INVISIBLE HAND: West needs to jaw-jaw, not war-war

By bne IntelliNews May 19, 2014

Liam Halligan in London -


"That the Cold War ended in our lifetime without a general war and a nuclear exchange is the greatest shared boon, a true miracle of our own times. Nothing beats that – it is the thing that trumps it all".

These words were uttered two years ago by Peter Hennessy, the distinguished British historian, on BBC Radio 4. It's revealing such a profoundly true observation is so infrequently made.

Far from celebrating the end of the Cold War, and its peaceful denouement, the western establishment appears to long for a return to the bad old days of east-west loathing and mutually assured destruction. Rather than building on the successful defusing of a 40-year standoff, recognising the vast benefits of cooperation and trade, politicians in Washington and London seem intent on renewed conflict with Russia. This sentiment has grown stronger, of course, since the outbreak of rhetorical hostilities over Ukraine.

When the Kyiv disturbances began in February, after then Ukrainian president Viktor Yanukovych rejected the EU's Association Agreement, Russia instantly reverted to pariah status in the eyes of many western observers. Complex issues were reported in absolute terms, just as during the Cold War. Russia was axiomatically wrong, whatever Moscow said, with the US and UK always right.

Since then, hard facts have gone out of the window, vital shades of grey ignored. The Anglo-Saxon media has coalesced around a single "narrative" – that the Euromaidan protesters in Kyiv are brave freedom fighters, while Moscow is itching to invade eastern Ukraine and maybe Poland and the Baltic States too.

Having recently written several articles advocating mediation between Russia and the West on Ukraine, I've receiving a slew of media abuse for my trouble. To observe that the 2010 election of Yanukovych was "fair" and "competitive", as stipulated by the Organization for Security and Co-operation in Europe, is to be labelled a "Putin apologist". To highlight that it was perhaps unwise for the West openly to encourage a welter of rock-throwing thugs to oust an elected president is "suspect". To call for a thorough, independent investigation into who really was behind the February sniper shootings – which killed 70 protestors, transforming Kyiv unrest into a global diplomatic crisis and "New Cold War" – is apparently "tasteless" and "insensitive". To offer factual, rational analysis of an extremely dangerous and complicated situation, while rejecting jingoism and tub-thumping, is to provoke unalloyed scorn.

The Ukrainian people as a whole should surely have ousted the incompetent and unsavoury Yanukovych via the ballot box in elections originally scheduled for March 2015. Surveys of voting intentions suggested that would happen. Ordinary Ukrainians, rightly, are sick of kleptocratic government – precisely why the unelection of Yanukovych should have gone ahead. A peaceful yet decisive removal of a discredited leader would have embedded a stronger, more durable Ukrainian democracy.

Instead, violence prevailed – violence backed and encouraged by megaphone diplomacy from Washington, London and Brussels. An "interim" government was installed, again with heavy western intervention, the composition and early actions of which seemed deliberately designed to create as much upset and insecurity as possible in Ukraine's Russian-speaking south and east.

The forceful removal of Yanukovych seriously undermined Ukrainian democracy, even before you consider its chaotic aftermath. The current unelected (nay imposed) government, lionized as "legitimate" and "courageous" in western editorials, is also clearly despised and feared by much of the population – not least as several senior members are from the openly-Russophobe Svoboda party, including the minister of justice and deputy prime minister. Svoboda's founder, Andriy Parubiy, has become National Security Secretary, no less, with Dmytro Yarosh, leader of the neo-fascist Right Sector group, as his deputy.

To write such uncomfortable truths, to observe that threatening sanctions you'll never impose is counter-productive, and that for all our moralising it's the "advanced" countries that, across much of the world, look marginalized and shrill, has been to endure ridicule.

The current atmosphere in the western media village reminds me of the early 2000s, prior to "regime change" in Iraq. Those of us who opposed that foreign foray, voicing concerns about self-serving western intelligence, endured ridicule then too.

The invisible hand

As someone who is British, and proud to be British, I know how admirably truth-seeking my native media can be. American journalists, too, can point to a long and proud tradition. I have years of experience, though, that tell me when it comes to covering post-Soviet Russia, even the pretence of objectivity has gone.

As a rookie journalist living in Moscow in the mid-1990s, I wrote a column in the Moscow Times. Dubbed "The Invisible Hand", my weekly offering focused on the thrills and spills of Russia's early economic reforms. Like its 1990s predecessor, this column will focus on economic and business developments, not only in Russia but across the entire bne region, from Poland to Mongolia, from Estonia to Kazakhstan.

Twenty years ago, Russia's fragile "transition" economy lurched from crisis to crisis. Prices spiralled upward, the ruble seesawed wildly and the Communists looked set to return. By the time of the 1998 collapse, the Russian economy was on its knees, with 86% annual inflation, income per head below $1,500 and government debt at 160% of national income.

Since then, Russia has staged a quite remarkable turnaround. Annual inflation is in single digits, per-capita dollar incomes are up ten-fold and state debts are miniscule at around 8% of GDP. Barely recognised by Western pundits, this transformation is among the major economic stories of our time.

Many "experts" argue that Russia remains a stagnant petro-economy. Yet energy production now accounts for just 16% of GDP, less then Norway and down from 40% in 2003. Russia's service sector, which barely existed in the late-1990s, is now three-times bigger than oil and gas.

Yes, growth has been uneven and major challenges clearly remain. But Russia is a low-tax, fiscally-sound economy with a rock-solid core banking sector – and great prospects in high-tech, pharmaceuticals and other value-add sectors. Adjusted for purchasing power, it's the sixth biggest economy on earth.

Western journalists who've followed Russia for a long time and remember the chaos of the early post-Soviet era, tend to recognise this incredible progress – not just on the economic front, but in terms of pluralism, social attitudes and freedoms too. Contemporary Russia isn't as liberal as we'd like it to be. But it's come a long way in a short time and the direction of travel is clear.

Most other commentators, having visited Russia only recently, if at all, seem determined to think the worst, stressing the negatives and ignoring significant gains. This is a mistake, commercially and diplomatically too – as shown during this crisis in Ukraine.

No one is saying Russia is blameless. Moscow probably exaggerated immediate safety threats in Crimea to help justify annexation of this formerly Russian territory. While preceded by a decisive referendum, this was hasty and opportunistic. Defendable on many levels, Russia's actions in Crimea still transgressed international law.

It's now clear, though, that Russians and Russian-speakers should indeed fear for their rights and safety under the new Ukrainian government. A UN report published in mid-May highlighted an "alarming" deterioration in human rights in Eastern Ukraine", with major transgressions on both sides. And the report didn't include the tragedy in Odessa's trade union headquarters, where up to 100 anti-government protesters were burnt alive by pro-Kyiv forces.

The West was surely wrong to back the violent overthrow of an elected president and woefully premature in recognising the new Ukrainian government. We should have insisted on meaningful representation from Eastern Ukraine and guarantees of minority rights.

Above all, our leaders shouldn't have tried to force Ukraine to choose. The EU's Association Agreement was an "us or them" ultimatum. Yet it's Ukraine's destiny to be a bridge between East and West. And to thrive economically, the country must trade both ways.

Western policy should be focused on working with Russia to prevent Ukraine being torn apart. That means seriously considering Moscow's proposals – a neutral Ukraine, with semi-autonomous regions, that could join the EU but not Nato.

The West needs to get beyond Cold War distaste and start negotiating with Russia, rather than engaging in a crass public relations war. Unless we see de-escalation, and fast, this Ukrainian crisis could yet result in a major human catastrophe.

Liam Halligan is Editor-at-Large of Business New Europe


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