bne -

As the EU meets Monday, September 1 for an emergency summit on how to respond to Moscow recognizing South Ossetian and Abkhazian independence, things are clearly spiralling of control. Coming on top of all the other bad news - both in Russia and abroad - this new threat of EU sanctions has helped pushed Russia's stock market below the levels hit in 1998 when Russia defaulted on its international debts. "Perfect Storm" has been the favourite metaphor for the current mess. I prefer "hysteria."

What stuns most about this situation is the size of the gap that has opened up between the facts and the positions: how can the two sides be so completely at odds? To Washington, Moscow is the aggressor, whereas the Kremlin points out it was its peacekeepers that were attacked. You can't negotiate anything from a starting point like this.

Asia Times columnist Spengler explained the clash very neatly with a clever analogy: Americans play Monopoly, Russians play chess. The way you win at Monopoly is to put as many hotels on as many properties as you can - and that's it. There is no real strategy here and put in the terms of US foreign policy, all these hotels need to be run by the Freedom & Democracy franchise, irrespective of who keeps the profits. The way you win at chess is to marshal your pieces around the periphery of the board to control the centre and then eventually push through to attack the king. You don't have to take the opponent's pieces, you just need to control the strategic lines on the board.

Washington's Monopoly approach to international relations is infantile in its simplicity. Washington may genuinely see the Czech/Poland-based anti-missile system (Warsaw decided to sign off on this deal at the height of the crisis - is it possible to imagine worse timing?) as simply another hotel and really has no aggressive intentions towards Russia. However, for the chess-playing Russians it was an incredibly aggressive move on the US' part, as it points directly at the king.

Despite Georgian President Mikheil Saakashivili's battered democratic credentials following his use of riot police to quell an opposition protest last November, all Washington sees in the Georgian fracas is a piece of the Georgian F&D hotel being lost to Russia. Washington probably doesn't have any intention of actually doing anything with this hotel, they simply want it to be there. This is the bit the Kremlin doesn't understand.

The analogy also explains how Washington, without showing the slightest trace of embarrassment, can ignore the parallel Moscow is drawing with Kosovo. The issue here is not one of sovereignty or choice exercised by an ethnic people living in an enclave, but one of hotels. Kosovo is now another hotel in the Balkans run by Freedom & Democracy Inc.

Chickens

Now everything has gone pear-shaped. The Russians were already losing their patience with the West as Vladimir Putin made clear in his Munich speech last year. When Dmitry Medvedev took over as president at the middle of this year, he went to Berlin and called on the West to show it was serious about engaging with Russia. But little happened. And now any deal is off. Russia will abandon any attempt to be nice, and what business happens will done on a commercial basis under contract, case-by-case, deal-by-deal. Diplomacy is dead.

The West has goofed and is resorting to threats that they cannot hope to carry through. German Chancellor Angela Merkel insisted in late August that Georgia will still join Nato, but none of the member states will allow Georgia into Nato while Saakashvili is still in charge. To do so would hand him the power to drag the western world into World War III with Russia.

What other hold does the West have over Russia? EU accession - Russia was never going to join. Nato partnership? Nato was set up to oppose Russia and is now searching for a new role. No one wants that new role to be opposing Russia. The World Trade Organisation? Russia hasn't been allowed to join anyway. Moreover, following the collapse of the Doha round of talks, the WTO project is losing its appeal, as trade remains based on bilateral relations anyway. Sanctions? Russia doesn't export any manufactured goods to speak of and the West can't cut off supplies of what it does export - metal, oil and gas.

What about hurting Russia's domestic market by cutting off exports to Russia? This would hurt the West more than it would hurt Russia. The economies of Central Europe like Germany and Austria are evermore reliant on Eastern Europe for sales, while Ford Motor's only profitable market in the world at the moment is Russia. Indeed, this weapon is being used in reverse. The Kremlin announced August 26 that it was going to cut US poultry imports to Russia, which account for three-quarters of the chickens sold in the markets - known as "Bush's legs" by the locals. Russia is also a massive market for Western European pork and other foodstuffs, importing about 40% of its needs. One distributor told me that it was impossible to get class-A fruit and veg for London's top restaurants, as it's all sent to Moscow now.

The West needs Russia far more than Russia needs the West. Russia is a key transit route into Afghanistan where the war on terror is going badly. Russia has warm relations with North Korea and, along with the Chinese, has one of the few levers on the bonkers regime in Pyongyang. And Moscow's good ties with Tehran provide one of the few realistic ways of containing Iran's nuclear ambitions.

About a year ago, former German Chancellor Gerhard Schoeder gave a speech in Berlin in his new role as chairman of the Gazprom-led Nord Steam gas pipeline in which he urged the West to make up with Russia. "There is a window of opportunity to engage with Russia and work with them as partners, but this window will not stay open forever and Russia has alternatives. There is another large and hungry market to the east - China," he said.

That window has just slammed shut.

Appendix

The reporting by the international press has gone into hype-mode in an attempt to milk the Russo-Georgian drama for all its worth, playing on its favourite theme of: "the nasty Russian bear is coming to get'cha."

The Sunday Times produced a classic of the genre by sending Askold Krushelnycky to Sevastopol in Ukraine and ran a piece entitled, "Ukraine fears being next on Russia's hit list." This is a completely irresponsible piece of reporting. What hit list? It suggests Russia's actions in Georgia are part of a grander plan to retake control over its former vassal states without providing a shred of evidence that this is the case. This story should have been entitled: "Ethnic tensions in Crimea rise in wake of Georgian war."

The opening paragraph of this article is a classic example of egregious misreporting: "Rival groups of Russian and Ukrainian demonstrators hurled insults at each other to a background of cannon fire as the Russian navy's Mirage sailed into Sebastopol on Ukraine's Crimean peninsula last week. The celebratory gunfire could become all too real if fears are realised that Russia may repeat its incursion into Georgia and turn Ukraine into the next Caucasian flashpoint," Krushelnycky writes.

"...could become all too real"? And pigs could fly if they had wings. The chances of Russia bombing Kyiv in the near future are infinitesimal. The article doesn't even attempt to address the chances of a Russian invasion of Ukraine. The Georgian story has turned into what is known in the profession as a "feeding frenzy," where the game simply becomes to find someone, anyone, who will supply quotes that contain the required buzzwords. In this case, Krushelnycky dug up a pro-Russian Crimean party called the Russian Bloc that has no representation in the Rada, but supplied all the necessary quotes. Apparently, a Russian invasion is a "certainty," but "the Russian annexation of Crimea would be peaceful," says the party's leader Vladimir Tyunin.

The only reference to real political analysis on the actual likelihood of a Russian invasion was: "A western military source advised caution, saying Crimea was effectively already occupied by Russia." This is obviously a spurious remark and says nothing about the real threat of Russian aggression against Ukraine. This remark was so clearly taken out of context that Krushelnycky was careful not to name the analyst.

Send comments to The Editor