September 15, 2014

Kicking the bear has backfired

Posted in Sunday Business Post · 40 comments ·
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In the summer of 1787, determined to show foreign ambassadors the might of Russian power in the newly-subjugated Ukraine and Crimea, Catherine the Great organised a boat trip down the Dnieper past modern-day Kiev.

 

Her trusted field marshal, and her lover at the time, Prince Gregory Potemkin, organised a series of mobile villages to appear as soon as the imperial barge, stuffed with innocent and gullible foreign dignitaries, came into view.

When the riverbank came within earshot, the villagers would break into a spontaneous, sycophantic chorus of praise for the Empress, giving the perplexed foreigners the impression that not only had Russia pacified Ukraine, it had also managed to win over the local peasantry, which was no mean feat in the 18th century.

As soon as the imperial barge turned the corner, the villagers would dismantle their villages and rebuild them overnight further downstream, with a view to performing the same malarkey the following day.

This continued each day for over two weeks. The overwhelmed foreign dignitaries then reported back to Berlin, Paris and London on the marvel of the Russian conquest and pacification of Ukraine. Thus was born the “Potemkin village” approach to economic and political progress.

This was all part of the Great Game.

Over the years, the Russians have perfected this approach of half-truths, misinformation, disingenuous analysis and obfuscation. Russian and Soviet governments perfected the art of identifying culprits on whom to pin the blame for their own failings: Jews, Poles, profiteers, priests, intellectuals, kulaks, enemies of the revolution, and so on. Typically, if there is a problem, a few culprits are rounded on and grandiose decrees are announced to fight the evil, whether it is economic, social or political.

Along with the entirely invented triumphs of the five-year plans, the Soviets deployed the Potemkin tactic to pretend that they were more powerful than they actually were.

The West believed the Potemkin villages, and maybe this is why no one foresaw the overnight implosion of the Soviet Union, despite the billions spent on so-called “intelligence”.

No one predicted Russia’s move on Crimea, nor did they see Russia’s move in the Middle East, where it is now supplying arms to Egypt despite the fact that the US is Egypt’s biggest aid donor.

The reason why no one saw this coming is because Russia has camouflaged its recent massive investment in its military complex, and the West’s intelligence didn’t seem to notice.

Then it kicked the bear with its ill-advised support of Ukraine’s nationalists, and suddenly it was dealing with a strong Russia; stronger than anyone thought.

It is clear that Europe is in a bind because counter-sanctions (the Russian reaction to Western sanctions) are giving corporate Germany the jitters. After all, there are 3,000 German companies heavily invested in Russia. They stand to be isolated if this crisis between Russia and the West continues.

We are seeing these concerns in the worrying collapse in German business confidence since the beginning of hostilities in Ukraine.

Until then, German business confidence was roaring ahead. But now it is heading downward. And when Germany wobbles, so too does the rest of Europe.

The German industrial supply chain is the European industrial machine. Nothing else matters, and now we are seeing German industry pulling in its horns, cancelling orders and holding off on plans until the dust settles. But will it settle?

There is a massive power play going on. In the next 50 years, two major factors will become even more evident than they are now, and this will drive geopolitics in Europe and the regions.

The first is that a non-nuclear Germany is a massive factory at the end of the Russian gas pipeline. If it stays non-nuclear, it is entirely dependent on Russia. To avoid this it may try to get into bed further with Iraq, Syria, Saudi Arabia, the Gulf states or Iran.

But, as Iran is Russia’s mate in the Middle East, it is hardly likely that the Iranians will do deals that will adversely affect Russia. As for the other four entities, who’s to say whether they will even exist as countries in a few years? Qatar is on a collision course with Saudi Arabia over Hamas and the Muslim Brotherhood. Meanwhile, Saudi Arabia itself, as the sugar daddy to both Isis and its older brother al-Qaeda, is hardly the safest regime in the world. It may still end up eaten by its own young.

So Germany has to do a deal with Russia. In fact, the most logical long-term alliance in Europe is the mutually beneficial alliance of resource-hungry Germany with resource-rich Russia.

This is terrifying to Washington, because it elbows the US out of central and eastern Europe.

Therefore, the US is trying to drive a wedge between Germany and Russia via continued hassle in eastern Ukraine, where America has no vested interest at all and can’t win.

The only country to gain out of all this is Poland. In a sense, the Polish tail is wagging the European dog. Have you noticed how many leaks concerning Ukraine seem to come from “sources” in the Polish foreign ministry?

This is all part of the Atlantic alliance – mainly the US and Britain – to thwart the emergence of a power nexus in eastern and central Europe. Henry Kissinger would be proud of these diplomatic games in Europe.

A second factor driving geopolitics now is the fact that the US will soon be self-sufficient in energy, particularly gas. The shale revolution in the US is real. The only problem is that it can’t get the gas to Europe.

As the US becomes less energy-dependent, it will become less concerned, both in Europe and in the Gulf.

The energy dynamic will drive Germany closer to Russia, as the US becomes less worried about energy and a newly-federal Britain loses its admittedly small influence on the world stage. After all, if a constituent member of your own country wants out, you can hardly lecture the rest on nation building!

The Great Game is still on.


  1. uncle fester

    So we’re all doomed because we’ve antagonised Russia?
    Think Dave is forgetting that Russia is a basketcase economically and needs us as much as, if not more than we need them.

    • joe hack

      it appears yo have had Too much BBC – Russia with virtually no debts and a surplus is exchanging it’s dollars for gold is no basket-case

  2. SMOKEY

    Wow that is the natural title for your new book, “The Great Game”
    Your publisher can mail me a check or do an EFT.

  3. Boyo PUTIN

    Its the Hucklebuck Merkel is just buying TIME

    Nothing is Changing it only seems to be

  4. Kevin Ryan

    On a pedantic point, ‘The Great Game’ is widely considered to have commenced in the first part of the 19th century. Some sources refer to the Russian-Persian Treaty of 1813. So interesting as it is to be reminded about Potemkin villages, that story from 1787 predates ‘The Great Game’.

    Besides, the best modern biographer of Potemkin, Simon Sebag-Montefiore, has joined other historians in casting doubt on whether the story matches the reality. It is a great story though and a useful metaphor.

    Onto the thrust of the article. I’m not sure how the observation that Russia is unpredictable and devious supports the conclusion that Russia should be accommodated as part of an interdependent trading relationship. Putin’s Russia has shown an appetite to take a big sanctions hit to play games in Ukraine; it’s currently cutting gas exports to Poland, closing every McDonalds in Russia and sending messages to Sweden by raiding Ikea. How can this Russia be trusted to play ball with Germany and Europe? Remember that no foreign leader has had more 1 to 1 conversations with Putin (in fluent German) right through the destabilisation of Ukraine than Angela Merkel. And by all accounts she feels thoroughly burnt by the experience: http://www.spiegel.de/international/world/pressure-mounts-for-more-aggressive-stance-against-russia-a-989216.html

    Separately, it’s a big claim to present the US as causing ‘hassle’ in eastern Ukraine and ‘driving a wedge’ between Germany and Russia. Are you one of the family of commentators who attributes the flight of Yanukovych to Western meddling and/or Ukrainian neofascism rather than a genuine uprising of the people in opposition to corruption, state security abuses and the introduction of Kremlin style repressive legislation? If so, you go down a notch in my estimation since your writing on Ireland has been excellent in analysing the present and past through the lens of normal people’s everyday lives and economic insecurities. I’d expect that same mode of analysis to show more sympathy to the people of Ukraine than write them off as both playthings of the West and, in between your lines, a necessary sacrifice to ensure Germany’s energy security.

    • Legally_blonde

      I think you’ve a clearer vision of the whole picture than David. His analysis may fit a macroeconomist’s neat view of strategic alliances, but it underestimates the irrationality, megalomania and potential destructiveness of Putin; Warsaw’s alarm and wariness of dependence on European allies; and young Ukrainians’ wish for a brighter future than living in an oligarch’s playground, whatever their leader’s allegiance.

      • Kevin Ryan

        Yeah, what I don’t understand is that when Ireland was put on the rack to protect the commercial interests of German banks and Sparkassen, David was a significant voice against that agenda. And fair play to him for speaking out.
        But now this article suggests Ukraine’s sovereignty is of secondary importance to the interests of German commercial power consumers. Much as I admire Germany and hope it continues its economic success, it shouldn’t come at the price of the sovereignty of smaller countries.

    • The fact is “right sector” are fascist and have an influence in Ukraine, the new regime did try and ban the use of the Russian language but backtracked.

      Also the Crimea voted for independence and so too did the eastern provinces of Donetsk and Lugansk, I thought we’d all be for self determination.

      • Deco

        That is something that is conveniently shoved into the background concerning the current Ukrainian “narrative”.

        The other fascist leaning elements, and their brigades are also ignored by the US and British media in particular. [ it brings back memories of the build up to Iraq, when nobody pointed out that Al Qaeda and the then Iraqi regime hated each other. There were zero Al Qaeda members in Iraq under Saddam Hussein].

        There are striking resemblances between a long litany of interventions in Latin America, and the power takeover in Kiev.

        Apart from anything else…..the very richest in society are left in control. Now, that is very Latin American, as “regime change” occurs.

    • cooldude

      Victoria Nuland proudly boasted that the overthrow of the democratically elected Ukraine government had cost the US over $5 billion. Most of the protestors were paid fifty euro a day by the US to cause the demonstrations. Nuland did not want democratic elections because she knew her stooge would more than likely lose and she didn’t want to risk this scenario. The proof of this is that when Yanukovych, after consulting with Putin, conceded to most of the demonstrators demands including immediate elections there immediatly occurred the sniper attacks which murdered both the demonstrators and the police. There is phonecall evidence linking Nuland to this attack and after this Yanukovych scarpered because he knew the so called demonstrators had no interest in democracy and were intent on overthrowing his government by whatever means it would take.

      It is quite clear if you look at the facts impartially that this was a US/Nato funded overthrowal of a twice democratically government because the US wanted to put Putin in his place after his peace proposals stopped the neocons from their attempt at war in Syria.

  5. Mike Lucey

    Russia has relied on ice and snow to do battle for her when Napoleon and Hitler attacked and it looks like she will do so again now that she is facing the USA and EU. Stock up on coal, turf and timber as it could be a cold and icy winter.

  6. willie

    This is all good news for tracker mortgage holders they should thank Putin and draghi and make them honoury citizens of Ireland.have we seen all the new German made cars on our roads recently crazy remember a weak Germany is good for us. lower ECB rates keep up the good work lads

    • Deco

      Thanks for the link. That is an insightful.

      The photos are also very revealing.

      One of those fine fellows ran for the office of US President, on the promise of bringing an airhead from Anchorage in as his anchor woman. Just as well that never happened.

      Count your lucky stars….

  7. Deco

    The Dublin housing market is a Potemkim Village. Centralize the state as much as possible, over-regulate everything (but still enable politicians to circumvent it all – as exhibited in various deals), and then produce glorious PR stunts. [ like people waiting 5 days for a house, from an estate where 20% of the houses remain unsold).

    Two more Potemkim Villages – those Pillar banks that have received enormous quantities of love at the people’s expense.

    With regard to Russia – an EU that is dependent on a gradually modernizing Russia is acceptable. Apart from anything else helps the EU improve it’s relations with East Asia and Latin America.

    On the other hand an EU that is bound to please the whims of Qatar, or the next heir to the Saudi monarchy (where there is a lot of action behind the scenes) is not healthy.

    And then there is nuclear power. There is the option to use Thorium as a nuclear fuel instead of uranium. It is far safer.

  8. Deco

    Saudi Arabia is an epic powder keg. David is right.

    Ultimately, it will blow up. After 9/11 Saudis were texting each other in delight over what happened. Michael Moore’s film “Fahrenheit 9/11″ is an excellent primer in how the Bush Administration was accommodative of Saudi interests, in the aftermath of an attack where 15 of the 19 hijackers were Saudi nationals, to a baffling degree.

    In fact, Moore’s expose of Saudi Ambassador Prince Bandar (“Bush Bandar”) was public service.

    The monarchy in Saudi Arabia has instilled a religious doctrine into the populace that will cause serious problems within a decade. The Saudis take religion far too seriously. Massive problems ahead there.

    Make peace with the Russians and do not be at the mercy of extremely unstable, unpredictable regimes in the Middle East, who seem to be funding terrorism in EU countries.

  9. “Over the years, the Russians have perfected this approach of half-truths, misinformation, disingenuous analysis and obfuscation. Russian and Soviet governments perfected the art of identifying culprits on whom to pin the blame for their own failings: Jews, Poles, profiteers, priests, intellectuals, kulaks, enemies of the revolution, and so on. Typically, if there is a problem, a few culprits are rounded on and grandiose decrees are announced to fight the evil, whether it is economic, social or political.”

    Funny, as when I read this I thought you must be talking about the USA and NATO as one country after another has been invaded and destablized.

  10. Fraud and deception is endemic, world wide. Central bankers boost stock markets to give the illusion of economic recovery

    http://www.marketwatch.com/story/central-banks-becoming-major-investors-in-stock-markets-2014-06-16

  11. At the end of the day the same billionaire evil scum stay in control and remain as billionaires.

    The wars are a way to keep nation states divided and keep workers divided and week also.

    It doesn’t really matter much to the evil at the top who is fighting who so long as their are enough wars going on and the nation states are mistrustful of each other.

    Its like competition in a workplace taken to a level of war among populations over resources.

    If the evil scum could not keep these wars erupting and going then they would quickly fall from power.

  12. StephenKenny

    What’s fascinating about the US intervention in the Ukraine is how similar it is to recent interventions elsewhere, be it Iraq, Syria, Libya, the various operations in Iran, Pakistan, the various ‘stans, and the rest.
    These in turn bear almost surprising similarities to the interventions in central and south America, in Guatemala, Nicaragua, El Salvador, and so on.
    These are all very well documented in the CIAs own histories of the period. The successes, and the failures.

    We’ve had the string of, as it turns out, completely fabricated warnings of imminent attacks. In the Ukraine, it’s gone even further, and the US & UK governments have supported claims of Russian invasions on Ukraine! Just as with the 45 minutes in Iraq, the ‘spontaneous and popular’ coup in Libya, and the endless ‘credible intelligence of imminent attacks’, not to say the top level intelligence proving WMD in Iraq, and the proof of the imminent Iraqi invasion of Saudi, all the news fades away.

    We’ve had the ‘Putin as Hitler’ meme, so similar to the ‘Hussein as Hitler’ meme, the ‘Assad as Hitler’ meme, and the ‘Gaddafi as Hitler’ meme, and a sort of ‘Iran as Hitler’ meme.

    When you strip away the hyperbole, the endless drumming repetition of unsubstantiated claims, and the ‘news’ that turns out to be been made-up, where’s the evidence that this time is any different?

    The problem with lying on such a scale is that after a while your claims just aren’t credible.

    Regimes may not be as we would wish, but our solutions, in recent decades, have caused mass slaughter, and condemned tens of millions of people to lives of terrifying horror.

    It’s entertaining to note the the Kazakstan government were forced to destroy two museum field pieces after pro-Russian separatists were able to reactivate a tank stolen from a museum.

    • Deco

      Stephen, a lot of truth there.

      Belief in Ponzi-economics is driving an incredible amount of lying in the English speaking world. We are all living in the hellish consequences of political monetarism. Everything is evaluated in terms of GDP statistics. It is as ridiculous as the “production” obsession of the USSR. Except in the English speaking countries it is a case of “consumption obsession”.

      Wages have been squeezed downwards. And consumption is suffering. Therefore, the owners of this Ponzi-scheme need more stimulus packages.

      And militarism is the ultimate stimulus package.

      We have been here before. This is getting very dangerous. The next step will be indoctrination to dispel scepticism. With so much that deserves sceptical appraisal, the rich need the masses to avoid scepticism.

      War makes scepticism forbidden.

      • The war being waged is over the control of the world.
        Lies, deceit, and propaganda are the modus operandie.

        The control of a country is through the control of a nations money. Hence the development og the central banking system. Any country stepping out of line will be attacked. Any threat to the banking system will be apposed. This included the demonization of gold and silver as money.

        Attributed to Meyer Rothschild ““Give me control of a nation’s money and I care not who makes the laws.”
        To J.P.Morgan “gold is money, all else is credit” (that is all money is debt except gold).

        http://blog.milesfranklin.com/but-why-are-gold-and-silver-prices-manipulated

  13. [...] is trying to drive a wedge between Germany and Russia via continued hassle in eastern Ukraine, Kicking the bear has backfired | David McWilliams Sign in or Register Now to [...]

  14. China will open the Shanghai “physical” gold exchange this Thursday. To trade one must be prepared to deliver the gold and or pay for it on the spot.
    Unlike the London or Chicago exchanges where there is only one ounce of metal available for every 100 traded and the traders are not interested in taking delivery anyway but are just gamblers on the price.
    The western exchanges are a front for manipulation.
    Soon to be exposed by real physical pricing on the Shanghai market.

    http://www.reuters.com/article/2014/09/16/china-gold-contract-idUSL3N0RH1YE20140916

  15. Here is one for you Adam. Best regards.

    Society Without a State:
    Law and Order in a
    Free World

    Or is this just an illusion too?

    http://www.mises.org/WorkInProgress/MisesCirclePostcards/2014CostaMesa.html

  16. StephenKenny

    On slight tangent, just glancing through the UK media’s unbiased reporting of the Scottish Independence vote, I started wondering whether I was going to start seeing claims of credible evidence that Putin is Scottish.

  17. BnB

    The West was just minding its own business, avoiding interfering in other countries and innocently trusting those devious Russians. Then the Russians were able to start interfering for no apparent reason by using their age-old “half-truths, misinformation, disingenuous analysis and obfuscation”.

    Keep up up the anti-Russian hysteria and try to avoid any hard facts, and your media career is secure.

  18. Mike Lucey

    Its interesting to try and figure out where ‘natural’ sovereign state boundaries should currently be in Europe.

    This European states boundaries time-lapse map shows the changes over the past 1000. https://www.youtube.com/watch?feature=player_detailpage&v=u1sjHGODFHg

    What is the natural defining factor for state boundaries? Could it be ethnic groups speaking the same language? Maybe this is why the EU is not doing so well. There is a lot to be said for directly understanding what a person is saying or not.

  19. Sanctions on Russia are backfiring as the russian reaction could be to have a large section of Europe freezing in the dark.
    Sanctions will accelerate the Economic separation of Russia from the petro dollar into the BRICS alternate currency basket for trade. Also it Accelerates the rise of China as the holder of the de facto world reserve currency, the Renminbi.

    Subterfuge and insider trading is rampant in all financial markets. This corruption will end in disaster for the world economies or in particular the western economies.

    The whole reporting system is one huge “Potemkin” illusion presented to the world to pretend that our economy is fixed when there is little of substance to any recovery to be seen behind this facade.

    http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/9/14_Paul_Craig_Roberts_Accuses_US_Banks_Of_Gold_%26_Silver_Smash.html

  20. Grzegorz Kolodziej

    David writes that the US is trying to drive a wedge between Germany and Russia via continued hassle in eastern Ukraine, where America has no vested interest at all and can’t win and that “the only country to gain out of all this is Poland. In a sense, the Polish tail is wagging the European dog. Have you noticed how many leaks concerning Ukraine seem to come from “sources” in the Polish foreign ministry?”

    This chimes with his previous statement from his article “Deadly game of human chess” that Poland gets all the best American military equipment, gets the US investment and regular US pats on the back.

    I think these statements are factually incorrect in many ways. First of all, despite Poland’s extraordinary loyalty to the US as showed in her military engagement in Iraqi War (as the only country except for the UK), Polish citizens are still required to apply for tourist visas to the US – even for short visits.

    Secondly, Polish financial contribution to NATO as a percentage of her GDP is 12.5% higher relative to the average member, and this year Poland expects to be almost 22% higher than average. Compare that to Israel which gets $3.1bn a year from the US, while being so disloyal as to sell sensitive security equipment and technology to various countries, especially China.

    As to Poland getting all the best American military equipment, this sounds like a bad joke. It is the US industry which benefits from Polish military purchases, not the other way round (and not only from military purchases – during the Operation Simoom Polish intelligence agency was able to assist in the withdrawal of six American CIA and DIA officers from Iraq – American, British and French agencies refused to help them because the operation too risky; this was not the first time Western intelligence services had to rely on Poles: during WWII Polish mathematicians were the first to break the Enigma codes – that knowledge gave the Allies a decisive advantage in the crucial battles of the War; Polish officers collected and passed on information on Hitler’s V-weapons; Polish double agent known only as ‘Brutus’ passed dis-information to the Germans about the D-Day landings while other Polish agent Witold Pilecki volunteered for a Polish resistance operation to get imprisoned in the Auschwitz concentration camp in order to gather intelligence and broadcast details on the number of arrivals and deaths in the camp using a radio transmitter that was built by camp inmates – the result of which was the US State Department effectively banning any news on Holocaust by sending a memo to the American legation in Bern, on February 10, 1943, stating that in the future they not transmit reports to private citizens, since they “circumvent neutral countries’ censorship” – this was followed by British Foreign Secretary Anthony Eden meeting in Washington with President Roosevelt, Secretary of State Cordell Hull and Undersecretary of State Sumner Welles; at this meeting, Eden expressed his fear that Hitler might actually accept an offer from the Allies to move Jews out of areas under German control – president Roosevelt did not object to Eden’s statement).

    The American gratitude for all of this was Israel Singer’s (the general secretary of the World Jewish Congress) statement from April 19, 1996 that if Poland does not satisfy the US demands (to advance their US $65 billion claim against Poland), it will be “publicly attacked and humiliated”.

    The circumstances surrounding Poland’s purchase of American planes and her rejection of other offers are worth mentioning.
    Swedish JAS-39 Gripen is a plane which is both more modern and more practical to use than F-16 Block 50/52, but its main proponent in the Polish Army was first caught in the friendly fire over the Baltic Sea and then a mysterious sensor failure in his plane led to his tragic death. The Polish Defense Minister, Romuald Szeremietiew, who was also a proponent of buying Gripens, was accused of corruption and dismissed, whereupon he was acquitted on all charges. By the way, the version of F-16 bought by Poland has mechanical failures every 7 hours of flight on average (over 1,700 mechanical failures so far) – perhaps because the US insisted on selling Poland the most obsolete version of F-16, not only refusing to sell the latest version F-16 Block 70, but even the older version F-16 Block 60. The planes sold to Poland for $6bn have obsolete avionics and do not even have the LANTIRN system. May I also inform David that Greece was offered a more modern F-16 Block 60 (for less money). No wonder the Polish Foreign Minister Radoslaw Sikorski declared that “This Polish-American union is worthless. It is even harmful because it gives Poland a false sense of security.”

    Finally, is Poland helping the US to drive a wedge between Germany and Russia? Highly unlikely, considering that the Liberal-Democratic Congress founded by the long-term Polish Prime Minister’s Donald Tusk (now chosen to head the European Council) was financed by Germany (and he himself wrote for a magazine financed by the Germany Embassy in Poland) which was the subject of heated debate in Polish parliament. If anything, Polish naive involvement in Ukraine should be seen as Poland pulling German chestnuts out of the Ukrainian fire.

  21. Pat Flannery

    Grzegorz Kolodziej: great post! You obviously are well informed. Thank you for all that valuable information. I hope David reads it and takes it on board for the next time he comments on your country, Poland.

  22. Mike Lucey

    I second that! Well informed statements by Grzegorz Kolodziej.

    If anyone is interested in understanding who the tail is thats wagging the USA, listen to what Philip Giraldi, Former CIA officer and Executive Director of the Council for the National Interest, has to say.

    Philip Giraldi – Is Israel a U.S. ally? https://www.youtube.com/watch?v=CkxuC0phFck

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