This week’s column comes to you from a very warm and sunny Istanbul, where I am working, for my sins. This is one of the world’s great cities and everywhere there is the evidence that this place has been at the centre of the world for close to 2,000 years, stretching down the ages from the Roman Eastern Empire to the centre of the Ottoman Empire. The Ottomans were eventually deposed and replaced by Ataturk and his extraordinary secular vision in the early 20th century, who fashioned the new Republic out of the twin ingredients of science and nationalism. Now this secular republic is under threat by the renewed religious fever of Islamists in the government of Tayyip Erdogan.
Over the years the city has been home to Jews, Greeks, Slavs, Armenians and Georgians, as well as the Muslim Turk population. It has been one of the three great Muslim Caliphates, the centre of the flourishing sophistication of the Christian Orthodox Church at a time when Rome was home to barbarians, and it was also the site of Judaism’s finest synagogues.
You can see the imprint of all these great tribes in the architecture, the places of worship and the markets. You can feel the 19th century European aspirations of the Ottoman merchant class in the wide, French-designed boulevards, but its narrow lanes and higgledy-piggledly lanes tell you this isn’t Paris, London or Berlin. It smells of the Orient, yet large parts look like the West. This is the echo of all who have passed through, set up home and then moved on again. Most of the Greeks, Jews and Armenians left in the 20th century.
However, one constant has been the Bosphorus Strait, linking the Black Sea and the Mediterranean. For thousands of years this was the single most important trading route in the world and even today, it still feels like this. I am looking out over the strait watching massive Russian cargo-ships relentlessly ploughing through it, heading from the Black Sea to the Mediterranean. This is where East meets West; and this is the place which will have to be shut if the West imposes sanctions on Russia. The fact that the West will have to get Turkey to do its bidding by closing off the Bosphorus shows how strategic this narrow channel still is geo-politically.
The congestion on the strait is amazing to see. Just outside its mouth, close to the Dardanelles, where thousands of Irish troops died almost 100 years ago next year, there is an orderly queue of ships waiting to get through.
Being here, it is unsettling to think that the Irish were the first troops who landed in Gallipoli. To put the futility and slaughter in context, the Royal Dublin Fusiliers and the Royal Munster Fusiliers were the first to attack the Turks from the SS River Clyde. Of the first 200 men to leave the ship, 149 were killed and 30 wounded immediately.
This was always a strategic spot.
From that point in Gallipoli to the far side in the Black Sea, there is a constant flow of enormous, laden-down hulls carving slowly through the waters.
Being here in Istanbul, allows you to appreciate the proximity of the eastern part of Europe and the West. All sorts of Russian, Ukrainian, Crimean and of course, Romanian and Bulgarian cargo ships use the Black Sea. And coming the other way are all sorts of manufactured products from southern Europe and North Africa.
Russia’s major export markets are the Netherlands, which buys $78 billion worth of Russian produce – mainly energy. This is followed by China, with Russian energy imports of $35 billion; Germany $35 billion; Italy $32 billion; and Turkey $27 billion. These figures show you how dependent the rest of the world is on Russian energy. I am assuming the Dutch figure is an overstatement and marks energy exports logged in Holland, but destined for other markets.
When you look at things a bit closer, it reveals just how dependent Germany is on Russia for energy. An enormous 24 per cent of all Germany’s energy needs are met by Russia, compared to just six per cent of France’s needs.
In terms of who Russia imports stuff from, not surprisingly, China and Germany export most to Russia. Russia imports $50 billion of goods from China and $37 billion from Germany. Therefore, sanctions against Russia will hurt Germany severely. In fact cessation of trade with Russia would push the world into recession and Europe’s fledgling and fitful recovery would be quenched overnight.
But could it happen? The answer must be yes. Ukraine is now getting very nasty. Russia may feel it necessary to send in troops to protect’ its people in eastern Ukraine, and it looks as if the Ukrainian government is upping the ante. It’s a game of chess now. While the Ukrainians take a few pawns, it remains to be seen whether the Russians decide to use their Bishop, Castle or Knight.
If so, we are in for a game that could end with war in Ukraine and recession in the EU. Up to now, the Russians were content to out-source nationalism to the pro-Russian characters in eastern Ukraine. This is very like what Serbia did in Croatia and Bosnia in 1992. It’s a form of arms-length trouble making. But if the Ukrainians move to eliminate these self-styled secessionists, Russia’s bluff may be called.
This is a significant risk now and, because the Europeans signaled to the Ukrainians last month that we aren’t really prepared to help them, it’s hard to see why the Ukrainians would be minded to worry about our economic concerns now.
German chancellor Angela Merkel, revealing her own personal experience as an East German brought up under Soviet occupation, appears to be more enthusiastic about punishing Putin than other European leaders. If she carries this through, she will be acting not in Germany’s self-interest but in the interest of international law.
Equally, it is hard to see Putin backing down from provocation in Ukraine. Having sub-contracted nationalism out to pro-Russian militia in eastern Ukraine, the Russian president could find himself in the bizarre position that he has to move to protect the creatures he created. If the secessionist tail does end up wagging the Russian dog, then sanctions may well be on the cards. The first place this trade dislocation will be felt is here in Istanbul. However, as with so many other historical episodes when Istanbul has been at the epicentre of the crisis, the ripples will be felt all over Europe.
David McWilliams writes daily on international economics and finance at www.globalmacro360.com
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I have been on that bridge linking the two continents and it is so wide and high above sea water with lots of International Shipping and local traffic and in a part of it it has local fishermen with their lines dropped . There is an amazing buzz there and everyone is so busy . Sarsfield Bridge/ Limerick is the biggest Irish city local pedestrian bridge in Ireland over the Shannon fresh water and with local fishermen . There are similar bridges in Cairo founded by the Turks but very little traffic as compared to Istanbul . There are still… Read more »
What effect would the economic disruption caused by possible future sanctions on Russia have on Ireland?
“Of the first 200 men to leave the ship” Boys David, Boys. There were so few of the Dublin and Munster Fusiliers left that they banded into one group called the Dubsters. There is an excellent parallel here in that small nations have always been the first to cough up the troops for slaughtering at the front when dominated by a bigger neighbor. Now we have a situation here in Ireland where we are being asked to make sacrifices in Ireland to protect European banks and THEIR follies with a resulting catastrophic loss of talent to emigration and a suicide… Read more »
It’s only fair to remind everyone that the Ukrainian ‘government’ is unelected, very far from being clearly popular, and was put into power by by a coup. Prior to the coup the Ukrainian was broadly pro-Russian, and after the coup it is pro-Western.
[…] full article at source: http://www.davidmcwilliams.ie/2014/04/28/the-threat-from-the-east […]
Crisis? What Crisis? IMF’s latest Irish review warns that Ireland is facing “an acute unemployment crisis” with a broad jobless rate at 24%. Constantin Gurdgiev in yesterday’s Sunday Times estimates the broad jobless rate at 32%. We already have the highest long term unemployment rate in Europe. Both assert that the government have already admitted defeat on the jobs front with its narrow focus on the high-skilled export-driven economy. Most of the 32% need to be up-skilled and retrained, and what do they say about Ireland’s retraining structures, the worst in Europe, abysmal. And to hammer home the last nail,… Read more »
With US agents stirring up trouble all over the Middle East and now Ukraine the threat is not from the East as your Headline suggests but from the West.
The US Petro Dollar is losing its hold on the world economy and the function of reserve currency and the economic power residing with it.
Economic power is moving East and the US is a wounded giant lashing out in all directions. It will devour its own. The danger is from/in the West.
History tells us What is BAD for Germany in the Eurozone is always GOOD for Ireland ……those waves of Change in the Bosphorus Sea must be GOOD
“When you look at things a bit closer, it reveals just how dependent Germany is on Russia for energy. An enormous 24 per cent of all Germany’s energy needs are met by Russia, compared to just six per cent of France’s needs.” This shows the stupidity of Germany’s energy policy compared to France’s. France’s decision to have most of its power supplied by nuclear has now been vindicated. France now has a major nuclear industry which the rest of Europe now needs and is returning to. Germany’s dalliance with wind energy and renewables has been a disaster and as a… Read more »
This from the North East? Daily Reckoning———– Russia Will Hit America Soon Russia Will Hit America Soon Russia to strike? James Rickards watches his financial war predictions unfold in real time… Paul Mampilly with today’s market notes — Pfizer’s blunder is your chance to pick up massive gains… Plus, Bill Bonner, looking for the pin that will pop the U.S. debt bubble. Could it be the U.S. sending troops into Ukraine? He sure hopes so… Read on to learn why… ——————————————————————————– External Advertisement Still Time to Lift Your Restrictions… This corner of the market will hit for 41 price doubles… Read more »
North East, South or West, the threat is all around you.
Oft described but never heeded.
IT IS The Central banking Ponzi Scheme money system.
It is heading for imminent collapse and will change the balance of power in the world for centuries. All we do is discussed inanities.
buy, land, income producing property and gold and silver or live to rue the day.
http://campaign.r20.constantcontact.com/render?ca=7e0e00b5-6159-4488-9160-6eb8c3cd05c7&c=877a32b0-427b-11e3-ad08-d4ae52a45a09&ch=8905dbc0-427b-11e3-ad3c-d4ae52a45a09#holter
Morning All How are things ? I trust everything is magnificent………….. Politicians lie..that’s what they do..Russian, Ukrainian or Irish or American.. its not about serving the People …its about serving those who will take care of you. War is Big Business.The greater the profit margin ..the more popular War becomes. Humans are doomed to repeat the mistakes of the past over & over & over again..Why ? Because we don’t learn..short term memory..short attention span.whatever If you wish to hide something from a U.S President..put it in a History book , he’ll never find it The West & N.A.T.O &… Read more »
What about us ?
Take care of yourself Barry. Your still looking at the darkness. Look at the light.
best regards,
Michael.
Hi Michael
Thanks for that. .but I am fine..nicr & bright & looking towards the light every morning.
family is good…I am well
hope you are too ?
Barry
From an environmental perspective it is better that the world pays more for hyrdrocarbons. It ensures that the resources are used more carefully, and less wastefully. Try running an SUV in Europe, compared to Los Angelas for example. The entire premise of this engagement with Russia over the Ukraine – that we need to get cheaper hydrocarbons is dangerous, to us – even if we in the West get what we want. The Shale revolution, has a critical flaw. The flow rates decline precipitously, and quickly – much more so than from conventional hydrocarbon deposits. In five years, the Shale… Read more »
Hi All,
Here is a thought experiment post I just wrote:
http://blog.errright.com/2014/04/30/off-the-wall-health-care-suggestion/
It may be of interest to some who hang out here in the macro-economic mosh pit!
Regards,
Brian
Us economy is a house of cards
http://www.paulcraigroberts.org/2014/04/30/us-economy-house-cards-paul-craig-roberts/
All people are being robbed blind.
As we said above. The danger is in the west. US instigated coup in Ukraine and now wants to blame Russia
Jim Rogers
http://usawatchdog.com/sanctions-are-not-going-to-hurt-russia-at-all-jim-rogers/