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Saturday, July 1, 2023

The New World (Dis)order: PART III: China Awakens Under Xi Jinping

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NOTE: This is the third in a five part series.
PART I: American Adventurism, Non-Interventionism, Trumpism and Afghan Chaos
PART II: The Misunderstanding of Vladimir Putin
PART III: China Awakens Under Xi Jinping

PART IV: Crony Capitalism and the West’s Achilles Heel

PART V (November): The New World (Dis)order

PART III: China Awakens Under Xi Jinping

“If the U.S. side does not put on the brakes and continues down the wrong path, no amount of guardrails can stop the derailment and rollover into confrontation and conflict.”
Chinese Foreign Minister Qin Gang

From 2008-2013, there was one particular leader who was closely studying America’s actions and lack thereof. Xi Jinping became vice president in 2008, around the time Barack Obama became president. 

Xi’s rise was meteoric after being named chairman of the Communist Party and Central Military Commission in 2012. Holding the reins to the party apparatus and military, he began consolidating power by launching anti-corruption probes to purge the military and party ranks of rivals and non-loyalists.

As Mr. Xi consolidated his grip on the party we began to see a bolder China emerge onto the world stage. It is not a coincidence that this transpired around the time the world started to perceive a weaker, divided and non-interventionist America.

For most of the last century Chinese leaders have followed Deng Xiaoping’s strategy of "hiding our capacities and biding our time.” The idea was to avoid provoking hostility until China had the military and economic strength to challenge US hegemony.  Xi Jinping’s China didn’t simply come out of hiding but has embraced a far more aggressive and muscular posture at home and abroad. 

During Covid-19 Mr. Xi implemented a zero-Covid policy which involved forcibly locking up residents and publicly shaming those who broke quarantine. He authorized a genocide against Uyghurs in China’s Xinjiang region and oversaw a brutal crackdown in Hong Kong, a territory to whom China had promised press and other freedoms until 2047 under the ‘one country, two systems’ handover agreement with the British in 1997. 

In the last few years, China has provoked India with the Chinese military violating agreements along their shared border, leading to deadly clashes. Beijing packed Hong Kong’s legislature with loyalists and passed a draconian national security law. This law applies not only to local residents but to “people outside [Hong Kong] - who are not permanent residents”. China openly threatened the UK with dire consequences for offering residency to fleeing Hong Kong citizens.

In 2012, China launched their first aircraft carrier, after spending years modernizing their navy. Soon after they started to flex their muscles in the South China Sea, laying claim to disputed territories and territorial rights. 

A year later, they consolidated bureaucratic control over multiple maritime agencies to create a State Oceanic Administration that would match the size of Japan’s coast guard, the largest in the world. That same year they announced the creation of an East China Sea Air Defense Identification Zone over disputed territories and demanded that all non-commercial aircraft submit air plans prior to entering the area or risk being shot down. 

A 2015 Pentagon report found that China had reclaimed more than 3,200 acres of land in the southeastern South China Sea and were “weaponizing these man-made islands”. The report concluded that in addition to building facilities on disputed islands, China was “increasing its role and power around the world, while continuing to modernize and build up its military and inventory of ships, missiles and aircraft.”

In March 2022, the U.S. Indo-Pacific Commander confirmed to the Associated Press that China had fully militarized at least three islands in disputed areas of the South China Sea. They armed these islands with anti-ship and anti-aircraft missiles, laser and jamming equipment and fighter jets. This happened despite the fact that Xi Jinping had made public assurances that China would never convert these islands into military bases. 

Last year, the Solomon Islands shocked the world by signing a security pact with China. It allows the Chinese navy to dock warships on the island and allows the island to call in Chinese security forces, to restore “social order”. 

The agreement also gives Chinese forces the authority to “protect the safety of Chinese personnel and major projects.” Both Australia and America sent high-level delegations to dissuade Solomon’s PM from signing the agreement but failed to change his mind.

Why all the fuss over six small islands with a population of less than 700,000 people?

Australia is concerned about having the Chinese military stationed less than 1,200 miles from their shores and America is worried about reduced freedom of navigation in the South Pacific because the Solomon Islands sits at a major trade transit point through which massive amounts of global cargo flow.

This agreement was a startling reversal for a country that had been both a diplomatic partner of Taiwan’s, and a long time Western ally. It can in part be explained by the 2016 election of President Tsai Ing-wen, in Taiwan, and her refusal to endorse the “one-China principle”. After the Taiwanese elections, Mr. Xi’s administration went into overdrive to persuade countries to sever ties with Taiwan. 

Today, only 13 countries, many of them small, less-developed nations, have formal relations with Taiwan. China recently persuaded Honduras to sever ties with Taiwan. This was a major rebuff to Washington, who had been working hard to get Central American countries to support the island nation.

China is reported to be building a secret naval base for its military in Cambodia, though both countries have denied this. If true, it would be their second such outpost outside their territory, and first in the strategically significant Indo-Pacific region. Australia's Defense Minister recently warned in a speech that China’s "military buildup in the region was occurring at a rate unseen since World War II”.

Last year, the US Commander of Strategic Command, Vice Adm. Chas Richard, issued a more ominous warning. He said America’s military edge, which has thus far provided a deterrence against China, “is slowly sinking.” He added that China is putting capacity in the field faster and that if this continues, “it isn't going to matter how good our [operating plan] is or how good our commanders are, or how good our forces are—we're not going to have enough of them. And that is a very near-term problem."

Even as China flexes its military might, Mr. Xi understands something previous Chinese premiers failed to see: that military might and financial muscle alone will never allow China to rival America on the world stage. They also need to build soft power. 

With soft power in mind, in 2013 Mr. Xi launched the Belt Road Initiative (BRI). The BRI is modeled after The Silk Road created 2,100 years earlier by the Han Dynasty to build trade routes linking Europe to Asia. However, Mr. Xi’s ambitions go far beyond trade. By investing in developing nations and making their economies co-dependent, it allows him to bring them into China’s sphere of influence.

Within seven years of launching the BRI, 139 countries have signed cooperation agreements. This includes 39 countries in sub-Saharan Africa, 34 in Europe and Central Asia, 25 in East Asia and the Pacific, 18 in Latin America and the Caribbean, 17 in the Middle East and North Africa, and 6 in South Asia. Currently, the BRI, including China, accounts for 40 percent of the world’s GDP and 63 percent of its population.

To put the scale of BRI in perspective, over the last decade, China has doled out more than $1 trillion across Asia, Africa and Latin America. This makes China the largest government lender to the developing world, almost equalling the total loans of all other governments combined.

In Africa, more than 60% of the revenue major international contractors collected in 2019 went to Chinese companies, according to a 2021 paper by Johns Hopkins University. In 2022, China’s trade with Africa was five times greater than that of the US. This, in addition to the fact that the Russian Wagner Group, a private military contractor, has been providing security assistance in several African countries. 

These ties to China and Russia are a large part of the reason why many African nations, including South Africa, have been reluctant to condemn Russia’s invasion of Ukraine. After neglecting the continent for many years, the US is now playing catch-up to try and blunt China’s influence with recent high-profile visits by the US Treasury Secretary and one by the Vice President.

In 2014 China launched the Asian Infrastructure Investment Bank (AIIB) to rival the Asian Development Bank (ADB), which lends money for infrastructure projects to Asia. According to China it was necessary because unlike the ADB, which funds projects ranging from environmental protection to gender equality, the AIIB would be focused on building infrastructure in poor Asian countries. Most world watchers believe the true reason was to expand China’s influence in the region at the expense of Japan and America, who hold more sway at the ADB.

Over the last decade, China has been increasingly using its economic clout to bully and punish nations that act in ways it deems unacceptable. In 2011, China blocked salmon imports from Norway after they awarded the Nobel Peace Prize to Chinese dissident Liu Xiaobo. In 2020, they blocked agricultural, beef and other imports, after the Australian government supported a global inquiry into China’s early handling of Covid. As the war of words escalated with Australia, China even threatened them with a missile attack.

When Lithuania, an EU country of less than 3 million people, let Taiwan open a trade office in Vilnius, China halted its own exports to Lithuania to starve their manufacturing industry of components and raw materials. Then they took their vindictiveness to a new level by letting Chinese goods, that had been paid for by Lithuanian companies, get mired in new red tape and endless inspections delays.

China even pressured EU countries to stop importing Lithuanian products. They halted shipments of auto components to German, French and Swedish companies from ports in China, because some parts were manufactured in Lithuania. The Lithuanian spat exposed the limits of power of a massive trading bloc like the EU, against the growing might of China. Apart from filing a complaint with the Word Trade Organization (WTO) and offering words of solidarity, EU was reluctant to do anymore, for fear of upsetting China. 

The fact is that the EU is reliant on China for their supply chain and China used Lithuania to send a message to the bloc. Theresa Fallon, Director of the Center for Russia, Europe, Asia Studies in Brussels summed it up saying,“Many European leaders look at Lithuania and say, ‘My God, we are not going to do anything to upset China.”

Prior to Russia’s invasion, China and the EU’s economic ties were mutually beneficial, and a way for both sides to limit their reliance on the US. However, after China’s bullying of Lithuania and support for Putin’s invasion, these ties have begun to fray.

At the 2023 Munich Security Conference, China’s top diplomat received a cold reception when he tried to woo Europe, by bashing the United States. His audience was aware that even as he spoke, in the background European security officials had discovered that official Chinese channels were hard at work spreading disinformation all over Europe.

Despite these tensions, it is worth noting that the EU’s largest economy, Germany, continues to have deep ties with China and is still their largest trading partner. At the end of 2022, the German Chancellor made a high-profile trip to Beijing. For now, Sino-German relations remain “cold politically and hot economically” as the Director of European Studies at Fudan University put it.

Meanwhile on the home front, Mr. Xi has been walling China off from the world. He aims to make China self-reliant and less dependent on the West. From the time he came to power Mr. Xi has feared “infiltration” of dangerous Western values, like democracy, press freedoms and judicial independence.

One of his first acts as premiere was to accelerate policing and censorship of the internet by banning anonymity and making internet providers responsible for deleting content deemed offensive or politically sensitive. He systematically clamped down on foreign NGOs and churches, and issued rules restricting the use of Western textbooks, banning any texts that promote “Western values”.

To understand why the man who once said in 2017 “Openness brings progress, while self-seclusion leaves one behind,” seems to be ignoring his own advice, we need to understand that Mr. Xi never embraced “openness” in the way we define it in Western democracies. Instead. Mr. Xi always viewed “globalisation” as a series of risks and rewards, enacting reforms in piecemeal ways to ensure that the Party never cedes control of the economy and is able to protect citizens from dangerous outside ideas.

Even prior to the Covid_19 lockdown, which closed China’s borders for two years, by every measure China’s global isolation had been growing. Foreign films accounted for less than 16% of box office revenue, down from over 50% in 2012. In 2021, the value of imported books and periodicals fell to their lowest level since 2017. The number of Chinese students leaving to study in Australia dropped dramatically last year. Even foreign remittances fell by more than half compared to figures for 2019.

In Mr. Xi’s vision of China the state plays a central role in guiding the economy, the private sector is loyal and aligned with the Party’s policy goals, and he is the leader who restores China’s power on the world stage. He envisions China as the center for global innovation, aided by government investment into domestic research and technology, which will help power productivity and propel growth. China as a self-reliant nation, no longer meek, or beholden to the West.

Over the past decade, the state has shuttered or taken control of many private businesses, absorbing them into state-owned enterprises, but the tech sector managed to escape Mr. Xi’s increasingly visible hand on the private sector. However, this changed three years ago, after Mr. Xi personally intervened to block the Ant Group’s IPO. 

In a speech a few days before the IPO, Jack Ma publicly criticized the government’s financial regulation, blaming it for holding back technology development. It is said that Mr. Xi was infuriated by this, but the likely reason is the complex ownership structure behind the Ant Group. A number of well-connected political families were shareholders, and could have posed a challenge to Mr. Xi’s leadership because they stood to collect billions from what would have been the world’s largest ever IPO. 

Since then Mr. Xi has singled out the tech sector, blaming it for widening inequality in China. Mr. Xi knows that if this inequality is left unchecked, it will lead to social unrest. 

A few months after launching antitrust investigations into big tech companies and announcing new rules to restrict overseas listings by Chinese companies, Mr. Xi gave a speech about pursuing a “common prosperity agenda,” in which he vowed to adjust excessive incomes and redistribute wealth to tackle growing inequality.

However, I believe the main reason for the tech crackdown has to do with the fact that a handful of entrepreneurs and companies have attained such great market dominance and influence over the economy that they threatened the clout of the Party. Chinese tech giants account for a much larger portion of the economy than their counterparts in the US and Europe, and I suspect that Mr. Xi’s began to view them as a threat.

To give you an idea of the dominance Chinese tech companies have, Alipay, a mobile payments app owned by Jack Ma’s Ant Group, is used by roughly 70% of China’s population. Ant has issued loans to 20 million small businesses and nearly a billion individuals. 80 million businesses use their apps and they run China’s largest mutual fund. Ant’s focus on serving the unbanked has made it a dominant force in finance.

Also, unlike in America and Europe, a small handful of Chinese companies have a multi-tentacled reach. They have built super apps with walled gardens, offering services that span e-commerce, payments and delivery, to social media, gaming and entertainment. This power over the economy and populous was likely viewed as a long-term threat to Mr. Xi’s leadership and the Chinese Communist Party dominance.

The tech sector was the last remaining threat to Mr. Xi having absolute power, ahead of being anointed de facto emperor of China, at the 2022 CCP Congress.  At the last congress, the party amended its constitution to enshrine Mr. Xi as the “core of the party and his political thought as its underpinning ideology”, clearing the way in March this year for the National People’s Congress to unanimously vote to rubber stamp Mr. Xi’s norm-breaking third term, putting him on track to be in premier for life. 

While it may appear that Mr. Xi and China are at the pinnacle of their power, there is trouble brewing on the long horizon.

A slowing global economy coupled with rising interest rates and inflation are leading to an increasing number of debt defaults by developing nations which are struggling to repay loans received through the Belt and Road initiative. 

As a result other issues have emerged with these loans, from a lack of transparency and rampant corruption to labour violations and predatory lending practices. It has resulted in a number of countries finding hidden debt that was never officially disclosed on government balance sheets.

Additionally, completed infrastructure projects are falling apart due to poor quality equipment and construction flaws. These problems threaten to leave developing nations in worse shape because in addition to repaying loans, they will now need to spend money to repair these defects. 

Cracks were found in Ecuador’s Coca Codo hydroelectric plant, the country’s biggest power source. In Pakistan, officials had to shut down the Neelum-Jhelum hydroelectric plant after finding cracks in a tunnel, just four years after it went online. In Uganda officials identified more than 500 construction defects in a Chinese-built hydropower plant that has suffered frequent breakdowns since going online in 2019. The World Bank estimates that hydropower plants should have a lifespan of up to 100 years.

Also, China’s economy can no longer rely on easy growth through technological transfers.For much of the 1990’s and 2000’s foreign firms that set up factories brought advanced technologies that were forcibly transferred to local Chinese firms, or reverse-engineered at little cost. 

However, these transfers are increasingly being restricted, even though China continues to be accused of hacking and theft of intellectual property. The US put tough new export controls on advanced technologies, like semiconductor chips, in a bid to slow down China’s technological and military advances through illegal transfers.

In late 2022 and early this year, foreign investors pulled more than $100 billion out of China’s bond market and there was a dramatic slowdown in investments in the country’s stock market. But these investments are likely to bounce back because many investors sold for fear of getting caught up in sanctions aimed at Chinese entities, due to the country’s support for Russia's invasion, and because of Mr. Xi’s reluctance to lift the strict zero-Covid policies which were hampering economic growth.

In the early part of this year, after Covid restrictions were lifted, China’s economy has shown signs of a strong rebound with manufacturing showing the biggest improvement in more than a decade, services sector activity climbing and signs of stabilization in the troubled housing market

These figures were released ahead of the National People’s Congress in March, where Mr. Xi shared plans for “deepening structural reform” in the financial sector and tightening controls over science and technology in strategic areas like chips.

However, troubling systemic issues lurk beneath this short-term buoyancy. For years Chinese cities accumulated vast amounts of debt in a bid to boost GDP, by spending on wasteful infrastructure projects. 

Already struggling to pay off debt, these cities experienced a further strain on coffers to implement Covid restrictions. The situation is so bad that some cities are struggling to deliver basic services. Recently, a city went viral after announcing they could no longer provide bus services.

China’s housing market remains on tenterhooks after property owners suspended mortgage payments last year, over delayed and stalled projects. It is too soon to tell if this eroded confidence in home buying more broadly. Also, analysts expect that further government bailouts will be necessary to help debt-stricken property developers.

In 2022, China’s population declined for the first time in 60 years. This demographic crisis will result in a shortage of labour while simultaneously increasing healthcare and other social security costs. Aware of the looming crisis, the government has been trying to incentivize couples to have kids, raising the limit from 2 to 3 in 2021, but they have not succeeded in reversing declining birth rates.

They even tried paying couples but got pushback with people saying that the main issue is that the country has become one of the most expensive in the world to raise a child. They say that these government incentives do nothing to help with supporting ageing parents and dealing with the rising cost of education, housing and healthcare. 

A related problem is the high rate of youth unemployment. One in five urban youth were unemployed at the end of 2022. The latest figures for June this year show the unemployment rate among 16-24 year olds rising to 20.8%, which is four times the overall national jobless rate. This means China is now facing its worst unemployment crisis in four decades. Young people unable to find jobs and income are delaying plans for marriage and having kids, which is putting further negative pressure on the country’s birth rate.

While China says they have reopened for business and foreign investment, official figures show that the number of foreigners living in Shanghai and Beijing has been in steady decline over the past decade, and there is likely to be a mass exodus in the future. 

2022 survey by the European Chamber of Commerce found that 85 percent of expats living in China said that the government harsh Covid policies and inhuman lockdowns, had caused them rethink their future in the country.

It is not only foreigners who are fleeing Mr. Xi’s harsh policies. Wealthy Chinese faced with the prospect of income redistribution have been fleeing in greater numbers after Mr. Xi’s promise to narrow ‘inequity’, according to data compiled by firms which track the movement of the rich. They expect many wealthy families more to leave in 2023.

It is not just wealthy Chinese who are fleeing. The US has seen a marked increase in Chinese citizens willing to risk life and limb to pass through the treacherous jungle between Panama and Columbia, to seek asylum in America. Panamanian government data shows that in the first two months of this year, more Chinese migrants crossed into Panama than all of 2021 and 2022 combined.

More recently the government banned a prominent finance writer and two of his peers for “spreading negative and harmful information” because they had written about the country's spluttering economy and unemployment rate. While all this does not bode well for China, in the end their biggest threat might be the impacts of Mr. Xi’s desire both to remake the economy based on his ideology and to secure the Party’s grip on power. 

By giving the Communist Party even greater say in managing the economy, replacing tech leaders with academics and internationally respected economic officials with politicians loyal to Mr. Xi, he threatens to further erode the lines between party, government and private sector in ways that will have dangerous and unintended consequences for China and the rest of the world.

Read next installment in series:

PART IV: Crony Capitalism and the West’s Achilles Heel

Thursday, June 1, 2023

The New World (Dis)order: PART II: The Misunderstanding of Vladimir Putin

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NOTE: This is the second in a five part series.

PART I: American Adventurism, Non-Interventionism, Trumpism and Afghan Chaos
PART II: The Misunderstanding of Vladimir Putin
PART III: China Awakens Under Xi Jinping
PART IV: Crony Capitalism and the West’s Achilles Heel
November): The New World (Dis)order

PART II: The Misunderstanding of Vladimir Putin

To anyone who would consider interfering from the outside: If you do, you will face consequences greater than any you have faced in history. All relevant decisions have been taken. I hope you hear me.”

-Vladimir Putin, 24th February 2022

In February, 2014 after three months of violent and sustained demonstrations in Ukraine, their Russian-leaning President Victor Yanukovych fled Kyiv. The Ukrainian parliament appointed an acting president and prime minister who immediately announced they wanted to bring the country closer to Europe and further away from Russia.

Fearing the Arab Spring could arrive at Moscow’s doorstep and banking on Mr. Obama’s non-interventionism, Mr. Putin invaded Crimea, days after Mr. Yanukovych fled. There is an argument to be made that his decision to annex Crimea was driven less by a desire to rewrite history and more as a strategic maneuver to ensure Russia’s Black Sea Fleet would not get evicted from its base in Sevastopol, as Ukraine drew closer to Europe.

However, regardless of his motivations, what is laughable is Mr. Putin’s claims that Crimea has always been a part of Russia, and that he was liberating its ethnic Russian population. Records in Russian government archives show that Crimea was transferred to Ukraine in 1954, under Stalin, and in 1991 Ukrainians voted overwhelmingly in favour of independence from the Soviet Union.

At the time Mr. Obama condemned the Russian aggression in Crimea but insisted that the country was a "regional power” and said that Mr. Putin’s actions were a sign of weakness, not strength. He said the US remained committed to defending NATO allies but non-members, like Ukraine, could only count on non-military pressure and sanctions to dissuade Russia from making further territorial encroachments.

Again, Obama rejected the recommendations of his national security advisors and overruled Congress when they tried to send lethal military aid to Ukraine. A senior Obama administration official said that they did not want to “provoke Russia”. 

Unlike after Putin’s invasion of Georgia, this time the international community did impose economic sanctions and target members of Putin’s inner circle. Vice-president Biden vowed the sanctions would leave Russia standing "naked before the world”.

There is no question that the sanctions that were imposed after Putin’s invasion of Crimea hurt Russia’s economy. However, it is hard to pinpoint the direct impact they had because Russia retaliated by issuing a ban on food imports from Western nations, which contributed to rising food prices and inflation at home. Also, a drop in oil prices that occurred around the same time, put downward pressure on the Rouble. The combined effect of sanctions and these events helped exacerbate underlying weaknesses in the Russian economy.

The more important thing that happened is that Mr. Putin took on the post-Crimea sanctions as a challenge and decided to enact measures that would make the Russian economy less reliant on the West and sanction-proof in the future. 

Russia grew its foreign currency reserves to $631 billion, the fourth largest in the world. They adopted a new fiscal policy, cutting expenses to enable greater financial stability and withstand future volatility. They created their own payment system, in the event the West blocked them from SWIFT. They invested in homegrown food production to become self-reliant and far less dependent on imports from the West. 

All these measures should have been a clear indication to the West that Mr. Putin’s territorial ambitions were far from satiated. Also, Mr. Putin believed he held the ultimate trump card - he supplied 40% of Europe’s energy and the Georgian and Crimean invasions had not deterred Europe’s thirst for Russian oil.

From Putin’s perspective, it was a victory. The post-Crimea sanctions caused pain, but they did not cripple Russia or leave her standing "naked before the world”. If we reviewed his tally sheet, we would see that he achieved his goals in Georgia, annexed Crimea without a shot being fired and occupied the Donbas with scant resistance and with no consequences from NATO or the US. In addition, his popularity soared back home with the majority of Russians supporting the annexation of Crimea.

On the heels of his annexation and illegal occupation of Crimea, confident the U.S. would again not intervene militarily, an emboldened Putin sent Russian troops to Syria in 2015. It was Russia's intervention that made the difference and helped turned the tide in favour of Assad’s regime. 

Obama’s non-intervention in Syria had given Mr. Putin an opportunity to get a foothold in the Middle East. This was something Russia had wanted since the end of the Cold War, and now they were able to do it while sidelining America.

The fact is that every post-Cold War US President has underestimated Mr. Putin and failed to understand his motivations. A fundamental miscalculation of successive administrations is that unlike in democracies, where we think in four or five year terms, autocrats play the long game and plan their moves over decades, not over election cycles.


In 2001, Bush famously said that he had looked in Putin’s eyes and had,“seen his soul” and found him to be “very straightforward and trustworthy”. Bush was partly right because in 2008, Putin told Bush in a straightforward way during a one-on-one meeting that Ukraine was not a real country, a comment the US President laughed off.

President Obama, like his predecessor, believed he could tame Mr. Putin and declared the infamous Russia ‘reset,’ after taking office in 2009. This foreign policy reboot was launched with much fanfare when Hillary Clinton presented Sergei Lavrov with a cartoonish “reset” button which misspelled the word in Russian. 

Mr. Obama scrapped plans to deploy a missile defense system in Poland and the Czech Republic. The administration claimed it was due to a reduced threat from Iran and technological challenges, but it was widely seen as a move to appease Mr. Putin in order to win Russian support for a vote in the UN Security Council. The vote would support tougher sanctions on Iran and bring them to the negotiating table for the deal Mr Obama sought.

Obama’s most memorable quip, reinforcing his naivety about Russia, came in the form of his response to Mitt Romney during the 2012 Presidential debate. After candidate Romney stated that Russia remained one of America’s greatest national security threats, Obama retorted, “The 1980s are now calling to ask for their foreign policy back because the Cold War's been over for 20 years”.

To understand Mr. Putin, we have to go back to the days before the fall of the Soviet Union. His worldview was formed during this time, while he was in the KGB. In 1989, when the Berlin Wall came down, he was stationed in Dresden, Germany. He witnessed first-hand how leaders and systems could be toppled when citizens grew too powerful. While Putin acknowledged that the Soviet Union had been in decline, he believed it was ailing due to paralysis of power and the frailty of political elites.

He wrote in his autobiography that after his office was surrounded by protestors threatening to storm the building, he called the Red Army’s German tank unit, stationed nearby, and asked them for protection. They said they could not do anything without orders from Moscow. They had reached out but no orders came. The words “Moscow is silent” are said to have haunted Putin his whole life, and shaped his worldview. 

Putin watched helplessly as everything he spent years building collapsed in the blink of an eye. First, East Germany disappeared when it was reintegrated into the West, and then the mighty Soviet Union disintegrated. In his mind, this was a direct result of the weakness of its current leadership.


Mr. Putin’s ambition has always been to rebuild the Russian Empire and unite all the people displaced after its collapse. He has publicly stated these aims many times. In a 2005 address to the Russian Duma, he said ”…the collapse of the Soviet Union was a major geopolitical disaster of the century. Tens of millions of our co-citizens and compatriots found themselves outside Russian territory.”

In a 2007 speech at the Munich Security Conference he started by asking the audience not to get angry, or turn on the red light because his remarks might seem “polemical, pointed or inexact”. Then he launched into a tirade about United States “unipolar” global domination after the Cold War and how America’s “Unilateral and frequently illegitimate actions have not resolved any problems” but created more conflict and human tragedy. 

Alluding to the US invasion of Iraq he said “We are seeing a greater and greater disdain for the basic principles of international law” and added that  “… the United States has overstepped its national borders in every way.” “This is visible in the economic, political, cultural and educational policies it imposes on other nations. Well, who likes this? Who is happy about this?”

He expressed concerns about NATO’s expansion, saying it had less to do with “modernization” or “ensuring security” and was a “serious provocation that reduces the level of mutual trust.” He spoke of a new world order that would upend the current one. 

He pointed to the fact that the combined GDP of India and China was greater than the U.S. and that the BRICs - Brazil, Russia, India and China - cumulative GDP surpassed that of the EU. He warned that the “economic potential” of these new centers of power would soon translate into political influence”.

Mr. Putin is convinced that the West actively works to undermine Russia, inflicting their woke, weak and morally bankrupt ideology to foment and finance colour revolutions across former Soviet republics. We saw this paranoia on display when Mr. Putin rapidly deployed “peacekeeping” troops as part of the Russia-led Collective Security Treaty Organisation (CSTO) to quell growing unrest in Kazakhstan last year.

In March 2014, Mr. Putin made a speech to both houses of parliament about the annexation of Crimea. He claimed, after holding an illegal referendum, that 96% of people had voted in favour of reuniting with Russia. In the same speech, he put the West on notice that Russia would be staking further territorial claims. 

Then in July, 2021 he laid out his mission in a 5,000 word essay entitled “On the Historical Unity of Russians and Ukrainians” in which he argued that Belarusians, Russians, and Ukrainians are all descendants from Ancient Rus. That they are still bound by a common language and faith. According to his version of history, Ukraine has never been a sovereign nation, except for a few times when it tried and failed to become an independent state.

He accused the West of using Ukraine to undermine Russia and made false claims about Zelensky’s government actively supporting “Neo-Nazi’s” and burning people alive in Odessa. He concluded that the sovereignty of Ukraine was only possible in partnership with Russia and declared “we are one people.”

Mr. Putin has never hidden his ambitions to restore Russian greatness which he is convinced was robbed by the West, making it hard to believe that he will stop at Ukraine, even though his invasion had not gone according to plan. 

He has made it amply clear that until every former Soviet republic is fully subservient or part of Russia, Russia's very existence is threatened. Along the way he seeks to diminish US influence in Europe, degrade NATO and form a new anti-US global alliance.

There is no question that Mr. Putin’s and his generals badly miscalculated the Ukrainian invasion on every front. They underestimated the level of resistance from a disciplined and well-trained Ukrainian army, while overestimating the capability of their own forces. The biggest surprise , which nobody saw coming, was President Zelensky’s Churchillian rise and his ability to rally not just his fellow countrywomen, but the U.S. and Europe. 

With Putin’s invasion of Ukraine not going according to plan, some observers believe it might dissuade him from achieving his goals and lead him to look for an off-ramp. I disagree. 

Despite the Russian army’s battlefield humiliation, Mr. Putin remains in a strong position to finance his war because the Russian economy, while it did wobble, is far from hobbled. In fact, it weathered the sanction storm better than anyone predicted. 

Russian economic output contracted a mere 2.1% in 2022, surprising some economists who had expected a catastrophic meltdown. Meanwhile, the war has damaged billions of dollars of infrastructure and caused the Ukrainian economy to shrink by more than 30% in 2022.

An independent poll taken immediately after the invasion found that 58% of Russians approved of Putin’s military action, while 23% opposed it. Most people expected support to drop as the average Russian began to feel the day-to-day pain of Western sanctions and losses on the battlefield mounted, but the opposite has transpired with support for the war hardening and less than one fifth of Russians now opposing it. 

But Russian support must be taken with a bag of salt because Mr. Putin has unleashed a wave of repression with new laws that punish people who spread misinformation. Sharing “false information" includes using the word ‘war’, for which people can face up to 15 years in prison. 

Public works deemed critical of the war have resulted in exhibits being torn down and replaced with state propaganda. Actors, writers and artists have been hounded and forced out of jobs. Curricula in schools and universities have been changed, and students are being taught to report teachers who talk of peace, and Russians are encouraged to snitch on anyone who opposes the war.

A single father was recently sentenced to three years in prison for social media posts that came to light after his daughter made a drawing for a school project with the words “No to War” under the picture. The thirteen year old girl has been placed in a state orphanage, after her father fled arrest.

In addition, the Russian government is doling out cash payments in the country’s most impoverished regions to buy public support, and brainwashing the population. Every media outlet that countered the false state narrative has been shut down and replaced by propaganda that paints the war as “far away,” while highlighting Mr. Putin’s “economic successes, new welfare benefits and renovated clinics”.

It is true that Mr. Putin believed that European support for Ukraine would crumble fast because of their reliance on Russian energy. However, while Europe has managed to miraculously cut their reliance on Russian gas by almost half, India and China have massively increased their oil purchases, which has eased part of the hole it might have caused in Mr. Putin’s coffers, and thus his ability to continue financing his war.

To further hurt Mr. Putin’s ability to finance his war, last December the EU added a ban on sea borne Russian oil into the Europe, and prohibited European insurance and shipping services from transporting it anywhere in the world. At the same time G7 nations put a price cap on Russian oil of $60 per barrel, hoping it would deliver the fatal blow to Russia’s war chest.


Earlier this year, research by Columbia University found that the ban and price cap have not had the intended effect on the flow of Russian oil, and that Russia has been commanding prices ranging from $74 - $82 per barrel from China, India and other countries. A New York Times investigation used publicly available shipping data to track the movement of some of these shadow oil tankers. However, more recently there is new evidence that the price cap is starting to work and oil revenues have declined substantially, but it is still not to anywhere near a level that would bankrupt Russia, or prevent Mr. Putin from continuing to fund his war.

So, Mr. Putin has no reason either to acquiesce to peace talks or to agree to terms that would amount to a humiliating loss of pride and his political clout. For Mr. Putin to admit he wants an off-ramp, one that would result in a territorial retreat, would be a fate worse than death. For the time being we are at an impasse, with neither side willing to negotiate anything short of complete victory.

Prior to the war the NATO alliance looked fragile and fractured, with President Macron publicly declaring it “brain-dead”. NATO’s weakness is something Mr. Putin likely factored into his calculations, but unfortunately for him Russia’s invasion had the opposite effect, not only jolting NATO back to life but also bolstering European unity. 

Mr. Putin has claimed that his invasion of Ukraine was partly intended to stop NATO expansion by sending a message to other countries that border Russia not to join NATO. This too has not worked out for Mr. Putin, as the previously neutral nordic countries of Sweden and Finland overwhelmingly voted in favor of joining NATO.

Europe also got lucky with an unusually warm winter, which helped avert an energy crisis. Also, they were helped with the US boosting natural gas deliveries and brokering deals with countries like Qatar to fill the gaps. However, these are not long-term solutions and the jury is still out on whether Europe can survive a harsh winter next year.

So, where do we go from here?

Mr. Putin has made it clear that he is digging in for a long, drawn out war of attrition. This is a man who has no respect for life, so he will keep throwing ill-equipped, poorly trained Russian troops as cannon fodder onto the battlefield. While the Ukrainians have shown tremendous courage, resolve and tactical military superiority, they are reliant on the US and NATO for aid, equipment, munitions and weapons. 

To break the stalemate on the battlefield, President Zelensky is pushing for delivery of heavy weaponry like armored vehicles, tanks and fighter jets, and has grown increasingly frustrated at the pace at which they are being supplied. It was this request for heavy weapons which showed the first cracks in the Western alliance. 

Germany pushed back on sending tanks and only reluctantly agreed to send them after US prodding. Germany is also dragging its feet on doubling its defense budget, something Chancellor Schultz had publicly announced he would do three days after Russia invaded.

There are other cracks within the NATO alliance too. Hungary continues to play both sides because it is reliant on Russia for its energy needs. They even secured an exemption on the EU oil ban, along with the Czech Republic and Slovakia. 

Turkey has refused to impose sanctions while significantly increasing trade with Russia, and continues to buy lots of oil. Both President Erdogan and Hungary spent months dragging their feet on approving Finland’s accession to NATO and continue to block approval for Sweden’s. 

While the US remains a staunch ally, President Biden now has to contend with a less Ukraine-friendly Republican Congress. If a Republican were to win the White House in the next election, Ukraine would most likely lose their blank cheque and without US support, they would not be able to stand up to Russia for long.

So it is in Mr. Putin’s interest to drag out this war. The longer it goes, the better the cards he will hold and President Zelensky knows that time is not on his side. He is acutely aware that only a decisive Ukrainian victory on the battlefield, sooner rather than later, will shift the calculus decisively in their favour, and force Russia to the negotiating table.

Read next installment in series:

PART III: China Awakens Under Xi Jinping