QUO VADIS, UKRAINE?

Foreword

Putin played one of his biggest cards on  March 31, demanding European energy buyers start paying in roubles from April 1 or have existing contracts halted.

Russia and Ukraine on April 1 resumed peace talks by video conference as Moscow accused Kyiv of carrying out its first air strike on Russian soil, further dashing hopes of any de-escalation in the Ukraine war.

Meanwhile Russian troops pulled out of Kyiv and the heavily contaminated Chernobyl nuclear site in Ukraine.

Current situation

Russian President Vladimir Putin said "unfriendly" countries, including all EU members, must set up rouble accounts to pay for gas deliveries from April.

European governments rejected Putin's energy ultimatum, with the continent's biggest recipient of Russian gas, Germany, calling it "blackmail".

The depot hit by the Ukrainian air strike, a facility run by Russian energy giant Roseneft about 35 kilometres from the border, was set ablaze by the attack. Such a strike could seriously undermine negotiations between Russian and Ukrainian representatives that resumed by video link.

As for the Russian withdrawals in the country’s north and centre it is considered a military tactic to gather more strength for new attacks in the Southeast.

It is possible that Moscow is using its current de-escalation in Ukraine as cover to regroup, resupply its forces and redeploy them for a stepped-up offensive in the eastern part of the country.

Effects of sanctions on Russia

With Russia's invasion of Ukraine now entering its seventh week, new Western sanctions continue to be added and the effects of the conflict on trade (Russian and global) continue to evolve. What are the developments so far?

1. Russia is looking to the grey economy to supply goods that are in short supply.

2. Sanctions are expected to decelerate economic growth, particularly in Europe. Higher global commodity prices, if sustained or exacerbated, will likely cause accelerated and prolonged high inflation in many countries. Higher commodity prices can also weaken economic growth.

3. India has resisted global calls to distance itself from Russia, which is a trade ally.

4. Sanctions against Russia are reorganising global trade along political lines, defying geography and efficiency.

5. The pre-eminence of the dollar as the global currency of choice is threatened  as a more fragmented international monetary system evolves with the dollar’s share of international reserves fallen from 70% to 60% over the past two decades. Meanwhile the emergence of other trading currencies such  as the Australian dollar and the  Chinese renminbi is a further blow to the dollar.

6. China may simply be looking for loopholes to help Russia. In virtual talks on April 1 the EU has pressed China on its position in the conflict by asking Beijing that it will neither supply Russia with arms nor help Moscow circumvent Western sanctions.

Recent events

France's military intelligence chief is shown the door for failing to accurately predict that Russia would launch a full-scale invasion of Ukraine: Eric Vidaud had only been in the position since last summer.

Putin's ratings have received a boost since the start of military actions in Ukraine, Russia's independent Levada Center polling institute says, with more than 80 % of Russians saying they support his actions.

Russia's invasion of Ukraine has created a "new sense of urgency" among NATO member states to boost defence expenditures as just 8 of NATO's 30 member nations were meeting a target of spending 2% GDP on defence.

Ucraine crisis highlights stark divisions among France's presidential candidates. In France, the Ukraine crisis is a hot topic for the candidates jockeying for position ahead of April's presidential election.

After all, Paris holds the rotating presidency of the European Union for the first six months of 2022, lending incumbent Emmanuel Macron a special role in diplomatic efforts to stop conflict on Europe's eastern frontier even as his own term as French president comes to a close.

Food security and political instability

The war in Ukraine poses serious threats to food security, including far beyond Ukraine’s borders. This not only jeopardizes lives and livelihoods, it can stoke socio-economic and political instability.

The invasion is happening as Ukraine’s spring planting season is about to begin, and not long before wheat planted last autumn is due to be harvested. Furthermore, a significant proportion of last year’s harvest is stuck in warehouses, as export shipments have ground to a halt.

At the same time, Russian grain deals are paused due to uncertainties around sanctions, while shipments face crippling insurance costs. The implications are significant. The two countries account for just over half the global output of sunflower oil, 19 per cent of barley, 14 per cent of wheat and 4 % of maize. As a result of these disruptions, it is estimated that global supplies of major agricultural products will dramatically fall.

There is also a real risk that increasing food insecurity and rising food prices linked to the war in Ukraine could lead to social and political crises in other countries.

History is rife with examples of how increasing food insecurity has contributed to the emergence and duration of violent conflict, from the French and Russian revolutions to the Arab Spring. Food riots are as old as civilization itself.

The war in Ukraine and the worsening global food insecurity that has followed is a stark reminder of the links that exist between hunger and conflict. It is imperative that global leaders recognize and act on these links. Combating hunger is more than altruism.

President Xi Jinping video-meeting

President Xi Jinping met via video link with President Charles Michel of the European Council and President Ursula von der Leyen of the European Commission in Beijing on the evening of  April 1. 

President Xi recalled that he made a suggestion eight years ago for China and Europe to foster a China-EU partnership for peace, growth, reform and civilization.

President Xi called on the EU to adopt an independent China policy, and work with China to promote the steady and sustained growth of China-EU relations and to add stabilizing factors to a turbulent world.

President Xi stressed that China and the EU should act as two major forces upholding world peace, and offset uncertainties in the international landscape with the stability of China-EU relations.

The two sides need to seek greater synergy between their development strategies and explore more complementarity between China’s new development philosophy and paradigm and the EU’s trade policy for open strategic autonomy.

The EU expressed readiness to keep deepening cooperation with China  and promote world peace. The EU did maintain that positive steps by China to help end the war would be welcomed by all Europeans and by the global community.

The two sides exchanged views on the situation in Ukraine. President Xi emphasized that China finds it deeply regrettable that the situation in Ukraine has come to where it is today. President Xi shared his views on how to settle the Ukraine crisis under the current circumstance.

First, promoting peace talks that are the only viable way to prevent an escalation of tensions. Second, preventing a humanitarian crisis on a bigger scale. Third, fostering lasting peace in Europe and the Eurasian continent. Fourth, preventing the regional conflict from magnifying.

China and the EU need to commit themselves to keeping the situation under control, preventing spillover of the crisis, and, most importantly, keeping the system, rules and foundation of the world economy stable, in order to bolster public confidence.

Conclusion

Russia will push for Ukraine to definitively drop  any aspirations to join NATO while  achieving the independence of Donbass or, in the best case scenario, of Eastern Ukraine (east of the Dnieper river).

The Ukrainian army alone cannot bring the country under control, and diplomatic efforts have not made real progress beyond a stream of telephone calls back and forth on one side and a succession of peace negotiations on the other side.

We are at a very dangerous crossroads with the confrontation between the two major nuclear powers, namely US and Russia. The worst case scenario remains WW III which hopefully will not occur but, for planning purposes, is not an abstract concept.

Nuclear war has no winner: a US - Russia nuclear war, fought with less than half of US or Russian strategic nuclear weapons, would wipe out mankind along with all other forms of life.