How Vladimir Putin has exploited the liberal disorder and survived the sanctions
(Illustration: Saurabh Singh)
ON JULY 15, the news agency Reuters filed a report marked “exclusive”. The story was certainly unusual, as the headline indicated: “Saudi Arabia doubles second-quarter Russian oil imports for power generation”. Why was the world’s largest oil exporter buying Russian fuel oil? The answer was not illogical: “…to meet summer cooling demand and free up the kingdom’s own crude for export” as the “data showed and traders said”, since Russia was “selling fuel at discounted prices after international sanctions over its invasion of Ukraine left it with fewer buyers”.
So far, so business-cool: buy low, sell high.
There was nothing wrong with the purchase, since Saudi Arabia, like India or China, did not sign up to the anti-Moscow alliance fostered by America, Britain and the European Union (EU) to stop, or limit, sales of Russian oil in order to squeeze its finances. But this was not a story with only one surprise.
How did this oil reach the Arabian kingdom? “Data obtained by Reuters through Refinitiv Eikon ship tracking showed Saudi Arabia imported 647,000 tonnes [48,000 barrels per day] of fuel from Russia via Russian and Estonian ports in April-June this year. That was up from 320,000 tonnes in the same period a year ago. For the full year 2021, Saudi Arabia imported 1.05 million tonnes of Russian fuel oil. Saudi Arabian and Russian energy ministries declined to comment on the increased imports.” There was more to come: “Energy analytics firm Vortexa found rising flows of Russian-origin fuel oil cargoes through Egypt and Estonia boosted imports, Vortexa said.”
The Saudis and Russians would decline comment, of course; neither has any interest in publicising a clandestine transaction. Their silence was pragmatic.
But what about the silence of Estonia, whose ports were being used for shipment?
Estonia, a Baltic state, left the crumbling Soviet Union in August 1991, and joined the European Union and NATO 13 years later. With a 180-mile border with Russia, it has good reasons to be apprehensive about Moscow’s intentions, even if NATO offers an American shield against aggression. Estonia’s 45-year-old Prime Minister Kaja Kallas has been among the most vociferous critics of Moscow’s “military operation” against Ukraine, preaching morality to the world, and demanding everything on Kyiv’s wishlist.
Let us check out the casualty rate of the major players in this European war through what might be called the Boomerang Table. Boris Johnson: Out. Emmanuel Macron: Limping, after defeat in the French parliamentary polls crippled his authority. Olaf Scholz: Tottering in Berlin. Mario Draghi: Without a government in Rome. European Union: Full of sound and fury, signifying nothing else. Joe Biden: Hanging by a constitutional thread, with approval ratings in freefall across America. Vladimir Putin: Reading Clausewitz in Tehran
On March 9 this year, Kallas told Judy Woodruff of PBS News that President Vladimir Putin was a habitual liar, and a war criminal who should be isolated and punished: “I think that Vladimir Putin has to be isolated politically on all levels… What I’m really worried about is that if some kind of agreement is made, that Putin, Vladimir Putin, is not somehow liberated from all the responsibility… So, we can’t forget all the crimes that he has already committed in Ukraine…”
She added, piously: “We see that the sanctions work.”
Kallas did not tell the American broadcaster that she, as head of her government, was secretly and perhaps sneakily helping Russia sell its oil to Saudi Arabia.
The American magazine Foreign Policy headlined a story in its issue of June 3, 2022 with her strident call: “Only Russia’s defeat will lead to peace”. The article began with fulsome praise for Kallas, claiming that no European leader, apart from Volodymyr Zelensky, had “taken a more uncompromising stance on Russian leader Vladimir Putin’s unprovoked war of aggression against Ukraine”. Prime Minister Kallas did not stint on colourful adjectives about Putin, pausing only to swivel her guns towards France’s President Emmanuel Macron for the satanic sin of keeping in touch with the Russian leader. All Macron wanted was a dialogue with Moscow. He did not open French ports to Russian tankers. Estonia, on the other hand, actively helped Russia fill up its war chest.
What was Washington’s reaction to this exposé? Did the cudgel of America and the whip of NATO descend upon Estonia? Did EU leaders pass solemn injunctions against apostasy? So far, nothing has happened. Nothing will continue to happen. The story itself has been underreported. Ukraine’s President Zelensky surely knew what Reuters has found out. He too has no option but to keep quiet.
In their hurry to mobilise domestic and international public opinion after the Russian attack in February, Western leaders did not quite think through their strategy. No one gave much consideration to either Russian slippage through a leaky sanctions net or the boomerang effect.
There cannot be any effective embargo on Russia’s biggest earners, gas and grain, because the West needs both to maintain the lifestyle to which it has become accustomed. Each time Gazprom dangles the threat of reducing gas supplies to Europe, Berlin, Paris, Brussels and Rome get the jitters. Putin was never likely to succumb to either an unsustainable economic ring-fence or bombast filtered through the vitriol-stained expanse of social media, the fifth dimension of the fourth estate. Edmund Burke famously proposed, during a British parliamentary debate in 1787, that the rising power of the printed word had made it the fourth estate of the realm, after the ancient three: nobility, clergy, and commoners. Fast forward to the 21st century. Edmund Burke, meet Bill Gates. Social media, released from accountability by technology, has created new forms of warfare, but they are yet a substitute for the older variety.
America and Europe will not go beyond a proxy conflict with Russia, leaving Ukraine to fight the real war.
There is a fundamental contradiction in the Euro-American position. Why does the West consider Estonia and Finland, both on the Russian border, eligible for NATO, but not Ukraine? The argument that Russia would be provoked is thin and even counterproductive. You can provoke Russia as easily from Estonia and Finland as from Ukraine. This makes no sense, except as implicit acceptance of the Moscow view that every Ukrainian should be blessed with a Russian passport. If Ukraine is independent, then NATO, as the self-proclaimed guardian of European stability, needs to add boots on the ground to the hot air from its nostrils. If Ukraine is considered a quasi-Russian state, then NATO must get out of the way. There is no third way in war.
The initial shrinkage of the Russian economy has been reversed and could be no more than 5 per cent by the end of the year. Inflation is at 14.5 per cent this year against 8.4 per cent last year, which is painful but not overwhelming. Meanwhile, the boomerang continues its merry games. Sanctions have lowered Russian imports and raised the price of its commodities. The rouble has strengthened, thanks to Russia’s record current account surplus
IN THE FIFTH month of war, Russia has annexed the territories it claimed in Ukraine’s east and Crimea. Ukraine’s forces have fought bravely against the odds, but plaudits are no substitute for retreat. With no stomach for the deadly churn of battlefields, the West will lose interest once Russia manages to secure its gains, shift its borders, and establish a new reality.
For the first time since February, some influential Western voices have begun to question the triumphalist hoopla that marked the discourse during the first phase of Russia’s advance. All manner of mischievous stories were planted on a pliant media, including suggestions that President Putin was either dying of some mysterious disease or was on the point of being assassinated by internal dissidents. Speaking to BBC on July 17, Admiral Sir Antony (Tony) Radakin, the British chief of the defence staff, dismissed propaganda about Putin’s health and Russia’s war performance: “I think some of the comments he’s not well or that actually surely somebody’s going to assassinate him or take him out, I think they’re wishful thinking… As military professionals we see a relatively stable regime in Russia… Russia continues to be a nuclear power, it’s got cyber-capabilities, it’s got space capabilities, and it’s got particular programmes under water so it can threaten the underwater cables that allow the world’s information to transit around the whole globe.” He noted that the Ukrainian army believed it would regain all lost territory but did not quite endorse this optimism.
On July 16, the Times, London, quoted an unnamed former Pentagon official as saying, “But so far the ‘speculators’ have been generally wrong. No Russian Blitzkrieg. No Russian collapse. No striking results from unprecedented sanctions….”
Sanctions were no more than a subterfuge to disguise the inability or an unwillingness to do more. Sanctions have not destabilised the government or reduced the military prowess of the most sanctioned country in the world, Iran. During a conversation, a senior Iranian cabinet minister gave a pointed answer to my query on the subject with a counter-question: “How do you impose sanctions against a country with seven neighbours?” Iran has developed indigenous weapons and nuclear capabilities. Nor has there ever been a shortage of basmati rice for its exquisite pilao. The basmati reached the Gulf through perfectly legal trade; what happened after that was not the exporter’s business.
Having lost fertile fields and the Crimea, a reduced Ukraine will probably retain two-thirds of its size, but only one-third of its economic and strategic power. If this happens—and the war is still in progress—one of the most significant gains for Russia will be its dominance over the world’s food stocks.
Till last year, Russia supplied 17 per cent of global wheat requirements. Ukraine provided 10 per cent of the wheat, 12 per cent of maize and 37 per cent of sunflower oil with an annual harvest of around 100 million tonnes of grain, oilseed and pulses. If Ukraine was the granary of Europe, then eastern Ukraine was the breadbasket of Ukraine. This part of Ukraine is now under Moscow’s control.
Instead of being throttled economically, Putin is squeezing buoyancy out of the Western economy, and stoking levels of inflation sufficient to vaporise governments. He has taken back control of the narrative. The initial shrinkage of the Russian economy has been reversed and could be no more than 5 per cent by the end of the year. Inflation is at 14.5 per cent this year against 8.4 per cent last year, which is painful but not overwhelming. Meanwhile, the boomerang continues its merry games. Sanctions have lowered Russian imports and raised the price of its commodities. The rouble has strengthened to 50 against the dollar, thanks to Russia’s record current account surplus.
Inflation is the Covid of 2022. The infection has reached New Zealand, where prices have shot up to a three-decade peak; Britain is at a four-decade high; Turkey’s inflation is around 70 per cent. Inflation has punctured the government of Italy. Mustard is missing in Canada; the cost of butter has pole-vaulted in Britain. Europe shivers at the prospect of a bitter winter while Brussels prepares plans for gas rationing. Germany’s production lines have started to suffer, and its exports have contracted for the first time since 1991.
US President Joe Biden beat a misery-laden path to Riyadh to bump a weakened fist with Mohammed bin Salman, the 36-year-old crown prince of Saudi Arabia who was, till Putin began knocking on Ukraine’s door, the pre-eminent ‘pariah’ in the Biden Doctrine. Biden had promised Americans that he would not shake hands with Mohammed bin Salman, so they did fist bumps. The semantics were farcical. This was Monty Python diplomacy.
The outcomes were modest. Biden’s principal objective was to persuade Saudi Arabia to increase oil production, soften prices and reduce inflationary pressure. Biden told inquisitive journalists that he believed this might happen in a few weeks. I was reminded of 19th century German Chancellor Otto von Bismarck’s famous remark that one should never believe anything until it had been officially denied. The complementary maxim would be: Don’t trust anything that has been officially said.
Biden’s Air Force One had barely taken off from Riyadh when the Saudis politely pointed out that they had given no commitments on raising oil production. We do not know how this will play out, but one thing is certain. Mohammed bin Salman is not going to take orders from Washington, as his predecessors did.
A far more relevant visit took place on July 19 when Vladimir Putin visited Tehran. Putin has measured his opponents with far greater accuracy than they have understood him. By ostracising Iran and Russia, the West has boxed itself into a corner. Taking advantage, Putin has launched a diplomatic counteroffensive. His Iran visit signalled the start of a virtual Russia-Iran energy-military alliance. Thus far, Putin has been wary of coming too close to Iran, unwilling to provoke a negative reaction in the West. The hesitation is over. Gazprom has signed agreements worth $40 billion with the National Iran Oil Company to develop two gas fields and six oil fields. Also in play is the sale of Iran’s effective Shahed 129 drones, an equivalent of the American MQ-1 Predators which saw action in the Syrian war.
Turkey was also at the table in Tehran, but with a limited agenda, seeking Iran’s and Russia’s nod to pursue its offensive against the Kurds in Syria. This too is evidence of a shift in the equation. America’s acquiescence is less necessary. China will be the eastern outlier of this alliance, watching for opportunities to pursue its own interests in the common confrontation with America.
WAR IS AN EXPLOSIVE catalyst and the Ukraine conflict has altered the strategic map of Europe and West Asia. It is impossible to predict how much will change, but it is equally certain that the status quo of the previous three decades is in meltdown. It is, however, naïve to underestimate American power, but under its current leadership Washington has become vulnerable to self-induced mistakes. America is too strong to tolerate a weak president.
The core asset of a democracy is its institutional ability to change leaders who have outlived their utility. America, like any other democracy, will find a leader who can organise course-correction. That is what democracies do. Let us check out the casualty rate of the major players in this European war through what might be called the Boomerang Table.
Boris Johnson: Out.
Emmanuel Macron: Limping, after defeat in the French parliamentary polls crippled his authority.
Olaf Scholz: Tottering in Berlin.
Mario Draghi: Still in office, but without a government in Rome. (He resigned on July 21.)
European Union: Full of sound and fury, signifying nothing else.
Joe Biden: Hanging by a constitutional thread, with approval ratings in freefall across America.
Vladimir Putin: Reading Clausewitz in Tehran.