320 billion.
What will happen if the West refuses to buy gas for rubles and Moscow stops gas supplies? And what will happen if Putin announces that grain will also be sold only for rubles? And mineral fertilizers too?
In Europe, the food market may have difficult times. A sharp and uncontrolled rise in prices is possible. Against the backdrop of these difficulties, Europe is facing an influx of millions of refugees …
At the same time, there are countries that Russia does not have the right not to provide with grain, for example, Armenia and Kyrgyzstan. These are the countries of the former USSR playing important role in establishing the system of relations between countries in the post-Soviet space that I mentioned above.
For the rest of the world, thanks to Western sanctions, grains are becoming an important political and economic lever in the hands of the Kremlin.
It is important to take into account that Russia supplied grain to 95 countries of the world. The largest importers of Russian grain were Turkey, Egypt, Latvia, Saudi Arabia, Azerbaijan, Nigeria, Bangladesh, and China.
Ukraine supplied grain to the countries of the Maghreb and the Middle East, including Egypt, Turkey, Algeria, Tunisia, Iran, and Saudi Arabia. Now these countries will depend on Russia.
This dependence will develop in the face of increasing food shortages, including cereals and grain that in the Middle East, for example, form the basis of the diet of the middle class and low-income segments of the population.
With a shortage of grain, «bread riots» and revolutionary situations like the «Arab spring» will become a reality, and the world may face this new reality in the coming weeks. Energy trade will be under threat, because it is the Middle East that is the largest producer of oil and gas and is important pathway for all world trade.
Even if the West fails to organize a complete blockade of Russia and the sanctions remain limited, those sanctions will inevitably lead to catastrophic consequences: disruption of trade relations, unprecedented price increases, revolutions and riots…
Where will the streams of refugees go from North Africa and the Middle East that will be covered with hunger almost inevitably? The governments from the Middle East and North Africa may go bow to Moscow, agreeing to everything that Putin demands, for example, the military bases on their territories or the transfer of their oil and gas fields to Russian companies. If not, flows of refugees will go to Europe… In addition to those 10 million refugees who will come from Ukraine…
European leaders are to take that into account.
(To be continued)