Ukraine: Russia Bites The Hand That Feeds

Written By Unknown on Senin, 12 Mei 2014 | 20.18

When the Russian bear roars, us jobbing journalists reach for the grab bag of cliches and hackneyed metaphor.

Vladimir Putin is playing chess while the West is playing checkers.

He's behaving like an 18th-century Tsar in a 21st-century world.

He's a small man with a massive trove of resentment filled by two decades of contempt shown by the West to Mother Russia.

Cliches come into common use because they are very often true.

But now that the general picture has been established the latest developments in the Ukraine deserve closer examination -  what are the options for Russia's president?

The question itself is revealing.

In this race for influence Mr Putin has made all the running. The US and, more importantly, the European Union, can only remain reactive.

The Kremlin is dictating the order of battle.

Clearly Russia is intent on destabilising Ukraine's east.

Clearly the Kremlin will disrupt the May 25 presidential elections and thereby establish an argument that whoever wins cannot be seen as a legitimate post-revolutionary leader because Ukraine's east will have been left out of the new dispensation (thanks to Russian support for separatists).

Critics accused Russian president Vladimir Putin of provocative behaviour by visiting Crimea for Victory Day Vladimir Putin visited Crimea on Victory Day

Over the next three weeks there will be more violence - that much is obvious.

But there are already hints that Mr Putin knows that he needs to reduce the tensions before his economy is wrecked by sanctions.

Harrumphing over whether or not the latest "referendum" in eastern Ukraine is legitimate or not is a natural part of what European politicians will have to do.

Some 14 more individuals, and a couple of companies, associated with Mr Putin's inner circle are to be added to a slowly growing list of economics targets that was first drawn up when Russia annexed the Crimean Peninsula.

The incremental imposition of limited sanctions has already had a profound effect on Russia's economy.

Capital flight is now at $70bn this year, more than the total of last year's export of wealth from Russia.

Inward investment is inevitably depressed. This is very damaging for Russia in the long term.

It's lost about 60% of its Soviet-era manufacturing base, leaving it vulnerable as a primary producer of fossil fuels - rather than as an economy capable of adding value, and therefore wealth, by processing its own raw materials.

Europe gets about 30% of its gas from Russia. About 80% of Russia's oil and 76% of Russia gas is imported by Europeans.

But the EU and others in the West don't need to depend on an unreliable Russia.

Plans are already under way to reduce this relationship in the long term with imports from elsewhere, notably from American gas fracking operations.

Russia, however, needs European machinery in order to grow. Some 85% of her imports from the EU were manufactured goods in 2012.

Members of local election commission empty ballot box as they start counting votes of today's referendum on status of Luhansk region in Luhansk Vote counting is under way in the referendum in parts of eastern Ukraine

Russia needs Europe more than Europe needs Russia.

Small wonder that the Russian petrochemical giant Gazprom is hoping to sign a deal with China.

Anatoly Yanovsky, the Russian deputy energy minister, recently said that the deal to supply a vast amount of gas to China was "98%" done.

An alternative buyer for Russia petrochemicals is now a strategic necessity for Russia. The West will never again trust it as a supplier of choice.

The Chinese know that and are driving down the price they will pay for Russian gas that the Kremlin desperately needs to sell.

In hack-speak that means that the Russian bear has not only bitten the European hand that feeds it but is also finding that the Asian tiger has claws.


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