On February 24th, 2022, President Vladimir Vladimirovich Putin of Russia ordered his armed forces to invade Ukraine. The signs were clear. The ominous massing of troops. The aggressive rhetoric, the historical revanchism harkening back to the Soviet past. The accusation of a Ukrainian “genocide” against Russians. The recognition of the Donetsk and Luhansk breakaway ‘republics’. And in a fatal slip-up, Sergey Naryshkin, director of Russia’s Foreign Intelligence Service, blurted out that he supported “the proposal about the entry of the Donetsk and Luhansk People’s Republics into the Russian Federation”, hinting at annexation, and further to that, invasion.
Yet nothing prepares you for reality. Almost 80 years after the Red Army’s Dnieper Offensive, once again, tanks roll on the plains of Ukraine. Air raid sirens shriek in Kyiv, smoke rises from the smouldering ruins of Mariupol, martial law has been declared, and ordinary people are huddling into subways and signing up to resist. It is incredible, fantastic, terrible, that in 2022, we have returned, once again, to full-scale general war at the heart of the European continent. What on Earth has led us here? What does Putin hope to gain from this invasion? How will this impact world energy markets? How should this war end? And what ramifications does Russia’s aggression hold for global geopolitics and grand strategy?
Part I: From Superpower to Anarchy, and Back Again
Vladimir Putin once said that “the collapse of the Soviet Union was the greatest geopolitical catastrophe of the century.” This quote is the key to understanding what happened here.
There are two highly interconnected levels on which this quote bears significance — the psychological and the geopolitical. We begin first with the psychological. As Serge Schmemann wrote recently in the New York Times, “the Soviet state had denied people freedom, but it had given them something else: the pride of superpower”. And in 1990–1, that promise of superpower, of undeniable national greatness, collapsed into anarchy and chaos. The centrally planned economy collapsed; no one was at the controls. Salaries and pensions were not paid. Russia defaulted on its sovereign debt. Law and order disappeared; mafyias controlled local economies and governments. President Yeltsin sent in the army to shell a disloyal parliament into submission. And even the once formidable Russian army proved itself a shambles, massacred by Chechen fighters in the brutal First Battle of Grozny.
This was as traumatic an event as one could imagine to the Russian psyche. And even as the authorities slowly clawed back power, returning Russia into a functioning state, the national humiliation suffered remained and remains at the forefront of collective memory.
And here we get to the geopolitical aspect. One of the biggest symbols of and contributors to that collective trauma was the collapse of the Soviet Union into fifteen successor states, stretching from Lithuania all the way to Kyrgyzstan. These regions were historically controlled by Moscow, in the case of the Baltics, since the 1710–21 Great Northern War, and in Central Asia, the 19th-century conquest of the steppes. They are linked to Russia by centuries of linguistic, cultural, and family ties. Ethnic Russians are scattered all over the region, and non-Russians are dispersed across the regions of the ex-Soviet Union; Stalin was a Georgian, and Khrushchev and Brezhnev were Ukrainians.
Given their geographic proximity to Russia and their historical significance and connections, these areas are clearly what Russia considers its sphere of influence, an essential component of its status as a great power. There’s a very good reason why in Russia, the term for the post-Soviet states isn’t the post-Soviet republics — it’s the ‘Near Abroad’.
And as these elements of the ‘Near Abroad’ broke off, they sought to ensure their independence by counterbalancing Russia’s traditional hegemony with the West. Many, like Belarus and Ukraine, though leaning towards Russia, wanted to maintain something of an independent stance. In Central Asia and the Caucasus, Kazakhstan, Uzbekistan, Azerbaijan, and Armenia leveraged their newly developed oil supplies, enticing both the West and Russia to come knocking for a share of black gold.
However, some, like the Baltic republics of Lithuania, Latvia, and Estonia, veered completely into the West’s orbit. And this is where NATO comes in.
The NATO defence alliance, along with EU membership, is a direct projection of American and Western European power. In its famous Article 5, it commits all member nations to come to the defence of any one of its members. If any nation in Europe joined NATO, it would represent a clear intention of permanently separating from the Russian sphere of influence.
At the end of the Cold War, with the Berlin Wall falling and the Warsaw Pact dissolving, negotiations between the US, USSR, Britain, France, and the two Germanies were underway with regard to what later became known as the German Treaty, governing the reunification of the two Germanies into one. According to Gorbachev, as part of discussion around the treaty, US Secretary of State James Baker made assurances to Gorbachev that NATO would never move beyond the German border, assurances that Gorbachev accepted in exchange for signing off on the German Treaty.
American internal documents from this era are consistent in providing a sound rationale for these assurances:
In the current environment, it is not in the best interest of NATO or the US that [Eastern European] states be granted full NATO membership and its security guarantees… [We] do not, in any case, wish to organize an anti-Soviet coalition whose frontier is the Soviet border. Such a coalition would be perceived very negatively by the Soviets.
U.S. Department of State, European Bureau — “Revised NATO Strategy Paper for Discussion at Sub-Ungroup Meeting”, October 22, 1990
Indeed, as former US Ambassador to the Soviet Union George Kennan explained in 1998:
I think [NATO expansion would be] the beginning of a new cold war… I think the Russians will gradually react quite adversely… I think it is a tragic mistake. There was no reason for this whatsoever…. Of course there is going to be a bad reaction from Russia, and then [the NATO expanders] will say that we always told you that is how the Russians are — but this is just wrong.
Former US Ambassador George F. Kennan — May 1, 1998
And then the Soviet Union fell apart. With its collapse, there was only one superpower. Being the only kid on the block, America evidently felt it could do as it wished, never mind how the Russians felt. And so they threw caution to the wind.
At first, NATO expanded into the Czech Republic, Hungary and Poland in 1999. The Russians howled — as Yeltsin said in 1997, “we believe that the eastward expansion of NATO is a mistake and a serious one at that.” But what could they do? Russia was weak, and having just defaulted on its sovereign debt, its economy was a wreck.
But then, in 2004, NATO expanded into Romania, Slovakia, Slovenia, Bulgaria, and critically, the Baltic republics. NATO had not just expanded to the borders of the former Soviet Union, but in fact, to the Russian border. It actively incorporated parts of the former Soviet Union — a clear affront to their claim to the ‘Near Abroad’ and to Russia’s status as a power to be respected on the world stage.
But again, what could Russia do? Yes, it was now led by an ambitious ex-KGB officer named Vladimir Putin, but it was still in no state to challenge America and the West. After all, its military was still dilapidated and mired in ineptitude. When the nuclear submarine Kursk exploded in 2000, the Russian Navy did not realize an accident had occurred until six hours later, and it took seven whole days, with British and Norwegian assistance, for it to finally breach the wreck — by which time all the survivors of the initial explosions had long died.
And so Russia bided its time. With the involvement of Western supermajors, Russia finally gained the ability to exploit vast yet technically challenging new oil and gas reserves, from Shell and ExxonMobil’s ventures on remote Sakhalin Island to ConocoPhillips’ Northern Lights project in the icy Barents Sea. And with rising prices in the mid-2000s and from 2011–14, oil and gas exports powered the Russian economy to new heights — by 2010, Russia was the second largest producer of oil in the world. To quote Putin, “I have never referred to Russia as an energy superpower… [but] if we put together Russia’s energy potential in all areas, oil, gas, and nuclear, our country is unquestionably the leader.”
And thus, when two more former Soviet republics, Georgia and Ukraine, were proposed for NATO membership in 2008, Putin was ready. He provoked a diplomatic crisis with Georgia, and after manufacturing a pretense, launched a full-scale invasion. Russian forces quickly stormed across the border, stopping only 30 miles from the capital, Tbilisi.
The West was not going to militarily aid a non-NATO country far in the Caucasus — Georgia faced Russia alone. After a flurry of diplomatic efforts led by Bush and Sarkozy, Russia retreated. But Georgia got the message — when you mess with the bear, you get the claws.
And then we get to the case of Ukraine. For much of the 1990s, Ukraine was ruled by the mildly pro-Russian Kuchma, who essentially ran the country along the same lines as Putin, but whom clearly wanted to preserve Ukraine’s strategic autonomy as a player in between Russia and West. Yet in 2004, the Orange Revolution swept Kuchma and his protégé, Viktor Yanukovych, from power. An awkward power-sharing agreement was then arranged between Yanukovych and the pro-Western Yushchenko, maintaining Ukraine’s strategic balance between East and West.
But in 2013, a now President Yanukovych was caught in a bind. On one side, he was negotiating an EU association agreement, a large step towards further integration with Europe; on the other, he was negotiating with Russia over Ukraine’s involvement in the Eurasian Economic Union, a customs union across many of the post-Soviet republics, headed by Moscow. He chose the former. An alarmed Moscow realized that it was one agreement or the other, and quickly persuaded Yanukovych to execute a sudden volte-face, lubricated by a $15 billion loan.
The popular response was revolution. In what became known as the Euromaidan Crisis, Yanukovych was ousted from power, to be eventually replaced by the much more pro-Western Petro Poroshenko. The first act of the new Ukrainian government was to remove the Russian language as an official language of Ukraine, just in case there were any illusions about which way this government leaned.
There was absolutely no way Moscow was going to take the loss of the key post-Soviet state lying down. Prior to the dissolution of the Soviet Union, the Ukrainian SSR had the second-largest economy and the second-largest population of the Soviet republics, second only to the Russian SFSR. Furthermore, Ukraine, with its shared and intertwined history with Russia, with both countries claiming the 9th century Kievan ‘Rus as its historical ancestor, and its extremely high degree of cultural, linguistic, and familial ties, was of overwhelming psychological significance to Russia. However unhappy Putin was with the EU and NATO’s expansion into the Baltics, it had no comparison with potential NATO expansion into Ukraine. And at special risk was the Russian Black Sea Fleet, hosted in a controversially leased base in Sevastopol, the only warm-water port open to Russia; it was highly likely that this lease would not be extended (or revoked outright) by the new government.
The EU and NATO’s expansion into the heartland of Russian influence was simply unacceptable. There is simply no way a state that culturally, militarily, and economically dominated Eastern Europe since at least the 18th century would be willing to accept the continuous encroachment of Western powers into what it, with reason, considered its sphere of influence. And so, in February 2014, ‘little green men’ began to appear in the Crimea, where the Black Sea Fleet was located. Using Russian equipment and wearing Russian uniforms stripped of insignia, they seized key points in the Crimea, and forced the Crimean parliament to declare a pro-Russian prime minister at gunpoint. A quick annexation followed, with Russia formally incorporating it in mid-March.
The West was furious. The Russians had, like in 2008, invaded a sovereign state. But this time, they had no intentions of withdrawing back across the border; this was a land grab, plain and simple. Furthermore, Putin began funding and arming separatist ‘republics’ in Luhansk and the Donbas, recruiting from those pro-Russian Ukrainians disenchanted with the pro-Western government in Kyiv, in addition to committing Russian army units to combat. In response, the West sanctioned Russia, excluded it from the G8, and provided armaments and training to the Ukrainian military, while negotiating an oft-disregarded ceasefire agreement (the Minsk I and II agreements).
Here’s where the situation gets critical. In light of Russia’s aggression in Ukraine, the West committed enough aid for the Ukrainians to give the Russians a bloody nose, but refused to further provoke Russia by letting them into NATO and EU. For if Ukraine were part of either organization, the West would be essentially compelled to assist in Ukraine; yet joining either grouping would result in an immediate Russian invasion. Yet Putin’s continuing aggression made it very clear to Ukraine that the only way it would achieve any level of national autonomy would be to ally closer to the West, which was already providing them with substantial support. In fact, the goal of joining NATO is now embedded in the Ukrainian constitution.
However, as Putin stated on February 21st, “if Ukraine was to join NATO it would serve as a direct threat to the security of Russia”. The fact that the Ukrainians were now leaning towards Bruxelles and Washington was a cause for major concern. And so, the Ukrainians were in a bind. Their only hope for national autonomy was to join the West, which had no interest in their joining. Yet the fact of their involvement with the West made them the prime target of Russian aggression. Caught between a rock and a hard place, with no exit route, so the Ukrainians waited in a strategic purgatory for eight years.
Then Putin decided to invade.
Part II: ‘Special Military Operation’ and Peace
There is no overstating just how catastrophic this invasion is. This is the world’s single biggest crisis since the Cuban Missile Crisis — the first general war on the European continent since 1945.
Before the crisis began on February 24th, I wrote:
Millions will suffer, tens, maybe hundreds of thousands will die from the largest military offensive in Europe since the nightmare of 1939–45. There will be a global energy crisis, perhaps one for the foreseeable future. Refugees will stream into the Eastern European NATO states. And there is a very strong possibility that there will be a bitter insurgency in Ukraine, a massive civil conflict on the doorstep of the EU and NATO.
Disastrously, all of this has come to pass. I have never been sadder to hear that a prediction of mine has come to fruition. But nevertheless, what exactly did Putin want in his invasion? According to US intelligence (which has been more or less right so far), his advance on Kyiv seemed to indicate a move to destroy and decapitate Ukraine’s government. In addition, Putin’s repeated claims to “denazify” and “demilitarize” Ukraine hint at an effort to totally destroy Ukraine’s strategic military and political autonomy.
This begs the question: why this? Ukraine was already considering ‘Finlandization’ before the crisis began — essentially a pledge to never join NATO and the EU, and to consult with Moscow before any significant policy action. In fact, according to the Russian interpretation of the Minsk II ceasefire agreement signed in 2015, this is exactly what the Russian-controlled Luhansk and Donetsk ‘National Republics’ possess — a veto over significant Ukrainian policy decisions. And before February 24th, both France and Germany were edging towards a compromise solution that acknowledged a Russian reading of Minsk II as opposed to a Western one that denied the Luhansk and Donetsk separatists’ right to veto decisions made in Kyiv. These compromises would have satisfied a geostrategic reading of the situation — to stop NATO encroachment as well as enlarge Russia’s sphere of influence in Eastern Europe and therefore improve its power projection and help regain its status as a great power on par with China and the US.
But here we must reach the natural limits of realism, and move from the geopolitical to the psychological. Putin, the former KGB lieutenant colonel who described the best part of his life as spent with “the organs [of state security]”, is a man who witnessed the collapse of the Warsaw Pact and the Soviet Union, watching helplessly as protesters ransacked the KGB villa in Dresden and as Communist hard-liners attempted to take power in the 1991 August Coup. And to him, the collapse of superpower is a humiliation he must undo at any cost.
Here we must look again to history. In Russian history, the Czar has the title of “Czar of all the Russias: the Great, the Little, and the White”. The Great is Russia proper, the White, Belarus/Byelorussia. And the Little? Ukraine, which in Russian means “the frontier”. Given Putin’s recent efforts to support Lukashenko to the hilt during 2021’s protests in Belarus, it’s clear he’s pulling Belarus further into the Russian ‘Union State’ — Belarusian forces are integrated into the Russian command-and-control structure, there are no limits on what Russian weapons systems (up to and including nuclear weapons) can be stationed on Russian territory, and a significant proportion of the Russian forces invading Ukraine have crossed the border from Belarusian territory.
For Putin, therefore, there seems to be a significant nationalist-revanchist element to the invasion of Ukraine — to complete the triad, as it were. It’s as if he wants to pull Ukraine permanently into Russia, into some sort of Union State, like with Belarus, as a way of avenging the Soviet Union’s humiliation and breakup into a panoply of ‘Near Abroad’ territories. This nationalism is espoused in his now infamous speech on February 21st:
Modern Ukraine was entirely created by Russia, more precisely, Bolshevik, communist Russia… As a result of Bolshevik policy, Soviet Ukraine arose, which even today can with good reason be called ‘Vladimir Ilyich Lenin’s Ukraine’. He is its author and architect… And now grateful descendants have demolished monuments to Lenin in Ukraine. This is what they call decommunization. Do you want decommunization? Well, that suits us just fine. But it is unnecessary, as they say, to stop halfway. We are ready to show you what real decommunization means for Ukraine.
President Vladimir V. Putin — “Address concerning the events in Ukraine”, February 21st, 2022
Perhaps even more revealing is Putin’s own declaration of war against Ukraine, just a few days later on February 24th:
[Our] goal is to protect people who have been subjected to bullying and genocide by the Kyiv regime for eight years… At the same time, our plans do not include the occupation of Ukrainian territories. We are not going to impose anything on anyone by force… The results of the Second World War, as well as the sacrifices made by our people on the altar of victory over Nazism, are sacred. But this does not contradict the high values of human rights and freedoms, based on the realities that have developed today over all the post-war decades. It also does not cancel the right of nations to self-determination, enshrined in Article 1 of the UN Charter. Let me remind you that neither during the creation of the USSR, nor after the Second World War, people living in certain territories that are part of modern Ukraine, no one ever asked how they themselves want to arrange their lives. Our policy is based on freedom, the freedom of choice for everyone to independently determine their own future and the future of their children. And we consider it important that this right — the right to choose — could be used by all the peoples living on the territory of today’s Ukraine, by everyone who wants it.
President Vladimir V. Putin — “On conducting a special military operation”, February 24th, 2022
It’s as if Putin considers himself the protector and guardian of Russian peoples everywhere, acting in the legitimate, freely chosen interest of what he considers to be the Russian peoples. He speaks as if the will of the Ukrainian people is to “come home” to Russia, over the objections of the “criminal” and “Nazi” Zelensky regime in Kyiv, and he is merely acting in their interest, as their protector and guardian — a new Czar.
What terrible irony it is that the bloodshed and agony he is now inflicting on the Ukrainian people is supposedly in their name and interest. Russian forces have indiscriminately shelled civilian centers, killing thousands; they have cut off water and electricity to civilians. The smouldering ruins of Mariupol and Severodonetsk stand as monuments to Russia’s claim to act for the Ukranian people.
Yet one has to pause at this moment and ask a critical question: is the use of such terror tactics on other Slavs palatable to the Russian people, who have close ties with the Ukrainian people on the basis of historical experience, cultural similarity, and intimate ties of family and friendship?
Probably not. But it doesn’t mean the Kremlin propaganda machine can’t gin up some sort of alternate reality, where the Ukrainians are bombing their own cities, committing genocide against their own people, and Putin is the heroic savior, stepping in to free the poor Ukrainian people. Indeed, with the sudden mobilization of the state information apparatus, most notably with the overnight appearance of the ‘Z’ campaign, this is exactly what Putin seems to be doing. He doesn’t have to care about public opinion, because he can make it whatever he wants.
Yet despite Putin’s expansive war aims, literally everything imaginable has not gone according to plan. The assault on Kyiv, meant to deliver a blitzkrieg “decapitation” blow to the Ukrainian government, ended in streams of burnt-out Russian armor, a humiliating retreat from the capital, and war crimes in Bucha. The Siege of Mariupol, intended as a rapid victorious march into Russian-speaking Donetsk, turned into a nearly three-month bloodbath of indiscriminate shelling and urban warfare that blasted the city into ruins and tied down more than 14,000 Russian troops, nearly 8% of total Russian forces committed to the invasion, from badly needed redeployment elsewhere. And the flagship of the Russian Black Sea Fleet and Putin’s favorite vessel, the Moskva, lost after being struck by two Neptun anti-ship missiles, missiles the ship’s multiple layers of air defence weaponry should have been well able to neutralize.
The fundamental blunder in Russia’s approach here is not to do with its tattered military or its lack of combined arms strategy. It’s that Putin expected his ‘Special Military Operation’ to be exactly that — a quick waltz into Ukraine, dealing targeted blows towards the Ukrainian government, and meeting mass surrenders of poorly motivated Ukrainian troops and a welcome with open arms by its citizens, especially in the Russian-speaking east, a reception consistent with Putin’s belief that he’s acting in their interest. Instead, the Ukrainian people have fought back, with an astounding determination. We see common people, students, women, the elderly, Ukrainians abroad, all contributing to the defence effort — making Molotov cocktails, forming village watches, preparing defences, removing signposts, and volunteering for service with the Territorial Defence Forces. Meanwhile, his indiscriminate bombing and shelling of Ukrainian towns and cities have turned even the Russian-speaking east largely against the invasion. Instead of a ‘Special Military Operation’ like his annexation of the Crimea in 2014, Putin got a full-scale war.
And so, what happens now? Well, it depends on what exactly Putin’s war aims are. Russia had stated that the “demilitarization and neutral status of Ukraine” is non-negotiable, and “will be achieved no matter what”. Furthermore, to quote Putin himself on March 5th, “[Zelensky’s government] needs to understand that if [they continue to resist], they risk the future of Ukrainian statehood.” The price he was prepared to pay for that reunification with Russia was immense; some things, particularly those related to nationalism and revanchism, are simply non-negotiable.
But now, things are different. Russia has lost 15,000 troops in three months, as many as in ten years of war in Afghanistan. Nearly one-third of all Russian forces committed to the invasion have been rendered combat ineffective, with precious little to show for it. On the opposite side, Ukrainian morale remains high, and armed to the teeth by NATO, recently announced a plan to arm up to one million volunteers for the Territorial Defence Forces, likely in preparation for its own offensive operations. And as sanctions continue to bite, the military, economic, and strategic costs, already high, will increase immensely, further burdening a country already heavily sanctioned for its aggression in 2014, and one whose GDP is less than 10% of the EU’s. It is a war Russia can ill afford, and one which with each passing day, is bound to make it a poorer, more isolated, and much more internally dysfunctional nation than it already is.
In the wake of this abject failure in Ukraine, Putin has significantly downgraded his war aims. Claiming victory in Kyiv, he called for Russian troops to instead accomplish the “liberation of Donbas”, in effect giving up on taking the whole of Ukraine. He needs, more than anything, some sort of win to justify this immense investment of blood and treasure. Yet even this limited goal seems difficult, judging by the results on the ground, and given Russia’s dwindling capabilities and Ukraine’s continued will to resist and expanding arsenal.
It makes one wonder: why? Why go through all this pain and suffering, for both Ukraine and for Russia? It’s hard to conceive of a more ill-thought out war, one fought with less grasp of realities on the ground. And in the end, it is not Putin who will suffer. It is ordinary Russians who will feel the bite of sanctions, ordinary Ukrainians who will see their lives and communities shattered, and young Russian and Ukrainians whose bodies will pile up in the streets.
Part III: Policy With Other Means
Clausewitz famously wrote that “war is the continuation of policy with other means”, by which he meant that war, along with diplomacy, economics, and ideology, are all means of conducting policy. The problem here is that war, especially of the type once regarded as a thing of the past — organized, openly acknowledged general war between internationally recognized sovereign states — creates great effects on the normal operation of the other means.
Inter-state wars do not end in days, especially not where they involve such a spirited defence. And in allowing time to pass, Putin’s invasion became less a fait accompli — which one might lament for a time, but then deals with as a matter of realism — but something that might yet be reversed. Images of Russian atrocities, themselves largely the product of a stalled offensive meeting a hostile populace, have galvanized Western public opinion, while the resolute Ukrainian will to resist continues to inspire and renew calls for further support, both economic and military.
The fact that this has not been a fait accompli but instead a full-scale confrontation between East and West has fundamentally transformed the mode of conflict, and therefore, of the economic, diplomatic, and ideological dimensions of the struggle on the ground. Indeed, if one looks at the sanctions levelled against Russia by the US, the EU, and other allies, one sees something quite remarkable. The initial packages of sanctions applied just after the invasion on February 24th focused on cutting Russian access to the international financial system and Russian access to technological imports from the West. These measures did not even cut off all of Russia’s most significant banks from interacting on the SWIFT global payments system, leaving some untouched. Yet by March 9th, the US and UK were cutting off imports of Russian oil and gas, and on March 11th, the EU banned all Russian iron and steel imports. And by April 8th, even Russian coal imports were being targeted by the EU.
The initial sanctions were quite clearly agreed-upon in advance, prepared as a punitive reaction to a Russian invasion, designed to hurt unlike any sanctions package yet devised, but commensurate with the wide expectation that a Russian invasion would be a cakewalk. While invading a sovereign state must have a deterrent cost for potential future aggressors, one needs to live with Russia at the end of the day. Instead, in light of the ongoing struggle against Russia, what we see today is the economic equivalent of total war, with even critical oil and gas imports being considered for sanctions.
This unexpected “total economic war”, as French finance minister Bruno Le Maire put it, is far beyond what Putin expected when he prepared his invasion, and the ramifications for world energy markets will be dire. Most immediately, with the EU preparing a phased cutoff of all oil and gas imports from Russia, we are looking at a decline in marketable Russian oil and gas for the short term.
What the 1967 Arab oil embargo demonstrated was that oil can shift around — despite cutoffs of oil exports to Western countries, the Sette Sorelle (Royal Dutch/Shell, BP, Socal/Chevron, Jersey/Exxon, Socony/Mobil, Gulf, and Texaco) simply shuffled oil from one port to another, taking oil meant for non-embargoed countries to embargoed ports and vice versa, embargoes be damned. But while tankers can be moved around, pipelines cannot. Russian oil and gas reaches Europe through pipelines like Nord Stream through the North Sea and the Brotherhood pipeline transiting through Ukraine. Russia’s connections to other major markets are much less significant. Only one major pipeline, the recently completed Power of Siberia, connects Moscow with its friend with “no limits”, Beijing. Otherwise, its energy is trapped, with export volumes limited by LNG terminal capacity and available tonnage for oil exports — for the few nations willing to do business with a pariah regime. Even the recently increased flows to China and India are indicative — the Russian Urals grade is trading at a $30–40 discount to Brent crude to compensate for Russia’s weak negotiating position. Estimates have been made suggesting that up to 2.5 Gbbls/year originally bound for Europe might be permanently removed from the world market.
With so little Russian hydrocarbons reaching the world market, we are in a precarious situation with regard to world supply. In 1967, due to spare capacity in the US and Venezuela, the embargoed oil was replaced by stepped-up production from these two sources, averting a potential shortage. Today, however, there is precious little spare capacity. Venezuela, the great rescuer of 1967, stands with rusted and idle machinery, even though it appears somewhat open to US overtures to restore production; the US, with significantly higher variable costs than the Middle East, needs time to restart capacity and begin new drilling activities for wells that were previously unprofitable during the energy market crash of 2020. What little immediately accessible capacity remains is in the hands of the UAE and Saudi Arabia, which have not been entirely willing to cave to US pressure, while Iranian crude remains locked away under sanctions. And as for gas, little real spare capacity exists, as in the current elevated pricing environment, few producers would have any incentive to produce anything less than their total possible output. And even if there were spare capacity, Europe does not currently have enough LNG regasification terminals to absorb much more LNG. One way or another, there will be a shortage.
Even if new Russian pipelines could be built to redirect previously Europe-bound oil and gas flows towards China and India, it would appear that this shortage is not likely to be abated in the next ten years, if sanctions continue to bite. Before the invasion, the IEA predicted little spare capacity up to 2030; now, that looks to be even lower. Russia’s non-military technological sector lags behind the West, and without significant foreign investment and access to foreign technology, Russia is unlikely to be able to exploit its significant recent discoveries. Formations like the massive Bazhenov Shale will be inaccessible without the use of horizontal drilling and fracking technologies perfected in the US. But due to sanctions on the export of Western technology to Russia, Russian researchers (or those who haven’t already fled to the West) will be spending the next decade reinventing the wheel. Indeed, with the current level of sanctions lasting for the foreseeable future, it is questionable whether even current production can be sustained. Sustaining production from existing fields relies on constantly deploying new wellhead technologies. With Russian equipment in Ukraine being found to use repurposed dishwasher and washing machine semiconductors in the wake of Western sanctions on their export, it is highly dubious, to say the least, that the Russian oil and gas industry will be able to sustain its current production levels.
With oil and gas supply seemingly constrained in both the short and long term, prices have inevitably gone up in anticipation of continued shortage. But this isn’t the end of the bad news; no, it’s only the beginning. Led by spiralling oil prices pushing $130/bbl in March 2022, inflation is rearing its ugly head, on a scale not seen since 1982, in the wake of the 1979–81 Second Oil Crisis. Inflation thus far does not appear to be embedded in consumer expectations; yet that may soon change the longer this oil shock wears on. If this happens, there is a real chance the Fed could repeat its performance in 1982, reining in inflation at the expense of short-run GDP. And as economic growth in the core slows down, so too will the periphery. The 1982 Volcker Shock led to what economist Tyler Cowen termed “the worst financial crisis the world had ever seen” in Latin America; in Africa, the effects were similar.
Caught between either an economic crisis or severe inflationary pressures, the next decade in the developing world will have broad implications for the energy transition. Firstly, when coupled with disinflationary pressures in the core, energy demand would be set to decline, resulting in a glut on energy markets as exploration and production reach new heights in reaction to the expectation of prolonged elevated prices. This would be a serious blow to the economies of major producers like Saudi Arabia, and would further frustrate their already lackluster efforts (Vision 2030, anybody?) to move towards diversified economies, portending instability further down the road when a net-zero economy is eventually reached.
But more importantly, permanently lowered energy prices would be a severe blow towards the energy transition. Permanently lowered energy prices would make the transition difficult, if it meant switching away from cheap oil and gas towards renewables, which, beyond being more expensive, are more unreliable in terms of 24/7 generative capability and uncertain technologically. If so, given the short-termist nature of political decision-making, it is foreseeable that investment in clean energy would follow oil and gas prices on their trajectory downwards.
Yet in light of recent events, it may be argued that this transition must take place as a matter of “policy with other means”. Nuclear, wind, solar, and other carbon-neutral technologies are not necessarily the safest or most reliable methods of energy generation, but they have one thing in common — they can all be produced under conditions of autarky, within one’s borders. A country that embarks upon something akin to energy self-sufficiency will be substantially less vulnerable to geopolitical shocks abroad. The search for energy security on the European continent is driving further action towards net zero.
And this shift is exactly what we are seeing. Not only are EU nations shifting to increased investment in renewables, but committing to expansions in the long-taboo (with the honorable exception of France) area of nuclear power.
Yet the question remains: when prices come down, will the political will persist to transition towards alternative energy sources? In response to the 1973 AOPEC oil embargo and the First Oil Crisis, Nixon announced Project Independence, seeking energy self-sufficiency by 1980; yet, by 1979, America had increased its dependence on foreign energy sources from 36% to 50%. A tentative answer, at least for Europe, is yes — the naked aggression of Russia towards Ukraine has made it clear that energy is not only a question of energy security, but national and continental security.
But diversifying energy sources in search of security does not in itself mean energy transition. In a coming glut, there are many potential sources for cheap and politically secure energy, from Cypriot offshore gas to American shale oil. And precisely none of this implies continued investment in clean energy and renewables.
The inescapable conclusion, therefore, is that if renewables are to continue their gradual ascent towards supplanting King Oil from his throne, the citizens of the world must continue to pressure their governments towards the energy transition, harder than they have before, in a coming era of cheap and plentiful energy. Otherwise, the simple fact of the matter is that oil and gas will be here to stay, longer than anyone anticipated, with potentially catastrophic effects for our climate and the civilization we have built thus far.
Part IV: A Philosophical Deepening
Since 1945, world politics has ostensibly revolved around the concept of a pax Americana, based around the principle, not always respected, but held sacred nonetheless, of the sovereignty of nations, enforced by and for hegemonic American power. Yet here, the UN, NATO, the EU and America have failed in guaranteeing the independence of a sovereign state. For perhaps the second time in the post-1945 era, a universally recognized sovereign state has started a general war of national annihilation with another universally recognized sovereign state. (Individual accounting will differ — does Israel, for instance, count as a universally recognized sovereign state?) This is a naked land grab, disconnected from any semblance of international consensus — only Russia, Belarus, Eritrea, Syria, and North Korea voted against the UN General Assembly resolution condemning the Russian invasion. And unlike the first time this happened — in the 1990–1 Gulf War — the international community has been unable and/or unwilling to send troops to fight off aggression.
This is a dark new world we live in, one where we have returned to the cold, bare facts of great power politics, and the illusion of national sovereignty discarded. We seem to have returned to 1939, when Hitler could simply march his Wehrmacht into Czechoslovakia, meeting strong Western disapproval, but with little else.
In the face of this unprecedentedly naked aggression, the West has reacted in a way no longer thought possible, not only by Putin, but by many in the West itself. Though not always united on every measure, the West has rallied to push through sanctions on Russia and to rush increasingly sophisticated and deadly weapons systems to the front lines in Ukraine. Yet while certainly laudable, this was certainly not what Western leaders were initially prepared to do in response to a Russian invasion widely expected to overwhelm Ukraine within three days. Indeed, the initial response — cutting select Russian banks from SWIFT, sanctioning Russian technology imports — seems now woefully inadequate, in light of Putin’s huge commitment to the invasion, to deter a quick Russian takeover. The massive investment in Ukraine by the West comes as a reaction to the fact that Ukrainian military capabilities vis-à-vis the Russians have been far more effective than expected, allowing for a chance to repel the invasion and degrade Russian capabilities. In other words, high levels of support to a non-NATO Western ally under attack is contingent not on its being attacked, but on its ability to defend itself when under attack.
The lesson here is clear — great power politics, realpolitik, is back, and with it, the realization that the only true deterrence is ex-ante credibly committed force. That’s why Germany has committed to rearming, with a huge €100 billion investment in the Bundeswehr, making it the third-largest military power on Earth. This is, as Chancellor Olaf Shultz put it, a Zeitenwende — a sea change. Germany, more so than almost every European power, is historically extremely reluctant to base its foreign relations on the cornerstone of military force. Compared to France, Spain or the UK, it vastly preferred instruments like international trade (“Wandel durch Handel” —“change through trade”) and diplomacy (e.g. Ostpolitik) to achieve its foreign policy aims, a legacy of the disastrous last time around it tried to use military force to implement foreign policy. The fact that even Germany is plunging headlong into a massive rearmament program that just thirty years ago would have raised concerns in London and Paris is an indicator of just how fundamentally the geopolitical calculi of great powers have turned towards the cold logic of deterrence.
The same calculi are being made a continent away, both in Beijing and Taipei. Despite the war in Ukraine, China, not Russia, continues to be the West’s greatest strategic rival, a near-peer competitor to the US. The funnel of American and European arms to Ukraine concerns Beijing very much, as a similar funnel could exist in the event of a prolonged war in Taiwan. Even more so than in Ukraine, the Taiwanese will fiercely defend, with their far more extensive arsenal of American-supplied weapons, what they see as a lone outpost of democracy from a one-party state they no longer identify with on a solely ethnic basis. And a hard-biting sanctions regime, if enacted, would hurt China far more than Russia, given how much more interconnected China’s economy is with global trade.
Xi Jinping is no fool, and will not be drawn into a conflict with potentially destabilizing consequences for both China and the world, at least not while he’s eyeing re-election. But he’s also critically aware that with the test case of Ukraine, the clock is ticking on the window for forceful reunification. President Tsai Ing-Wen’s government in Taiwan, keenly aware of the Ukrainian example, is rearming post haste, and with each delivered weapon, China’s ability to conduct a swift invasion diminishes, increasing the chances of a prolonged and bloody conflict where ROC forces are continually resupplied with American arms, and massive sanctions are applied to Chinese exports.
Between China and Russia, American power is now challenged in such a way that it hasn’t been since 1972, before Nixon’s opening to China. This challenge is further exacerbated by the fact that the West, especially the US and UK, is intent on degrading Russia’s forces to such an extent that it no longer poses a threat to the safety and security of its neighbors. They suppose that Russia, so far having proved itself a paper bear, has little potentially useful geopolitical value. But this ignores two critical realities. The first is that the broader Central Asian region, that Russian ‘Near Abroad’, is in the security sphere of Russia, namely, the Collective Security Treaty Organization (CSTO), Russia’s answer to NATO. The CSTO has an important role in maintaining order in Central Asia — for instance, when Kazakhstan experienced anti-government protests in early 2022, CSTO peacekeepers were deployed to quell the unrest. If Russia is so degraded as to lose its ability to intervene in these nations, China will very gladly move in. Far better a Russia as weak hegemon over this geopolitically critical area than China as its absolute master.
More importantly, this view is dangerously short-sighted. Yes, Russia is, as Xan Smiley once put it, “Upper Volta with rockets” (and oil). But that forgets that historically, Russia has been a great power since the 18th century. Nelson Mandela once said that “there is nobody more dangerous than one who has been humiliated”; a great power endowed with a magnificent legacy does not suffer humiliations lightly. And great powers have a tendency of returning, often with a vengeance—the nationalist-revanchist Putin regime is a prime example.
More dangerously, consider the case of China. A century of humiliating national weakness from 1842–1949 was followed by an aggressive Communist regime that sought to expand Chinese influence and restore its greatness by any means necessary, regardless of China’s ability to support its interventions in Korea, Vietnam, and elsewhere. Even today, that century of humiliation is at the psychological core of Xi Jinping’s ‘Wolf Warrior’ diplomacy to reclaim China’s rightful place as the Middle Kingdom, the center of the civilized world.
While a humiliating military defeat will lead to the destruction of Russia’s military and strategic capabilities for the next generation, as Lord Palmerston once said, “our interests are eternal and perpetual, and those interests it is our duty to follow.” The West’s long-term strategic interest is in Russia as a stable second-rank power with an according sphere of influence that can potentially serve as a counterweight to China. If Russia experiences what amounts to half a century of humiliation, from 1989 to sometime in the 2040s, or perhaps even longer, there will be no going back. The West will not be able to undo fifty or more years of Russian psychological conditioning against the West. The West will now have to contend with a Russia conjoined to China at the hip, the absolute antithesis of Western objectives.
It will be naturally objected that it is possible to build a lasting peace with a totally defeated state. Examples include West Germany, Japan, and France during the Bourbon Restoration. But the postwar reconstructions of Germany and Japan required the garrisoning of those nations for years, as well as a massive investment in the rebuilding of their economies. On a similar note, the largely peaceful France of Louis XVIII and Charles X was only made possible at the behest of the victorious allies of the Seventh Coalition, who afforded France very lenient terms at the Congress of Vienna.
Total military defeat and occupation is clearly out of the question here. But the second option, the offering of a graceful exit, is still possible.
But what is the off-ramp for Russia? What will Putin accept? This, unfortunately, is yet unknown. But it will surely involve assuaging Putin and the Russian people’s psychological demands, by way of fulfilling some of their geopolitical demands: some sort of territory transferred to Russia, and some degree of ‘Finlandization’. The trouble is with getting the entire West to agree on this, let alone the Ukrainians.
For many Western allies, especially in Eastern Europe, their primary concern is that future aggression is deterred, that Russia, China, and other would-be aggressors see that there is a price to be paid for aggression. But while there is a cost to aggression, as the initial sanctions package demonstrated, that initial sanctions package was not sufficient to deter aggression. Rather, the price that Russia is paying is a product of better-than-expected Ukrainian military capabilities that convinced Western leaders that stronger sanctions and more arms were a realistic option to undo Putin’s initial battlefield advances. Any belief that the West has the willingness to come to the aid of a future embattled non-NATO ally that will not hold out so bravely is simply a fantasy. If only ex-post measures, taken in view of the situation on the ground, can ward off threats, deterrence has already failed. All that has been demonstrated, and will be demonstrated, no matter how much support is sent to Ukraine, or however much battlefield success the Ukrainians achieve, is that the West may respond with deterrent force if a non-NATO allied state manages to survive hostile aggression for an extended period.
And as for the Ukrainians, let us make no bones about strategic realities. The West’s interest in Ukraine extends so far as they are strategically important, not in their right to self-determination. Russia’s drive to reclaim Ukraine is geopolitically important given Ukraine’s position on the European landmass; Russian domination would imply control over both troop positionings as well as Ukraine’s natural resources, from pipeline routes to its extensive wheat exports. Furthermore, it indicates a desire to bring back the Baltics back into the Russian sphere of influence, a direct threat to the integrity of NATO.
No such support would extend to any state in the Caucasus or Central Asia which decided to free itself from Russian influence. An attack on Georgia instead of Ukraine would be met with protest from the West (as in 2008), but certainly not any substantial support, even though both scenarios would involve violating the principle of the sovereignty of nations. The simple fact is that Georgia is far away from core European and Western strategic interests, the true criteria that concern Western policymakers.
Somehow, the Ukrainians must be made to acknowledge Western strategic realities. Yes, it is ultimately their war, but it is not in the Western interest that all options be available to them. Just as Nixon threatened to abandon South Vietnam in order to get President Thiệu to sign off on the 1973 Paris Peace Accords, so too should the West resort to arm-twisting measures with Zelensky, if need be.
Abstracting now from the case of Ukraine, what this crisis calls for is a new philosophical deepening in foreign relations. As former US Secretary of State Henry Kissinger wrote in 1969:
In the years ahead, the most profound challenge to American policy will be philosophical: to develop some concept of order in a world which is bipolar militarily but multipolar politically. But a philosophical deepening will not come easily to those brought up in the American tradition of foreign policy… a certain manipulativeness and pragmatism, a conviction that the normal pattern of international relations was harmonious, a reluctance to think in structural terms, a belief in final answers — all qualities which reflect a sense of self-sufficiency not far removed from a sense of omnipotence. Yet the contemporary dilemma is that there are no total solutions; we live in a world gripped by revolutions in technology, values, and institutions. We are immersed in an unending process, not in a quest for a final destination.
Former US Secretary of State Henry A. Kissinger—“Central Issues of American Foreign Policy”, 1969
A new constructive realism needs to set in with regards to the world we live in, a structural approach that returns to the cold hard facts of geopolitics and the psychological realities of global players. This is truly a dark new world, where all actions are contemplable, technological change is transformational, and multipolarity fundamental. With the onset of the Trump administration in 2017, many observers, myself included, believed a chance existed to pivot away from a strict ideological us-versus-them dynamic. But Trump’s foreign policy only deepened this confrontation, embedding ideological conflicts with China and Russia over issues like human rights in Xinjiang and democracy in Hong Kong.
President Biden’s “battle between democracy and autocracy”, while a nice rallying cry centered around a set of admirably noble goals, needs to take second place to this constructive realism as a fundamental view of the world. In fact, it is exactly Washington’s ideological bipolarity that has driven Moscow and Beijing together as friends with “no limits”; the American commitment to democracy as a basic building block of international relations both threatens the legitimacy of their regimes and demeans their pride in their own systems of government. Further ideology-based policy would only undermine the multipolar division of the world and divide the world into two blocs, a dangerous inflexibility that sacrifices potential strategic gains for moral self-congratulation.
In the spirit of constructive realism, I close with an enlightening quote from Machiavelli:
It appears to me more appropriate to follow up the real truth of the matter than the imagination of it; for many have pictured republics and principalities which in fact have never been known or seen, because how one lives is so far distant from how one ought to live, that he who neglects what is done for what ought to be done, sooner effects his ruin than his preservation; for a man who wishes to act entirely up to his professions of virtue soon meets with what destroys him among so much that is evil.
Niccolò Machiavelli — The Prince, 1513