Could invasion be for Russia’s economic survival?

UKRAINE was a cornerstone of the Soviet Union, the archival of the United States during the Cold War. Behind only Russia, it was the second-most-populous and powerful of the 15 Soviet republics, home to much of the union’s agricultural production, defence industries and military, including the Black Sea Fleet and some of the nuclear arsenal. Ukraine was so vital to the union that its decision to sever ties in 1991 proved to be a coup de grâce for the ailing superpower.

In its three decades of independence, Ukraine has sought to forge its own path as a sovereign State while looking to align more closely with Western institutions, including the EU and NATO. However, Kyiv struggled to balance its foreign relations and bridge deep internal divisions. A more nationalist, Ukrainian-speaking population in western parts of the country generally supported greater integration with Europe, while a mostly Russian-speaking community in the east favoured closer ties with Russia. Ukraine became a battleground in 2014 when Russia annexed natural gas-rich Crimea and began arming and abetting separatists in the Donbas region in the country’s southeast.

What are Russia’s broad interests in Ukraine?

Russia has deep cultural, economic and political bonds with Ukraine, and in many ways, Ukraine is central to Russia’s identity and vision for itself in the world. Russia and Ukraine have strong familial bonds that go back centuries. Kyiv, Ukraine’s capital, is sometimes referred to as ‘the mother of Russian cities’, at par in terms of cultural influence with Moscow and St. Petersburg. Russia relies heavily on revenues from oil and natural gas, which in 2021 made up 45 per cent of its federal budget, and Ukraine plays a vital part in its production and export. In 2021,

Russian crude and condensate output reached 10.5 million barrels per day (bpd), making up 14 per cent of the world’s total supply. Ukraine is strategically placed at an advantage for three very important reasons to Russia:

1) Its position is the transit route for the oil and natural gas pipeline, which goes through Ukraine to European markets. Deals were signed to pay Ukraine money to allow the pipeline, which Russia had built during the Soviet era, to go through the Ukrainian territory. This soon came under threat.

2) Ukraine has vast deposits of natural gas and threatening to develop them with the help of western countries considered hostile to Russia, and Russia stands to lose a very important revenue stream from the European markets. Basically, if Russia were to lose control of Ukraine, its economy would crumble in a few years.

3) Ukraine is just too close to the heart of Russia for a military invasion from NATO for comfort, just as the Americans were not comfortable with Cuba.

Why did Russia launch an invasion in early 2022?

Some Western analysts see Russia’s 2022 invasion as the culmination of the Kremlin’s growing resentment towards NATO’s post–Cold War expansion into the former Soviet sphere of influence. Russian leaders, including Vladimir Putin, have alleged that the United States and NATO (North Atlantic Treaty Organisation) repeatedly violated pledges they made in the early 1990s not to expand the alliance into the former Soviet bloc, particularly Ukraine, given its strategic importance.

However, continued Europe’s Energy Dependence on Russia for energy is the real reason. Most of the EU’s natural gas comes from only three external producers – Russia, Norway and Algeria. At 37.7 per cent of the EU’s 27 total gas imports in 2005, Russia is by far the biggest gas supplier to the continent.

Generally, the farther east one goes into Europe, the greater the reliance on Russian gas imports, to the extent that seven European states of the former Warsaw Pact and the Soviet Union rely on Russia for over 99 per cent of their natural gas. Almost all Central and Eastern European countries depend on Russia for the majority of their natural gas consumption. Looking 25 years out, it is estimated that 80 per cent of the EU’s natural gas will be imported, with Russia providing up to 60 per cent, equating to one fifth of the overall EU energy mix coming from Russia in the form of pipeline natural gas. Without European money, Russia will not be able to fund its budget and would soon collapse. Of course, fossil fuels are being phased out anyway, and Russia needs to cash-in in the few years left.

Enter the USA

The New York Times reported that the Senate overwhelmingly approved a US$40 billion emergency military and humanitarian aid package for Ukraine, moving quickly and with little debate to deepen the United States support for an increasingly costly and protracted fight against a brutal Russian invasion.

The measure, paired with an initial emergency infusion of aid to Kyiv that was approved in March, amounts to the largest package of foreign aid passed by congress in at last two decades, bringing to roughly US$54 billion the total American investment in the war in just over two months. Why would America go all out like this?

As we have seen, Russia is fighting for its very survival as it stands to lose its European oil and gas markets. On the other hand, the US is also fighting for its survival as it fights for the Dollar to remain the world’s main trading currency. Basically, the Dollar is no longer backed by gold, and the fact that it’s the world’s trading currency is the only thing that is holding it up. Plans by the BRICS countries (Brazil, Russia, India, China, and South Africa) have long been afoot to unseat the Dollar as the main trading currency.

What is even worse is that some are predicting the crash of the US Dollar in the very near future. The pressure on the European countries to break sanctions as they desperately need the Russian energy supply this winter will break the camel’s back. My article next week will give more details.

However, make no mistake, the US economy and resources are very large, but its debt levels are very high. The threats by Saudi Arabia and a few other countries like Argentina and Indonesia to join BRICS should be very concerning to the US. BRICS is where American problems will come from, and Africa and part of Asia seem not to be on the American side. Comment septemereswatini@gmail.com