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The world after Ukraine—Part 2: Winners, the Loser-in-Chief, and winning the peace

by Ilian Vassilev

In the first part of this two-part essay, we argued that Russia is losing the current war in Ukraine – and indeed needs to lose it definitively. Only thus will it cease being a chronic threat to its neighbours and to escape from its malign time-warp of old-style imperlalism and from a role as raw-material supplier that denies its citizens the benefits of a modern economy. An insistence on premature negotiations is dangerous, because it could prevent a necessary revamp of Russia from taking place. Military underperformance in Ukraine, we noted, is already undermining Russia’s credibility among the Russian Federation’s subject peoples and among former states, while an enlightened attitude on the part of Ukraine could do much to encourage Russians to look to their real interests rather than close ranks to protect an obsolete model.

In this, the second part of the essay, we will turn to two areas likely to be among the long-term winners in the postwar world, namely Eastern Europe and Ukraine itself. Then we will turn back to Russia and the war, examining the prospects for Russian president Vladimir Putin, for the process of “deputinisaton” in Russia, and for a safe and benign conclusion of a still tricky and dangerous final phase of the war.

Europe: the rise of the East

As to Europe, the old continent will continue to lose its place alongside the two major global powers – China and the US – mainly because, thanks to a lack of vision and leadership, it has squandered too much of its political energy in pursuit of illusory goals and appeasement of Russia. That’s sad news. 

But the good news is that the engine of the European Union (EU) will shift to Central and Eastern Europe (CEE), where economic growth rates will continue to exceed those of Western Europe.

The explanation is not just that CEE is making up for its past lag in economic development and wealth. It’s also that CEE will come to occupy a position very similar to that which China has enjoyed in respect of manufacturing: it will be much safer than other regions, more affordable and, above all, blessed with a workforce of sufficient quality and motivation. And migration trends will benefit the development of CEE countries two ways:

  • First, “reverse migration” (of people returning home to CEE after years working in Western Europe) will mean a transfer of skilled labour back to the region, boosting its growth potential.
  • And, second, CEE will be spared the turmoil and damage to social cohesion that has been associated with mass immigration in Western Europe.

CEE is, and will remain, the EU region that is developing most dynamically. And this will be a question, not just of GDP growth, but also of other structural indicators of sustainable development. CEE, that is, will be in the vanguard of the re-industrialisation of Europe and of the continent’s achievement of lower debt levels. 

One more or less inevitable feature of the economies of CEE states after the war will be the need for military spending to represent a higher percentage of GDP than before it. This will be necessary to secure the region’s Eastern flank and contain Russia. But more spending on military budgets won’t necessarily hinder economic growth in the region, for at least two reasons:

  • First, part of defence spending will be invested in domestic arms industries. And the global arms trade will be one of the key growth drivers.
  • Second, that spending will be mitigating the Russian geopolitical risk that might otherwise be a serious drag on investment. Oil and gas companies’ recent decisions to hold off on exploration and production investments in the Black Sea and along its coastline are cases in point: insurance companies have refused to cover the uncertainties involved.

All in all, therefore, the outlook for CEE is relatively bright, even if that for Western Europe is decidedly less so – and the resultant “average” for the EU as a whole is lacklustre.

These articles, analyses, and comments are made possible thanks to your empathy and contributions, which are the only guarantors of independence and objectivity in our work. The Alternatives and Analysis team.

Ukraine: Western club memberships and future prosperity

Word-mongering about Ukraine’s membership of EU and NATO membership is a fairly pointless exercise. Whatever the resources spent on it and whatever clubs Ukraine has formal membership of, the country will continue to act as a shield against Russia. Hence there will be a need for it to have a long-term strategic relationship with both the EU and NATO. Given the need for internal consensus, it is of small importance whether this partnership is formalised in a quick membership track for Ukraine in both organisations. Instead, what matters most is the systemic nature and level of support given to helping Ukraine win the war and to rebuilding the country. In addition, the post-war agreements will need to accommodate the need for security guarantees for Eastern Europe against a resurgence of Russian imperial hubris and aggressiveness. The cornerstone of the ЕЕ’s post-war security system will be Ukraine.

The country has proven its indispensable role in curbing and taming the essential direct threat to European order and security and the main reason for NATO’s existence – namely, Russia. There is no need to wait for the war’s end in Ukraine to conclude that the country now holds the key to Europe’s security. With or without membership, the Ukrainian army is the most combat-ready unit in the forces at NATO’s disposal to defend the EU-and Europe generally and, in effect, a most precious asset on NATO’s military balance sheet. The war has destroyed many myths and has proved that the Russian army, formerly assumed to be the equal of NATO, has been grossly overrated. Whether the fact is acknowledged by NATO membership or not, the Ukrainian armed forces contribute far more to our collective defence than do those of some member states. Hungary and Bulgaria are particular cases in point.

Economically, Ukraine’s postwar reconstruction could propel the country into a higher orbit, alongside (or among) the EU’s most dynamically developing countries. This will apply with especial force if Kyiv succeeds in removing the malign oligarchic model and the corruption that have held it back so far, and in using the élan of its people – forged by freedom and now tempered in war –  to rebuild strong institutions and ensure the rule of law. 

All this will happen regardless of how quickly Ukraine joins the EU, since, postwar, the country should enjoy its own “Marshall Plan”, while Ukrainians will benefit from free access to goods, services, and capital and from free travel. Moreover, the burden of Ukraine’s defence budget should not be too damaging following postwar shifts in budgetary priorities and NATO’s collective security systems arrangements. Finally, economic growth will more than make up for the drop in Ukrainian GDP suffered during the war.

Russia in the postwar world

As to what becomes of Russia once the war is over, well, the scenarios are various. But most touch on the fallout from a possible disintegration of Russia. Or, strictly, of the Russian Federation: for remember that Russia is a multi-ethnic state whose sub-units – or “federal subjects”, some of which are ethnically as well as regionally based – have meaningful existence and a fair measure of autonomy, both theoretical and de facto, even if this is in the context of the dominance of Great Russian nationalism, centralisation, and the interests of a power-hungry despot. The country’s sheer size gives rise to quite genuine concerns that, if the Kremlin loses its grip on the country, the repercussions for global peace and global security repercussions seem hard to accommodate. Moreover, Russia’s mammoth land mass sends shivers down the spines of strategists and politicians around the globe. 

In these frightened experts’ worst-case scenario, Mr Putin holds on to power long enough to exhaust any opportunities that remain for the Russian state to survive within its current boundaries, setting in motion a process of uncontrollable disintegration. A similar prospect has been a nightmare for top Western leaders ever since the collapse of the Soviet Union (USSR) in 1991, during which Washington and European capitals dispatched envoys to Moscow in a desperate last-minute effort to forestall the USSR’s disintegration. 

What actually happened, however, was altogether less alarming. A process that had seemed set to be uncontrollable turned into a predictable narrative of the formation of new nations, in which a balance was found between the former imperial power and the newcomers, as the latter found their independent routes to new geopolitical pivots.  

This trend lasted until Russia decided in 2014 on a more aggressive line of forceful unification of former Soviet territories into Greater Russia. This, to be more precise, was Mr Putin’s decision, but the lack of active resistance to his line among Russia’s elite was conspicuous. Unless he can somehow avert the complete failure of his expansionist policy – which now looks very unlikely indeed – this would put Mr Putin and Russia into a situation rather like that of Adolf Hitler and Germany in April 1945. 

Although on this occasion there will be no occupying foreign powers to carry out a reckoning with the country’s past and superintend the construction of a new order, whoever succeeds Mr Putin would have to agree to come to terms with the West in order restore the country to a positive track for the future. A measure of reorientation of Russia’s economy and attention towards Asia might be a useful refinement, but certainly it would be no substitute for strong relations with the EU and the West.  Above all, a Russia that continued to act as an energy and minerals appendage, merely replacing Europe with Asia as the destination of its resource exports, would just be ignoring the key problem the country must solve. Namely, that of how to build a more diversified, technology-intensive and globally competitive economy, securing sustainable welfare for its people.

These articles, analyses, and comments are made possible thanks to your empathy and contributions, which are the only guarantors of independence and objectivity in our work. The Alternatives and Analysis team.

The Putin succession

Mr Putin has, by now, almost certainly missed his chance of securing a safe exit from power in the way his predecessor Boris Yeltsin did, with Mr Putin’s own help, back in 1999. Tsar Vladimir the Dismal has failed so badly and led his country into such a disaster that he now has next to no hope of disappearing into oblivion gracefully or even picking his own successor. His inner circle, as well as the regime’s somewhat broader elite, are unlikely to be forgiving of failure, however well they did out of Putinism in the “good times”. So Mr Putin may face a grim future – or possibly a short one.

However, it’s not just a question of the fate of one individual. The fate of a system is at stake, and the key questions are how those associated with that system will seek – or fail – to negotiate the transition to something different, and how soon those outside that system will be able to take a hand.

In its present state, Russia lacks an indigenously powerful, organised and acceptable alternative force capable of taking over immediately and securing a controllable exit of the current leaders. Mr Putin’s entourage will no doubt dispose of him – and maybe one or two of themselves as well, to judge from recent infighting – but who will dispose of them? The answer is probably: no-one – immediately. Barring a popular uprising that is not at once suppressed by the rather extensive resources of thuggery available to the status quo, the immediate successor regime will be a junta of Putinists. But system continuity, on the model, say, of that achieved by Stalin’s successors after 1953, is not inevitable.

While the direct superintendance of foreign powers won’t be an option, one mechanism will be available that has a partial analogue in the case of post-1945 Germany. This is the postwar tribunal that has been decided on by the G7 – the group of the seven biggest advanced economies. To be set up along the lines of the Nuremberg Tribunal that, between November 1945 and October 1946, tried 22 former Nazi leaders, it will deal with charges relating not only to casualties and destruction in Ukraine resulting from the Russian invasion, but also to the damage Russia has caused to European and world economies. Although some of the trade disputes will inevitably end up in arbitration courts, these will be unable to rule over the force majeure caused by actions taken by Mr Putin to cut off supplies and change the terms of trade. The tribunal could, therefore, step in to deny the Russian state the option of claiming that Mr Putin’s actions were legitimate.  

This could be a powerful way of pushing forward a process of “deputinisation”, analogous to “denazification” in Germany from 1945 onwards. “Deputinisation” will need to precede the emergence of a form of government based on welfare and social security objectives, instead of dominance by the military and the security services. And the tribunal will serve as an ongoing reminder, repeatedly and in detail, of the wrongs that were done and the fact that they are internationally recognised as wrongs. 

The Russian body politic must be drained of the toxins that have built up during decades of lies, delusions and denials of the obvious; Russians must be confronted fully with the horror, enormity, folly and self-defeating futility of what has been done in their name and with their tacit consent; and they must be shown in the years that follow – patiently, pragmatically, and by experience – that a better way is possible.

This is what made post-1945 Germany such a success. And failure to bring about a similar thoroughgoing replacement in Russia would inevitably create conditions that would, sooner or later, give rise to a new Putin. 

Cold war or hot peace?

That’s for the future. But in the present, the war rages on. And it’s dangerous. Debates about how best to define the state of relations between Russia and the West – cold war or hot war? – might seem academic and remote when a real-time war involving actual casualties is being waged. But the intensity of hostilities makes a difference. The fact that NATO is not yet directly involved is no guarantee that Russia won’t drag the alliance into the fight by means of escalation. And how fierce the war becomes has an effect on its impact, both on Ukraine and on the wider world.

Direct material and human losses in Ukraine are without precedent in Europe’s post-1945 history, running, according to some preliminary estimates, to trillions of dollars in costs and over 200,000 dead. The consequences of the war – turmoil on global commodity and energy markets, surging inflation, collapsing incomes, and dwindling growth prospects – are already reshaping the agendas of governments in Europe, the Black, Baltic and Caspian Seas’ regions, and the entire world. And a combination of two crises, the COVID-19 pandemic and the Ukrainian war, promises to bring about a massive redistribution, a shift of wealth (and poverty) between continents, countries and people – a shift such as has not been witnessed since the Second World War. Escalation may mean yet more of all that.

In a sense, indeed there has already been a serious escalation recently – and whether one defines it as “hot peace” or “cold war” is a secondary matter. On December 5, the West crossed one of the Kremlin’s red lines, when the G7, the EU, the UK and the US imposed a ban, and shortly after a price cap, on Russian oil exports (or, to be precise, a ban on G7-based insurers giving P&I [protection and indemnity] coverage to ships carrying Russian oil cargoes priced above a certain level per barrel). So far, the markets have reacted with a drop in crude oil prices, as Russian Urals blend crude fell to $52-53 per barrel for European buyers and $43 per barrel for buyers in Asia. 

The fact that the West, collectively, has gone for the “nuclear” option of imposing sanctions on Russia’s biggest export revenue generator – crude oil –  means that confrontation between Russia and the West has entered its most acute phase. Presumably it is only a matter of time until Russian natural gas suffers the same fate as Russian crude oil. And if you want a label for all that, “full-scale hot energy war” seems as good as any! 

Faced with this, Mr Putin is likely to raise the stakes in some way. He can’t hope to achieve much by calling in favours in Europe, for he is now more or less without friends there: deprived since last year of his biggest ally, Angela Merkel – and, with her, of the prospect of German cooperation – he has no chance of winning Europe over again and thus negotiating a graceful exit from his war in Ukraine. So his answer is likely to be more brutal force and strikes in Ukraine. We should prepare for some desperate moves on his side, as he is trying to raise the cost of the West’s support for Ukraine. And we must keep our nerve.

If we do that, however, it’s a near-certainty that whatever he tries won’t work. In other words, with his war finally discredited as a bankrupt and disastrous adventure in the eyes of those at home, Mr Putin will be exposed as a loser and will be on the way out. 

Maybe he’ll buy a little time by a few sackings which imply that the problem lies, not in his policies, but in subordinates’ inept implementation or communication of them (foreign minister Sergei Lavrov seems a plausible scapegoat). Just conceivably, he’ll be allowed by his colleagues to slip quietly into retirement (though whether the Russian public and that international tribunal allow him to stay there is another matter). More likely he will be punished conspicuously by an elite enraged that he has led them to disaster. But whatever happens, he’ll go.

The only question remaining in that case would be whether his exit from the scene will trigger the disintegration of Russia. 

Most of the answers to that question depend on events, personalities and sentiments in Moscow. Ultimately, the salvation of Russia is in the hands of the Russian elite. And their choice is stark: either they allow Mr Putin to destroy their country or they save Russia.

But it also matters what happens in Kyiv. Ukraine is on the way to winning the war. But it must bear in mind constantly that it needs also to win the peace. That means securing the earliest possible transition of power in the Kremlin, as the best guarantee of long-term peace and security on Ukraine’s eastern borders.

And it means something else, too. It means that, henceforth, Ukrainian president Volodymyr Zelensky and his team should avoid lumping all Russians together as accomplices of Mr Putin, since this works in his favour.  Instead Kyiv should further engage with Russian-speakers, both in Russia and elsewhere in the post-Soviet space, to sell them an alternative to the imperial, Asia-centric vision that has been offered by Mr Putin and his ideological allies, in line with the “Kievan Rus” enlightenment tradition brought to the Moscovites.

This alternative is the non-confrontational, mutually satisfactory EU-compliant model of relations, in which Russia gives up excessive nationalism in return for the benefits of a single open economic space with free movement of goods, services, capital and people across Europe. 

Presented well, it is a very attractive vision. Who knows? It may even catch on in the Russian Lands… But, be that as it may, the key takeaway from the last 25 years of dealing with Moscow is this: Do not leave Russia on its own, or it will resort to the evils of the past. Engage, engage, engage!

These articles, analyses, and comments are made possible thanks to your empathy and contributions, which are the only guarantors of independence and objectivity in our work. The Alternatives and Analysis team.