Email of the day on Ukraine
Comment of the Day

February 23 2022

Commentary by Eoin Treacy

Email of the day on Ukraine

I wondered this morning what you meant when you said on commentary, as regards Ukraine, that, "all other factors aside, these are reasonable demands from a geopolitical perspective".

This comes across as appearing to justify Putin's move. I am sure what you meant to say was that the move might be considered reasonable from Putin's perspective.

That might be true but that doesn't make it right morally: every sovereign nation should be able to decide what their future looks like, not an outsider.

Eoin Treacy's view

Thank you for this email which raises some important points. First off, I am in no way saying that moving troops into another country is ever morally correct. What I said was the demands are reasonable. The methods used to achieve them are not. The reality is geopolitics seldom has anything to do with morality.

This article from PBS may be of interest. It carries a lot of historical context. Russia was never happy with NATO’s eastward expansion. The prospect of admitting Ukraine, which shares a long land border with Russia, is viewed as a bridge too far. That’s a reasonable request.  

The list of demands Russia made recently was an over-ask by any definition, since it basically said no country in the agreement could move assets to within striking distance of another signatory. Given the range of missiles today, that is a nonsense clause. It should only be viewed as the opening volley in an ongoing negotiation.

Russia is an authoritarian state. They have engaged in extraterritorial assassinations, cyber-attacks, and deliberate goading of NATO, with the annexation of Crimea, and now another part of Ukraine. They also feel aggrieved at perceived slights in the post-USSR era and their reduced prestige.

Back in 2003, we had a stall at the World Money Show in Florida and the Russian trade delegation’s stand was next to ours. We had a fine time chatting over the couple of days, and I helped edit the ambassador’s speech. I was struck at how deferential it was. Five years after the debt default and depreciation of the Ruble, Russia was still apologising for the ills of communism.  

Conditions could not be more different today. Thanks to a subscriber to this article from the Airforce magazine which may be of interest. Here is a section:

Since the 1990s, Russia has been referring to this approach as “sixth generation” or “new-type warfare.” Russia has employed these approaches in its blockade of oil exports to Western Europe, in its campaigns in George and Ukraine, and in its interference in NATO member and U.S. elections. 

“Unlike 20th century conflicts,” the authors observed, nonmilitary forces and methods “are not deployed in the initial period of war, but during peacetime, resulting in offensives and strategic operations beginning with already-prepositioned forces.” During this period, true military forces are moved into position to either threaten action or be ready to move into contested areas unopposed, or too quickly for an enemy to block.

“Operations are characterized as highly maneuverable, non-contact, with mass employment of high-precision weaponry, large scale use of special operations forces, robotic systems, weapons based on new physical principles, and the participation of a strong civil-military component.” The goal is to strike enemy formations across a wide front, simultaneously, borrowing a page from U.S. strategy known as “parallel warfare.”

Russia’s administration puts national pride and priorities ahead of cordial relations with the West because they can afford to. Russia has built up a series of trade relationships that make their exports essential to their customers. That allows the country to act aggressively and makes its major trading partners think twice about intervening militarily.

Germany’s Economy Minister claiming they can do without Russian gas imports sounds like fanciful. It also does not pay heed to the concerns of neighbouring countries, with much higher dependence ratios on Russian gas.

Countries have been willing to play along to get along with both Russia and China for decades. Those countries are now more assertive and willing to push their individual national priorities. That increasingly looks like overt military action. The ongoing cooling of relations between Australia and China over (another) laser pointing incident is another example. It suggests there will be a continued trend of geopolitical stress, even if outright war is ultimately avoided.

Ultimately, countries and companies will be forced to choose between putting up with bad actors who put national priorities ahead of trade and fair dealing and standing up for the world order of laws and good governance.

Gold continues to firm in the region of $1900 and the odds remain in favour of the view that this 18-month consolidation is being resolved to the upside. With increasingly geopolitical tensions and the deflationary impact of higher oil prices, the risk that central banks will flinch from doing what is necessary to curtail inflation is rising. That’s a clear tailwind for gold. 

Russia dominates supply of palladium so that is putting upward pressure on the price.

Back to top

You need to be logged in to comment.

New members registration