“If Russia fails, all bets are off for the 21st century. And if Russia succeeds as a nation-state in the family of nations, it will owe much of that success to one man, Vladimir Vladimirovich Putin.” – Time magazine, “Putin Man of the Year” in 2007
Admire him or despise him, Russia’s president has put his stamp on 2022. By invading Ukraine and challenging the West, Vladimir Putin changed the world’s political and economic landscape. He set the table for a post-American, multipolar world. Future historians will speak of the pre- and post-2022 worlds.
Putin, whose grandfather cooked for Josef Stalin, succeeded the tragicomical Boris Yeltsin as president in 1999. He is said to have prevented the disintegration of the Russian Federation. This year he dealt a fatal blow to NATO expansion into the heart of the Eurasian continent. Whether by design or coincidentally, he also put a bomb under the global dollar system.
Western governments frame this epic proxy war with Russia as a battle between democracy and authoritarianism. From a limited Western perspective, this is an obvious and marketable narrative, but much of the non-Western world doesn’t buy it. Most countries in the East and the Gobal South see the conflict in Ukraine as a battle between globalism and sovereignty.
Globalization under Western rules is said to have caused a decline in the power of national governments to direct and influence their economies, especially in terms of macroeconomic management. It also led to a decline in the ability of countries to determine their own political structures. The Ukraine war made countries in the European Union belatedly realize that the European Commission sets the EU’s foreign policy.
The non-Western world has reasons to be skeptical about the motives behind proclaimed Western ideals of freedom and democracy.
After the Warsaw Pact dissolved, the North Atlantic Treaty Organization, rather than following suit, was transformed into what is in effect the enforcement arm of globalism and its backbone: the (petro) dollar system, SWIFT, the International Monetary Fund, the World Bank, Wall Street, and the City of London.
NATO’s operational theater has now expanded far from its Atlantic roots. It is now active in Africa, the Middle East, and Central Asia.
No Plan B
After Russian tanks rolled into Ukraine, the West confiscated billions of dollars in Russian reserves and unilaterally expelled the country from the global dollar payment system, the Society for Worldwide Interbank Financial Telecommunication (SWIFT). No court was involved. The West also confiscated private property and yachts from anyone who carried a Russian passport.
The plan of the US and its EU Atlanticist allies was simple enough: Let Ukraine fight a proxy war against Russia until the Russian economy collapses or Putin is replaced in a Kremlin putsch. The plan was apparently not gamed out with a rigorous “what if” test, which may explain why there was no Plan B.
What if the resilience of the Russian economy and its war machine was underestimated? What if Russia cut off all or part of its energy exports? Russia is one of the world’s leading exporters of commodities. Where would the EU get its energy? What if China, India and Saudi Arabia didn’t sign on to the plan?
The miscalculation had catastrophic consequences. At the start of the war, Ukraine’s army was the second-largest in Europe. Ukraine has spent the past eight years heavily fortifying the Donbas region using NATO standards. Military commentators compared it to a modern version of the World War I Maginot Line.
Six months into the war, Ukraine is on course to lose a third of its territory. It has suffered well over 100,000 dead or wounded, a number that exceeds the total manpower of the British Army. Russia is said to have suffered 15,000 casualties. This alone will assure the Russians will extract a heavy price from Ukraine – and the West.
Realism catches up with idealism
Russia has also prevailed on the economic front. It raked in billions of dollars in additional income from rising fuel prices. Oil banned by the EU found eager buyers in Asia and elsewhere. The ruble nearly doubled in value, while the euro tanked. In March of this year, a euro was worth 145 rubles. In August, it had dropped to 58 rubles. The ruble has been the best-performing currency in 2022.
The damage from the self-harming sanctions against Russia is growing by the day. Germany’s captains of industry have warned that their country, without cheap Russian energy, may see the disintegration of its business model. In August, British gross national product saw its biggest decline in 300 years. Economists predict an inflation rate of 18% for the UK later this year.
In the early days of the war, EU leaders projected the resolve of wartime leaders, defiantly proclaiming they were defending democratic values and freedom. If sanctions cause economic hardship, so be it. The media, on the left and the right as well as state-owned, displayed a rare unanimity in depicting Putin as the new Rasputin.
When economic reality sunk in, the EU leadership acted like deer caught in the headlights. One day Brussels sanctioned Russian oil, the next day it accused Russia of “blackmail” for reducing gas deliveries. While it was sending weapons to Ukraine to kill Russian soldiers, it protested that Russia was “weaponizing” its oil.
For Europe’s young and inexperienced political elite, needling Russia and letting new states into NATO was all part of the (political) game. But getting into a full-blown fight with Russia was not. EU leaders, many of whom were toddlers during the Cold War, found themselves dealing with the biggest economic, financial, and geopolitical realignment since World War II.
Back to gold
As it becomes apparent that the war on Russia has had many unintended consequences, the first cracks are appearing in the united Western front. “No matter who wins Ukraine, America has already lost,” headlined the influential American magazine The National Interest last weekend. It pointed at the new alliance between Russia and China, respectively the world’s largest commodities exporter and the world’s largest industrial producer.
Rather than isolating Russia, the West has isolated itself from the majority of countries that make up 80% of the global population. Russia has taken the lead in developing an Asia-centric currency as an alternative to the global dollar system.
A shake-up of the dollar system was inevitable in the long run (global dollar-denominated debt is about $300 trillion and impossible to unwind without a major financial reset), but the expulsion of Russia from the dollar system has forced the issue.
The rival to the dollar will likely be digital only and backed by gold and commodities. Countries likely to participate are the resource-rich BRICS countries (Brazil, Russia, India, China and South Africa), the eight members of the Shanghai Cooperation Organization, as well as Saudi Arabia, Iran and Nigeria.
If the rise of the ruble is any indication, the new currency will lead to a steep increase in the prices of oil, gold, and other commodities in both euro and dollar terms.
The EU and even the US will come to regret the day that a handful of Western ideologically driven politicians took it upon themselves to torpedo the Minsk Accords. A neutral Ukraine could have led to the further development of a contiguous Eurasian economic zone.
Given its geography and abundant resources, Ukraine would have been a natural hub in China’s Belt and Road Initiative. When the dust settles over Kiev, the BRI will gradually get back on track and will include what is left of Ukraine.
And rather than being neutral, Ukraine’s security will depend on Russia rather than NATO.