Ukraine in focus

Ukraine in focus provides commentary on the conflict and outlooks for various facets of the crisis. GIS Founder and Chairman Prince Michael of Liechtenstein explores the long-term view in detailed scenarios for Europe and beyond.

May 17, 2022

Who wins from shutting down business in Russia?

Prince Michael of Liechtenstein

The truth may be the first casualty of war, but economic destruction is not far behind. These inevitabilities are increasingly obvious to the world as the war in Ukraine approaches its three-month mark on May 24.

I have long viewed government-ordered economic sanctions against Russia or other powerful states as generally ineffective and more harmful to economies in general than the intended targets. Sanctions can often be evaded and, in the case of essential global commodities, there will always be buyers. Military superiority, motivation and morale are the three ways to win wars.

Nevertheless, more and more businesses are choosing to leave Russia on their own – a self-sanctioning spurred by international outrage and pressure from clients, but also perhaps because the Russian market is simply no longer as attractive as it was before Vladimir Putin’s great misadventure.

Fast-food giant McDonald’s became the latest big-name brand to pull out of Russia, announcing the sale of all 850 of its outlets and casting the decision in moral terms.

“We have a commitment to our global community and must remain steadfast in our values,” said the company’s CEO Chris Kempczinski in a May 16 statement. “Our commitment to our values means that we can no longer keep the arches shining there.”

French carmaker Renault also announced on May 16 that it would exit Russia, but gave itself the option of returning within six years.

The question is whether these so-called “value-driven” decisions will have much influence on the Russian state’s bottom line.

While international firms leaving may at first look bad for Moscow, in reality, their assets will be quickly snapped up – likely by a well-connected businessperson, ready to rebrand the company and use its facilities and assets – at a bargain price. People will keep their jobs.

For companies like McDonald’s and Renault, their actions may give them a quick public relations boost. But leaving a market of 140 million people will take a significant chunk out of revenues – even if Russia has temporarily lost some attractiveness. McDonald’s expects a write-off of $1.2-1.4 billion. That Renault left itself the option to return quickly is telling. And while McDonald’s closed its restaurants in Russia months ago, it still plans to hold onto its trademarks there.

So, these companies may end up hurting themselves, could come back anyway (but in a weaker market position), and in the meantime, the business they were doing will simply be done by someone else. The Russia-based firms that take their place could get a boost from patriotic consumers, while they fill the Kremlin’s coffers with tax rubles. Nobody wins.

Except, perhaps, for Mr. Putin’s standing within Russia. This is why he seems impervious to the economic fallout and willing to continue the war anyway. Closing businesses will certainly not help.

May 10, 2022

Victory Day ambiguities

Prince Michael of Liechtenstein

The West approached Victory Day, the 77th anniversary of the Allies’ defeat of Nazi Germany, with trepidation. Many Ukrainians remained outside of their country, fearing a nuclear Armageddon on May 9 or at least intensified attacks from Russia. And while the frequency of air raid sirens has increased throughout Ukraine in recent days, the carnage has remained largely contained to the contested eastern areas near Russia’s border.

Vladimir Putin’s words were closely watched during the traditional Red Square parade for clues about where the war was heading. What the world heard was ambiguity in a brief address from Russia’s president, who cut a solitary figure on the stage as other world leaders boycotted the Moscow event.

He did not declare victory. He did not officially declare war, so what remains is a “special military operation” launched on February 24. He did not announce a full-scale mobilization. He did not talk about taking over the whole of Ukraine. He did not state specific aims.

Rather, Mr. Putin continued to play the victim, insisting Russia was engaged in a defensive operation to thwart a NATO-backed plot to invade the Russian homeland, including the eastern Donbas and on the Crimean Peninsula. (The international community regards these territories, of course, as part of Ukraine.)

Where does this leave us, besides guessing? The Russian president – in line with centuries of Russian political tradition – is a master at presenting enigmas. It is unlikely, however, that he will silently give up.

It was somewhat naive to believe that the May 9 celebration would prompt President Putin to disclose plans or start specific actions.

Unfortunately, we cannot see a light at the end of the tunnel.

May 4, 2022

Another casualty of war: Agricultural production

Prince Michael of Liechtenstein

It is not only the human toll of Russia’s war on Ukraine that grows daily. The economic fallout is already rippling through the global economy, contributing to higher inflation, energy prices and food costs. 

Russia and Ukraine are major agricultural producers, together producing 12 percent of the world’s calories. Combined, Russia and Ukraine account for 14 percent of the world’s wheat production and 28 percent of all traded wheat. Ukraine is also a top 10 producer of sunflowers, barley and corn, while Russia and its ally, Belarus, supply a lot of fertilizers to the world.

The war is putting all this at risk. The fighting (and Western sanctions) are damaging Russia’s economy, which may shrink by 10 percent in 2022. Still, Moscow is getting off lightly compared to Kyiv. Ukraine’s loss is simply devastating – a 45 percent drop in gross domestic product is expected this year alone. Ukraine’s famously fertile black-earth soil has made it a breadbasket of the world – and a target for invaders.

Today, Russia stands accused not only of war crimes, which it denies, but of blockading the Black Sea so that Ukraine cannot export its grain to the world. Accusations of outright theft of stored grain and farm equipment have been made, reviving horrible memories of the Holodomor, during which Soviet leader Joseph Stalin starved to death an estimated 4 million Ukrainians in 1932-1933.

Spring is the time for renewing life – and for farmers to be in the fields. The longer that this war goes on, the likelier it becomes that some of the world’s neediest will be hungrier while the more fortunate among us will be paying a “war premium” on the purchase of our next loaf of bread or sirloin steak. 

April 27, 2022

Darkness before dawn?

Prince Michael of Liechtenstein

As the destruction mounts in Ukraine, the West has beefed up its military assistance to Kyiv. The more muscular response should be welcomed and could, hopefully, bring the world mercifully closer to peace. The end to Russia’s invasion cannot come fast enough amid global economic and other challenges.

Ukrainians have shown they will courageously and capably defend their nation if properly armed. After initial hesitation, more than 40 nations came together on April 26 in Germany for a conference to pledge continuous military aid.

If the West can help Ukraine gain a decisive upper hand on the battlefield, reality may start to dawn on Moscow that the invasion will have to end.

Unfortunately, Russian President Vladimir Putin has not reached that point and is launching economic attacks of his own against the West. On April 27, Russia’s Gazprom cut off natural gas supplies to Poland and Bulgaria, evidently to punish the willingness of these two nations to arm Ukraine and their refusal to meet Moscow’s demands for payment in rubles.

With Russia’s nuclear saber-rattling increasingly having no effect on the West, Mr. Putin’s best option is to seize on the desire of the world to end this conflict quickly. The Kremlin will find that calling off the invasion is the only way to ease the mounting, but not necessarily permanent, military and economic pressure it faces.

April 12, 2022

The horrible slaughter in Ukraine continues

Prince Michael of Liechtenstein

In the war in Ukraine, the center of gravity has moved away from Kyiv to the east and southeast of the country. However, this does not mean that Kyiv will not again become a target.

It is now clear that the Kremlin miscalculated. Unfortunately, instead of looking at the situation realistically and taking the appropriate measures, the Russian authorities have allowed the military to unleash severe brutality.

Economic measures have never proven effective against savagery. At the present stage, Moscow will only understand force.

Getting Russia to the negotiating table under acceptable conditions requires the West to show credible strength. That means military strength, and the least NATO can do is supply effective weapons systems – including offensive ones – probably through its members. It can neutralize Russia’s nuclear threat by promising to retaliate in kind.

During the war in Iraq, the United States declared a no-fly zone over the entire country, since the enemy was comparatively weak. In the current conflict, it is a big mistake to exclude such measures in advance. This war is not a pure military war anymore, it has degenerated into manslaughter.

April 5, 2022

How Western Europe’s lack of policies helped get us here

Prince Michael of Liechtenstein

This past weekend, we learned that a terrible massacre had occurred in Bucha, a city about 24 kilometers outside Kyiv. The evidence suggests that the Russian army killed hundreds of civilians there during its occupation and retreat. The enormous outrage this has created is justified.

Ukrainian President Volodymyr Zelenskiy invited former German Chancellor Angela Merkel and former French President Nicolas Sarkozy to inspect the site. His argument – which is correct – is that these two leaders’ policies helped to create this war.

It is true that Germany’s past neglect of its defense contributed to Russian assertiveness: Moscow knew very well that Europe was neither ready nor willing to fight militarily. As GIS pointed out years ago, a better response to the occupation of Crimea and the Donbas region would have been efficient investments by Germany in defense, instead of just such lukewarm sanctions.

The irresponsible decision by Chancellor Merkel’s government in 2011 to discontinue nuclear energy led to a high dependence on Russian gas. This dependence means the current, stronger sanctions against Russia will be short-lived. Although Ms. Merkel said that Nord Stream 2 was just a business decision, it was in fact very political.

It is certainly necessary to have relationships with Russia, but as long as Europe cannot reach the same level in matters of defense, it will have a weak position.

April 1, 2022

Long-term opportunities for Ukraine

Prince Michael of Liechtenstein

With its armed forces putting up a courageous fight and its people coming together to support their country, Ukraine is experiencing a unifying moment. Most of its population is made up of either native Ukrainian or Russian speakers. When it comes to the degree of resistance to Russia’s military aggression, there is no difference between these two linguistic groups.

When peace finally comes – hopefully, it is not too far away – this unifying experience could provide a foundation for successful reforms. A postwar government could have broad popular support, which it could use to reduce the country’s oversized bureaucracy, transforming it into an efficient civil service and administration. As reforms in Georgia have proven, such an initiative could go a long way toward solving the country’s biggest problem: pervasive corruption.

Ukraine has well-educated, diligent people, and the potential to be a rich country. Due to excessive bureaucracy and high levels of corruption, it has so far not managed to attain the prosperity its citizens deserve.

March 23, 2022

What Europe can learn from Ukraine

Prince Michael of Liechtenstein

The brave resistance of the Ukrainian people and the determination of their president, Volodymyr Zelenskiy, have aroused a lot of admiration throughout Europe. Refugees have been received in a very friendly and open manner. Sanctions on Russia are continually being ratcheted up.

However, some unnecessary animosity against Russia has also appeared. For instance, a university in Milan halted courses on Fyodor Dostoevsky because he was Russian. Some in Europe have implemented anti-Russian measures without making a distinction between factors that are related to the war and those that are not.

Years of prosperity have led Europeans to worry about minor matters. Gender issues and cancel culture, for example, have recently dominated the headlines and had an outsize influence on politics. Europe needs a call to respect traditions and to recognize that European heritage has brought us freedom and prosperity.

It is worth pushing back against the tendency to misjudge Christianity and Europe’s past. The liberal ideals of freedom and self-responsibility, as well as the protection of life and property, all derive from the Christian tradition.

The Ukraine crisis should be a wake-up call for Europe. It has revealed the foundation of our values and shown us that they are worth fighting for. To deserve peace means to be willing to fight for it.

March 18, 2022

A lesson for Russia

Prince Michael of Liechtenstein

If we are to analyze the reasons for, and the results of, the war in Ukraine, we need to find the causes – which does not mean we want to justify the invasion.

Like many autocrats, Russian President Vladimir Putin tolerated corruption among the people who surround him to ensure their loyalty and dependence. Contrary to popular belief, he is not necessarily enriching himself.

He likely lost control of the extent of the corruption, especially in his country’s defense sector. The Russian army’s inability to take over Ukraine quickly after the invasion must have come as a shock to him. It was a misjudgment, probably based on faulty information.

Due to the corruption, the Russian military had poor-quality equipment, less-than-ideal training and low morale. A major mistake in the information President Putin received is how determined the Ukrainians would be. Another was the status of Russia’s defense forces.

This week, he denounced “national traitors,” especially those who are earning money in Russia but are living in the West, “who have a villa in Miami or the French Riviera, who cannot do without foie gras.”

The leaders in the Kremlin might try to get out of the trap typical to autocrats and sometimes technocrats of surrounding themselves with irresponsible “yes men” who only offer them the information they want to hear.

March 16, 2022

A ray of hope

Prince Michael of Liechtenstein

Kyiv and Moscow are continuing talks and keeping open the possibility for further dialogue. This is already a good sign, and for the first time, yesterday, President Zelenskiy mentioned that these talks have become more substantive.  

Both sides must still strengthen their positions. Ukraine is bravely continuing its resistance, while Russia persists in its attacks. 

The battlefield positions are not changing much. The destruction, misery and casualties are terrible. Ukraine’s strength is in the determination of its armed forces and its people. Russia’s is in its potential for escalation. In fact, Russia has already escalated the conflict significantly and has recently brought in mercenaries to help its efforts.  

A further escalation was Russia’s limitation of its food exports. The resulting food price inflation is a problem for the West. However, the bigger problems will be in Africa and the Middle East, severely hit by the rising costs and shortages. This could also create migratory pressure toward Europe. 

If we take an optimistic view, we can see the strengthening of both countries’ positions as setting the stage for more negotiations in the short term. Those talks could then open up further opportunities for a resolution. 

March 11, 2022

Ukraine and European priorities

Prince Michael of Liechtenstein

The Russian invasion of Ukraine abruptly transformed attitudes and policies in Europe. Several shocks have occurred that have forced countries to reconsider their priorities. 

The first shock for many – especially younger people in Europe – was that war is possible. Attitudes toward defense have changed completely. 

Most see a possible energy crisis as a critical challenge to European prosperity. Such a crisis would not only mean a rise in energy prices, but also a threat to energy security.  

If the supply of energy to Europe were cut off, it would be a severe blow, and could show just how vulnerable highly developed economies can become. Even short blackouts can have long-term effects, hindering the delivery of essential goods. Civil protection throughout the continent should be strengthened. 

The looming danger of an energy crisis also shows how important collaboration and integration are in Europe. However, that integration must be limited to areas where it is strictly necessary. Countries cannot afford to engage in unnecessary harmonization. 

Europe indulged in the luxury of trying to enforce a value standard. That standard did not always include – and sometimes even neglected – the core values of individual freedom, self-responsibility, the right to life and property rights.  

And while checks and balances on power are necessary, European structures (as well as leaders and the media) issued moral judgments against members like Poland and Hungary, while ignoring deficiencies in other countries. Poland was highly criticized for its policies on refugees. Now, however, it is showing a type of generosity not seen in 50 years.  

We can only hope that while supporting Ukraine, Europe will realize that it is necessary to concentrate on core priorities and forget about exaggerating problems about which it is a luxury to worry. Only on this basis can Europe defend its freedom, which could also give a greater sense of security to Ukraine, Georgia, Moldova and the Baltic states.

March 9, 2022

The coming food security challenge

Prince Michael of Liechtenstein

There is a lot of talk these days about Europe’s future energy supply, mainly natural gas. Spot prices for oil and gas continue to see drastic increases. Supply remains constrained: Russia will be cut off from many markets, Saudi Arabia has not yet increased its output and the future of Iranian production is up in the air. 

There is less talk about the effect of the Ukraine crisis on global food markets, though it is even more important. Ukraine is one of the world’s main exporters of wheat and corn, as well as sunflower oil. Sunflower oil is a key frying oil and is used in many prepared foods. The war has hampered not only cultivation, but also shipping of this resource, since many of the country’s ports are now part of a war zone.  

Before the conflict, food prices were already increasing; now that situation will accelerate. Higher food prices could lead to significant unrest and instability in regions like India, Africa and the Middle East. We also have to acknowledge that Russia – now under severe sanctions from many countries – is also one of the world’s main exporters of grain. While it remains crucial that we use all means possible to stop the aggression, we must face the consequences of doing so with realism. We will need to find alternatives to mitigate the pain that high food prices will cause. 

In this context, it is a pity that Argentina and some other large food exporters have implemented socialist policies that reduce the efficiency of their agriculture sectors. It is also a shame that pressure to use biofuels – often produced from crops that would otherwise be sold as food – is reducing the availability of essential foodstuffs on global markets. Organizations like the International Energy Agency promote using biofuels as a means to reduce climate change, but the issue needs to be rethought. 

March 7, 2022

The importance of mediation

Prince Michael of Liechtenstein

The increasing brutality of the war in Ukraine is shocking, bringing to mind images of the Chechen war and the destruction of Grozny. 

At the beginning, it was clear that Moscow intended to take Ukraine via “blitz,” rapidly removing the government and doing little harm to the civilian population. That strategy overlooked the patriotism and bravery of the Ukrainian armed forces, government and people.  

Now the Kremlin has a dilemma. It will be difficult for Russia to extricate itself from this war, but domestically it will also be hard to justify the brutality against populations that according to President Putin are “ethnically Russian.” This is a key difference compared to the war in Chechnya, when Russians were appalled by Chechen terrorist activities in their country.  

Developments could accelerate quickly now that both sides have decided to use mercenaries. Such troops are difficult to control.  

More importantly, leaders like Israeli Prime Minister Naftali Bennett are trying to mediate the conflict. Mediation can help achieve the crucial goals of getting Russian troops to retreat and reestablishing Ukraine’s sovereignty. 

The Russian population will likely understand that its troops cannot become entrenched in Ukraine indefinitely. In this context it must be made clear that the present invasion is unacceptable, but also that Russia as a country will remain a respected major member of the international community once its forces have retreated. 

March 4, 2022

Taking the long-term view

Prince Michael of Liechtenstein

It appears that Russia is serious about advancing further in Ukraine. It will be difficult for Moscow to back down now: the propaganda it has used – calling the Ukrainian government and military “Nazis,” as well as its declarations that it will “demilitarize” the country – makes it difficult to justify not taking control over the entire country.

We can hope that the ongoing negotiations will at least succeed in establishing corridors of safe passage for civilians. Unfortunately, we will have to prepare ourselves for the reality that this war will continue for some time. This will mean more activities by paramilitary groups on both sides, potentially causing the situation to spiral further out of control.

The bravery of Ukraine’s armed forces and the patriotism of its people are impressive. They deserve help. Lofty words – like U.S. President Joe Biden’s a few days ago – are not enough. They must be backed by action. Demonstrations around the world and displays of sympathy on social media are nice, but ultimately ineffective.

European countries must stay strong and show determination to improve their defense and prepare their economies for a possible energy crisis. The openness to refugees is reassuring. Now, however, it is important to support Ukraine’s defense, find a way to keep what is left of its economy standing, and assure the delivery of food and medical services. All of this will require specific, targeted action.

In the long term, Ukraine’s future will hinge on rebuilding its economy and allowing most refugees to return. That so many people are leaving Ukraine is not only a human tragedy, it represents a massive brain drain.

March 3, 2022

Preparing for the long-term consequences

Prince Michael of Liechtenstein

Moscow’s isolation is increasing. However, because Europe – especially Germany – still depends on Russia for energy, the SWIFT channels that allow countries to pay for those supplies are still open. 

Europe must be prepared for very high energy costs and for an additional bout of inflation. This is the price to be paid for some countries’ ill-fated energy policies. Shutting down nuclear power generation did not only hurt the environment by increasing the reliance on fossil fuels, it was also an exercise in virtue-signaling that may become very difficult to afford. Failed politics and insufficient defense of Europe have brought us to this point. 

The crisis will have other repercussions. Russia and Ukraine are two of the world’s largest producers and exporters of essential food products. Food prices will rise. We will have to adjust to these new realities, and they should not be used as an excuse to allow aggression. 

Preparing for the consequences of the current crisis and finding alternatives will allow us to apply policies that take a long-term view. This is the only way to find satisfactory solutions for Ukraine’s independence and future European relations with Russia based on mutual respect. 

March 2, 2022

Ukraine and the European Union

Prince Michael of Liechtenstein

A few days ago European Commission President Ursula von der Leyen proposed European Union membership for Ukraine. Understandably, Ukrainian President Volodymyr Zelenskiy picked up on this and requested that the bloc immediately grant his country accession under a “special procedure.” Eventual EU membership for Ukraine is worth discussing, but there is a danger in overpromising.

Back in 2014, during the Euromaidan protests in Ukraine, several Western politicians implied that there was hope for EU membership. Little progress was made – for justified reasons, though Kyiv was disappointed.

It is questionable whether it is the European Commission’s role to offer such hopes. We must not forget that the Commission is the EU’s executive body, not its decision-making one – that is the job of the European Council.

Instead of making grandiose, feel-good statements about where Ukraine belongs in the long term, it would be better to find ways to help Ukraine and end the bloodshed.

In 2006, Archduke Otto von Habsburg, a longtime member of the European Parliament, wrote this request to that body: “If economic difficulties persist that prevent the Ukraine from adhering to the Copenhagen criteria, an immediate partnership should be granted Kyiv with a view to obtaining the status of a membership candidate. This would show Russia that the Ukraine belongs to Europe and that one is not ready to betray friend and partner because of pressure from Moscow.

In 2006, this was a long-term view. The goal of Ukrainian membership will not be achieved by raising expectations. We know how long accession negotiations take. Now is the moment that pragmatic solutions need to be achieved, to end the bloodshed and destruction.

March 1, 2022

Refugees

Prince Michael of Liechtenstein

Refugees from the war in Ukraine have begun arriving by the tens of thousands, primarily in Poland but also in neighboring countries. For now, those fleeing the war are mostly women, children and the elderly, while the able-bodied men are staying to keep the country’s essential services running and to volunteer in the defense of their land. 

It is impossible to know how bad this conflict will get or how long it will last – the number of refugees could still increase greatly. Hopes are high that eventually, they will be able to return. Their situation seems temporary.

When the Soviets crushed the Hungarian Revolution of 1956, nearly 200,000 refugees fled to Austria. They had little hope of going back to their homeland. They were warmly welcomed and continued on to various countries in Europe and North America. Some 20 percent remained in Austria. The welcoming spirit remained, and they were quickly integrated into the society and labor market. They were keen to be active.

Today, Ukrainian refugees are also receiving a warm welcome. They often have relatives in neighboring countries. They share cultural similarities with most of the peoples in Europe. If they have to stay longer, they will likely integrate without (take “too much” out) trouble. The situation with migrants from Africa and the Middle East is different. Difficulties in integration could have less predictable effects on society and the economy. 

Now, the challenge is mainly to provide the basic necessities for the refugees: food, shelter and medical treatment, as well as schooling for the children. By the way Poland handles the situation well and generously. It also appears that large numbers of Ukrainians will be absorbed into the rest of Europe. Families are already keen to welcome these unfortunate people in their time of hardship.

February 28, 2022

Western armament and cyber defense

Prince Michael of Liechtenstein

Despite warnings from American intelligence agencies and others, Russia’s full-scale invasion of Ukraine took many by surprise. The Kremlin, however, seems even more shocked by the resistance it has encountered. The Russian leadership appears to have greatly underestimated the determination and bravery of the Ukrainian people, its armed forces and its institutions.

The entire country is finding ways to support the fight. Volunteers are lining up to join militias, while others are helping the medical services or giving blood. Cities and towns across Ukraine are preparing to receive the invaders with Molotov cocktails.

The “blitz” with which the Kremlin sought a quick victory, did not work. Its military operation is already bogged down. Though the blame for the conflict lies with Russia, Europe – and especially Germany – bear some responsibility, since they have been unwilling to invest in defense for years.

During former Chancellor Angela Merkel’s 16 years in office, Germany neglected its defense. Until four days ago, the Scholz government was not ready to support Ukraine effectively. Military attacks cannot be avoided by sanctions, but only by preparedness. This has been one of GIS’s main messages for 10 years.

Germany has now decided to support Ukraine and has also announced that it will dedicate additional 100 billion euros in its defense budget. We hope that these funds will be used more effectively than in the past. The problem is that even with a lot of money, the Bundeswehr’s effectiveness will only increase over the long term. What Europe should do now, besides support Ukraine, is increase its civil protection and especially its cybersecurity.

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