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Ukrainian Combat Robots Join Fight Against Russian Invasion

David Hambling wrote . . . . . . . . .

Ukrainian forces are getting a new helper, a locally made robotic battlefield scout called GNOM (“Gnome”). The small machine will stealthily reconnoiter Russian positions and provide fire support with a machinegun, according to its maker, a company called Temerland that’s based in Zaporizhia. Gnomes versus ‘Orcs’ may sound like fantasy, but the first robots will enter service next week, the company said in a statement.

While drones seem to be ever-present, remotely operated robots, or Uncrewed Ground Vehicles (UGVs), have so far played little part in this conflict. As the battle lines have stabilized, both forces are increasingly using of portable radio-frequency jammers to knock drones out of the sky which may reduce their impact. GNOM offers an alternative, jam-proof way to spy remotely.

Not much larger than a microwave oven and weighing 50 kg (110 pounds), Temerland says GNOM is highly mobile on four large wheels with 4×4 drive and a quiet 5-horsepower electric motor. The current version is armed with a 7.62mm machinegun. U.S. Army research shows that UGVs make stable firing platforms, allowing a remote gunner to hit targets with considerable accuracy.

While most UGVs are radio-controlled, GNOM spools out a reel of fiber-optic cable behind it. Eduard Trotsenko, CEO and owner of Temerland, told me that the tough, wear-resistant cable provides a broadband link which is immune to radio countermeasures.

“Control of GNOM is possible in the most aggressive environment during the operation of the enemy’s electronic warfare equipment,” says Trotsenko.

Also because the operator is not using a radio, they cannot be detected and targeted by artillery, which may happen to drone operators.

“The operator doesn’t deploy a control station with an antenna, and does not unmask his position,” says Trotsenko. “The cable is not visible, and it also does not create thermal radiation that could be seen by a thermal imager.”

Similar arrangements with fiber optics were used for guided missiles in the early 2000s, notably the French Polyphem and U.S. Army EFOG-M, as well as DARPA’s Close Combat Lethal Recon munition, which developed into the Switchblade. They are also used for some tethered drones and also for remotely operated underwater vehicles, but the sort of electronic warfare seen in Ukraine may see a new demand for fiber-optic control for UGVs.

GNOM’s cable gives it a range of 2,000 meters (1.25 miles); if it is broken the vehicle automatically returns to a predetermined location. While it is usually operated by remote control, GNOM clearly has some onboard intelligence and is capable of autonomous navigation. Previous Temerland designs have included advanced neural network and machine learning hardware and software providing a high degree of autonomy, so the company seems to have experience.

Trotsenko says the machinegun allows GNOM to defend itself and also to provide fire support in situations which might be too dangerous for personnel. He notes that other versions of the GNOM can be used for logistics, intelligence gathering, sabotage and engineering. Temerland has previously shown off a cargo carrier GNOM able to bring ammunition or other supplies to the front line, which can also evacuate casualties with the addition of a special trailer.

A more aggressive GNOM delivers TM62 anti-tank mines: Temerland released a YouTube video showing the robot driving underneath an enemy vehicle and detonating. From underneath, the mines’ 7-kg explosive charge will destroy the heaviest tank, but even getting close should be enough to damage a track and immobilize it. (The Australian Army signed a contract for similar kamikaze ground robots last year).

“Work is underway on mobile platforms for transporting mines,” says Trotsenko. “New designs are being tested.”

Previously the company has announced other possible GNOM variants armed with anti-tank missiles or acting as communications relays or drone carriers.

For the meantime, GNOM will be on scouting duty. Temerland developers say that the vehicle is nearly silent and has a low profile. It can be equipped with a 360-degree camera on a telescoping mast to give a detailed view of the surroundings.

Ukraine fields other remote systems, including a sedan armed with a remote-controlled 14.5mm heavy machinegun, but the GNOM will be the first robotic vehicle on the scene. Russia also has military robots, but so far the only units seen in Ukraine are Uran-6 demining robots; the Uran-9 robotic tank, which performed poorly in Syria, has not shown up in this war.

Tactical robots have long been promoted as a way to reduce casualties and keep soldiers out of the line of fire, while maintaining contact with the enemy. GNOM may prove invaluable for getting a close view of Russian forces – and directing artillery fire on to them – without risking Ukrainian lives.

As the war rages in Ukraine, manufacturers are rolling out large numbers UGVs at the Eurosatory 2022 trade show, some larger and seemingly more sophisticated and more expensive than the GNOM. But the success or otherwise of the small Ukrainian robot in action may do more to shape the future of remote warfare than any of them.

Source : Forbes

Watch video at You Tube (0:28 minute) . . . .

Chart: 6.8 Million Ukrainian Seeking Refuge from Russian Invasion

Source : Statista

Why Ukraine’s Undersized Military Is Resisting Supposedly Superior Russian Forces

Liam Collins wrote . . . . . . . . .

Before Russia’s invasion of Ukraine on Feb. 24, 2022, many observers looked at Russia’s overwhelming combat power and thought Russia would achieve a quick victory.

Because Russia has a US$62 billion defense budget and holds numerical advantages in weapon systems such as tanks, artillery, attack helicopters and planes, many analysts asked not whether Russia would win but rather how quickly it would do so.

What these observers and less experienced analysts are not taking into account is that wartime performance is influenced by more than how weapon systems function.

Success in battle is also a function of strategy, operational employment, doctrine, training, leadership, culture and the will to fight.

Russia held and continues to hold an overwhelming numerical advantage in manpower and weapon systems, but Ukraine holds the advantage in every other factor.

Ukraine’s military competence goes a long way to explain why Russia failed to seize Kyiv and Kharkiv and why Russia’s attempts to seize the entirety of the Donetsk and Luhansk provinces in its latest offensive in the east will likely fail.

Ukraine’s military reforms

Following its miserable performance in 2014 against Russia, when demonstrations by pro-Russian groups in the Donbas region of Ukraine escalated into a war between the Ukrainian military and Russian-backed separatists, Ukraine conducted a comprehensive review of its security and defense establishment.

The ensuing report led former president Petro Poroshenko to enact the Strategic Defense Bulletin of Ukraine in May 2016.

The bulletin mandated broad and sweeping reform across the defense establishment, with the goal of producing a force capable of performing up to NATO standards by 2020.

Over the next six years, Ukraine reformed its military with the help of Western advisers, trainers and equipment. From 2016 to 2018, I served as the executive officer to the U.S. senior defense adviser to Ukraine and was able to witness some of these reforms.

In that position I met with dozens of members of Ukraine’s security establishment, including then-President Poroshenko and then-Defense Minister Stepan Poltorak.

It was clear that Ukrainian leaders feared a large-scale Russian invasion, and they knew they had little time to make difficult reforms in five categories: command and control, planning, operations, medical and logistics, and professional development of the force.

Battlefield experience

By the time Russia invaded Ukraine on Feb. 24, Ukraine had built a well-led, professional force with a culture that encouraged junior leader initiative on the battlefield.

These initiatives occur when original battlefield orders are no longer relevant or fit the changing situation.

Before reforms were enacted, the lieutenants and captains who were conducting the fighting on the ground were unable to make decisions and were required to seek permission before they could act.

Benefiting from eight years of fighting in the Donbas and six years of Western trainers and advisers, Ukraine’s military in 2022 wasn’t the same as it had been in 2014, much to Russia’s surprise.

In fact, it was far superior to Russia’s military in nearly every measure but size.

As a result, Russia’s latest invasion pitted a large but poorly trained force against a much smaller but well-trained, well-led and motivated force.

As the war moves east, Ukrainian levels of proficiency, training, leadership, culture and motivation remain constant.

Russian levels of troops and equipment also remain constant – and their poorly led forces cannot be fixed in weeks or months.

It took Ukraine six years to reform its military.

Deploying combat troops

Many media reports have focused on the fact that Russian forces’ moving from the north of Ukraine to support operations in the east will increase Russia’s likelihood of success of occupying Ukraine’s eastern region.

Yet, what is often ignored is that Ukraine is also able to move forces east. Sure, a small element of Ukrainian forces will remain to defend Kyiv.

But others will move east, meaning the overall ratio between Russian and Ukrainian forces is unlikely to change much unless Russia decides to ship in even more troops.

Likewise, Russia does not seem capable of changing how it employs its troops when they meet stiff Ukrainian resistance.

Although much was made of the appointment of Gen. Alexander Dvornikov to command Russian operations in Ukraine, his promotion seems to have changed little on the ground.

Operations over the past few weeks have demonstrated that Russia is still incapable of executing large-scale attacks that result in Russian control over Ukrainian territory.

The only real change that gives hope to Russia is the geographic terrain.

The land in the north of Ukraine consists largely of wetlands, which forced Russia to stick to the roads and thus limited the number of routes it could use to advance on Kyiv.

The terrain in the east contains more open space and would enable Russia to move its troops and tanks along multiple routes instead of one.

Critical military aid

A key to Ukraine’s holding off this much larger force is the ability to rapidly replace military equipment that gets depleted or destroyed.

Western aid since the start of the war in February 2022 has been absolutely critical to Ukraine’s continued success.

Ukraine’s needs have not changed since then.

As Ukraine Foreign Minister Dmytro Kuleba explained during a meeting with NATO officials in April 2022, his wish list “only has three items on it. It’s weapons, weapons, and weapons.”

Ukraine can likely hold out, provided it can get more of everything. But given questions about the continued U.S. supply of Javelin anti-tank missiles, getting more weapons is not a guarantee.

Source : The Conversation

How the War in Ukraine Is Rattling China’s Energy Transition

Since Russia attacked Ukraine in late February, prices of crude oil and natural gas have jumped as sanctions on the major energy exporter have left many countries scrambling for alternative sources of fossil fuel.

If the war lasts more than six months, crude prices may top the record high seen during the global financial crisis in 2008, Sun Renjin, secretary-general of the expert committee at the China Petroleum Circulation Association, predicted at a mid-April conference.

China is already feeling the pressure. In March, its producer price index — which gauges changes in prices of goods circulated among manufacturers — recorded a month-on-month increase of 1.1%, the fastest pace in five months. The country’s consumer price index — which measures changes in prices of a select basket of consumer goods and services — climbed 1.5% year-on-year in March, the fastest pace in three months.

Experts at the April conference estimated that China — the world’s largest importer of oil — may pay nearly $100 billion more for the crude oil imports this year. Those costs would ripple through its economy.

Ironically, some say this could slow progress on the country’s “dual carbon” goals — peaking emissions by 2030 and achieving net neutrality by 2060. Beijing has been promoting the use of natural gas — which burns more cleanly than coal — as part of its transition away from fossil fuels. Volatility in the global gas market may push many Chinese industrial users to rely on coal.

Surging costs

From late February, Brent crude futures set to for delivery in June jumped from $90 to well over $100, peaking at nearly $120 per barrel. A natural gas benchmark, Dutch TTF natural gas futures that expire the same month, swung from under 90 euros at a day before the conflict to around 105 euros now, peaking at 211 euros per megawatt hour.

Additional costs involved in importing liquified natural gas (LNG) have also increased, ratcheting up pressure. On April 24, the most recent date for which data is available, China’s comprehensive import price index for LNG was up 171% year-on-year.

China is heavily dependent on energy imports.

In 2021, China imported over two-thirds of the crude oil it used, according to the CNPC Economics & Technology Research Institute. That year, the country imported 121.4 million tons of natural gas, 20% more than the previous year, customs data show. Imports accounted for some 44% of total gas consumption, according to the China Petroleum and Chemical Industry Federation.

Overall, coal still accounted for more than half of total energy consumption, compared to just 8.4% from natural gas and 18.9% from crude oil, figures from the 2020 China Statistical Yearbook showed.

Figures from the General Administration of Customs showed that China’s LNG imports were down 6.7% year-on-year in January and 11.8% in February. March brought a 12% drop compared to last year, according to 315i.com.

Kevin Jianjun Tu, the managing director of Agora Energy Transition in China, said that in a short term, coal will play an even bigger role in China’s energy market.

Many parts of China suffered a severe power crunch between late September and mid-October of 2021, as a manufacturing boom led to high demand while the coal supply was constrained by Beijing’s emission-reduction campaign. In China’s latest five-year plan for its energy system published in March, the authority didn’t cap the country’s consumption and output of coal. Instead, it emphasizes the essential role of coal in ensuring the stability and safety of the country’s energy supply.

End customers

Price hikes may cause China’s growth in natural gas use to slow to 6% from last year’s 12.7% expansion, says Yang Jianhong, chief researcher at Beijing BSC Energy Consulting.

And this is an “optimistic” prediction, Yang added, as major industrial consumers like those in engineering, power generation, and transportation companies are particularly sensitive to price changes.

He gave trucks running on LNG as an example. From 2018 to 2020, annual sales of such vehicles in China jumped from 71,000 to 147,000 units. However, that declined to just 50,000 units in 2021 due to high LNG prices. This year, sales are expected to dip to 30,000 units, according to Yang.

“When customers switch to other energy sources, they don’t switch back easily,” cautioned Yang, adding that natural gas may be marginalized.

Oil refiners are also feeling the pain from high oil prices, even as the price of their products rises to new highs.

Beijing raised the prices of gas and diesel seven times from the start of the year to early April, though they’ve fallen back slightly since. At the end of March, the government-set upper price limit for a liter of standard gasoline was over 9 yuan — a record — in 27 of the Chinese mainland’s provincial-level regions.

In mid-April, gas and diesel prices fell for the first time this year, but about two weeks later authorities raised them again, in the eighth such increase within four months.

But even though drivers will be forking out more at the pump, refiners won’t be celebrating. A source at a state-owned refiner told Caixin that the increase in refined oil prices is smaller than the growth of crude oil prices, leading many refiners to stop production or reduce output to prevent losses.

Sinopec Shanghai Petrochemical Co. Ltd., a unit of one of the country’s big three oil giants, said in its annual earnings call on March 24 that profit margins are narrowing as it cannot pass costs on to downstream customers.

Liu Bingjuan, a senior oil product analyst from research institute Oilchem.net, told the aforementioned April conference that some privately owned refiners in Shandong province lost money in March because of higher prices and the impact of Covid-19 flare-ups.

LNG power generation

Power generators are also hurting, as they are locked into a long-term supply contracts and face widespread shortages.

“Currently, energy prices are way above electricity prices, and power generators are definitely losing money,” a source at a state-owned natural gas power plant in Guangdong province told Caixin.

As of the end of 2021, Guangdong had 159 million kilowatt-hours of installed natural gas power generation capacity, accounting for nearly 20% of the country’s total, the most of any province.

Based on the April 13 spot price, the cost of burning gas to generate power in Guangdong was about 1.5 yuan ($0.23) per kilowatt-hour while the provincial price ceiling for electricity was just 0.55 yuan per kilowatt-hour. In other words, for each kilowatt-hour of electricity sold, the generator would lose 0.95 yuan.

A senior industry insider suggested that the government could allow electricity prices to fluctuate more above the government-set price point, to prevent such losses when commodity prices spike.

According to the source, his plant’s contracted suppliers could only provide natural gas to cover one-fourth to one-third of projected electricity demand in 2022.

Another source from a smaller local power generator said that they could not even get a long-term contract signed. A source from a Shenzhen power plant added that their contracted supplier simply stopped providing natural gas due to shortages.

The most essential prerequisite of a long-term contract is sufficient supply. If there is not enough supply, the contract will become invalid, said the senior industry insider.

Although China overtook Japan to become the world’s largest LNG buyer in 2021, many major Chinese buyers resell much of their LNG to other countries, rather than using it themselves, according to commodity market information provider 315i.com.

“If they sell LNG to domestic power plants, they could only earn $500 per ton at most. But if they resell it to Europe, they could make up to $1,875 per ton,” a source from a state-owned oil and gas company told Caixin.

Zhang Mianrong, chairman of Guangdong Electric Power Trading Center, told a conference on March 24 that the province is expected to see a tight supply this year, especially in the second quarter.

Currently, China is trying to allow market forces to play a bigger role in the natural gas sector. Domestically, major resources are held by the big three state-owned oil producers — China National Petroleum Corp., China Petrochemical Corp., and China National Offshore Oil Corp. (CNOOC). Midstream, the cost of pipeline transportation is controlled by the State Grid. And finally, end market prices are guided by the government.

Marketization will help companies pass costs along the production chain. But multiple sources told Caixin that rising LNG prices could hinder this process, as the market will become sluggish due to less import and consumption volumes.

The sluggish market will then push smaller players out of the game. A senior industry source sighed, “if many companies die out amid the volatility, how can we hope to achieve marketization?”

Source : Sixth Tone

Chart: The Countries Committing the Most of Their GDP to Ukraine Aid

Source : Statista

Will the Ukraine War Change Europe’s Thinking on Nuclear?

Dave Keating wrote . . . . . . . . .

Two decades ago, the Green Party of Belgium demanded a commitment to phase out nuclear power as a condition for joining the federal government. They got their wish, and Belgium was supposed to end all nuclear power by 2025. But in March 2022, in light of the Ukraine War, the Belgian Greens did a U-turn. On 18 March, they gave their assent to extend nuclear power in Belgium until at least 2035. Just four months earlier, in December 2021, the Greens had successfully insisted the 2025 phase-out date be respected, even as other parties in the coalition government argued the early phase-out would be bad for climate change because it would drive a need for gas.

The phase-out plan is “ready and feasible, but reassessment is needed with Ukraine”, the Green Belgian energy minister Tinne Van der Straeten said in early March. The fear was that closing Belgium’s seven nuclear reactors would mean burning more gas for power until enough renewables capacity became available, and that gas would have to come from Russia. The country’s two newest nuclear plants alone, operated by French utility Engie, account for almost half of Belgium’s electricity production.

The idea of phasing out nuclear power has been popular in much of Europe for some four decades, but more recently, its status as a CO2-neutral power source has prompted a rethink as Europe aims to become the world’s first climate-neutral continent in 2050.

Nuclear safety concerns in war

Germany next door, however, has been a different story. Former Chancellor Angela Merkel made a dramatic recommitment to phase out German nuclear power in 2011 following the Fukushima nuclear disaster in Japan. Of the 17 operating reactors in Germany, eight – mostly older ones – were permanently shut down following that decision. Today, only three remain, and the government is sticking with its plan to shut these down by next year; a decision confirmed by a vote in the German Parliament in mid-March.

That decision surprised many, considering the difficult position Germany now finds itself in because of its high dependence on Russian oil and gas. For some, however, the heightened sense of urgency around energy independence has been outweighed by the frightening images of Ukrainian nuclear plants on fire after missile attacks over the past weeks.

“In Germany it is [safety fears] already something which is deeply rooted in peoples’ minds, including under this government,” says Yves Desbazeille, director-general of the European nuclear industry association FORATOM. He notes that the Greens are more powerful in the German governing coalition than in the Belgian governing coalition. “For [the German Greens] it is really very deep in their DNA. So having them make such a U-turn was [going to be] very challenging.”

The International Atomic Energy Agency (IAEA), which coordinates nuclear safety worldwide, has been working with both the Russians and Ukrainians to guarantee the safety of nuclear plants in the war zone. They have in particular been working to get the Ukrainian technical staff back on rotation at the Chernobyl plant, which they reported was completed towards the end of March.

IAEA director-general Rafael Mariano Grossi says he is continuing consultations to agree a framework with both sides to ensure the safety of nuclear facilities. “With this framework in place, the agency would be able to provide effective technical assistance for the safe and secure operation of these facilities.”

The two operating units of the Zaporizhzhya nuclear power plant in southern Ukraine, which caught fire after being hit by Russian missiles two weeks ago, are operating at two-thirds of their maximum capacity of around 1,000MW each, after the repair of two power lines in late March. Of the country’s 15 reactors, eight remain in operation and radiation levels are normal, according to the IAEA. Everything, they insist, is under control, despite the war.

This is also the message from governments that are pushing for nuclear power as part of the solution to both energy security and climate change, such as France and the US. “Despite Russia’s reckless military activity there has been no near-term challenge to safety,” said US Secretary of Energy Jennifer Granholm on a visit to Paris on 22 March to chair the annual ministerial meeting of the International Energy Agency. “Containment structures are built to withstand nuclear accidents as well as external assault. The safety risk here is not from the presence of nuclear power but from Russia’s unjustified invasion and violation of basic safety principles.”

“The US continues to view nuclear energy as really playing a key part in both our domestic and international efforts to enhance energy security and global climate change,” she added.

However, despite these assurances, breaking news about a nuclear plant on fire after a missile attack is hard to ignore, and will likely linger in peoples’ minds. As much as the Ukraine crisis is showing the value of nuclear power as a home-grown alternative to imported fossil fuels, war in a nuclear country is a reminder of the risk that is always present with this form of power.

“There is no human-made site or infrastructure that can resist proper attacks with powerful weapons like Russia has today,” acknowledges Grossi. He notes that nuclear power plants are protected against most external shocks, including an airplane crash. “Any infrastructure you can attack would be at risk,” he adds. “You could do the same to a hydro dam.”

Changed thinking on nuclear?

Grossi says it is too early to know exactly how the Ukraine crisis will impact Europe’s thinking on nuclear power in the long term, although last week’s developments in Belgium and Germany give some clues. “The gas and power price crisis has already lasted for some months now and a lot of governments have in mind that something should be done,” he says. “The current situation isn’t sustainable and solutions have to be found.”

As the energy price crisis has unfolded, fuelled by the economic recovery from the pandemic, its impact is already clear in the outcome of a long-running debate over an EU taxonomy for green investments. In the end, both gas and nuclear were included on the list. It was a demonstrable comeback for nuclear power in Europe after fears that Brexit would tip the balance of opinion against it in the remaining EU 27.

However, when the European Commission came out with its REPowerEU strategy on how to wean the EU off of Russian gas on 8 March, nuclear was strangely absent. The strategy had been in the works since the start of the year as a response to rising energy prices, but it was quickly retooled with a Russia focus following the outbreak of the war.

“We are disappointed that very little is said about nuclear in the communication, given that it consistently produces around one-quarter of electricity in the EU,” said Grossi. “Ignoring the EU’s main source of highly dispatchable, low-carbon and non-weather dependent energy raises questions about whether the proposed measures are realistic.”

New nuclear power plants will not solve today’s energy security problems, he acknowledges, because they will take at least ten years to build and come online, but at the very least the Commission should be advising against taking existing plants offline, he says.

“The Commission itself has already admitted that nuclear will form [part of the] the backbone of a carbon-free European power system, together with renewables,” Grossi notes. “Having an energy mix composed of both nuclear and renewables is key to ensuring an affordable, secure and stable supply of energy in the long-term.”

However, recent decommissionings, coupled with fewer new plants being built as they struggle to attract investment, means the number of nuclear reactors operating globally fell to a 30-year low in 2020, according to the World Nuclear Industry Status Report. A total of 55 new reactors are currently being constructed in 19 countries, but they are almost all outside Europe. China, India and Russia are building the most new plants. The only plants being built in the EU are one in France and one in Slovakia.

The very different reactions in Belgium and Germany this past month show it is hard to predict how the Ukraine crisis will impact European policy on nuclear power. Much may depend on whether the nuclear plants in Ukraine stay safe in the coming weeks and months. Were any kind of nuclear incident to occur, it would likely be game over for nuclear power in Europe – no matter its climate benefits.

Source : Energy Monitor

The Bear Breaks Down: Andrei Soldatov on Russia’s Self-Destruction

Jonathan Tepperman wrote . . . . . . . . .

About 20 years ago, Andrei Soldatov, a Russian newspaper reporter, co-founded a website called Agentura.ru devoted to monitoring the activities of Russia’s security services. The experience turned him into one of the world’s leading experts on Russia’s secretive intelligence and military agencies. In Moscow’s eyes, it also turned him into a dangerous man. In 2012, a new Russian law expanded the definition of treason to include the sharing of any information the FSB (the successor to the KGB) deemed harmful to Russia’s national interests. The noose tightened further in 2020, when another law made it effectively illegal to write anything at all about the security services—a change that “basically cancelled our profession,” Soldatov says. But the last straw came later that same year, when the Russian government cancelled the media license for Soldatov’s website, citing the death of its editor—the very job Soldatov held at the time. Taking the hint, he and his partner Irina Borogan fled for London. Today he’s a fellow at The Center for European Policy analysis, the co-author (with Borogan) of several books, including The Compatriots: The Brutal and Chaotic History of Russia’s Exiles, Émigrés, and Agents Abroad, and one of the most authoritative voices on Vladimir Putin’s coercive apparatus. We spoke by phone on Thursday about Russian intelligence before and after the Ukraine war began, how to indentify Putin’s goals, and why the Russian state seems to be disintegrating around him.

Octavian Report: Given all of the restrictions Russia has imposed on the media and on independent organizations, how is it still possible to report on the Kremlin and the security services? The government seems like a black box.

Andrei Soldatov: Publicly, people are not willing to express their opinions. So it’s become a big problem to find someone still in Moscow who will go on the record. At the same time, however, more people are actually coming to me and my colleagues, because there is a feeling of desperation, especially among Russian bureaucrats—including in the security services. And if they trust you, they are quite eager to share their feelings, because the climate in Moscow is not good.

And this is new. In 2014, during and after the invasion of Crimea, I spoke to many people inside the government, and you could feel that most, or maybe even all of them, were on the same page as Putin. They believed that he had done the right thing in a really efficient way and with no bloodshed. So there was no distance between Putin and these people. Now it feels completely different. Lots of people in the financial sector, in the security services, and even in the army believe that something should have been done about Ukraine. People were ready for something like the occupation of the Donbass, or maybe some airstrikes in imitation of NATO’s 1999 bombing of Belgrade. Instead of that, we got this mess. My sources in the government think that Putin’s full-scale invasion was a horrible mistake.

OR: Does that mean that if the war continues to go badly and becomes an Afghanistan-style quagmire, say, that the unhappiness in the security and intelligence services could become so extreme that they either force Putin to change policy or remove him from power?

Soldatov: I’m a bit skeptical of that. Or at least, I’m skeptical that they could do it on their own. Why? For several reasons. One is that while we’ve had a heavily militarized society for decades, if not centuries, the history of military coups d’état here is surprisingly short. The last time the army tried it was the Decembrist revolt in 1825, and that failed miserably. There was another failed coup in 1991, but that was mostly led by the KGB.

The second problem is the military does not have a tradition of building underground organizations within the ranks, like in Turkey or Egypt. We’ve never had a Young Officers movement here. And, of course, the FSB has penetrated the military to a huge degree.

OR: But the FSB is also becoming unhappy with Ukraine, isn’t it?

Soldatov: Yes, but I’m also skeptical that the FSB could organize something. The 1991 coup didn’t fail because of the bravery of Muscovites—and they were brave, I was 15 years old and I was there. It didn’t fail because of Boris Yeltsin. It failed because there was a huge level of mistrust between the KGB’s generals and its midlevel officers, and that mistrust is still there. Generals in the Russian security services fail to build patronage networks by distributing money and things like that, so the midlevel officers don’t trust them. They respect the position, but not the person.

One final point: in the 1990s, you had competing political forces in the country. You had opposition parties. You had oligarchs. You had very strong regional centers of powers, such as the mayor of Moscow. All of them were competing, so if a group of generals became unhappy with the president, they could rush to this group or that group for political support. That’s not the case anymore. There is no political force left in the country except for Vladimir Putin. The political opposition is either dead, in jail, or in exile. The oligarchs are extremely dependent on Putin and on the military-industrial complex. The regional governors are really scared, because a number of them have been thrown in prison.

At the same time, I cannot say that things are absolutely hopeless, because Russia is a huge country, and due to the sanctions, the regions are going to have more and more problems. Moscow is already very nervous about the regions. All this talk about the nationalization of industry—it’s about politics, not the economy. In many regions, you have these big enterprises, and if they stop their operations, it would mean huge layoffs, and a lot of people would go out on the streets, which would create a big political problem. Now the government is trying to find a way to deal with that. So if you had this combination of factors—if, say, problems in the regions became worse and worse, and they could connect with some major new political force, then maybe the military or the FSB might do something.

OR: Let’s go back to the beginning. How do you explain the massive intelligence and policy failures that led Putin to start this war? Do you think that Russia’s intelligence agencies shared his fantasies about Ukraine?

Soldatov: Russia’s intelligence agencies might not be extremely competent, but they’re not that stupid. Of course they understood that nobody wants to join a new Soviet Union or any of that. What they believed then is that Ukraine is a dysfunctional state, with dysfunctional government institutions, so if you attack it, it will collapse.

They also had a view that Zelensky was a human being who cares about people’s lives. So what they expected to happen is that Putin would attack Ukraine with airstrikes, and all those Russian troops massed on Ukraine’s borders would convince Zelensky not to counterattack. They believed that they could bluff him and use the army not as a real force that would actually go into Ukraine, but as a deterrent to prevent Zelensky from launching a counterattack. And they thought that that decision, to not counterattack, would then ruin Zelensky politically.

What actually happened, however, is that Putin did something completely different. He decided to attack with ground forces immediately, and that left the Ukrainians with no choice but to say, “We need to fight now.” So it was a terrible miscalculation, but not because of the intelligence. It was because of Putin himself.

OR: What are the big takeaways for you from the way the war has gone so far? Has it revealed, for example, big structural problems in Russia’s military, intelligence, and policymaking bodies?

Soldatov: Yes and no. These days everybody is talking about how bad Russia’s army is. I would be a bit more cautious, because what we’re seeing is a huge degree of political interference. Militarily speaking, many things we are doing in Ukraine don’t make any sense. One is using the national guard. It doesn’t make any sense militarily, but it makes some sense politically. Because politically speaking, if you’re sending in your national guard, it means that it’s not a military operation, it’s a policing operation. So you are just dealing with thugs and drug addicts and so on.

The other problem is that the chain of command being used in Ukraine is very different from Putin’s previous wars. In every other war Putin conducted, you had a joint group of forces led by a commander whose name was known. So the public would know who was ultimately in charge of the operation on the battlefield. We had this knowledge in the second Chechen war, in Georgia, in Syria, everywhere. But not here. Here, we only have Minister of Defense Sergei Shoigu and the chief of the general staff. So we don’t know who’s in charge of the situation in Ukraine. We don’t even know where the headquarters of this joint group of forces is, or how many forces are involved. Nobody knows. This creates confusion, and it’s bad for the military because they don’t understand what is going on. So you can blame the military, but the problem is really with the Kremlin, because it decided how to design this whole thing. It’s absolutely astonishing. The only way I can explain its decisions is by pointing to the fact that Putin is way more emotional about Ukraine than he is about any other region.

OR: A lot of people are saying that his age and isolation have also affected his judgment. Do you agree?

Soldatov: To some extent, yes. And he’s become obsessed with history, which is something old politicians do. But I think he’s been obsessed with Ukraine for a very long time.

OR: What do you make of the recent American claims that Putin is being misinformed by his aides about the progress of the war?

Soldatov: I think it’s true. First thing, it was absolutely clear that Putin was not privy to information about the [widespread use of Russian] conscripts. He was quite astonished when he learned. So we know that the military was hiding something from him from the start. The second thing is much more important, however. We know what his initial war plan was, right? It involved airstrikes combined with sending vehicle columns deep into Ukraine. Now, this plan crashed immediately, as soon as it faced reality on the battleground. But Russia’s tactics didn’t change for more than a month, which is absolutely astonishing. They kept sending these columns deep into Ukrainian territory for weeks and weeks and weeks. And you would only do that if your leader was still convinced that the initial plan was absolutely fine.

OR: Why isn’t he getting good information from the battlefield? Is it because the security services are too frightened to tell him the truth?

Soldatov: I think so. There’s huge confusion inside the Russian government. To start with, the military has a longstanding habit of hiding information from Russia’s top leader. In the past, the FSB has helped fill in the gaps. But the problem is that Putin started this war by attacking his security services. He held a horrible meeting with his security council, where he publicly humiliated his chief of foreign intelligence. Two weeks later, he placed two guys from the FSB under house arrest. A few weeks later, the deputy head of the national guard, a former security services guy, was forced to resign and is now probably under some sort of criminal investigation. What all this ignores is that you cannot fix your intelligence problems with repression.

OR: Speaking of intelligence, why was U.S. intelligence prior to the war so good? How did Washington learn so much about Moscow’s plans?

Soldatov: To begin with, I think the United States had succeeded quite well in penetrating the Russian government. The other thing is that the Russian security services have always been famous for producing the biggest numbers of defectors. So I think the United States probably got some good sources. Maybe they still have some people in place.

OR: Say a little bit more about why Russia’s military performance has been so bad.

Soldatov: Well, there are things that are still not clear for me. Because some units of the Russian army, like the spetsnaz[special forces], are really good, very competent, and very well trained. So why they’ve performed so badly is a really good question. I think it has had something to do with morale. And the problems started before the war. Last year, there was a horrible story reported by the Russian media that in a spetsnaz brigade in Siberia, a commander had raped his soldiers as a form of punishment. That is absolutely unprecedented, because spetsnaz forces tend not only to be Russia’s most professional soldiers, but they don’t have hierarchical problems, because they fight in small groups where you need to trust everyone who’s with you. In the spetsnaz, it doesn’t matter whether you are lieutenant or a captain or just a soldier, you’re all in it together and do the same things. So it looks like something has broken down in the Russian military. That might help explain the really bad performance. And again, all the problems with bad planning and the chain of command were also a big factor.

Back in 2014, the Russians outperformed the Ukrainians by a long distance. For some reason, they’re not doing that now. There are so many mysteries. I’ll give you another example: why hasn’t a big cyberattack happened? It would make perfect sense, because it could produce panicked crowds of people jamming the roads and making it difficult for the Ukrainian military to move around. But that chance was missed completely. Disinformation operations have also not been good. They didn’t have lots of stories prepared for this war. This is very different from what we saw just eight years ago. I do not have an explanation, but it looks like several elements just went completely wrong.

OR: What you’re saying suggests massive disarray within the Russian state, the military, the political apparatus, and the intelligence services, as though everything is breaking down.

Soldatov: That’s my impression.

OR: Do you believe the reports that Russia is now shifting its military strategy and aims in Ukraine toward consolidating control over the east and abandoning the center and the west?

Soldatov: My fear is that they’re just playing for time. I think that when you have a guy in the Kremlin who is being absolutely delusional about the real situation in Ukraine, you can’t speak in terms of a coherent foreign policy. Let’s say he does secure the Donbass, this chunk of land that nobody wanted. He might even make it a part of Russia. So what? It’s never had the symbolic value for Russians that Crimea has. It’s not a big win. And the price is all these sanctions and all these problems with the rest of the world.

OR: So you’re saying that one shouldn’t talk about Russia shifting its strategy because there is no strategy? That Putin is just making things up as he goes along?

Soldatov: Yes. Because strategically speaking, I don’t quite understand his end game. Maybe you have some ideas, but I don’t get it.

OR: Is it possible that his maximalist objectives were just a smoke screen, and that his real objective has always been to establish a land bridge between Crimea and Russia proper and to permanently destabilize Ukraine—to turn a fairly successful, Western-leaning, increasingly liberal democracy into a failed kleptocratic state?

Soldatov: Maybe, but I have a problem with this argument. Because let’s say you want to destabilize Ukraine, or you want to create a land bridge between Crimea and Donbass. That could all be achieved with air strikes. You could do what the Israelis did to Lebanon in 2006, which is to bomb the infrastructure of the country into the ground. Just bomb all its bridges, all its railroads, everything. And if you did that, a lot of countries, especially in Europe, would say nothing about it. Remember that before the war, the French said, “Well, air strikes are bad, but they don’t qualify as a real invasion.” Only after the tanks started rolling into Ukraine did people in Europe say, “Okay, this is a real thing.” So why invite all these horrible sanctions on yourself when you always had the option to use your formidable aviation, which completely outmatched Ukraine’s? I don’t get it.

OR: How, then, do you see the war ending?

Soldatov: Putin’s usual way out of trouble is to escalate even more. I think that people in Moldova and in the Baltics should be extremely, extremely nervous right now. I think it’s absolutely possible that he might start something there, just like he did with the Donbass as a way out of Crimea.

Source : The Octvian Report

Why China Stands Firmly with Russia — for Now

Tom Nagorski wrote . . . . . . . . .

Former Australian Prime Minister Kevin Rudd has known China as a student, scholar and head of state. When it comes to China’s “limitless partnership” with Putin’s Russia, he thinks he knows where the red lines are.

The conventional wisdom is that when it comes to the war in Ukraine, China is walking a tightrope, a balancing act between its partnership with Russia and a concern that it not rupture completely its relationship with the West. To date, however, China has refused to criticize Russian President Vladimir Putin, amplified various Russian falsehoods about Ukraine and placed blame for the war at the feet of the U.S. and its NATO allies.

Few people outside China know the country and the thinking of its leaders better than Asia Society President Kevin Rudd. Rudd was a student of China and the Mandarin language before entering politics in his native Australia. He served as Australia’s foreign minister and twice as prime minister. Rudd became president and CEO of Asia Society in January 2021 and has been president of the Asia Society Policy Institute since January 2015. His latest book is “The Avoidable War: The Dangers of a Catastrophic Conflict Between the US and Xi Jinping’s China.”

Rudd spoke with Grid about that “avoidable war,” about the U.S.-China relationship, and about the current war in Ukraine and the extent to which Putin will be able to count on continued full-throated support from Beijing.

This interview has been edited for length and clarity.

Grid: Lately, it looks like China is all in, in terms of support for Putin’s war. What’s going on there?

Kevin Rudd: Well, first, Vladimir Putin and Xi Jinping have developed a relationship at the personal level, which is quite deep and quite influential. But then at the structural level, the nature of the China-Russia relationship means that the underlying Chinese interests point definitively in the direction of Moscow. They want a benign relationship with the Russians because of the length and history of the Russian-Chinese border. They want to be able to dedicate all their strategic energies to their principal global and regional strategic adversary, the United States, rather than having to divert some of those resources — military or otherwise — to handling the Russian question, which they had to at various other times in their history. And thirdly, Russia is a handy strategic partner to divert the United States to other regional conflicts, either in Syria or in North Africa or most recently in Ukraine.

So, I think people need to not have a romantic view about where China’s national interest actually stands on this, and where the personal interest on the part of Xi Jinping stands in terms of his desire to preserve his relationship with Vladimir Putin.

G: There’s one way to do what you just described — which is to abstain from votes, or not call it an invasion or a war, but the Chinese have gone further. Pushing the Russian false bioweapons lab story, for example, or the fact that China is giving directives to educators to teach that NATO and the EU are to blame for the war. I’m wondering, need it be that overt, for them to pursue those interests?

KR: The Chinese propaganda system usually has two gears: forward and back. It’s pretty difficult to nuance the propaganda, in terms of what you put out and what you allow to be put out. And there’s a reason for that — simply the scale of the system: 1.4 billion people, and then 5 million-plus working in the propaganda apparatus. So this idea of nuance in the state newsroom doesn’t quite exist.

Secondly, the national interest questions are as I described — so when the system locks on to defending Xi Jinping’s position on both Putin personally and Russia generically, it locks on. The only variation on this theme I’ve seen is a recent decision after Putin began to run into a military stalemate on the ground in Ukraine, when the Chinese propaganda apparatus began to allow more spontaneous social media comment from Chinese citizens that was more sympathetic to Ukraine. But I think that’s basically to present an impression to international audiences that this is a more neutral Chinese position. When I look at the core decisions of the Chinese state and what they say and what they do, I see evidence of about an 85-to-15 split, splitting very much in Moscow’s favor.

G: Well, since you’re doing the fractions, a different question: How much of this would you say is the strategic interest in a partnership with Russia, and how much a strategic interest in just bashing the United States and the West whenever possible?

KR: Well, the two sets of interests fold into each other. Since Moscow’s first invasion of Ukraine in 2014, Russia has increasingly found that its only reliable long-term economic partner, and political and eventually strategic partner was China. So for those reasons, Beijing saw a huge emerging political and strategic opportunity with an isolated Russia. They grabbed it with both hands.

And now, as reflected in the Russia-China joint declaration of the 4th of February, which proclaims a limitless strategic cooperation in the future, you see the blueprint for a level of Russia-China strategic condominium which didn’t exist after the first Russian invasion of Ukraine, and serves both Russia’s interests and China’s interests — in particular China’s interests in rolling back against the United States, regionally and globally.

G: Given what’s happened in Ukraine, do you think there’s been any regret since the Feb. 4 agreement on the part of the Chinese?

KR: Let’s look at the tea leaves in China’s official commentary on Russia and Ukraine over the last month. When we look, for example, at the reported content of Xi Jinping’s engagement with Europeans — [French President Emmanuel] Macron and Olaf Scholz, the German chancellor, and others — it’s plain if you read between the lines that there is some degree on the part of the Chinese of buyer’s remorse. But I wouldn’t overstate it. The Chinese know that because they’ve locked in so hard behind the Russians, there has been reputational damage in Europe and reputational damage in the rest of the world. Look, for example, at the strong votes in support of Ukraine in the U.N. General Assembly, with 143 nation-states, a large slice of whom came from developing countries. So for those reasons there’s a perception of reputational damage.

But the ultimate realist Chinese position is this: The Europeans will do as they’ve always done in the past, and that is suffer strategic amnesia in the future, and European outrage over Ukraine will last essentially until the next year’s Eurovision Song Contest. And then they will get back to business, trade and investment, and everything gets driven by the gravitational force of the Chinese economy. That’s the deep Chinese view, the skeptical view of European strategic solidity.

It’s up to the Europeans of course to prove them wrong.

G: Do you think there’s anything the Russians may do that would change the Chinese calculus?

KR: I think there are two things. If Putin was mad enough to cross the weapons of mass destruction threshold, and to threaten or actually use chemical weapons, or to threaten or use nuclear weapons, this, in my judgment, will be a bridge too far for the Chinese. China has had to engage in all sorts of twisting and turning ideologically and theologically, almost, to justify its current position in de facto support of Russia’s violation of Ukraine’s political sovereignty and territorial integrity, which violates article two of the U.N. charter, and to justify that within the framework of China’s 70-year long embrace of the five principles of peaceful coexistence framed by Zhou Enlai back in 1954, which includes respecting the political sovereignty and territorial integrity of other states. So there’s been a whole lot of, shall I say, diplomatic contortionism in order to render that position as being consistent.

I would imagine beneath the surface, if there is one level of conversation occurring between the Chinese Central Military Commission and their Russian counterparts right now, it’s simply saying: Comrades, we’re with you, but don’t do the WMD thing.

Second thing is, if the Russians find themselves in absolute military stalemate or the war starts to go decisively against them militarily, then fasten your seat belts for a one-minute-to-midnight ceasefire diplomatic offensive by the Chinese, who turn adversity into opportunity in order to demonstrate to the Europeans that our friends in Beijing have always had peace and moderation in their hearts. And so to partly salvage reputational damage suffered so far, they would be tempted to do that. But we would be incorrect, I think, to assume that they are likely to assume a substantive mediating role as opposed to a cosmetic one.

G: Other than getting abstentions and good rhetoric from China, what else do Putin and the Russians get from this relationship with China right now?

KR: Excellent question. A few things. One is China politically and diplomatically is able to help gather reasonable support in the Security Council and in other parts of the world in support of the Russian position. And there’s a very interesting case study here: Why did the United Arab Emirates, for example, join the Chinese in abstaining on the Russian resolution? Partly that’s to do with Russian equities in the Middle East. Partly it’s to do with China’s relationship with the Emirates and the Saudis, who also abstained in the General Assembly vote. So it’s not trivial to say that China is capable of leveraging international support for the Russian position and against this increasingly harsh and near-universal financial sanctions regime against Beijing.

The second level of support is to maximize trade, particularly in commodities — oil and gas and wheat, and to buy as much Russian product as you can, a) because it’s good for China, b) because the Chinese could agree to pay up front before deliveries are made and c) that actually helps the Russian net financial position. And none of that is prohibited by the existing financial sanctions regime.

But when you get to the meat of the sandwich of stepping around the financial sanctions of the use of the dollar-denominated financial clearinghouse system and the decision to put Russia outside of that, the decision to freeze Russia’s foreign exchange reserves held in third countries and the sanctions against individual Russian institutions — there’s no evidence that China has violated any of those. And China legitimately fears attracting secondary financial sanctions against itself, because the Chinese remain dependent on the U.S. dollar-denominated and dollar-controlled global financial system. That may not be the case by the time we get to the end of the 2020s. But it is the case now. So China has been very keen not to attract that incoming set of problems.

G: So let’s get to “avoidable wars” — since that’s the title and subject of your latest book, and one issue in particular: Taiwan. How do you think the conflict in Ukraine is being seen, first, in Taipei? Does this war change minds or behavior in Taiwan itself?

KR: It’s a really important consideration because the Taiwanese have not always acted in their own resilient national self-interest. So the observation, I think, that will be foremost from Taiwan is this: that Ukraine has maximized its support as a democracy in the world by the resilience of its asymmetrical warfare against the Russian invading force.

And that goes to the actual design of the Taiwanese defense force, its size and its ability to wage asymmetric warfare, as opposed to deploying its funds into capital assets on the high seas, on the water between the two sides of the Taiwan Straits. So there’s a question of both the quantum and the quality of the Taiwanese military acquisitions and the structure of its defense force, which, I think, will be seen very clearly by those in Taipei as underscoring the decisions they began to take about two years ago that changed the composition of their force, and to increase their overall long-term defense outlays.

I think the second is along these lines: At the end of the day, the message being pumped out to Taiwan, Hong Kong and others in the Chinese-language speaking world is not that we Chinese are terribly sorry for supporting the Russians. The message being put out by the Chinese propaganda apparatus in Asia is: Guess what, guys — the Americans didn’t militarily intervene to defend Ukraine. And that is a message explicitly targeted on a Taiwanese audience. So Taiwan will have noted that Ukraine was not a treaty ally of the United States because it was outside of NATO. The Taiwanese do have the Taiwan Relations Act, but it’s not a mutual defense assistance pact at the end of the day.

So this will, I think, cause them to conclude that in the future, if they found themselves standing alone, and leaving aside what the United States eventually did, by way of direct military intervention, their ability to hold on and prevent an effective blitzkrieg within Taiwan itself is fundamental to them garnering enough international support around their cause, as has happened with Zelenskyy and Ukraine. I think they’re probably the two significant takeaways from this.

G: Same question in Beijing. Do you think there’s anything in Ukraine that has surprised the leadership there?

KR: I think, knowing something about the way the Chinese construct their Taiwan policy, they’re on their own railway tracks and timetable of what they want to do with Taiwan, as determined by two factors.

First, have an overwhelming balance of military power in the Taiwan Straits. At present, they’ve got a favorable balance, but not a decisively favorable balance from the PLA [People’s Liberation Army] perspective, and they need more time to make that decisive. The Chinese do not want to have a risky adventure militarily across the Taiwan Straits, because if they did not prevail in such a conflict decisively, if they had an untidy conflict like we now see with the Russians, let alone were stopped by a combined American-Taiwanese force, it would be terminal for Xi Jinping.

But the Chinese have been working on building this overwhelming military balance of power in their advantage for a long time, probably since at least 2015.

The second is to render themselves invulnerable, or only partially susceptible, to a new range of financial sanctions against them arising from such an invasion. At present, they’re highly vulnerable on this because of their dependency on the SWIFT system, their dependency on the U.S. dollar-denominated financial system, and that’s going to continue until such time as the Chinese decide to float the Chinese currency, open their capital accounts, and make it a big globally traded currency so that they become invulnerable either to manipulation by a single speculative financial house, or from a nation-state doing as the Americans have done with Venezuela, Iran and now the Russian Federation. So that’s why I think the timetable comes much later.

But if there’s one sobering thing emerging from what we’ve seen so far it would be this: The Russians told us that they could knock over this country next door to them through a land attack within a week. That hasn’t worked. When you look at the dimensions of the amphibious challenge across the Taiwan Straits, that would make a Chinese invasion force arguably bigger than the D-Day landings, and more complex because that’s the English Channel and this is open ocean, which creates its own logistical difficulties. I think the boys running the PLA will be disappearing back into their bunkers for a while to take out their slide rules to work out how difficult this could actually be.

G: Can you say a few words about the U.S.-China relationship? Do you think it’s at a low historical ebb? And are there any glimmers of hope? Any patches of common ground?

KR: Well, if we were to apply the slide rule again to the state of the U.S.-China relationship measured against a stability index, as of the end of the Trump administration, and compared it with where we are now, I would argue it is somewhat more stable. Because back then — not that long ago, January of 2021, either side of the Jan. 6 uprising in Washington — if you’re in Beijing wondering what on earth the Trump administration would do next on Taiwan, on trade, on Huawei or anything else, this was massively unpredictable given the nature of the Trump administration and different signals being sent in different directions all the time.

But with the Biden team, it’s more stable. They have a more stable and predictable framework. It’s still hard-edged, it’s still strategic competition, though the administration perhaps doesn’t use that term every day of the week as the Trump administration did. But if you look at its essence, that’s what it is. So far what the United States has been doing from a Chinese perspective has been relatively predictable, even if it has been adversarial.

And secondly, despite everything that’s happened in the last 12 months in the U.S.-China relationship, and despite what’s now emerged with Ukraine, you’ve had in the space of 12 months, two virtual summits of some length between the two leaders. And this at least preserves a line of central communication at the presidential level. And by the time we got to the last year of the Trump administration, we were down to [U.S. Trade Representative] Bob Lighthizer as the only guy capable of talking to his Chinese counterparts. Against those measures, it’s more stable than it was.

The argument of my book, which is about avoidable war, and avoiding such a war through managed strategic competition and a framework to identify the strategic red lines between them, to allow nonlethal competition between the U.S. and China while still carving out space for strategic cooperation in areas like climate change, I think all that’s possible. It’s difficult given a hawkish Congress in the United States, and difficult also given the number of hawks who inhabit the halls of power in Beijing as well. But I don’t see it in the interests of either country to proceed down a path in the absence of such a mechanism, which would run the risk of blowing each other’s heads off if you have crises, escalation, conflict or war.

Source : GRID

Charts: Global Food Price Jumped to Record Level as Ukraine War Cut Supplies

Source : Bloomberg

“The West Will Decide on Putin’s Bankruptcy”

Peter Littger wrote . . . . . . . . .

As a teenager, Jim O’Neill, 65, wanted to play professional soccer for Manchester United. But his father, a mailman, encouraged him to study economics. He earned his Ph.D. at the University of Surrey, with his thesis focusing on the trade policy of oil exporters. Since then, he has focused on economic models and their effects on the real world of currencies and goods. Between 1995 and 2013, O’Neill was a partner at Goldman Sachs, serving as the investment bank’s chief economist for some of that time. His primary focus was on the development of the global economy, particularly the future of emerging markets like China and Russia.

From 2014 to 2016, O’Neill worked for the British government, developing strategies to combat rising drug resistance and to boost economic development in the North of England. O’Neill is a member of the House of Lords (as Baron O’Neill of Gatley) and works with think tanks like Chatham House and Bruegel in Brussels. Since 2014, he has been an honorary professor of economics at the University of Manchester.

DER SPIEGEL: In November 2001, you came up with the acronym BRIC to describe four economies that stood out for their exceptional growth: Brazil, Russia, India and China. How do you feel about the BRICs today?

O’Neill: It was a nice dream.

DER SPIEGEL: Wasn’t your own forecast convincing?

O’Neill: It’s comical that people really thought that I would make forecasts for the next 50 years – and that I would be right. That’s ridiculous! It actually was the art of the possible. I wanted to show that four countries that had been economically subordinate in the course of the 20th century could become influential in the 21st century and even overtake the large economies. Their enormous growth was real and impressive. From a certain point onwards, they used their potential for further development very differently.

DER SPIEGEL: That sounds more like four individual dreams, not one.

O’Neill: If you like. Today, the four countries are not in the same league. Years ago, I pointed out that I would only talk about IC, i.e., India and China. Brazil and Russia have not been able to move forward and realize their potential. They have turned out to be massive disappointments.

DER SPIEGEL: In China, the gross domestic product has not increased sevenfold since 2000, as you dreamt, but fully eighteenfold. At the same time, your dream for Russia’s GDP – of around 1.7 trillion dollars in 2020 – was almost right on.

O’Neill: The Chinese economy has developed far more than I expected at the time. Russia, on the other hand, left the growth path early. Don’t forget: During the first 10 years, the Russian economy actually grew, since then it has moved backwards.

“Brazil and Russia have not been able to move forward and realize their potential. They have turned out to be massive disappointments.”
DER SPIEGEL: Do you regret that you praised the potential of Russia 20 years ago – potentially leading to a lot of foreign money flowing into the country?

O’Neill: I don’t have anything to regret. I didn’t come up with BRIC to recommend investments. Many may have understood it that way after my observations were widely accepted.

DER SPIEGEL: Would it have been appropriate to warn against Russia at a certain point?

O’Neill: It was the Russian leadership itself that did the job in 2006, when they flattened Mikhail Khodorkovsky’s oil and energy company Yukos before the eyes of the world. Investors understand such things as a warning shot. In retrospect, that was the moment when the Russian BRIC dream started bursting.

DER SPIEGEL: People in Moscow, though, seemed to continue believing in it for quite some time after that.

O’Neill: That is correct, they did take BRIC as a forecast. I remember an invitation to speak at the St. Petersburg Summit in 2008, a kind of Russian World Economic Forum. The expectations of the hosts were not clear to me at first: I was supposed to talk about the stunning growth of the Russian economy and leave no doubt that Russia would be one of the five largest economies in 2020. But I was not prepared to do that; the reality simply did not reflect it. I fired a warning shot right into the heart of the Russian establishment. After my talk, the mood was at rock bottom; we held on to our coffee cups in embarrassment. That day, I realized that Russia was facing huge problems. While Putin’s people were confusing my dream with reality, they weren’t ready to do anything about it. They wanted me to serve as a kind of key witness for a story that was ultimately insubstantial.

DER SPIEGEL: What exactly did you say in St. Petersburg?

O’Neill: That an entire country cannot rely on oil and gas prices rising forever if the economy as a whole is going to grow and be healthy. In the case of Russia, it’s the scale of corruption and the terrible demographics – in particular, the low life expectancy among men. Productivity was and still is a huge issue. On this basis, one might be able to manage 2 percent growth for a few years. But for a stable, long-term development with significantly more growth, profound reforms and reliable and viable institutions are necessary. There’s only one way to boost the economy: by increasing productivity and enabling the establishment of new enterprises as well as attracting foreign investment. In other words, the full monty.

“Gold is an uninteresting, old-fashioned historic obsession of the 1940s. I don’t see any use for it.”
DER SPIEGEL: Was nobody interested in your criticism in Russia?

O’Neill: It was completely unwanted. Most of my contacts, technocrats from the Central Bank or the Finance Ministry, seemed to feel they were on a safe path with Putin. I was often struck by how widely-held the belief was regarding his excellence as a strategist. I never bought into that. The truth is that the international financial crisis of those years benefited Putin because it drove up the price of oil. Hence, he could continue to promise growth and prosperity to the Russian people. It was clear that his huge popularity was bound to decline as soon as the oil price fell, which happened from 2014 onwards.

DER SPIEGEL: And what did the great strategist do then?

O’Neill: He had to change tack when he realized that he couldn’t achieve the growth that had taken place pre-crisis. Nor could he really reform, because much of his personal financial benefit and that of some of the people close to him depended on the status quo. So he began propagating the goal, so to speak, of: “Make Russia Great Again!” Instead of growth, Russians were now getting nationalism. From what we can see, Putin has brought himself economic bankruptcy along with it.

And oil and gas facility belonging to Gazprom in Novoprtovskoye: “An entire country cannot rely on oil and gas prices rising forever if the economy as a whole is going to grow and be healthy.”

DER SPIEGEL: Can Putin avert bankruptcy by forcing the West to pay for gas and oil imports in rubles?

O’Neill: Since treaties will have to be amended, the West would have to allow itself to be forced. I think it is more likely that Russia will export less after this clumsy demand. But you can also see in it a typical move by Putin, whose hand has undoubtedly been forced by Western sanctions. He obviously wants to put the sanctioning parties, who buy energy from him, under pressure themselves, because if they agree to the demand, they would have to buy mass amounts of rubles from the very Central Bank that has been excluded from international business and whose immense dollar reserves have been frozen. The whole debacle reveals how heavily Putin is dependent on international finance as long as the dollar is the largest reserve currency. In the end, it is the West that will decide on Putin’s bankruptcy – and other despots will think twice in the future about where they park their money.

DER SPIEGEL: Can the dollar continue in its current role in light of the huge sovereign debt load of the United States and the continued growth of China?

O’Neill: Nobody knows, but at the moment there is a lot to be said for it, even if there are limits to everything, certainly including America’s mountain of debt. But to end the dollar’s reserve career – these prophecies are decades old, by the way – a new currency like China’s must be ready. That requires reformist steps and an openness not evident in Xi Jinping’s current one-party state. Even if the German doctrine “change through trade” (“Wandel durch Handel”) has not worked. It is no coincidence that only democracies – the U.S., Europe and Japan – provide reserve currencies.

DER SPIEGEL: Putin has stashed a lot of gold at the same time. What use – apart from serving as a war chest – do gold reserves still have today?

O’Neill: Gold is an uninteresting, old-fashioned historic obsession of the 1940s. I don’t see any use for it, except the one you’ve mentioned. Only governments that lack self-confidence stockpile gold. It’s pointless.

DER SPIEGEL: Germany is said to have the second largest gold reserves in the world. What would you do with it?

O’Neill: Do something more imaginative with it! Sell it and invest the money in education or in the fight against disease.

“For Germans, it must be a shock to realize the level of dependency on foreign energy.”

DER SPIEGEL: Or should Berlin, in the light of the transformation announced by German Chancellor Olaf Scholz following Russia’s invasion of Ukraine, buy weapons?

O’Neill: That would still be better than having gold.

DER SPIEGEL: What condition do you think the world economy is in today?

O’Neill: Very, very uncertain and complicated. I have not seen greater macroeconomic uncertainty in the past 40 years. Beyond the difficulties created by the corona pandemic, a situation has arisen that can change daily and lead to extreme reactions on the markets at any time – driven sometimes by fear, sometimes by greed. As is well known, these are the two strongest factors of economic action, which in turn can cause or accelerate crises. What would happen if tomorrow the sanctions were eased again by a peace agreement? The greed on the Russian market would probably be almost unstoppable.

DER SPIEGEL: What worries you most from an economic point of view?

O’Neill: That the general expectation of inflation continues to grow. It is the most dangerous condition for actual inflation. Then, the central banks would have to react and increase interest rates to 6 percent or more to force a recession. That would throw us back into a situation like in the 1970s, which was called “stagflation”: Money lost value, wages and prices went up, while the economy didn’t grow.

DER SPIEGEL: How can such a development be prevented?

O’Neill: The current situation is by no means conducive to better productivity. But that is exactly what we should be aiming for – at least at the end of the crisis: to increase the value of work for as many people and companies as possible. One thing is certain: Even before Putin’s war, the general conditions had deteriorated considerably and a decline in economic growth in the second half of 2022 was programmed. However, I have hope that the rest of the world can avert a real shock. For Russia it is a nightmare.

DER SPIEGEL: Is there anything that makes you optimistic at the moment?

O’Neill: First, as Winston Churchill said: “Never let a good crisis go to waste.” I strongly believe great opportunities arise from every crisis, not least financial ones. Secondly, the state we are in now demonstrates the importance of cooperation and collaboration – and that there is no advantage to standing alone, especially as the aggressor. And thirdly, we are learning again that bad things can happen, and that history isn’t always on our side. At the same time, we must continue to adapt to new conditions. For Germans, for example, it must be a shock to realize the level of dependency on foreign energy. The same goes for Germany’s dependency on exports. I think it’s insane that the largest economy in the heart of Europe can only be doing well if the rest of the world is doing well. It would be good if Germany didn’t only wake up with a new military framework as a result of this crisis, but also did everything it could with great people and ideas to turn its dependencies into a new edge.

Source : Spiegel