MOSCOW BLOG: Brexit in the age of fragmentation

MOSCOW BLOG: Brexit in the age of fragmentation
Euromaidan protesters wave Ukrainian and EU flags in Kyiv, November 2013.
By Ben Aris in Moscow June 24, 2016

"International relations are fragile and delicate and we are entering an age of fragmentation,"  European Commission President Jean-Claude Juncker told Russia's assembled business elite in his speech at the recent St Petersburg International Economic Forum (Spief), which he attended in an effort to patch up relations between Russia and the EU.

Those words are prophetic, as Europe is clearly a lot more delicate than Juncker had assumed, following Britain's decision to leave the EU entirely, or Brexit, a little over a week later. Juncker is right in that not just Europe but the entire world is splintering and countries around the globe are turning inwards.

The Commission head was not very optimistic that his widely criticised trip to Moscow would bear fruit, admitting that it was going to be a "very hard conversation". No news came out of his meeting with Russian President Vladimir Putin later the same day, and obviously the two men found little, if any, common ground. Europe now remains fundamentally divided along its eastern border, and with mounting military spending and massive military exercises, the prospect of a new Cold War look more real than ever.

Russia's geopolitical showdown with the West and the UK's decision to leave Europe are all manifestations of same centrifugal forces that are remorseless pulling Europe apart. 

One of the most powerful is that the old world order, dominated by the US, is struggling to adjust to the rise of emerging markets that joined the global capitalist community two decades ago, but are now starting to flex their economic, and in Russia's case military, muscles. The core of Putin's foreign policy is to shift from a unipolar world dominated by a single superpower to a multipolar world where all the major economies choreograph their interests – an aspiration shared by the other BRICS nations.

Another powerful force is the tsunami of migration that the fall of the Iron Curtain has unleashed. This has been most obvious in the millions of families fleeing the fighting in the Middle East, but Europe has also quietly seen floods of migrants from the Emerging Europe countries who are moving to seek a better life. In addition to more than a million Syrian refugees that Germany has recently sheltered, it had already given passports to 8mn Russians of German descent, as well as large numbers of migrants from across the former communist Eastern Europe.

But the most divisive force driving the fragmentation is widening income inequalities that have been made worse by the global fincnial crisis.

Continental wide protests

Within many countries – both in the East and West – income inequality is tearing at the fabric of society. In the US, most of the wealth created in recent years has accrued to the top 1%, leading to public protests the like Zuccotti Park "Occupy Wall Street" protests in September 2011. The poorest segment of the US population is becoming increasingly frustrated with unaccountability of the Wall Street/Washington elite and violence against Afro Americans in the "Black lives matter" campaign. Some 50mn Americans are now estimated to be "working poor".

Europe has been riven by similar protests ever since austerity was imposed following the 2008 crisis. Spain and Greece have seen sizeable riots and France was home to street fighting again this month as youths rioted in protest at harsh new labour laws.

The Brexit shock in the UK, where much of the establishment came out in support of "Remain" was due to a protest by Britain's working class, tired of "fat cat Eurocrats" and the Westminster elite telling them what to do. It is hard to see Europe's effect on the streets of South Shields or Bradford, and so the "Leave" vote was as much a protest against the system as it was in support of a specific policy goal.

"What is happening today is shameful crisis of leadership all across Europe in dark times when we need outstanding leaders the most," Max Eristavi tweeted on the morning after the Brexit vote. Eristavi is a leading opposition journalist in Ukraine, a country that is relying on the EU's help more than most.

But very similar forces are at work in Europe's east, although the problems are worse and the government's response a lot more heavy-handed.

Armenia was riven by the "electricYerevan" protests earlier this year after the government tried to impose large power tariff increases on the people to pay for debts arising from incompetent management of the utilities. Serbian authorities were under siege by protestors in June over a waterfront development that favoured the well-connected. And similar protests have been seen in Kosovo and Macedonia, leading some to ask whether a "Balkan Spring" is in the making.

Turkey too has seen mass protests that started over Istanbul's Gezi Park, again over a proposed real estate development that ran roughshod over public interest, and periodic anti-government protests since, one of which last autumn ended up as the target of terrorist bombs. In addition to the political arrogance of the ruling elite, Turkey is also dealing with Islamic extremism cross the border and a long-running ethnic dispute with the Kurds that has led to virtual civil war in the south-east of the country. 

Even in Central Asia, in the normally quietly suppressed republic of Kazakhstan, protesters burst onto the streets in May with the so-called land protests (again sparked the sale of land and development plans) that saw hundreds arrested only to be followed by a terror attack in the town of Aktobe a few weeks later.

Of course, the granddaddy of the protests in Eastern Europe was the Euromaidan protests of 2013-2014 in Ukraine. This began as a popular protest against then president Viktor Yanukovych's decision to snub the EU's free trade and association deal, and put his eggs in the Russian basket instead, but quickly morphed into a general protest against the kleptocratic regime that was (and still is) run by and for the benefit for oligarchs. Ukrainian President Petro Poroshenko is now sailing close to the wind after he has failed to deliver on any of his reform promises and the oligarchs continue to run the country.

Ironically Russia, which suffers from the same wealth inequalities and aloof elite problems, has largely escaped from popular protests, other than briefly in 2011 following a rigged Duma election. That is partly due to Putin's increasingly tight grip on power, exemplified by the recent setting up a National Guard security force that answers only to the president. But it is also because the trickle-down of hundreds of billions of petrodollars has lifted the average income of the average Russian way above their emerging market peers. Putin has also adroitly used the aggressive tactics of the West to contain Russia to stoke national pride and lift his own popularity to record levels.

Refugees drive lurch to the right

Most of these protests have at their root dissatisfaction caused by the growing gap between the rich and the poor, which has been exacerbated by the 2008 crisis and subsequent global economic slowdown. However, they have also been stoked by the mass movement of people leaving economic basket cases or fleeing warzones in the search for a better life, which is fuelling a backlash of right-wing politics.

The mildest manifestation was the decision of the Dutch to reject ratification of EU-Ukraine Association Agreement in April in a non-binding referendum that may still scupper the whole deal for Ukraine. There is clearly expansion fatigue in Europe and possible Turkish membership was used as a weapon in the "Leave" campaign in the UK.

The millions of desperate Syrian families piling up on the EU's borders have forced countries to ask themselves what they want to be, to which popularist politicians answer: "the same as we always were". For most that means white, Christian and richer than everyone else.

The Syrian refugees crisis has brought the issue to a head and forced European leaders to cut a deal with Turkey so unsavoury that Nobel prize winning Doctors Without Borders (MSF) has refused to cooperate with it. German Chancellor Angela Merkel has got herself into hot water at home by, uniquely in Europe, throwing open the gates and allowing a deluge of refugees to enter the country.

Studies show that almost all Europe-bound migrants from the developing world are headed to Germany (except for the Baltics, where young people almost exclusively want to go to London.) The fall of the Iron Curtain has added to the fragmentation process as the populations of the host countries become increasingly uncomfortably with all these "foreigners" coming to live in their midst.

The end of globalisation

The Eurozone crisis has caused countries to turn in on themselves for economic reasons too. Falling incomes, rising unemployment and slowing production have led countries to tout protectionist policies such as US presidential candidate Donald Trump's wall with Mexico. As bne IntelliNews wrote in a recent blog "The end of globalisation", the high-water mark of global economic integration was probably Russia's accession to the WTO in on August 22, 2012.

Alfa Bank's chief economist Nataliya Orlova said in a recent interview with bne IntelliNews, that"Until then, Russia was pursuing a policy of global intergration and the attraction of foreign investment. But after the events in Ukraine started it did a rapid about-face and is now shutting out the rest of the world and striving to become self-sufficient in everything it can."

Economic isolationism is the new fad. One of the arguments for Brexit is the pound will weaken – and it fell over 8% on the first day of trading after the vote – which will boost exports and help reduce the UK's large trade deficit. But as the BBC's Linda Yueh ‏points out the pound fell by some 25% after the 2008 crisis with little impact on the trade deficit.

The Greek and Cyprus crises are also centrifugal forces where the big and prosperous Central European countries would like to jettison the small and unproductive countries that are increasingly seen as a burden on taxpayers.

A June survey for the Pew Research Center found that only 38% of French still hold a favourable view of the EU, six points lower than in the UK. Euroscepticism, the pollster found, is on the rise across Europe and about two-thirds of both the British and the Greeks, along with significant minorities in other key nations, want some powers returned from Brussels to national governments.

Anti-Europe goverments and parties are on the rise in all the Scandinavian countries, Poland, Hungary, Denmark, the Netherlands, France and even Germany has spawned the "Alternative for Germany" anti-immigration party.

Clearly, EU enlargement is now over and that will destablise things further. British Prime Minister David Cameron explicitly said Turkish membership was not on the cards. Removing the pretence of membership removes the only leverage the EU had over the increasingly ambitious Turkish President Recep Tayyip Erdogan, who is striving to create an executive presidency and install himself as the supreme leader.

"The fragmentation of the EU has started. Britain was the first to abandon ship," Turkish Deputy Prime Minister Nurettin Canikli wrote on Twitter following the UK's vote.

It is also bad news for the rest of Southeast Europe where all the remaining candidate countries hail from: Albania, Macedonia, Montenegro and Serbia. Others who want to join the queue include Bosnia & Herzegovina, Kosovo, Moldova and Ukraine.

The break-up of the EU has come as an especial bitter disappointment for Ukraine, where over 100 people lost their lives two years ago on Kyiv's central square as they struggled to attain a new life closer to Europe. The people, if not the government, have been looking to Brussels for help and encouragement, but little aid has arrived.

"My reaction to Brexit is similar to the one about Crimea: you observe how the world you are used to ceases to exist… and you feel lost," Ukrainian political activist and bne IntelliNews columnist Katya Kruk tweeted on the morning after the vote.