Pozor Rossii (Russian Shame)

In recent weeks, we have seen an escalation of events which ultimately led to the invasion of the Russian troops of Ukraine. Despite the ruthless repression of internal dissent, already after the first hours of the Russian aggression a woman seems to have gone to the Red Square in Moscow and showed a sign with the words "The war with Ukraine is a shame for Russia", Pozor Rossii, in Russian. A shame that, also as a result of the images of the suffering of local populations, is taking on epochal dimensions day by day.

The complexity of the geopolitical scenario and the possible implications on the global economy, however, make the crisis not limited to Ukraine and Russia alone, but has profound international implications, making it difficult to predict future scenarios in a context in which volatility and uncertainty the dominant factors remain.

The game that President Putin had played until the day before, in fact, although extremely cynical and aggressive, had remained within the limits of the dialectic. This had basically led Putin to divide Europe, as always hesitant when it comes to taking an international position, he had dealt a further blow to NATO's credibility, recently declared by Macron in a state of brain death, had allowed that Biden's image, already in considerable difficulty in his homeland, was further deteriorated by the continuous announcements of invasion (with a wealth of details, dates and times) punctually denied by the continuation of the diplomatic skirmish, he had reduced Macron to a sort of waiter who shuttled between the master and the undecided servants.

If he had stopped the military occupation of the geographical area disputed by the two self-proclaimed independence republics of Donbas, effectively consolidating a situation that has been present for eight years on the ground, without firing a single shot he would have achieved a substantial victory and the achievement of the declared objectives.

In a sporting comparison, Putin at that moment was the center forward who was alone in front of an empty goal. It would have been enough to put the ball on the net to achieve success, which would inevitably also be reflected on the home front. Instead Putin wanted to score a powerful goal (invasion of Ukraine) and kicked… on the crossbar, attracting the arrows of much of the world, including Russia, and obtained geopolitical results contrary to what he foresaw.

The overcoming of the dividing line between the contenders and the beginning of the invasion of Ukraine have, in fact, immediately reunited Europe, revitalized a NATO in crisis (also bringing the quarrelsome Turkish ally closer), restored light to the faded figure of Biden , which has regained a lot of internal consensus) and regained Macron's mediating role. Perfect action opposed to King Midas.

A variant of the situation that took all observers by surprise, including myself. The attack on Ukraine also took the markets by surprise, normally very attentive to the various signs of destabilization, leading to the fall of the stock markets, the collapse of the ruble and a sharp rise in the prices of raw materials, especially oil and natural gas. News that was not really felt the need.

We will never know if a timely conversion to neutrality by Kiev would have really dissuaded Moscow from implementing the invasion plan. What we can do today is try to understand what effects this tragedy that has taken place in Europe will have.

The geopolitical framework

The approval of the UN General Assembly resolution of 3 March broke a deafening silence of the UN, immobilized by an obsolete organization and the possibility of veto, given that one of the five permanent representatives of the Security Council is involved ( sic!). Note, however, that as far as you can remember the participation of 160 countries in an extraordinary meeting is already an extraordinary event in itself. Furthermore, the approval of the resolution with such a large majority of the participants speaks volumes about the blame that the Russian action has generated in the world. But, beyond what was written in the condemnation of the aggression, the meeting of March 3 gave interesting indications about the possible post-war world geopolitical structure and underlined the hard core of the opposing sides.

In fact, only Syria, Belarus, Eritrea and North Korea have openly sided with Russia (which voted against the UN resolution). Among the 35 countries abstained, India, Pakistan, China and almost all the countries of Central Asia stand out. This should not suggest that the abstentions have somehow supported Putin. Abstention has, in fact, the meaning of demonstrating one's indirect support on the matter. It is with this interpretation that the votes in the classroom must be interpreted. Just think of the United States and Israel which, after 50 years of voting against the lifting of the embargo against Cuba, abstained on 2016 November XNUMX and allowed the UN to lift the measure. An abstention that was accompanied by applause from the General Assembly.

As regards the three populous countries that abstained, India has always had economic relations with Russia also in terms of military supplies. A very delicate sector, given the geopolitical and military opposition of New Delhi with Beijing, a cumbersome and important neighbor competitors in the Asian continent and in the Indo-Pacific theater. Pakistan is another country equipped with nuclear weapons, also with commercial relations in the military sector with Russia, and which lately has come very close to China mainly in an anti-Indian key, historical rival, providing among other important ports for Chinese ships.

For its part, China seems to hide with difficulty a certain opposition to Putin's moves against a Ukraine with which Beijing had good trade deals, but a certain commonality of objectives with Russia, not least the dislike for the USA. so far they have suggested to the Asian giant not to enter directly into the game, not even as a mediator. On the other hand, as pointed out by other observers, the turmoil that Putin has raised in Europe, in some way plays Xi Jinping's game. Washington's renewed focus on a Europe from which the US was gradually moving away, as a result of a questionable policy initiated by Obama, brings with it a parallel easing of its commitment to the Indo-Pacific, where Beijing continues to nurture ambitions of maritime hegemony and the reconquest of Taiwan, which has always been claimed as a territory belonging to the People's Republic of China. A relaxation that, in order to continue to monitor China's moves and contain its ambitions, requires greater commitment on the part of the other participants in the Quadrilateral Security Dialogue (QUAD), an informal strategic regional security alliance made up of the US, Australia, Japan and India.

Although, given the recent success of the General Assembly, the United Nations has called a meeting of the Security Council for Monday 7 March, the UN has once again manifested its inability to be able to carry out the assigned mission of maintaining the security. world peace and security, development of international cooperation and friendly relations between nations. In essence, to be an effective arena for the peaceful settlement of disputes. Therefore, a profound reform is urgently needed to make it possible to better manage crises and international cooperation, starting with the Security Council, as Italy has been clamoring for some time. Without this, the UN will essentially remain a useless booth imprisoned in its sterile bureaucracy.

Above the background noises remain the main figures of the national leadership, who have not been able to correctly read the current historical phase. Perhaps too intent on dealing with their own internal affairs, perhaps excessively busy seeking the striking political victory, they have not treasured the teachings of history, often built on the blood of the victims. Yet a reasonable path had already been indicated in 2014, at the time of the Russian occupation of Crimea. In an editorial in the Washington Post on March 5, a (mentally) XNUMX-year-old young man Henry Kissinger wondered if the international community knew where he was going, and suggested that Ukraine become a bridge between East and West, giving up participating in the opposition. between the two sides. Only in this way could it survive and thrive. In the same piece, the diplomat suggested that Russia refrain from wanting Kiev to become a satellite of Moscow and avoid making the same mistakes as in the past. There was also no lack of solicitations for the European Union, invited to be less delaying in international issues and not to subordinate strategic issues to internal issues, which normally allowed a negotiation to turn into a crisis.

The economic implications

It had been in the air for a few days. Yet, when Vladimir Putin, president of the Russian Federation, invaded Ukraine on the morning of February 24, the stock exchanges suffered total losses of approximately 331 billion euros in capitalization. In Piazza Affari, the Ftse Mib fell below the 25.000 points mark. The next day, Friday 25 February, everything already appeared significantly different, and Milan closed the session with a + 3,59% and Wall Street showed a positive sign on all the main indices, from the Dow Jones to the Nasdaq. The recovery eliminated the losses of the day before. But the tensions, as the opening of the markets on Monday 28 February showed, remained strong, so much so that on March 1 Piazza Affari still showed the minus sign. In particular, the sectors most linked to supply of raw materials, oil and gas, with the obvious consequences on GDP and inflation and the repercussions on citizens' savings.

However, even though diplomacy has failed to prevent Russian troops from entering Ukraine, the whole world has taken steps to try to limit its devastating effects. Western countries have approved a series of restrictive economic measures against Moscow, which have intensified with each passing day, up to the decision of the selective exclusion of Russia from international payment systems (SWIFT) and the blocking of assets held by the Russian Central Bank. The response from Moscow was not long in coming, and Putin blatantly announced the decision to put the country's nuclear arsenal in a state of early warning. A more propaganda than actual measure.

The situation is constantly evolving and, as already happened at the time of the onset of the pandemic, each variant can change in one way or another the impact of the conflict on global economic and financial scenarios.

It must be considered that the crisis in Ukraine came at a time of market decline since the beginning of the year, following the inflationary tensions and the consequent decisions of the monetary authorities to raise interest rates. In this context, it is reasonable to expect a period of high volatility of the stock market indices which could be overcome even quickly, as has already happened in other downturns, where the crisis is resolved in a reasonably short time and the system of sanctions imposed on Russia and the strong rising commodity prices do not jeopardize global economic growth. If this does not happen, the tensions on the energy markets will lengthen the path of inflation easing.

Precisely in relation to the energy aspects, the leaders of Italy, Germany and France reassured their compatriots about their respective availability and, as regards Italy, the Prime Minister Draghi, during his speech in the Senate on March 1, he reassured the country's energy stability. The three presidents also stated that, in the future, more decisive action will be taken than previously in the direction of greater use of renewable energies or nuclear power (France only). Three interventions were expected from the markets, as a shortage in supplies could directly affect the profitability of many companies, particularly in Italy, even if, on this aspect, the repercussions deriving from the increase in the costs of energy sources or packages must also be considered. supply chain bottlenecks, should the sanctions imposed by Western countries and the United States completely isolate Putin economically and financially, or vice versa, Russia decides to interrupt supplies.

Even if the issue appears to be under control in the immediate future, the uncertainty remains about the economic fallout of the conflict in the medium to long term. An apprehension shared by the main Western economies, especially due to the fact that Russia is the main supplier of gas, especially for our country. According to Infodata of Il Sole 24 Ore, in fact, Italy imports 46% of its gas from Russia, which we use to produce about 22,3% of its electricity.

Moreover, Russia is also one of the most important producers of oil in the world and metals which are widely used in industry such as aluminum, nickel and palladium arrive from Moscow, while corn and wheat are imported from Kiev. A shortage in the supply of these fundamental products could directly affect the profitability of many Italian companies and also the food supply chain, with all the obvious consequences.

Then there is also the importance of commercial exchanges to consider. As far as Italy is concerned, according to sources from the Ministry of Foreign Affairs, an overall turnover can be estimated at around 20 billion euros. And someone wondered what could happen to our GDP.

Finally, the increase in energy prices could trigger a new flare-up in inflation and a reduction in GDP. Nonetheless, the main economic indicators remain stable at the moment, giving hope for the longer-term situation. Previous events, in fact, teach us that although the first reaction was characterized by inevitable negative effects, in the following days the markets tend to recover.

This is not the first time this has happened. The same thing happened in 2014, at the time of the Crimean War. Even in that circumstance, the Russian invasion, which led to a tightening of economic sanctions by the United States, significantly increased the price of oil, which reached its peak precisely in conjunction with the attack. But there was no long-term effect on the principals assets financials, and the volatility was soon reabsorbed. Going even further back in time, the same situation also occurred during the invasion of Kuwait in 1991 and the beginning of the conflict in Iraq in 2003, when the markets suffered only temporary effects.

Conclusions

Now the Russian president has slipped into a Cul-de-sac from which he sees internal dissent growing, with decisive stances also on the part of people close to his "magic circle" or in any case linked to him by economic interests and able to direct public opinion. An internal situation that was immediately clear to attentive observers, given that alongside the images of the repression of dissenters, there is a complete lack of images of demonstrations in support of the work of the government, almost always organized by dictatorial regimes to emphasize the "voluntary and convinced" support of the population. A situation that, from a political point of view, does not promise anything good, unless Putin returns to listen to those who, among his closest collaborators, prove to be more dove than hawk. Like Foreign Minister Lavrov, who during the pre-crisis phase gave the impression of wanting to avoid the irreparable. However, given Putin's propensity to (literally) eliminate dissent, Lavrov also recently assumed rapacious behavior concretized, according to what was reported by the national media, in a formal letter received through the Russian Ambassador in Rome, with which with decisive tones the Russian minister is not very diplomatic and threatens the citizens and structures of the EU involved in the supply of weapons to the Ukrainian Armed Forces about any consequences of such actions. A manifestation of arrogance, as pointed out by the Minister of Defense Guerini, which denotes how "... we are in the presence of a situation that also from this point of view risks being explosive in the ability to control it ..."ⁱ.

However, alongside the proclamations of fire, there is no lack of gestures that suggest a still possible de-escalation. It is as if Moscow (or a part of it) is sending signals. Starting from the choice of the area where to conduct the meetings, which was the prerogative of Russia. The Brest area, in fact, was the scene of some crucial moments in Russian history, such as the signing of the armistice that put an end to Russia's participation in the First World War (March 3, 1918). Also this area, on 8 December 1991, saw the peaceful end of the USSR, with the signing of the independence act of Russia (Boris Yeltsin), Ukraine (Leonid Kravčuk) and Belarus (Stanislau Shuškevič).

Putin's latest interventions also seem relatively less aggressive. A sign that the numerous authoritative calls for a ceasefire (but also a price for his arrestⁱⁱ) are making him understand that he will not go down in history as the benefactor of Mother Russia?

In any case, whatever is going through the mind of the strongman (but how much by now?) Of the Kremlin, the international community wonders what scenarios it is objectively possible to hypothesize, in an extremely fluid situation like the current one? Distressing uncertainties that generate complex questions, just as complex is the general situation. In fact, every geopolitical forecast is based on the evaluation of the information known at the moment. Otherwise it would be like reading a glass ball. Pure dialectical fantasy.

The worst possible scenario is the widening of the conflict, with the involvement of NATO countries. This is an apocalyptic scenario, since the nuclear potential of the contenders would be such as to ensure not only mutual destruction, but also the end of mankind. However, it should be remembered that NATO is a defensive military-political alliance and its military intervention is envisaged if the conditions provided for by art. 5 of the Treaty. At the moment, a Russian aggression against a NATO country seems quite unthinkable.

Given Putin's stubbornness to go ahead until the set goals are achieved and the (understandable) stubbornness of the Ukrainian resistance, a military victory of Russia it goes through a bloodbath on both sides and the substantial destruction of key infrastructure and the Ukrainian state organization. In this case, Moscow, not having the strength to effectively garrison that vast territory, would "be content" with placing a puppet for the presidency and would withdraw behind a line to be established. West of the Dnieper River, it would halve the area to be controlled by its army, aided by a natural border and the support of the Russian-speaking armed groups of the Donbas. Further west, on the geographical borders of Donbas, it could instead ensure greater control of the area, but would give up territorial continuity towards the Crimea and the important commercial port of Mariupol. However, the motivations for military operations would remain to be explained to the Russians far beyond a line that was known not to be maintained. Without a state organization and with a president disinterested in looking after its interests, the downsized Ukraine could, however, turn into a paradise for criminals and terrorist organizations which, with the excuse of fighting the Russian occupation, could take control of that territory, with possible future repercussions on the safety of the area, and beyond. It would not be a question of finlandisation but the iraqisation of Ukraine.

Given the disparity of forces in the field, one military victory of Ukraine appears quite remote in the short term. Kiev continues to fight, trusting in the limited Russian autonomy, also due to the economic sanctions inflicted by the international community. Already today numerous testimonies give the idea, for example, of a Russian logistics chain less than reliable, with vehicles abandoned due to lack of fuel and soldiers wandering hungry. However, the continuation of the conflict until the eventual exhaustion of the Russian forces could still require months and months of hard fighting, related human losses and enormous destruction. But Ukraine trusts above all in the effectiveness of its tactics to oppose the aggressor which, in the long run, with the predictable dripping of Russian lives, could cause significant sustainability problems for the Russian public (and her regime). The result would still be an area where it would take a very long time to rebuild the presence of a state, with all the foreseeable economic implications and consequences of public order.

Another conceivable scenario is the dismissal of President Putin, through a forceful action led by dissenters and supported by the population. This, after the inevitable initial setbacks, could lead to the immediate cessation of hostilities, although on both sides the deaths on the ground could represent a heavy burden and a considerable obstacle to a rapid definition of any subsequent peace agreements.

Un happy (and quick) outcome of the negotiations in progress appears to be the only reasonable solution capable of putting an end to the clashes without completely unbalancing the Ukrainian state structures and, probably, would allow Putin to save himself (politically speaking), at least for the time necessary to be able to organize some safe place to enjoy retirement. The negotiation, however, will certainly not end in one day. A reasonable working hypothesis could be represented by the definition of a neutral state that would distance NATO from the Russian geographical border, accepting the most heartfelt requests of Moscow. Practically, welcome Kissinger's aforementioned 2014 suggestion. However, there are many variables that can still affect the success of the negotiations for an exit from the crisis, including the stubbornness of the participants and the related excessive demands. When it comes to it, it is normal to start with requests that aim high but, along the way, everyone has to give something up to get to their destination. We cannot ignore this principle.

In these moments it is particularly important to act with caution, avoiding being carried away by emotions and keeping in mind the geopolitical framework of reference.

Beyond the reasons that led to this tragedy, a matter for future historians and (perhaps) for judges, it must be strongly reiterated that armed aggression does not represent a civil response for the settlement of disputes.

One thing is certain: nothing will be the same as before. Ukrainians and Russians will hardly accept to still imagine themselves as brother peoples. If the solution to the problem fails to pass through a decisive awareness of the Russian population, even when Moscow is readmitted to the international market (raw materials and energy are needed anyway), the Russians will be indicated as pariahs by a large part of the world and at least two generations will have to pass before Moscow can once again become a relatively reliable interlocutor for the international community. It will take decades to make the memory of the betrayal, the furious fights, the young lives torn, the bombings, the destruction, the suffering caused by what will be transcribed in the history books as the Pozor Rossii.