The Ukraine World Crisis: Company Leaders Take Note
By Cameron Munter, Skytop Contributor / March 7th, 2022
Cameron Munter served as ambassador to Pakistan at the time of the Bin Laden raid. He was ambassador to Serbia during the Kosovo independence crisis. He served twice in Iraq, in Mosul as Provincial Reconstruction Leader and in Baghdad as Deputy Chief of Mission. In the course of three decades as a career diplomat, he was also NSC Director in the Clinton and Bush White Houses, and served overseas in Warsaw, Prague, and Bonn.
Munter studied at Cornell and earned a PhD in history from Johns Hopkins, and has taught at Pomona College, Columbia University School of Law, and UCLA.
Currently a global consultant living in Prague, Munter was President and CEO of the East West Institute, a nonprofit engaged in global conflict prevention. He is a member of the Council on Foreign Relations and the American Academy of Diplomacy and serves on numerous corporate and nonprofit boards.
No Speedy Outcome Near
It is slightly more than one week after Russian troops moved into Ukrainian sovereign territory– or, to be precise, one week after a new and concentrated wave of thousands of troops followed Russia’s previous aggression of 2014. Russian leadership expected something like what happened in August in Afghanistan: that the Ukrainian army would melt away, and that Russia would soon sweep away the Ukrainian government.
This has not happened.
In the age of social media, we somehow expect events to move at the speed of online exchanges. But, that’s not how Russia’s invasion of Ukraine will play out, despite calls for a quick resolution.
It’s complexities will add to it’s painful and costly impact.
Even through a dispassionate lens, Russian President Vladimir Putin has not only invaded Ukraine, but he has launched an attack on 77 years of peace building and economic inter-exchange, creating a situational hornet's nest. Experts are seeking to understand the repercussions of this invasion for Ukraine and beyond. We are in a new light now, one where the clouds of war may cast a shadow over the global economy for decades ahead.
Information Age Anschluss Thwarted
President Putin, in his recent writings and speeches, predicted that Ukraine would be an Information Age Anschluss, the moniker given to Hitler’s swift annexation of Austria in March 1938.
Determined resistance, led by the heroic efforts of Ukrainian President Zelenskyy, has stopped the Russians in their tracks. Supporting him and the Ukrainian people, the West has proven strong and unified with its unprecedented sanctions, palpable and stunning. Even the UN General Assembly has overwhelmingly condemned Russia’s actions. A more horrifying phase of the war is likely, when Russian forces move in on Kharkiv and Kyiv and engage in the kind of savage attack experienced in Aleppo and before it, in Grozny.
Putin’s Cold War Hangover
We ask: what made Putin do this? What did he want to achieve? Is there a way to get him to stop?
We answer: No one can get inside his head. That said, the best guess is that after twenty years in power, during which time he has consistently expressed the politics of grievance and humiliation, he feels he must establish his legacy. To compensate for the pain he has felt since the end of the Soviet Union, he must recreate a Russian empire that has, at a very minimum, constituent parts of Belarus and Ukraine.
Some ask if NATO’s enlargement brought this about, somehow provoking Russians; this is a spurious claim. Putin’s own writings and recent speeches don’t mention NATO but rather the rather startling assertion that there is no Ukrainian state or nationality. It’s identity, he asserts, is inextricably woven into the fabric of Russia.
Further claims are made that assert that had NATO, at the end of the Cold War, not taken on new applicants, such as Estonia and Romania, that Putin would be a model democrat on good terms with his neighbors. However, the “original sin” here is his need to revive the empire, despite the legitimate desire of his neighbors to choose their friends. Given our limited access to his inner thoughts, the larger question is in how he’ll extricate himself from what is already obviously a disastrous decision.
Prepare for even tougher times, as President Macron of France has just said, “the worst is yet to come.”
Global Economic Boomerang
Supporting President Macon’s outlook, we will feel the effects of these days for months and years.
At this time, more than a million Ukrainian refugees have fled to Poland, Slovakia, Romania, and more are on their way. The Ukrainian economy, a major exporter of foodstuffs and other goods, is no longer doing so. Our inflation, presently the result of supply-chain dislocation and other factors caused by the COVID-19 pandemic, will now be hit by supply reduction.
This will kick inflation even higher.
Russia is a supplier of hydrocarbons. The uncertainty of the war has driven up the price of oil over $100 per barrel for the first time in years, and experts expect that the price could soon reach as high as $150. Analysts calculate that this could add more than 3 percent to our already 7 percent inflation rate.
We have not seen this kind of shakeup since the post-oil-shocks of the 1970s, and we are simply too early in the process to predict just how this may happen and how long it will take. Keep an eye on commodities in general. Ukraine and Russia export nearly 40 percent of the world’s wheat, and Ukraine itself nearly 80 percent of the sunflower oil.
The longer the war goes on, the more we’ll feel the impact of these and other export driven factors, which could lead to even more inflation, if not food and energy shortages, world-wide.
Economic Fallout, Political Shifts as Setbacks
Looking years ahead, there will be geopolitical shifts.
The sanctions imposed on the west will make it very difficult for Russia to trade in world markets, and make it even more dependent on non-dollar-denominated trade, above all with the Chinese. Putin and Chinese President Xi’s agreement, signed at the Beijing Olympics just weeks ago, envisions building of pipelines and exports of commodities from Russia to China; but any income will have to be spent on Chinese goods.
We may be seeing Russia deepen its role as a vassal to China, which may emerge from this crisis as a winner. But in times of uncertainty, these will not be the only people whose circumstances change. Western Europe, almost entirely dependent on Russian energy, may be in for some very difficult times. Frontier markets, which are seen as risky even when financial leaders are confident, will see capital flee. This will not be good for Turkey, Egypt, or Pakistan.
Politics will change.
Some have already. The most remarkable change is in Germany where the new post-Merkel coalition has moved resolutely into a new era that began after the signing of Nord Stream 2. This agreement, covering a 764 mile gas pipeline under the Baltic Sea from Russia to Germany, toughened its approach to Russia. It may be reconsidering its phase-out of nuclear power, and committed to many billions of Euros in defense spending.
Some German experts have told me that American politics play a role in this as well. President Biden has proven himself a stalwart supporter of European allies, building a strong coalition against Putin’s war. In the event of a Trumpist victory in 2024, with the prospect after that of American withdrawal from NATO and international commitments, the Germans also must look out for themselves in what looks like an increasingly hostile world.
What’s Ahead
After slightly more than a week into the Russian attack, we seem to be in the new Post-Post-Cold-War era, where expectations of a peace without end in Europe are shattered. Along with it, the west has been resolved with unity, at least for now. Though the immediate picture is unclear, it is likely to include brutal scenes of urban destruction.
The midterm picture is cloudy: the longer term prospects are not what they were even when 2022 began.