Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
S&P 500 Stuck at 2,900, Still No Clear Direction - 17th June 19
Is Boris set to be the next Conservation leader? - 17th June 19
Clock’s Ticking on Your Chance to Profit from the Yield Curve Inversion - 17th June 19
Stock Market Rally Faltering? - 17th June 19
Johnson Vs Gove Tory Leadership Contest Grudge Match Betfair Betting - 17th June 19
Nasdaq Stock Index Prediction System Is Telling Us A Very Different Story - 17th June 19
King Dollar Rides Higher Creating Pressures On Foreign Economies - 17th June 19
Land Rover Discovery Sport Tailgate Not Working Problems Fix (70) - 17th June 19
Stock Market Outlook: is the S&P today just like 2007 or 2016? - 17th June 19
US China War - Thucydides Trap and gold - 16th June 19
Gold Stocks Bull Upleg Mounting - 16th June 19
Gold Price Seasonal Trend Analysis - Video - 16th June 19
Fethiye Market Fruit, Veg, Spices and Turkish Delight Tourist Shopping - 16th June 19
US Dollar Gold Trend Analysis - 15th June 19
Gold Stocks “Launch” is in Line With Fundamentals - 15th June 19
The Rise of Silver and Major Economic Decline - 15th June 19
Fire Insurance Claims: What Are the Things a Fire Claim Adjuster Does? - 15th June 19
How To Find A Trustworthy Casino? - 15th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match - Video - 14th June 19
Gold and Silver, Precious Metals: T-Minus 3 Seconds To Liftoff! - 14th June 19
Silver Investing Trend Analysis - Video - 14th June 19
The American Dream Is Alive and Well - in China - 14th June 19
Keeping the Online Gaming Industry in Line - 14th June 19
How Acquisitions Affect Global Stocks - 14th June 19
Please Don’t Buy the Dip in Nvidia or Other Chip Stocks - 14th June 19
A Big Thing in Investor Education is Explainer Videos - 14th June 19
IRAN - The Next American War - 13th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match Contest - 13th June 19
Top Best VPN Services You Can Choose For Your iPhone - 13th June 19
Tory Leadership Contest Betting Markets Forecast - Betfair - 13th June 19
US Stock Market Setting Up A Pennant Formation - 13th June 19
Which Stocks Will Lead The Cannabis Rebound? - 13th June 19
The Privatization of US Indo-Pacific Vision - Project 2049, Armitage, Budget Ploys and Taiwan Nexus - 12th June 19
Gold Price Breaks to the Upside - 12th June 19
Top Publicly Traded Casino Company Stocks for 2019 - 12th June 19
Silver Investing Trend Analysis - 12th June 19
Why Blue-Chip Dividend Stocks Aren’t as Safe as You Think - 12th June 19
Technical Analysis Shows Aug/Sept Stock Market Top Pattern Should Form - 12th June 19
FTSE 100: A Top European Index - 12th June 19
Gold Surprise! - 11th June 19
How Forex Indicators are Getting Even More Attention in the Market? - 11th June 19
Stock Market Storm Clouds on the Horizon - 11th June 19
Is Your Financial Security Based On A Double Aberration? - 11th June 19
What If Stocks Are Wrong About Interest Rate Cuts? - 11th June 19
US House Prices Yield Curve, Debt, QE4EVER! - 11th June 19
Natural Gas Moves Into Basing Zone - 11th June 19
U.S. Dollar Stall is Good for Commodities - 11th June 19
Fed Running Out of Time and Conventional Weapons - 11th June 19
Trade Wars Propelling Stock Markets to New Highs - 11th June 19
Best Travel Bags for Summer Holidays 2019, Back Sling packs, water proof, money belt, tactical - 11th June 19
Betting on Next British Prime Minister Tory Leadership Betfair Markets Forecast - 10th June 19
How Can Stock Market Go Up When We’re Headed Towards a Recession? - 10th June 19
If You Invest in Dividend Stocks, Do This to Double Your Returns - 10th June 19
Reasons for the Success of the Dating Market - 10th June 19
Gold Price Trend Analysis - Video - 10th June 19
US Stock Markets Rally Hard – Could Another Big Upside Leg Begin? - 10th June 19
Stock Market Huge Cosmic Cluster Ahead: Buckle Up! - 10th June 19
Stock Market Higher To Go? - 10th June 19
The Gold Price Golden Neckline… - 10th June 19
Gold Price Seasonal Trend Analysis - 9th June 19
The Fed Stops Pretending - 9th June 19
Fed Rate Cuts Soon; Bitcoin Enthusiasts Join Wall Street in Bashing Gold - 9th June 19
1990s vs. 2010s - Which Expansion Will be Better for Gold? - 9th June 19
Gold Price Trend Analysis, MACD, Trend Channels, Support / Resistance - 8th June 19
Gold Surges Near Breakout - 8th June 19
Could Gold Rally Above $3750 Before December 2019? - 8th June 19
5 Big Lies About Precious Metals Investing Exposed - 8th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

European Borderlands: The View Beyond Ukraine

Politics / Eastern Europe Jun 10, 2014 - 12:32 PM GMT

By: STRATFOR

Politics I traveled between Poland and Azerbaijan during a rare period when the forces that shape Europe appear to be in flux, and most of the countries I visited are re-evaluating their positions. The overwhelming sense was anxiety. Observers from countries such as Poland make little effort to hide it. Those from places such as Turkey, which is larger and not directly in the line of fire, look at Ukraine as an undercurrent rather than the dominant theme. But from Poland to Azerbaijan, I heard two questions: Are the Russians on the move? And what can these countries do to protect themselves?


Moscow is anxious too, and some Russians I spoke to expressed this quite openly. From the Russian point of view, the Europeans and Americans did the one thing they knew Moscow could not live with: They installed a pro-Western government in Kiev. For them, the Western claims of a popular rising in Ukraine are belied by the Western-funded nongovernmental organizations that were critical to sustaining the movement to unseat the government. But that is hardly what matters most. A pro-Western government now controls Ukraine, and if that control holds, the Russian Federation is in danger.

The View to Russia's West
When the Russians look at a map, this is what they see: The Baltic states are in NATO and Ukraine has aligned with the West. The anti-Western government in Belarus is at risk, and were Minsk to change its loyalties, Russia's potential enemies will have penetrated almost as deeply toward the Russian core as the Nazis did. This is a comparison I heard Russians make several times. For them, the Great Patriotic War (World War II), which left more than 20 million Soviet dead, is a vivid, living memory, and so is Hitler's treachery. Russians are not a trusting people and have no reason to be. The same is true of the Central Europeans, the Turks and the Caucasians. Nothing in their past permits them the luxury of assuming the best about anyone.

In recent weeks, three things have become obvious. The first is that the Russians will not invade Ukraine directly. You don't occupy a country of almost 50 million people with the 50,000 troops Russia has mobilized, and you can never assume that an occupied population will welcome you. The Russians have postured as if they were an overwhelming force, but the threat of American munitions dumps and airstrikes against fuel depots -- not something that the Russians can dismiss out of hand -- as well as the threat of an insurgency leave the Russians wary.

Equally clear is that no European power can defend the line running from Poland to Romania with the decisive force needed to repel a Russian attack -- or even support these countries against Russian pressure and potential subversion. Germany is the key country, and Berlin has made it clear that there are limits to what it is prepared to do in Ukraine and to the steps it is ready to take to defend the eastern flank of NATO and the European Union. Berlin does not want another Cold War. Germany depends on Russian energy and ultimately is satisfied with the status quo. The rest of Europe cannot intervene decisively.

Finally, this means that any support to Europe's eastern flank must come from the United States. Washington spent the past few weeks indicating its commitment to two key countries: Poland and Romania. President Barack Obama went to Poland while Vice President Joe Biden traveled to Romania, and while both leaders stressed Washington's absolute commitment to Poland's and Romania's national security, they were short on specifics. That lack of detail is not surprising -- the United States is still taking stock of the situation. Washington is not ready to outline the nature and extent of its support, and from the American point of view, so long as the Russians are focused on Ukraine, there is still time to do so.

The primary concern for the United States would logically be Poland, the most vulnerable country on the North European Plain. But for now, distance and logistics limit the Russians' ability to threaten Poland. The stability of the Baltic states is the greatest fear in the region, and the threat there is not Russian invasion, but Russian subversion -- a threat that armored divisions cannot address.

More important, a primary commitment to Poland forces any alliance into a defensive posture. That made sense during the Cold War, when Soviet conventional military forces were much larger and better deployed. But Russia today is far weaker, and a more assertive strategy -- one that presents Russia with risks while also defending key assets -- is more appropriate.

The Emerging Black Sea Strategy
For these reasons, we see the United States beginning to adopt a Black Sea strategy centered on Romania. The Russians held on to Sevastopol because naval capability in the Black Sea is critical. A strategy that enhances Romania's naval capability and places U.S. aircraft in the region would pose a threat to the Russian fleet. It would also extend defensive capabilities to Georgia and protect the indispensible route for any pipelines running from Azerbaijan. Put simply, a competent rival Black Sea fleet would create problems for Russia, particularly if the Ukrainian regime survives and Crimea is isolated. The visit by U.S. Secretary of Defense Chuck Hagel to Romania indicates the importance U.S. strategic thinkers place on that country.

It is important to note the extensive diplomacy ongoing between the United States and Turkey, as well as meetings between Turkish, Romanian and Polish leaders. The Turks are obviously vulnerable to energy cutoffs, and Ankara does not want to see the Black Sea used as a battleground. At the same time, Turkey would want to be a part of any alliance structure the United States is constructing in the region. In the long run, the Turks have a deep interest in Iraqi and Iranian energy and little trust in Russian intentions.

What we are seeing is regional players toying with new alliance structures. The process is in its infancy, but it is already forcing the Russians to consider their future. An added dimension to this is of course energy. The Russians would appear to have the advantage here: Many of the nations that fear Moscow also depend on it for natural gas. But there is a Russian weakness here as well. Natural gas is a powerful lever, but it is not particularly profitable. Russia's national budget -- indeed, its economy -- is built around oil. The chief danger Moscow faces is that it doesn't control the price of oil. A radical decline in that benchmark would cause the Russian economy to stagger at the very least. While in Poland, Obama deliberately pointed out Russia's economic problems. He wanted Russian President Vladimir Putin to know that he understands Russia's weakness.

Deployment of military force, while necessary, is therefore not the core element of the developing Western strategy. Rather, the key move is to take steps to flood the world market with oil -- even knowing that implementing this strategy is extremely difficult. It appears likely that once Tehran reaches an agreement with Washington on nuclear weapons, Iran's oil market will open up, and a major source of oil will flow. Additional Iraqi oil is also moving toward the market, and Libyan production might soon resume. Washington itself wields the most powerful weapon: The United States could reverse its current policy and start exporting oil and liquefied natural gas.

There are undercurrents in this. Bulgaria announced this weekend that it would suspend construction on South Stream, a pipeline the Russians favor, after the country's prime minister met with three U.S. senators. In the short run, the strategy may be to limit Russia's control over Europe's energy; in the long run, the strategy could create the means to destabilize the Russian economy.

None of this is an immediate threat to Russia. It will be years before these and other alternative sources of energy come online -- indeed, some may never be available -- and there are many constraints, especially in the short term. U.S. companies and oil-producing allies who depend on high oil prices would suffer alongside Russia -- an expensive collateral to this policy. But the game here is geopolitical futures. Once major efforts are underway to increase the worldwide availability of oil, those efforts are hard to stop. The Russian strategy must be to diminish the influence of energy on Moscow's geopolitical imperatives. The Russians know this, and their aim now is to diversify their economy enough within the next 10 years to reduce their vulnerability to fluctuations in energy markets. The threat to Moscow is a surge in supply that cuts into Russian markets and depresses oil prices before Russia completes this effort.

For the United States, the game is not to massively arm Poland, build a Romanian navy or transform the world oil markets. It is simpler than that: Washington wants to show that it is ready to do these things. Such a show of will forces the Russians to recalculate their position now, before the threat becomes a reality. It is not that the United States is bluffing -- it is that Washington would prefer to achieve its goals without a major effort, and frankly, without tanking oil prices.

New Calculations
The United States now has a pro-Western government in Ukraine. If that government survives and is strengthened, the Russian position becomes entirely defensive, and the threat Moscow poses is gone. Further, Belarus could destabilize and end up with a pro-Western government. In either case, the Russian position becomes enormously difficult. Its principal weapon -- cutting off natural gas to Europe -- would then have to take into account Russia's strategic vulnerability, and possibly even calculate the potential for instability in Russia itself. The future for Russia becomes the one thing no nation wants: uncertain.

Russia now has two choices. The first is to destabilize Ukraine. Success is uncertain, and Moscow cannot predict the U.S. response. Washington's moves in Poland, Romania and even Turkey have made this option riskier than it was. The fallback for Russia is to neutralize Ukraine. Russia would leave the current government in place so long as Kiev pledges not to join Western-led multinational structures and not to allow any foreign military presence on Ukrainian territory. In return, the Russians would guarantee Ukraine's territorial integrity and might even reconsider the status of Crimea.

The Western strategy is to create a credible threat to fundamental Russian interests. That means guaranteeing Poland's defense while setting up offensive military capabilities in Romania. But a linchpin of the strategy is to let Moscow know that the United States is prepared if necessary to stage an all-out attack on the price of oil. The goal is to make Putin rethink the long-term risks he is running by cashing in on Russia's short-term advantage in natural gas exports.

The Russians must now calculate whether they can destabilize Ukraine enough to displace the pro-Western government. They must also consider the costs of doing so. In the meantime, Moscow is exploring possibilities for the neutralization of Ukraine. Germany will be key, and I suspect the Germans would be happy to see Kiev neutralized if doing so brought an end to the crisis.

From the U.S. point of view, a Western-oriented but neutral Ukraine would create a buffer zone without forcing a confrontation with Russia. What the Americans must calculate is how stable this arrangement is and what the Russians might later do to undermine it. The problem with agreeing to any deal is in its enforcement. You enforce it by being able to threaten the other party with the one thing they don't want. And the one thing that Russia doesn't want is anything that threatens its weakened economy. If a control mechanism doesn't emerge, then Ukraine will remain a battleground in a little cold war.

"Borderlands: The View Beyond Ukraine is republished with permission of Stratfor."

This analysis was just a fraction of what our Members enjoy, Click Here to start your Free Membership Trial Today! "This report is republished with permission of STRATFOR"

© Copyright 2014 Stratfor. All rights reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis.

STRATFOR Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules