March 28, 2014
It may have slipped the memory of United States President Barack Obama, Canadian Prime Minister Stephen Harper, and the 28 European Union leaders, but 15 years ago it was decided that the G-8 club of the world’s leading economies was too elite a cabal to be of much practical use.
So, with Canada’s then-Finance Minister Paul Martin leading the charge, the G-20 was formed in 1999. The G-20 includes the G-8 countries – the United States, Italy, France, Germany, the United Kingdom, Japan, Canada and Russia – but also includes the major developing economies such as Brazil, China, India, Indonesia, South Africa, and Mexico as well as smaller industrialized countries like Australia.
Russian President Vladimir Putin, then, may well feel unperturbed about being expelled from a club everyone agrees has little utility and which often seems ridiculous. It is difficult to take seriously pretensions to world leadership from a group which included that priapic buffoon, Italy’s former Prime Minister Silvio Berlusconi, whose country has had to be put under adult supervision, and President Francois Hollande, whose equally active philandering around night-time Paris has given modern embellishment to the theatrical genre of the French farce.
Putin might even feel relieved he no longer has to spend time in the exclusive company of such people. And, anyway, there is no chance that Obama and company could get a majority of votes to expel Putin from the more significant G-20.
Also, if Putin needs to talk to Europe, there’s only one person who matters; German Chancellor Angela Merkel. It is German politics and the German economy that is keeping the whole EU project alive these days, and Merkel and Putin have a special relationship.
It is deeply ironic in the context of the history of the last century or so, but both Putin and Merkel cut their teeth in the old East Germany; Merkel because she spent her childhood there and Putin because that’s where his career as a KGB officer took off. Both speak German and Russian.
It is Merkel who will decide what serious sanctions, if any, Putin faces for easing the Crimea away from Ukraine, and back into the arms of Mother Russia.
As she made clear on Thursday as Harper stood by her side waxing lyrical about the G-8’s embargoes, she is not at all keen on economic sanctions against Moscow.
The reason is simple. German-Russian trade last year totalled about $100 billion and Germany depends on Russia for more than a third of its natural gas supplies. The equation is simple. Russia powers Germany and Germany powers Europe.
It’s a reasonable speculation that Crimea’s shift of sovereignty will not be undone any time soon. Putin has played this game before, and he is very adept at presenting as small a target as possible.
Russia’s 2008 invasion of Georgia to block Tbilisi’s attempt to regain control of the renegade territories of South Ossetia and Abkhazia is a template for the Crimea takeover. Despite Georgia’s incipient membership of the North Atlantic Treaty Organization, the West did nothing and those two territories are now, in effect, Russian possessions.
The Crimea peninsular has a majority Russian population and was part of Russia until 1954 when, for administrative reasons, then leader of the Soviet Union, Nikita Krushchev, who was born in a village on the border between Russia and the Ukraine, incorporated the territory into Ukraine.
While the Ukraine was an indivisible part of the Soviet empire, that administrative shift was of no significance. It only became so in July 1990 when the parliament in Kiev declared its independence from Moscow.
Nearly a quarter of a century later the country is still being torn between its European-looking west, and its Russia-focused and substantially ethnic Russian east.
The question now is whether Putin will by guile or force try to also take control of the Russian portions of eastern Ukraine. Viktor Yanukovych, Ukraine’s ousted president who is in exile in Russia, today advocated holding more regional referendums like that which resulted in the Crimea opting to join Russia.
Putin may be content to let his guest stir the pot of Ukrainian affairs from time to time and keep the region off balance. Such moves from Moscow are likely to get more intense if serious signs emerge of Ukraine joining the EU or NATO.
There is more passion than sense in the ideological drive within the EU to gobble up as much of the old Soviet eastern European satellite countries as possible. Eleven of these countries have joined the EU since 2000, and some are proving highly problematic. The European Commission, the EU’s bureaucracy, has become alarmed that there are powerful signs of democratic backsliding in several of these old Soviet bloc countries that threaten to taint the whole organization.
It would be more of a problem to absorb Ukraine into the EU than any other of the new entrants. East Germany, remember, was reunited with the West Germany in 1990. But despite the East having the most developed economy of all the Soviet European satellites, and despite West Germany’s lavish investment, it cannot be argued that, 24 years later, integration is complete.
By comparison, Ukraine is a basket case. Agriculture dominates the economy in the west of Ukraine, but it amounts to little more than subsistence farming and would require vast investment to become viable.
The same is true for the industrial and mining industries in the east. They are relics of the Soviet Union and unhappy reminders of why it could not sustain an economy that would allow it to survive.
Ousted President Yanukovich reckoned that Ukraine needs an injection of $220.5 billion over the next eight years in order to pay for the reforms needed to qualify for EU membership. No one seriously quarrels with that figure, and one of the sparks for the crisis of the last few weeks was when the EU offered only the paltry sum of $1 billion.
The International Monetary Fund today improved on that with an offer of a loan of up to $18 billion, with the EU, the U.S. and Japan kicking in more money to bring the total up to $27 billion.
But the IMF money comes with bitter conditions about cutting subsidies on staple goods and opening up the economy. These conditions will undoubtedly prompt a popular backlash against the interim government and tax its political legitimacy, which is already very limited.
Former Prime Minister Yulia Tymoshenko, freed last month from prison after a 2009 conviction for abuse of power, said on Thursday she intends to run for the presidency in elections scheduled for May 25 on a pledge to unite Ukraine.
But she is a divisive and mercurial figure. If she returns to the political centre stage it will be a warning of yet more tempestuous seas ahead.
Copyright © Jonathan Manthorpe 2014
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