| Cold War About to Turn Hot? Putin Warns Europe "I can Take Kiev in Two Weeks"; WW III Not a Good Option Posted: 02 Sep 2014 05:36 PM PDT People keep asking why I have a spotlight on Ukraine and not Gaza. It should be obvious. The economic impact of the Civil war in Ukraine has a huge European economic interest. Moreover, risk of further escalation involving Russia and the US looms large. The Financial Times reports Debate Heats Up in US and Europe Over Arming Kiev. As Barack Obama departs for Europe to attend a crucial NATO summit, the US president is facing fresh pressure at home to provide weapons to Ukraine, including from senior members of his own party.
European governments are also considering the wisdom of sending arms to Ukraine, with many leaders from eastern Europe eager to do more to help Kiev, while western European governments remain cautious.
"I think it is very important to recognise that a military solution to this problem is not going to be forthcoming," Mr Obama said last week.
But even leading members of his own party have joined Republican critics to call for more assistance to Kiev. Adam Smith, the leading Democrat on the House Armed Services Committee, said at the weekend that the US should help Ukraine build "a more capable fighting force to resist" Russia.
Robert Menendez, the Democrat who chairs the Senate foreign relations committee, said the recent Russian actions were "a watershed moment" in the Ukraine crisis and added that for the White House the issue of sending heavy weapons "may be very well on the table right now". NATO to Endorse 4,000 Man Rapid Response ForceYesterday, the New York Times reported NATO Weighs Rapid Response Force for Eastern EuropeAs Ukrainian leaders warned on Monday of "a great war" with Russia, NATO leaders meeting in Wales this week were expected to endorse their most concrete response yet to increased Russian military intervention in Ukraine: establishing a rapid-reaction force capable of deploying quickly to Eastern Europe, officials of the alliance said.
The new force of some 4,000 troops, capable of moving on 48 hours' notice, will be supported with logistics and equipment pre-positioned in Eastern European countries closer to Russia, with an upgraded schedule of military exercises and deployments that are intended to make NATO's commitment of collective defense more credible and enhance its deterrence.
The agreement is planned as the substantive centerpiece of the NATO meeting, which will take place Thursday and Friday and will be attended by President Obama, who will also stop in Estonia before the summit meeting. His aides said the trip was intended to highlight the United States' commitment to NATO, and the alliance's determination to protect all 28 members from aggression — from Moscow or elsewhere. Great War With RussiaUkraine of course wants that "rapid response force" on account of the "great war with Russia". Fortunately (at least for now) president Obama and chancellor Angela Merkel seek a non-military solution, but warmongers in the US are beating the drums of war at every turn. Putin's ReactionMeanwhile, Putin's reaction to escalating NATO talk has been to warn Ukraine " I can Take Kiev in Two Weeks". Vladimir Putin has boasted to European leaders that his forces could sweep into Kiev in two weeks if he wanted. The Russian president reportedly made the threat to the European Commission president during talks on the Ukraine crisis.
Mr Putin told Jose Manuel Barroso: "If I want to, I can take Kiev in two weeks," Italy's La Repubblica newspaper reported, implying this could be the result if the EU stepped up sanctions against Russia.
His comments, relayed by Mr Barroso to colleagues at last weekend's EU summit, emerged as NATO announced it would build a new "spearhead" rapid reaction force of up to 4,000 troops that can be flown into eastern Europe in 48 hours to respond to possible Russian aggression. No DoubtsI have no doubt that Russia could take Kiev in two weeks if it wanted to, but I am equally sure he has no desire to do so. Taking and holding hostile territory is a losing action. It never works in the long haul. And besides, Russia could not possibly afford the upfront cost, and that is something Putin no doubt understands. Besides, any such statement, is likely taken mightily out of context, and tossed about now by Barroso for political purposes. ZeroHedge reports "Russia ready to release audio recording of conversation between President Vladimir Putin and European Commission President Jose Barroso, Interfax cites Russian ambassador to European Union as saying." Involvement vs. InvasionI took a lot of email flack for my statement made on August 28: " I am convinced this talk about direct military involvement by Russia is 90% hype if not more. A few soldiers captured and paraded about does not change that picture." That quote is from my post Jane's Defense Caught With Pants Down: Ukraine Admits Rebel Counteroffensive, Including March to the Sea. I stand by what I said. Few if any reports from Kiev are credible. For example, the LA times reports Russians invading, says Ukraine leader; tanks reported crossing border. Where's the pictures? Wouldn't US intelligence offer any proof? How can anyone believe this crap? And such stories come out day after day for weeks on end. Jacob Dreizin CommentsI put reader Jacob Drezin, a US citizen who speaks Russian and reads Ukrainian on the hot seat today, asking for his thoughts. He replied. This is not really about credibility. It's more about the definition of "Russian involvement" and "Russian invasion."
As for the recent incident with the 10 or so captured Russian paratroopers, it is clear based on the information provided by the Ukrainians themselves that this was not an invasion. I've just watched a half-hour "interview" of the Russian soldiers, recorded by a Ukrainian TV crew, where their squad leader claims he and his men were on a training mission, got lost and separated from their unit, and were then shocked to find themselves under live artillery fire, after which they wandered around and realized they had crossed the border when they came across a Ukrainian force.
Here's a video interview of the paratroopers.
The above video is consistent with other videos posted by the Ukrainians in which the men were interrogated individually. Thus, Kiev's claim that they were attacked and taken prisoner 20 kilometers inside Ukraine is not supported by the "evidence" provided.
Moreover, it is clear from the above video that the Russians did not even know they were accused of invading Ukraine when they were "interviewed." The task of the interrogators was clearly to get them to talk as much as possible and then to take individual statements, out of context, and pass those over to the Western media. So I think this is just another lie that has been sold to the world.
Nonetheless, based on closely tracking this conflict since it started, I am certain of the following:
- At least 80% of the rebels are locals, that is, Ukrainian citizens/residents.
- Russian military units (i.e. divisions, brigades, battalions) are not fighting in Ukraine. Any media outlet or government agency that feels differently needs to provide the names/designations of the units, where they crossed the border, and where they are currently deployed.
- Russians who have come across the border have been integrated into rebel units. That includes both neophytes and seasoned veterans, as well as a small number of individuals "on holiday" from various Russian government bodies. Many of these volunteers are Ukrainian citizens who were residing in Russia.
- The lack of any credible, significant, publicized signals intercepts between the rebels and Russia suggests that any training/advising by the Russians is being done at arms-length, not in a "direct from Moscow" manner.
- The rebels have received large quantities of arms and munitions from Russia, probably through semiofficial, "surplus" channels. However, they have received even larger quantities of arms and munitions from Ukrainian forces, a process that has accelerated since the start of the current rebel counteroffensive. Here are a couple of vides. The first video shows four abandoned tanks and a BMP. The second video shows a large number of abandoned vehicles as well as mountains of artillery/mortar munitions.
- The current poor predicament of the Ukrainian army has nothing to do with a sudden "Russian invasion", and everything to do with the fact that the rebels, with Russian help, had been playing the classic game of trading space for time. Then, when the Ukrainians finally overextended themselves, and the rebels were ready, the counteroffensive began. Of course, it was predictable that the Kiev regime would begin screaming "Russian invasion!" as soon as the counteroffensive began.
- All the hype about a "Russian invasion" in the NY Times, Washington Post, and other leading sources in the last few days, has been little more than a shameless transcript of statements from Kiev, with no critical thought and almost nothing in the way of an opposing viewpoint. It is a sad testament to the effect of years of budget cuts on the mainstream media flagships. And it is highly convenient, given that they completely missed preparations for the counteroffensive.
- As of now, the civilian death toll in Donetsk and Lugansk (mostly caused by shelling of rebel-held areas) is roughly equal to the entire Palestinian death toll (both Hamas and civilian) from the recent war in Gaza. Yet, the Gaza deaths were a terrible crisis, and daily grist for the United Nations, no one at any high level seems to care about what Ukrainian artillery is doing in Donetsk and Lugansk.
- The reason that the intelligence agencies, foreign ministries, and national leaders of the U.S., Britain, do not accuse Russia of actually "invading" Ukraine, is the evidence is simply not there. Russia will never invade Ukraine, just like the U.S. never invaded Syria, Nicaragua, Tibet, Guatemala, etc.
- Putin, Lavrov, etc. naturally deny everything, just like Uncle Sam denies everything. You can't trust any government. However, the Russians have been consistent in their approach whereas the Europeans (in particular) are just zigzagging along for the ride.
- Russia is not alone in this mess. The U.S. and the West in general are helping Kiev fight this war. We know that the U.S. cheered on as the opposition broke its power-sharing agreement with Yanukovich and carried out its February coup. We know that the U.S. State Department handpicked the Ukrainian leadership immediately after the February coup. We know that a former top diplomat to the U.S. (Valentyn Nalyvaichenko) was appointed as head of the Ukrainian Security Service immediately after the February coup. We know that the CIA then set up a large operation in Kiev, to share information with the Ukrainians and probably help guide their military operations. We know that the head of the CIA visited Ukraine under a fake passport in April. We know that a U.S. surveillance drone was forced down over Crimea shortly before that. We know that the Ukrainian state would collapse immediately were it not for IMF dollars that were ultimately approved in Washington. So there may be a lot here that we're not hearing about from our honest, objective media.
The New Cold War and the Necessity of Patriotic Heresy On August 12, Stephen Cohen wrote an excellent column for The Nation: The New Cold War and the Necessity of Patriotic Heresy. Cohen says " US fallacies may be leading to war with Russia." Unfortunately, it may play out that way. His very lengthy article starts out slow but ends strong. Let's jump to sentences I pieced together from the middle where I sympathize with points he makes. Recalling the American adage, "There are two sides to every story," I have sought to explain Moscow's view of the Ukrainian crisis, which is almost entirely missing in mainstream coverage. As a result, I have been repeatedly assailed—no less in purportedly "liberal" publications—as Putin's No. 1 American "apologist," "useful idiot," "dupe," "best friend" and, perhaps a new low in immature invective, "toady." I expected to be criticized, as I was during nearly twenty years as a CBS News commentator, but not in such personal and scurrilous ways.
None of these character assassins present any factual refutations of anything I have written or said. They indulge only in ad hominem slurs based on distortions and on the general premise that any American who seeks to understand Moscow's perspectives is a "Putin apologist" and thus unpatriotic. Such a premise only abets the possibility of war.
Some of these writers, or people who stand behind them, are longtime proponents of the twenty-year US policies that have led to the Ukrainian crisis.
The perils and costs of another prolonged cold war will afflict our children and grandchildren. If nothing else, this reckless policy, couched even at high levels in relentless demonizing of Putin, is already costing Washington an essential partner in the Kremlin in vital areas of US security—from Iran, Syria and Afghanistan to efforts to counter nuclear proliferation and international terrorism. Fact vs. FallacyCohen offers a nice fact vs. fallacy comparison towards the end of his article. Fallacy No. 1: Ever since the end of the Soviet Union in 1991, Washington has treated post-Communist Russia generously as a desired friend and partner, making every effort to help it become a democratic, prosperous member of the Western system of international security. Unwilling or unable, Russia rejected this American altruism, emphatically under Putin.
Fact: Beginning in the 1990s, again with the Clinton administration, every American president and congress has treated post-Soviet Russia as a defeated nation with inferior legitimate rights at home and abroad. This triumphalist, winner-take-all approach has been spearheaded by the expansion of NATO—accompanied by non-reciprocal negotiations and now missile defense—into Russia's traditional zones of national security, while in reality excluding it from Europe's security system. Early on, Ukraine, and to a lesser extent Georgia, were the ultimate goals. As an influential Washington Post columnist explained in 2004, "The West wants to finish the job begun with the fall of the Berlin Wall and continue Europe's march to the east.… The great prize is Ukraine."
Fallacy No. 2: There exists a nation called "Ukraine" and a "Ukrainian people" who yearn to escape centuries of Russian influence and to join the West.
Fact: As every informed person knows, Ukraine is a country long divided by ethnic, linguistic, religious, cultural, economic and political differences—particularly its western and eastern regions, but not only. When the current crisis began in 2013, Ukraine had one state, but it was not a single people or a united nation. Some of these divisions were made worse after 1991 by corrupt elite, but most of them had developed over centuries.
Fallacy No. 3: In November 2013, the European Union, backed by Washington, offered Ukraine's President Viktor Yanukovych a benign association with European democracy prosperity. Yanukovych was prepared to sign the agreement, but Putin bullied and bribed him into rejecting it. Thus began Kiev's Maidan protests and all that has since followed.
Fact: The EU proposal was a reckless provocation compelling the democratically elected president of a deeply divided country to choose between Russia and the West. So too was the EU's rejection of Putin's counter-proposal of a Russian-European-American plan to save Ukraine from financial collapse. On its own, the EU proposal was not economically feasible. Offering little financial assistance, it required the Ukrainian government to enact harsh austerity measures and to sharply curtail is longstanding economic relations with Russia. Nor was the EU proposal entirely benign. It included protocols requiring Ukraine to adhere to Europe's "military and security" policies, which meant in effect, without mentioning the alliance, NATO. In short, it was not Putin's alleged "aggression" that initiated today's crisis but instead a kind of velvet aggression by Brussels and Washington to bring all of Ukraine into the West, including (in the fine print) into NATO.
Fallacy No. 4: Today's unfolding civil war in Ukraine was caused by Putin's aggressive response to Maidan's peaceful protests against Yanukovych's decision.
Fact: In February 2014, radicalized Maidan protests, strongly influenced by extreme nationalist and even semi-fascist street forces, turned violent. Hoping for a peaceful resolution, European foreign ministers brokered a compromise between Maidan's parliamentary representatives and Yanukovych. It would have left him as president of a coalition, reconciliation government until new elections in December 2014. Within hours, violent street fighters aborted the agreement. Europe and Washington did not defend their own diplomatic accord. Yanukovych fled to Russia. Minority parliamentary parties representing Maidan and predominantly western Ukraine, among them Svoboda, an ultra-nationalist movement previously anathematized by the European Parliament as incompatible with European values, formed a new government. They also nullified the existing constitution. Washington and Brussels endorsed the coup, and have supported the outcome ever since. Everything that followed, from Russia's annexation of Crimea and the spread of rebellion in southeastern Ukraine to the civil war and Kiev's "anti-terrorist operation," was triggered by the February coup. Putin's actions have been mostly reactive.
Fallacy No. 5: The only way out of the crisis is for Putin to end his "aggression" and call off his agents in southeastern Ukraine.
Fact: The underlying causes of the crisis are Ukraine's own internal divisions, not primarily Putin's actions. The primary factor escalating the crisis since May has been Kiev's "anti-terrorist" military campaign against its own citizens, now mainly in the Donbass cities of Luhansk and Donetsk. Putin influences and no doubt aids the Donbass "self-defenders." Considering the pressure on him in Moscow, he is likely to continue to do so, perhaps even more, but he does not control them. If Kiev's assault ends, Putin probably can compel the rebels to negotiate. But only the Obama administration can compel Kiev to stop, and it has not done so.
In short, twenty years of US policy have led to this fateful American-Russian confrontation. Putin may have contributed to it along the way, but his role during his fourteen years in power has been almost entirely reactive—indeed, a complaint frequently lodged against him by hawks in Moscow. First Casualty in War is the TruthLet's wrap up some loose ends about invasions, proxy wars, Russian troops, and Russian tanks. It is in Ukraine's best interest to lie, so Kiev does. That does not mean Putin is telling the truth, but for merely looking at the other side of the story, people comment that I am a Russian agent, that I am blinded by Putin, and I don't know what is going on. For every step in this civil war, western mainstream media (and most reading it), believed all the reports out of Kiev, I didn't. Recall Kiev statements that this war would be over by May, by June, by July, in two weeks, or whatever. We now see who was right. Media comparisons of Putin to Hitler are both absurd and Ironic. If anyone has ties to Hitler in this mess, it's the US puppet-sponsored officials in Kiev. Talks of "invasion" have been complete nonsense. Sadly, they are widely believed. Everyone seems to buy every statement by Kiev about Russian troops, Russian tanks, the downing of MH17, etc. etc. Yet, every statement by Kiev has been so loaded with hype that I wonder how anyone could have believed any of it. Understanding Putin If you do not like Russia or Putin, no one forces you to. But that is no reason to believe Kiev. For the record, I have no love of Putin. But I do understand where he is coming from. The other day, someone sarcastically asked me to explain Putin. Here goes: Putin does not want NATO in Ukraine. Similarly, the US did not want missiles in Cuba and launched a stupid war on Iraq. I do not use those as "two wrongs make a right" as some have claimed. Rather, I make this point: The US acted in its best interest (in the case of Iraq what it foolishly believed was in its best interest), and Russia is doing the same now. Countries act in their best interest. Period. The corollary is equally important: Sanctions will not do a damn thing to stop a country from doing what it believes is in its best strategic interests. WW III Not a Good Option Sending military supplies to Ukraine will not do any good either. Russia will give more support to the rebels, possibly even to the point of an actual invasion. President Obama and leaders in Europe may not like those simple facts, but it's not going to change them one bit. World War III is not a good way to end a civil war in a country that was haphazardly pieced together in the first place. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| France Needs a "Thatcher Moment" But First a Depression Posted: 01 Sep 2014 11:32 PM PDT It is amusing reading day in and day out the Keynesian cure for what ails Europe, especially France. Consider France. Public spending amounts to 57% of French GDP, yet Keynesians want still more. The sad irony is that 100% would not be enough. In fact, it would make matters worse. France suffers from too much government spending and too much government interference everywhere one looks. The Problem On Sunday, in Eurozone Currency Dispute Intensifies: France Wants More ECB Action to Correct Overvalued Euro, Germany Doesn't I summed up the problem. Inflation Won't Cure France
Contrary to popular belief, inflation will not spur consumer spending. Nor will inflation create any jobs or cause wage inflation.
Nonetheless, France demands the ECB wizards fix something that cannot be fixed by monetary policy.
Problem number one is the eurozone itself. The euro is fatally flawed. In addition, France's problem is that it is not competitive with Germany and arguably even Spain, not that the Euro is too high.
France desperately needs structural reforms.
- It is nearly impossible to fire someone in France, so businesses are reluctant to hire.
- Government and union rules on everything are sheer madness.
- France seeks to save local bookstores by taxing online retailers and elimination of free shipping.
- Agricultural subsidies to save inefficient French farms (at great expense to the rest of Europe) are inane.
- Pension rules need fixes, and the retirement age needs to increase.
- The "French way of life" is incompatible with rising productivity, especially on a relative basis, so France is increasingly left behind.
How is QE supposed to fix all that? It can't and it won't, but it increasingly looks as if the ECB may give it a try. The SolutionYesterday, Steen Jakobsen, chief economist for Saxo bank, summed up the solution: France needs a crisis and a "Thatcher Moment". Via email ... French President François Hollande unveiled his new government under Prime Minister Manuel Valls on August 26, and there have been a few changes. While most senior ministers have retained their positions, economic minister Arnaud Montebourg was replaced by Emmanuel Macron, a former investment banker and economic adviser at the Elysée.
Hollande is already the most unpopular president in French history so he is not risking much by removing a political opponent like Montebourg (who should never have been part of a so-called reform program to begin with). Montebourg is a man of the old school and of old ideas: Among other things, he titled himself "Minister of Industrial Resurrection." His ideas included threatening to fine businesses for each job they failed to create and speaking against globalisation.
The problem for President Hollande and any reform efforts is that, as much as removing Montebourg was a victory for his economic strategy, it was also a loss in terms of his political ability to rule both his party and the French state. We often forget that economic policy without political backing is like skiing without snow: Policy needs political anchoring.
The supply-side economics and ideas of Prime Minister Valls are good, but they are not sufficient to stop the "rotting of France". More and more observers argue that what France needs is either an European Central Bank that goes into full Quantitative Easing mode, a France that pushes for fiscal expansion, or even both. Not only is that short-sighted, it´s also wrong: France needs a new political system, a new tax regime, a less bloated government sector, and fewer subsidies. France is not lost, it´s just disorientated and lacks purpose.
France is its own worst enemy. It believes in old virtues and ideas from a time gone by. Dirigisme, the French version of socialist capitalism, has failed. In its place there needs to appear a a robust commitment to its strong and well-educated workforce. France has the ability to innovate and its early stage small- and medium-enterprise support ranks among the best in the world. Unfortunately, its tax policy, its inability to attract capital and — more importantly — its dismal return on capital are significant impediments to new growth or any reforms.
France needs a Thatcher moment, with a new leader brave enough to get elected on a mandate for change. It needs a leader brave enough to tear down a political system that generates macro- rather than micro-scaled policies, an elitist society with too many incentives for bad behaviour and disincentives for private initiative, innovation and hard work. With or without Hollande, France just doesn't seem ready to change yet. That is why we need a deep recession and even a depression before we see real change. Real changes can only emerge from a true crisis.
The good news is that France that has never been closer to this mandate for change than now, if only because we are quickly approaching the point where things can't get any worse. French history is full of examples of crisis yielding quickly to dramatic change. The one that comes most quickly to mind is when King Louis XVI lost his monarchical powers during the French revolution. He inherited an enormous state debt (sound familiar?) and tried a number of policy moves, but in the end the crisis overwhelmed him, and he and his Ancién Regime subordinates lost not only their power, but their heads.
It's time for a 21st century revolution in France. Dirigisme is dying. Vive la France. Good NewsThe good news: A depression in France may be just around the corner. Bad News The bad news: The extremists waiting in the wings leave a lot to be desired. Practical ViewSocialists have so messed up the country in every way, that heads need to roll (just not literally as during the French revolution). Thus, any major shakeup could be a good thing, even if a free-market candidate is not the first one to surface in a new power shift. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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