Ukraine: War is coming, part 2

Maybe I should have called this post ‘How wars start by accident’

In my last post I made the Afghanistan comparison to show that in the face of a smaller less well equipped enemy the Russians could not win a decisive war. The same for Chechnya, they basically had to destroy the country and even then the Chechen militia were not finished off, in the end the Russians had to change their strategy from direct military intervention in order to bring some form of order to that country.

Ukraine is different, yes her fighting force is smaller but ironically, in many ways is better equipped than their Russian counterparts, Ukraine was until recently an exporter of arms to Russia, but they stopped exports due to the current crisis, in fact it is one of the global leaders of arms exports as its quality control and engineering is seen as being of higher quality that of the same systems which are made in Russia. You can read part 3 of this series here.

I don’t believe Russia really wants to see war in Ukraine and I don’t think the Ukrainians want war either but both sides are playing a game of Chicken, to see who will blink first, the problem with that is the mentality that one can never back down, they are going to stumble into a war that neither side really wants to have. The USA and EU are also partly to blame, they are trying to push Russia into a corner over the situation in Ukraine and that will simply make the situation worse, Putin will feel he has no choice but to come out fighting. I am no fan of Putin but I don’t believe he wants to have a war but he feels that the options left open to him are becoming fewer by the day. This is going to become an accidental war.

Consideration should also be given to the economic consequences of any war between Russia and Ukraine. Ukraine is effectively broke and is only being kept going by foreign loans. How they will ever be paid back is anybodies guess. More dramatically, Russia might also get into serious trouble. There is a huge amount of capital flight, money being withdrawn from Russia, by businesses and individuals alike. Something I heard today that was very interesting is that companies have been using their shares as collateral for bank loans. I hadn’t realized this but apparently it is common practice. The problem is that the value of shares in Russian companies are plummeting due to a lack of business confidence and uncertainty about the future related to the situation between Russia and Ukraine. The banks have made loans against the value of shares and are now well into negative equity territory. The Russian banking sector is now trying to call in these loans but the cash isn’t there as much of it has already been deposited outside the country. Russia is potentially facing a full on banking crisis to rival that of the USA in 2008. Their central bank has been using its huge cash reserve to maintain liquidity in the system but the money is being used up fast. The longer uncertainty and instability continues between Russia and Ukraine, the worse the situation will become. Even if war between the 2 countries is brief, the long term consequences will be felt for a long time. The Russian banking system could effectively be bankrupted. Even without a war between Russia and Ukraine things could be about to become very difficult in the Russian banking system. If that were to happen, what would the political consequences be for Putin? You can read part 3 of this series here.

Advertisements

20 thoughts on “Ukraine: War is coming, part 2

      • To be honest I think every 60-90 years we have a World War. Its weird and I don’t think our Children will grow up that safe as we did. I don’t know why but history seem to repeat itself. There is a lot of tensions in the air in this Prosperous 2014. Unemployment, Heavily immigration, corrupt governments the list is long. People start searching for something to blame. Country borders that are not natural. just a line drawn on a piece of paper. with same people on both sides. I could be wrong but I feel that It can start in Africa between Christians and Muslims(I saw on TV how both sides spoke so strongly angry about revenge) revenge! revenge! Once you chose that path there is no turning back.

      • The global political, commercial and religious system is broken. It is going to destroy itself sooner rather than later. We live in interesting times.

  1. I sure hope cooler heads prevail. Surely there are better ways to stimulate the economies of the world than having a war. Thanks to globalization when one country is down it drags the rest of us with it.
    Leslie

  2. Is there a possibility that the USA is pushing for war as an economic solution? War is big profits and Ukraine would make money on arms sales to allied countries, we would make money on a war for our war contractors. So many money making opportunities here.

    • I’m not 100% but I don’t think so. I think the USA is more interested in putting Russia back in a box, there is still a very strong cold war mentality. When it comes to arms requirements both Russia and Ukraine are pretty much self sufficient. I still believe that neither wants a war but the penis waving competition they are having is going to suck them both into one, pun intended 😉

      • If his were a schoolyard brawl I might agree, but insecurity at the international level stems from some sort of economic instability whether real or imagined. This leads to the massive scale power struggles you speak of. We (US) get a shit ton of money from arms sales (one of the reasons gun control is so hard to accomplish here), Russia is our main competitor. Therefore, if the Ukraine and its quality arms mfg is up for grabs, we want it. Usurping the Ukraine gives us another mfg, and eventually devastates Russia economically and obviously militarily. Guns are the new commodity, and we want all the action.

      • You could be right. World conditions are very similar to that shortly before WW1. Personally I think the USA is changing its strategy on warfare, with Russia it can cut Russian banks off from the global financial system, they are already very close to the brink, cutting them off would bring them down with huge ramifications for Russia and Putin. If that were to happen then it is likely that Russia would respond with all out cyber warfare, attacking US power grids and transport networks. It would be a very ugly situation. The longer the Russia/Ukraine situation goes unresolved the more dangerous the situation will be become. One of them has to blink first or they are going to stumble into a war that will have global consequences.

      • Ah very good point. What sucks is that if we do something to take out Putin it is going to trickle down to the Russian people. Not fair.

      • Sadly yes, but then that means that we really aren’t taking a different tactic at all.

  3. Indeed, Russell. My thoughts exactly. I had one question in mind when I read your post. Another commenter mentions the possibilities of a world war. The belligerence from all sides is alarming. Given the vested economic interests, or concerns from the ends of the USA and EU, military intervention could be a possibility, no? But, perhaps not in the short term. Germany’s Angela Merkel is probably one of the best leaders around, and is not war-centric. Barack Obama, has slowly, but surely been withdrawing the USA’s forces around the globe (but leaving pockets of men and women behind). I foresee another Bush (Jeb) entering the White House once Obama leaves. And then? Putin is still in power by that time. Or not?

  4. Thanks for your comment Mark. While I don’t think any of the sides involved truly wants a major war I think they are stumbling into a situation that makes war inevitable. World War One was avoidable but pride, ego and nationalism led the world into a situation that non of the protagonists could have foreseen or desired. We are in similar territory once again. Add to the situation a very fragile global economy and I will agree with you that many things can happen. I think Putin’s time will come to an end in the next couple of years, maybe sooner, Russia is eating itself from the inside, it is very sad, I have many friends there and it is a country with a very rich culture but at the moment it is run on the basis of paranoia and authoritarianism that will ultimately destroy itself.

    Merkel, as you say, is not war-centric but neither does she have any solutions to the situation.

    What a future American President will do, I can not say. For the moment the USA seems to be taking a more isolationist stance while at the same time trying to stir things up from a distance using either economic means or various proxies. All I can say for sure is that hubris is never a good place to start from, it always leads to downfall.

  5. Pingback: Ukraine: War is coming, part 3 | Russell Chapman

  6. Pingback: Ukraine: War is coming, part 1 | Russell Chapman

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s