By Kim Iskyan
Russian troops massing at the Ukraine border ratchets up the possibility of war...
But will Russian President Vladimir Putin invade his neighbor and former fellow Soviet state, again?
The analysts say no...
- "A Russian invasion of Ukraine could be Vladimir Putin's downfall," warned thinktank Atlantic Council last month.
- "Russia unlikely to invade Ukraine despite ratcheting tensions," opined the Moscow Times in November.
- And geopolitical analysis company GZERO Media explained... "Is Putin going to invade Ukraine... again? In a word: No... The costs of an invasion, both human and material, almost certainly outweigh any conceivable benefits."
But when everyone says, "it won't happen," that means there's a greater-than-zero probability of "it will happen."
That probability is the risk – and opportunity – investors should focus on.
Earlier this week, Russia sat down with NATO to discuss whether the Western military alliance will expand to include Ukraine. The talks ended with an agreement to... talk more later.
And what lurks beneath the surface is something a whole lot bigger.
"Vladimir Putin wants Joe Biden and NATO leaders to redraw the security map of Europe by promising that Ukraine, Georgia, and other Russian neighbors will never join NATO... [to] in effect, redivide Europe into Western and Russian spheres of influence," explains GZERO.
Here are five reasons why the conventional-wisdom calculus of western analysts, investors, and armchair military strategists that Russia will stay out of Ukraine could be terribly wrong...
1. Ukraine matters far more to Russia than to anyone else.
When Russian troops marched into Ukraine and annexed Crimea in 2014, the rest of the world responded with crickets.
If you squint, Ukraine is a bit to Russia what Cuba was to the U.S. in the early 1960s... Much like the U.S. government wouldn't easily allow Cuba to "go red," Russia is projecting the notion that it won't let Ukraine "go West."
Ukraine is a red-line issue for Russia... and a "nice but not necessary" concern for the U.S. and NATO. With everything else that's happening in the world, the U.S. and Europe have limited bandwidth for a poor country that has the lousy luck of being in a geographic buffer zone.
And what about economic sanctions? Last time around, sanctions imposed by the U.S. and Europe made it more difficult for a handful of extraordinarily rich Russian oligarchs to vacation in the Maldives... but not much else. And in recent years the Russian economy has done a good job in reducing its reliance on imported goods (made-in-Moscow mozzarella, anyone?) – so it doesn't affect normal Russians much, either.
2. Demographics and the economy demand: There's no time like the present.
Russia's disastrous demographic outlook has improved somewhat in the past two decades. Average life expectancy has improved to 73 years, an increase of eight years... though still short of the 79-year expectancy in the U.S.
But by one study's count, Russia's population will drop by 50% within the next 80 years... Though that's beyond anyone's political time horizons, it does emphasize the dire reality that eventually the nation will need to make a move.
Forecasts of the collapse of the Russian economy due to its overreliance on hydrocarbons have proven incorrect for the past few decades. But the time will come when the backbone of the country's economy – oil, gas, and other commodities – will no longer be able to keep it all afloat.
3. It's a way for Russia to stay in the conversation.
Thirty-one years ago, the USSR was formally dissolved with the signing of the Belovezh Accords. The Cold War was over, and the U.S. had won.
Since then, Russia – and Vladimir Putin – has struggled to remain relevant.
Russia has watched its old sphere of influence shrink... as Central and Eastern Europe, along with the Baltics, have joined NATO and the EU. The country's economy is half the size of the economy of California. By population, Russia is smaller than Pakistan and Nigeria.
With the world's largest nuclear arsenal – and also because it's the world's biggest country by land mass – Russia can't be entirely ignored. But Putin wants more than that. And the longer Russia stays in the headlines, the better for Putin: He's on the stage, exactly where he wants to be.
4. Russia has Europe between a rock and a hard place.
And then there's the not-small issue of energy: Europe gets around 35% of its natural gas from Russia (the world's second-biggest producer) – which accounts for around a quarter of all European electricity generation. What further complicates matters though is that a significant portion of that gas flows through – you guessed it – Ukraine.
Europe's dependence on Russian energy is a heavy Damoclean sword perched above Europe. Russia needs the revenue from the sale of its natural gas – though probably not quite as badly as Europe needs natural gas to keep the lights and heat on. It's clear who has the leverage in this equation. The threat of Russia turning off the taps looms in the background... and Europe knows that Putin could use it.
5. Nothing like a war to boost your popularity.
The 2014 invasion of Crimea was a shot of adrenaline to Putin's flagging domestic popularity... around the same level where it is today. Though he has no real opposition – they're dead, exiled, or in jail – Putin is well aware that a so-called "color revolution" is one protest-that-gets-out-of-hand away (as what's recently happened in Kazakhstan so clearly shows).
The "rally 'round the flag" effect is real: War, even an unnecessary and self-imposed one, tends to bring a country together. It bolsters the support of the head of the country... And, what's more, it abets the conflation "I don't like the leader" with "I don't like the country," a thin line for any protestor or opposition leader to tread.
Will Russia invade Ukraine? Don't count it out.
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