Friday, 28 January 2022

Demystifying Putin: US vs. Russia geopolitics - the real story

In recent months, Russia has once again been in the headlines for all the wrong reasons, with the US and Western media loudly proclaiming (since November) that Russia is planning an imminent invasion of the Ukraine, though Russia has repeatedly denied that fact and it's not exactly clear what Russia is waiting for, or what advantage it could expect to derive from lying about its intentions at this point (the whole Western world expects an invasion and the US has pulled embassy staff from Kiev). 

Putin is generally portrayed in the Western media as a constant and unpredictable menace, whose actions defy any rational explanation, and who poses a meaningful security threat to the world. What the hell is he doing; what does he want; and why is he seemingly so hell bent on wreaking havoc and fermenting conflict, despite all the sanctions and international condemnation such actions entail? Some people have resorted to explanations that Putin wants to reconstruct the USSR, and likened his activities and putative designs on Ukraine to Hitler trying to seize the Sudetenland. That many serious people in the West seem to believe this highlights the extraordinary degree of misunderstanding that currently exists amongst Western audiences, and the amount of misinformation they have been subject to.

Strong opinions coupled with limited knowledge are the basis for ideology, not sound thinking and decision making. Most Western audiences are not even aware of the difference between the Donbass and Ukraine proper, and that the Donbass fought a war of independence against the Ukraine in 2014, and under the Minsk Accords is now semi-autonomous. Any forcible reincorporation back into Ukraine proper by the Ukrainian military, which Russia feared was being planned (with US aid and military armament, by the way), would be more of a breach of international law than Russia stepping in to aid its defense, and no one seems to much care about what the people who actually live in the Donbass want (independence from the Ukraine). Who would be invading who? But more on that later.

I have been investing in Russia since 2014 and have done quite a bit of work and thinking on these issues, and at this point feel compelled to write a blog article about it, because it has more than just investing implications - a better understanding amongst Western audiences might also reduce the probability of mutual escalations that could - at worst - eventually lead to WW3 between NATO and Russia (likely allied with China). Fortunately, I am not that pessimistic, but I do believe pervasive misunderstandings in the West, as well as some of its ulterior motives, are driving a policy approach that is significantly increasing mutual tensions and needlessly increasing the risk of war.

When you properly understand the situation, it becomes clear that Putin's actions are not mystical or unpredictable at all - they make perfect sense, and frankly, in many situations they are even justifiable. In many if not most cases, Putin is behaving in exactly the same way - if not in a much more reserved fashion - than the US would (and has) behave(d) if and when the shoe was on the other foot. To the uninitiated, all this may feel like Kremlin propaganda, but please do bear with me for a while.

It is important to recognize that we all have a very significant "home team bias" in assessing geopolitical phenomena, and if you want to properly understand the situation, you need to see it from both sides. You also have to get away from the reductionist assumption that the world is comprised of "good guys" and "bad guys". In political conflicts, people always perceive themselves as the "good guys" and the other as the "bad guys". A more mature mutual understanding is necessary if diplomatic solutions are to be reached, as is a willingness to *compromise*, rather than engage in domineering behaviour. 

There are two broad areas I would like to address in this piece. The first is a discussion of some of the bigger picture reasons that help explain not just ongoing Western - and particularly US - tensions with Russia, but also Sino-US tensions, and a broad range of other conflicts the US has involved itself in (and which also explains the seemingly bizarre behaviour of North Korea). This will provide the necessary context to understanding the second area I will address, which gets into the specifics of recent Russo-US/NATO tensions, and also what is happening on Ukraine's border, and why.


The bigger picture background

When I was a child, my mother used to talk of the "common denominator". When there were sibling squabbles where it was hard to discern who was to blame, mum would default to the heuristic "who seems to be the common denominator". If one sibling always seems to show up in disputes, there is a decent chance that their behaviour has at least something to do with the emergent conflict. The US seems to have a habit of embroiling itself in political conflicts and wars all around the world. Prima facie, the US appears to be the common denominator. Why is that? And why, incidentally, when the US turns up as it did in Iraq to putatively "liberate" the people, does the US often encounter stiff grass roots resistance? Don't they know the US is there to help? Why does nation building fail? And why does antipathy towards the US and West often reach such extreme levels that it can fuel terrorist activity. 

The likes of George Bush would have you believe that people in all these countries hate the US because of what it stands for, its values and its freedoms, etc. That is total hogwash. It has absolutely nothing to do with that. In my view, the underlying reason for all these tensions and conflicts is that the US State Department has a longstanding policy of *targeted regime change* around the world, which is a policy approach that became entrenched during the Cold War era via the doctrine of "containment". 

Under the said doctrine, rather than outright war with the USSR and the potential mutually assured destruction it could entail, the US would seek to prevent communism spreading via targeted interventions - both overt and covert - and it did. Overt interventions included most obviously the Vietnam War, but there were also many covert interventions, which included backing domestic insurgencies by providing (for eg) arms and funding. Some of these interventions are widely known (e.g. the Bay of Pigs invasion of Cuba), and some not. For example, I think it quite likely the CIA had a hand in the ousting of Surkarno in Indonesia, and installation of Suharto in 1965. Surkarno was inclining strongly communist by 1965, and the official narrative that communists launched an attempted coup against Surkarno, justifying a counter military coup by Suharto, makes little sense. Suharto went on to purge Indonesia of about 1m communist sympathizers. But I digress.

Since the Cold War ended, the US State Department has not abandoned this approach (institutional reflexes are hard to change), though it has pivoted to targeting regime change in countries it deems important to US national security interests. It is now more covert in its approach, however, and seldom explicitly acknowledges this is its underlying strategy (which also makes it much more hazardous to take US foreign policy rhetoric at face value, because there is often an ulterior motive). Indeed, after a long period of unipolarity associated with Pax Americana, the US has come to feel it has the right to define the terms on which it co-exists in the world with other countries, and it feels it has the right to weaken, destabilize or ferment regime change in countries it believes to be a threat to the US's national security interests. And this inclination is fundamentally where all the tensions come from, whether it be with Russia, China, or any other body politic around the world. And it often results in the US "picking sides" and intervening in domestic conflicts, so as to increase the chances of a resolution of the said conflict in a way that yields a new regime more compatible with US interests. 

US interventionalism is often done under the guise of "spreading democracy" and securing "human rights", and it might even be the case that such actions are for the greater good of humanity in the long term (at least if the interventions had a tendency to succeed, which for the most part they have not; why will be discussed later). However, it also seems apparent that the US has historically been much more concerned about spreading democracy and human rights in countries/regions that happen to serve the US's geopolitical interests, such as securing reliable access to hydrocarbons (hence its interest in the Middle East; the US is not interested in "stealing" Middle Eastern oil, as it is sometimes claimed, but it is interested in ensuring geopolitically compatible regimes exist that won't choke off supply a la the 1970s OPEC oil embargo). And it is also more interested in spreading (pro Western) democracy in regimes that are seen as posing a potential military threat to the US in the long term (for instance, China and Russia).

Whether or not one thinks this is a good thing or a bad thing for the world (I certainly prefer democracy and human rights), it is *absolutely predictable* that this approach to the conduct of foreign policy would lead to conflict, because US regime change ambitions come into direct conflict with the interests of incumbent regimes in the said countries. And they will fight hammer and tooth to prevent themselves from being deposed. Indeed, for such people, the outcome of this realpolitik can often be a matter of life and death. This dynamic is absolutely a major contributor to rising US-Sino tensions, as well as long-standing US-Russo tensions. The US wants China to become a democracy. The CCP, unsurprisingly, does not want that.

As I have blogged about in the past, if you are an authoritarian leader/regime, there are two threats to the continuation of your incumbency: the first is a purely domestic insurgency; the second is a foreign-led regime overthrow, such as what happened to Saddam Hussein. Incumbents have much more control over the former, and if they lose power by this means, then they only have (even in their own eyes) themselves to blame. However, it is much harder to ward off foreign-backed regime change when you live in a world with great powers with military strength that surpasses yours (particularly when they are allied into large and powerful blocks like NATO), and who have had a historical tendency to use a combination of political, financial, and military means to ferment such changes. It is a very important vulnerability of these regimes, they know it, and for that reason, it is taken with utmost seriousness. 

This, incidentally, is behind North Korea's seemingly bizarre and irrational behaviour. To the uninitiated, "Rocket Man" Kim Jong-Un seems completely unhinged, but I see things very differently, and instead see his actions as carefully calculated. You and your extended family do not keep absolute control over an entire country for multiple generations by being stupid and unaware of the dynamics of power. Kim Jong-Un understands that the biggest risk to the perpetuation of his regime is a foreign-backed overthrow. Consequently, he very deliberately wants to persuade the world that (1) we have a lot of dangerous weapons; and (2) we may just be bat shit crazy enough to use them if you fuck with us, so leave us alone. And he has succeeded with this ambition. It has had the desired effect of deterring foreign intervention to overthrow his regime. On the bright side, it means that North Korea is actually not a threat to the world at all, nor are many other so-called "rouge" countries. Though they are often cast as aggressors by the US State Department as as way of justifying the US's aggressive foreign policy agenda, in actuality the primary motivation for armament in these nations is to *deter/prevent a foreign-backed regime overthrow*. And the US absolutely hates it because it does, in fact, inhibit their ability to engineer regime change. This is ultimately where the tensions and oft-mutual escalations come from, and is absolutely critical to understand.

The 2003 Iraq invasion was also a very significant development in this regard, and for the uninitiated, offered a brief peek behind the US State Department curtain. Even in the US it is now widely acknowledged that falsehoods were perpetuated by US officials to persuade the US public to back going to war with Iraq, and at the very least, the US misrepresented the degree of confidence it had that Iraq was in possession of WOMDs - saying we "know" they have them, and "know" where they are (they didn't). However, people also acknowledged that Saddam was a "bad guy", and so not too many tears were shed. The outcome seemed ok, despite the dubious premise/means. However, as I will discuss, the long term consequences of the invasion have extended well beyond Iraq's borders.

The following is an excellent speech given by former UN weapons inspector Scott Ritter in 2002, on the eve of the invasion. During the 1990s, Ritter made more than 50 visits to Iraq, and presided over what he persuasively argues was a highly successful disarmament program, which by 1998 he believed was 95% complete. Then, seemingly inexplicably, the US unilaterally pulled all arms inspectors out of Iraq, instead of allowing the process to complete. Had it completed, Iraq would have become compliant with all UN security resolutions, and an invasion/deposing of Saddam would have become much more difficult to justify to the international community. He makes a strong case that the ultimate intention of US foreign policy was always regime change, and WOMDs were being used simply as a convenient premise/lie to pursue that underlying ambition. He was subsequently proven right. I highly recommend you watch it, because it significantly bolsters the credibility of the arguments I am making here, which otherwise might strike one as been imbued with a degree of conspiracy theory. 

This is just one example of the US playing fast and loose with the facts in order to justify covert State Department agendas. For instance, Ritter (one of the most qualified people in the world to comment on this, by the way) has also argued that there is no solid evidence Assad actually used chemical weapons against his population in Syria, which was used as the basis for US military intervention. Rebel groups claimed as much because it was necessary to recruit Western support (they know what buttons to press), but typical checks and balances used to ensure evidence was not fabricated false-flag evidence were suspended. It would appear the West was willfully blind because they wanted Assad out, and this was too good of an opportunity to pass up - backing a domestic insurgency that might very well succeed. Is it any surprise that leaders like Assad don't tend to be too fond of the US or too trusting, and tend to view the US as an aggressive and militaristic power bent on imposing its will on the world at gunpoint? And is it any surprise Russia backed Assad? What Putin is trying to do is resist US-sponsored regime change, because it's a matter of self preservation for him. And he is seeking allies that can assist with that ambition.

Iraq was the most explicit and militaristic regime-change intervention the US has undertaken in the post Cold War era, but there have been many other such interventions of a more indirect nature. The typical modus operandi is to ferment domestic discontent (e.g. via sanctions, or funding pro-Western "seditious" media); providing support to domestic rebels (arms and funding); and/or using alleged human rights violations as a pretext for military intervention, as was the case in Syria. The US/NATO also took sides and militarily intervened in Bosnia and Kosovo, and also bombed Belgrade (Serbia) in the late 1990s - something the Russians took close note of (bear this in mind whenever people claim that NATO is purely defensive in orientation, and so Russia/Putin has nothing to fear from NATO expansion). 

The US also intervened in Libya (and Afghanistan of course); and though the US has not invaded Iran, it has put significant pressure on it via heavy sanctions, which can lead to domestic instability (as it has long attempted to do in Russia, and has also started to attempt to do in China as well - unsuccessfully). Ritter has argued persuasively (see his book "Deal Breaker", for eg) that Iran was never a legitimate nuclear threat, and US domestic policy towards Iran has long been oppressive and unreasonable (he has totally changed my view on this issue; I now realize that in the past when I was talking about Iran, I had no idea what I was talking about; much the same way most Westerners today talk about Russia).

The legacy of the US invasion of Iraq and deposing of Saddam has been very significant - just not the legacy that was hoped for. While Western audiences looked on approvingly as Saddam was deposed, other quasi-authoritarian leaders of the world looked on in a concerned fashion and said "that could be me next". It highlighted a need for rapid armament, including ideally the acquisition of nuclear weapons, which are the ultimate defense/trump card. And it lead to a much greater degree of suspicion of US institutions (given it's willingness to fabricate a false pretext for invasion), which extended to those of Western donor organizations and media. This is one reason why restrictions on Western media (including social media) have become more common in these countries, and why countries like China have recently become more hawkish with respect to foreign-ownership restrictions of educational institutions/entities (witness the collapse in overseas listed Chinese education stocks of late). As US foreign policy has become more aggressively anti-China, China has moved to bolster its ideological defenses.

Overall, US policy actions over the past several decades have failed to make the world safer, and have in fact had the direct opposite effect. Even if you agree with the US's intentions, it is hard to find the outcomes agreeable. US "nation building" attempts have failed everywhere - including most recently in Afghanistan - and the world is now arguably more authoritarian and militaristic than it was before Iraq. Aggressive US foreign policy is also leading to greater co-operation amongst authoritarian countries, united by their need to defend themselves against attempted US-backed regime change. This is already resulting, for instance, in greater cooperation between China and Russia, and the greater prominence of the CSTO (Collective Security Treaty Organization), which was recently deployed to put down an attempted coup in Kazakhstan (which may or may not have had foreign backing - that remains unclear at this point, but Russia understandably has its suspicions given the coincidental timing, and it has contributed to the recent escalation in NATO-Russo tensions). 

But this is just the impact on leaders. What about the governed populations? Wouldn't they welcome liberation? That has been the assumption and justification used for many US incursions that otherwise could be seen as militaristic occupations of other countries in breach of international law, and it is an argument I have a lot of sympathy for. After all, if you are only holding on to power through domestic repression, you don't really have an ethical justification for retaining that power - you're merely a thug holding a country to ransom through force (though in many cases, domestic leaders actually enjoy significant and legitimate popularity - Putin being one such example). But even if liberation was the intention, very seldom has that been the outcome. Soldiers in Iraq frequently spoke with dismay about how they were being attacked by people they were there to help. What gives?

There are many reasons, but one of the most important is that (1) the incumbent regime will naturally resist such interventions and fight for their survival, meaning violent conflict/warfare is inevitable; and (2) the said warfare almost always leads to the lives of ordinary people being heavily disrupted, extending from heavy destruction of local economies and property, to the objectionably-euphemistic "collateral damage". People may not understand all the issues and long term consequences, but they do understand that ever since the US showed up, everything in their lives seems to have gone to hell (more than anything else, people just want to live a safe and predictable life). Unsurprisingly, this has not tended to be a very effective strategy for winning "hearts and minds" (and to the contrary, it often ferments such an extreme degree of hatred of the US that it congeals into organized terrorism). It is understandable why people would be embittered by loved ones being killed and their already-meagre possessions being bombed to rubble, even if it was for the long term greater good. 

This is particularly so because people are always (endowed by evolution) instinctively distrustful of foreigners and their intentions in the first place (because they are an unknown quantity that could pose a danger), and who wants to be bossed around at gunpoint by a bunch of foreigners "for your own good"? This is why in Vietnam, the US thought it was fighting communists, while many of the Vietnamese thought they were fighting a hostile invading force that was napalming their villages with impunity, and butchering their countrymen by the millions (and it didn't even stop Vietnam from becoming communist - what an absolute tragic waste of human life). I can't imagine the degree of hatred they must have felt towards the white man, and it is a credit to the country they have managed to forgive us and move past it as the decades have passed, but many others around the world have not yet done so for their own experiences of US-inflicted militaristic injustice. Add to that the fact that the US has a reputation of pursuing foreign policy in a way that places absolute primacy on its own geopolitical interests, and its no mystery why local populations may be cynical of US intentions. 

That's the big picture. And it is vitally important to understand. Western "aggression" can come in different forms; the declaration of conventional war by US/NATO against Russia or China is indeed very unlikely, but it is not the only form of aggression that Xi and Putin fear. Indeed, think about how Russia's (very modest) intervention in the 2016 US presidential election (posting on US social media; taking out US$150k of Facebook ads; and releasing hacked DNC materials which actually *increased* democratic transparency) was widely labeled "Russian aggression" and "undermining US democracy". If we consider that aggressive, how would you expect other nations to consider the US funding and arming rebel groups; funding seditious political activism and media; and sometimes even engaging in outright military intervention? The double standard and hypocrisy is laughable in its magnitude. 

It is absolutely critical to understand this background before proceeding to any analysis of the specific circumstances in respect of US-Russo relations. The latter will now follow. 

Russo-NATO relations 

As is now widely known, Russia has long objected to NATO expansion. NATO is a Cold War era military alliance, and after the dissolution of the USSR, its raisen d'etre ceased. However, the West did not disband NATO, though they did provide verbal assurances to Russia it would not be expanded. Russia even asked to join NATO at one point, but was rebuffed. Sorry buddy, this club ain't for you.

Since that time, NATO has been steadily expanded and pushing closer and closer to Russia's borders, notwithstanding the said assurances, which the West is quick to point out were not in any way binding. To the West's way of thinking, who is part of NATO is none of Russia's business, and it is a defensively-oriented alliance besides. But from Russia's perspective, they wonder why a Cold War era institution targeted specifically at Russia continues to exist; denies entry to it; and then keeps being aggressively expanded towards its borders. It comes off as unnecessarily aggressive, and implies the West may have some undeclared motive, and moreover it gives the West greater power to bully Russia and intervene in domestic conflicts - which we know from the prior discussion the US is wont to do. It raises legitimate security concerns - particularly given, as noted earlier, the fact that NATO has intervened in domestic political conflicts before and bombed Belgrade in 1999.

All that would need to happen to assuage Russia's fears and reach a permanent peace without risk of escalation would be for both Russia and NATO to declare the Ukraine (as well as perhaps a handful of other border states) neutral territory, like Finland is and has happily been for decades. But the West is hell bent on avoiding that, and wants as many territories surrounding Russia incorporated into its military alliance as possible. Why is that, exactly? And don't you think it might pay to show at least a tiny bit of regard to what a neighbour with 4,000 nuclear warheads and a powerful military finds acceptable?

It is important to understand that both Russia and the US/NATO have inherited a legacy of distrust from the Cold War, and as a result, the Russians trust the West about as much as as the West trusts Russia. Most Westerners think "Russia should just trust us, because we are the good guys". But would Westerners "just trust" Russia? Most of the leadership in both the US State Department and the Kremlin grew up during a period where the other side was a mortal, existential enemy, and on both sides it has been difficult to shake the instinct of viewing the other side with suspicion, if not as an adversary. Understanding this foundation of distrust alone helps clarify some of the confusion - particularly because much if not most of the time, what Russia is asked to accept from NATO is something that the US/West would *never* accept from Russia, were the shoe on the other foot. Indeed, if the actions were reversed the West would again be declaring Russia the aggressor. That is a problematic hypocrisy.

For instance, how comfortable do you think the US would be with Russia forming a military alliance with Canada, and then stationing Russian military bases and offensive missile systems on the eastern US-Canadian border, with capabilities of striking NYC or DC within 5 minutes? Do you think the US would be enthusiastically preaching about how Canada is a sovereign nation entitled to enter into any military alliance it pleases? Or do you think the US would perceive this as very aggressive, if not an existential risk? How about if Russia had backed a coup in Canada, that threw out a pro-US govt and installed a pro-Russian one, as the US did in the Ukraine in 2013/14 (see below)? And how would it look to the US if the US responded by moving troops to the border (within its own territory), and Russia then proceeded to declare this a totally unacceptable hostile escalation, recruited the international community to encircle and condemn the US and cut it off from the global economy, and called for a yet greater militarized build up of troops on the Canadian-US border. This would be seen as extremely aggressive - almost tantamount to a declaration of war. Yet this is not too far removed from what NATO/the US is doing to Russia, and we seem to believe *any* concerns at all Russia might have about this to be *completely unreasonable*, and do not believe *any* degree of compromise, no matter how small, to be tolerable.  

Indeed, we don't even need to speculate about how the US would feel and react to a foreign military alliance emerging within its "sphere of influence". In 1962, the US, under JFK, almost took the world to nuclear war over Russia forming a military alliance with (sovereign) Cuba and stationing missiles there. Russia was also doing this *in response* to the US having already deployed missiles in Turkey (the crisis was resolved when JFK quietly agreed to dismantle those offensive missiles in Turkey, though he never admitted it to the US public for fear of looking weak - then, as now, any sort of compromise with Russia is seen politically unacceptable; that uncompromising approach from the US almost lead us to nuclear war, and could eventually lead us to war in the future as well if US attitudes don't change).

From the Russian perspective, a lot of what the West/US does appears very aggressive, and this is even before taking into account the seditious regime-change behaviour the US routinely engages in. This has the potential to lead to a dangerous situation where both sides perceive the other to be the aggressor, and their own actions a necessary defensive response, which in turn are interpreted by the other side as yet further aggression. Unchecked, this can lead to tit-for-tat escalation that increases the risk of it spiraling into an all out war. Needless to say, we should be trying a lot harder to avoid this than we are. Indeed, it sometimes seems as if Western leaders are trying their absolute hardest to provoke WW3 - it's unfathomably dumb.

In the West, we have long enjoyed the comfort and benefit of Pax Americana, and have never felt the insecurity that comes with living in a world where you coexist with non-aligned great powers that are much stronger than you, and have both the potential willingness and ability to subjugate you, so we struggle to empathize. The closest the US has come to understanding this feeling is the creeping anxiety it is now starting to feel as it observes China grow ever stronger. The same insecurities Russia and other nations habour of not being fully in control of their own destiny are starting to manifest amongst Westerners, and when they do, it is amazing how quickly high-minded liberal idealism is thrown out the window. Suddenly, things look very different when your own security is in question. 

All of this is not to mention the fact that Russia was invaded twice during the 20th Century by Western powers, having been betrayed by its former ally Germany (a liberal democracy prior to Hitler's seizure of power, incidentally - democracy is no iron clad protection against fascism). Defending these invasions came at the devastating cost of *26m Russian lives*, not to mention contributing (in the aftermath of WW1) to growth in populist support for communism, which had a legacy of devastating Russia's development for three quarters of a century. So let's not forget that.

The biggest contributor by far, however, is Putin's fear - which I actually think is well justified - that the US is pushing for regime change in Russia, and he is pursuing a strategy of self-preservation. He does not want NATO and the US to grow strong enough on Russia's borders that they could easily covertly supply a domestic insurgency with military aid and troops by sneaking them across the border. Meanwhile, the US does not want to compromise and declare the Ukraine independent because it would, in fact, make it harder for the US to back the said insurgency, which is exactly what it wants to be able to do. And this, ultimately, is why the Ukraine is such a battleground state.

Russia has repeatedly raised concerns, but the response it typically gets approximates "fuck you, we will do whatever we want". This total disrespect for a nation that has 4k nuclear warheads has lead Putin to conclude he needs to declare some "red lines" - no offensive missiles and military based deployed on its border in places like Eastern Ukraine - *and* to offer a credible threat that he is willing to defend those lines with military force. By failing to compromise with Russia or respect their security concerns, and thereby rendering any Russian diplomatic outreaches a total waste of their time, the West has forced Putin to make it clear he is willing to use military force in order to get anyone to listen to him. He does not want conflict, but he is also not willing to continue to be treated with contempt.

The West continues, for the moment, to say "fuck you Putin we will put as many missiles and military forces on your border as we damn well please". At some point, this approach from the West could trigger a war - especially if it tries to call Putin's bluff and thinks it can violate his red lines without consequence. I hope it does not and I am optimistic it will not escalate to that, because I think the West is actually taking Russia's threats more seriously than it is prepared to admit. Nevertheless, the West's aggressive and uncompromising approach is needlessly creating the conditions that could lead to mutual escalation into war - particularly if Putin is backed far enough into a corner with severe enough sanctions (for e.g.) where he has little alternative but to go to war (after all, The Japanese bombed Pearl Harbour due to a US navel blockade that cut of their supply of oil; they had no choice).

The Donbass (Ukrainian border) situation specifically

Finally, this brings us to an analysis of the present situation and recent border tensions. The hysteria began in November when US intelligence sources claimed Russia was amassing troops on Ukraine's border and preparing an imminent invasion, which Russia denied and has continued to deny. Even if we assume for the moment the US State Department is not just looking for another excuse to try to pressure Putin's regime, US intelligence is probably derived mostly from US Ukrainian embassy staff, and those desk jockeys most likely get their information from West Ukrainian government officials (and, in all likelihood, the New York Times). 

The Ukrainian presidency is currently held by Zelensky, whose is a Ukrainian nationalist and is aggressively anti Russia. He has been lagging badly at the polls and would benefit politically from provoking a minor incident with Russia (though not a major one/all out war - just enough that he can say "I told you so"; justify taking actions to satisfy his nationalist base, and secure US political favours). His predecessor did likewise several years ago, sailing war ships into the Azov Sea and deliberately failing to respond to Russia's repeated communications seeking clarification of their intentions. When the vessels were impounded (without bloodshed), he declared it an act of aggression by Russia and used it as a pretext to declare a state of emergency a month or so out from an election, granting him sweeping powers such as suspending the rights of assembly, amongst other things. Western commentators, played like a grand piano, dutifully condemned "Russian aggression in the Azov Sea".

In addition, the Ukraine is also the recipient of US foreign military aid so benefits financially from a perceived threat from Russia, and it is also opposed to the commissioning of the Nord Stream 2 pipeline (which, by the way, is a shorter and more direct route, and therefore more economically efficient and environmentally friendly, while also bypassing a potentially politically unstable country and thereby enhancing EU energy security), as its commissioning puts billions of dollars of transit fees paid by Russia to the Ukraine at risk. It is notable that Hunter Biden received a US$600k board seat at a Ukrainian energy company. One might reasonably question whether those "generous" board fees reflected deep expertise in all things Ukrainian energy, or rather an ability to extract political favours from Washington. I guess we shouldn't be surprised that the US has so vociferously opposed the Nord Stream 2 pipeline.

Anyhow, the background to the current border tensions date back to 2014. In late 2013/early 2014, there was a coup/revolution in the Ukraine, which resulted in a democratically-elected pro-Russian president (Yanukovych) being removed from power, and a pro-Western government installed in its place. This occurred after a widespread uprising in West Ukraine, centered on the capital Kiev. While the coup had grass roots participation from many Ukrainians, it mostly reflected the opinions of those in West Ukraine, who are mostly ethnically Ukrainian and generally pro-Western, and it did not represent the universal opinion of all Ukrainians - including large ethnic Russian minorities in the far east. At the time, the Ukraine was a politically fractured nation, virtually divided down the middle between East and West in its political preferences, with a juxtaposition starker than that of California and Texas.

Furthermore, the US was a active supporter the uprising, expressed enthusiastic support for "freedom fighting" Ukrainians, and were caught plotting what government to install in the Ukraine in the infamous leaked "Fuck the EU" audio recording between the US State Department and US Ukrainian ambassador, which did not go down well either in Russia, or in the pro-Russian eastern parts of the Ukraine, who felt disenfranchised. The situation worsened after the new administration attempted to disallow the official use of Russian, despite the fact that many people in the far east were Russian speaking.

The result was a separatist uprising emerging in the Far East (Donbass). The Ukrainian military wanted to put down the rebellion, while Russia provided military aid to the separatists. A ceasefire/peace deal was eventually reached with the Minsk Accords, brokered by France and Germany. The Minsk Accords - which carry the force of international law - provided for a significant increase in self-governance. The compromise was essentially to grant the Donbass quasi-independence, without it needing to be officially recognized as a separate country.

Since that time, the Ukraine has failed to implement the Minsk Agreements, due to its political unpopularity and a rising tide of Ukrainian nationalism, which even has some fringe neo-Nazi elements to it. This has lead to periodic flare ups, though peace has been mostly maintained. The trigger for the recent movement of Russian troops was the Ukraine procuring advanced drone technology, paid for by US military aid, and using one of the drones in the Donbass. Importantly, such drones were used successfully last year by Azerbaijan to recapture territory after a 30-40 year frozen conflict. Russia did not intervene, but will have been put on alert when the Ukraine proceeded to procure similar technology.

In my view, the most reasonable interpretation of events is that Russian intelligence believed that Zelensky may have been planning an invasion of the Donbass (a la Azerbaijan) - potentially with US backing - to forcibly reincorporate the territory into Ukraine proper, to satisfy Ukrainian nationalist demands, boost his poll ratings, and to the extent US backing was involved, to also help facilitate NATO inclusion and the installation of NATO missiles and military bases on the Russian border, though the latter is far more speculative (though I'm sure Russia suspected as much). Russia decided to move troops close to the border to deter such an action by signaling a willingness to intervene. It is important to emphasise that such an action by the Ukraine would be in breach of international law, and would be a de facto invasion. This is something that is almost never acknowledged in any of the discussions on this issue.

As I alluded to in my opening section, it is notable that amongst all the great power sparing over the Ukraine; all the copious commentary amongst pundits; condemnations of Russia and "we stand with the Ukraine" rhetoric, no one ever thinks it important to consider what the people who actually live in the Donbass want. They fought a war of independence against the Ukraine, and want to be independent of the Ukraine. Russia *defended* the Donbass against the Ukrainian military (or more accurately, helped the Donbass defend itself), and did not annex the territory.1  

Yes, technically it is Ukrainian territory because as part of the compromise agreement reached with the Minsk Accords, Donbass' independence was not officially recognized, but on a de facto basis from the standpoint of the people who actually live in the Donbass, it would be seen as the *Ukraine invading* and *Russia helping to defend them*. And it was the potential for *Ukrainian aggression* in violation of international law that prompted Russia's troop deployments. Very few people understand any of these nuances, and they are of crucial importance. 

The other thing that is seldom taken into consideration by Western audiences is the growing tide of Ukrainian nationalism, and the fact that the Donbass is populated by Russian minorities. The potential for ethnic conflict against these minorities is real and growing - particularly with growing fringe neo-Nazi elements of this Ukrainian nationalism, as noted. Russia therefore also has some concern around protecting Russian minorities against ethnic violence should reincorporation occur. It would not be the first time the US/West has failed to understand local realities/nuances and had its interventions precipitate massive ethnic violence, resulting in many people being imbued with a sense of hatred and betrayal towards the US for supporting the people that perpetuated all measure of atrocities against them.

Where are we now? The risk of a Ukrainian incursion into the Donbass appears to have declined because Russia's troop deployments have had the desired effect. It has deterred a Ukrainian invasion, particularly because the US appears to have made it clear to the Ukraine behind closed doors that it will not have its back if they invade Donbass, perhaps both recognizing Zelensky's potential inclination to launch such an invasion, and fearing it could escalate into an all out war with Russia if it were dragged into it.

Ukraine nevertheless continues to play up the threat of Russia to Western audiences, while offering contradictory statements to domestic audiences. They were nevertheless recently forced to backpeddle after the US and some other countries pulled embassy staff, however, which the Ukraine condemned. Extracting US military aid and opposition to the Nord Stream 2 pipeline were the goals, not causing a panic that triggered a mass exodus of foreigners. They have recently clarified that the threat situation has not changed, Russian troops have been near the border since April, the troops are actually not literally on the boarder, but several hundred kilometers inland at a Russian military base that was built years ago. 

Very encouragingly, there was a recent news article that suggested the US had started to pressure the Ukraine into implementing the Minsk Agreements, and that the Ukraine was perhaps starting to acquiesce. As I tweeted a few days ago, if this is true, it is *hugely bullish* Russian assets as it would mean the risk of immediate conflict would basically fall to zero, though I noted that few (foreigners investors in particular) would grasp its significance. It took a little while but Russian asset prices started to move sharply higher not long afterwards. It may well have been that in combination with Russia's military build up, Ukraine's exaggeration of the threat had backfired and lead to the US genuinely believe an all out Russian invasion of the Ukraine was coming, and taking measures to defuse the risk of war. If so, Putin will have accomplished his aims in securing the Donbass' independence and security, an no military intervention would be necessary (Russia's diplomatic efforts may also have been more successful than Western commentators are prepared to acknowledge). It still does not resolve longer term simmering tensions between NATO and Russia, but it may deescalate the situation near term.

We will have to wait and see. However, broadly speaking, I see three potential conflict scenarios:

*The Ukraine invades the Donbass. The likelihood of a Russian response is practically 100%, but the conflict is unlikely to extend beyond Donbass (incidentally, Biden's much criticized remarks noting a qualitative difference between an incursion on the Donbass and Ukrainian proper are 100% accurate; he has been forced to walk it back for political reasons, but it is very encouraging he said it in the first place as it means he does seem to understand the situation described above. This is perhaps why the Biden administration now appears to be pushing the Ukraine to implement the Minsk Agreements; maybe Putin got through to him, though of course he will never admit that publicly to US audiences as he would be politically crucified). I think this risk has now fallen significantly given the Russian military presence and US-Ukrainian dialogue, though Zelensky could always do something imprudent/stupid.

*Secondly, US & NATO allies continue to heavily arm the Ukraine, and Russia concludes it is inevitable that the Ukraine will eventually try to seize the Donbass with (covert) NATO backing. Putin fears the longer he waits, the harder it will be to secure the Donbass and the bloodier the eventual conflict will be, and feels that in the long term it is better to annex the Donbass now (or secure its independence) than wait. This is the scenario I have been most concerned about from an investment perspective over the past several weeks, as it would entail inevitably brutal sanctions. It would likely result in very little bloodshed though as it is unlikely at this point that the Ukraine will want to go to war over the Donbass; they will inevitably lose. In addition, there will be no local opposition - indeed the locals will likely overwhelmingly support Russia taking this action.  

However, the probability of this scenario has now significantly fallen, because the likelihood of the Ukraine implementing the Minsk Accords - on account of US pressure - has now gone up. Furthermore, if the US public is opposed the the US involving itself in yet another war, this approach from the US makes political sense for Biden. He will also be able to claim credit for averting conflict by claiming his threats of tough sanctions successfully deterred Russia from invading, while he works behind the scenes to give Russia what it wants.

*Third, NATO encroaches into Eastern Ukraine and begins to deploy missile systems and military bases in violation of Russia's now declared "red lines". In this case conflict between Russia and NATO will likely occur, as at this point I think Russia has had enough and will be willing to go to war to defend these red lines. However, *the West is not* - at least for now - and I think Russia's threats - though they will not be acknowledged publicly - have been noted privately and are seen as credible, and so I don't think NATO will dare do that in the foreseeable future. I see this risk as being off the table for quite some time, but it is a long term risk and a tension that will likely resurface again at some point.

Overall I think the risk of conflict has fallen significantly in recent days, assuming that news reports about the implementation of the Minsk Agreements are in fact true, and there is follow through from the Ukraine. That remains to be seen. Events are fluid so my assessments may be proven off base in the future, and these are complex issues where the capacity for analytical error is high, but this is my best analysis and assessment of the current situation. I hope some readers found it useful, and I especially hope it can contribute in at least a very small way to reduced tensions/risk of war between the two blocs.


1. Russia did annex Crimea, but that was an unusual situation. Crimea hosts Russia's highly strategic Black Sea navel base, and was on long term lease from the Ukraine. After the Ukrainian coup, Russia feared Ukraine would be incorporated in NATO, Russia's lease invalidated, and access to this highly strategic military base denied. There was no invasion per se because the Russian military was already there. The annexation happened pursuant to a referendum which attracted 95% support (Crimea is overwhelmingly Russian). While some have argued that number cannot be trusted, no international body/institution or Western politician has ever dared request an internationally supervised re-vote, because they know what the result would be and it would risk legitimizing the annexation. It was a breach of international law, but it is highly unlikely to recur because no other part of the Ukraine (or broader ex Soviet Union for that matter) holds a comparable degree of military significance. If Russia was after territory it could have annexed Donbass as well, but it chose not to.