Putin will end the culture war between Liberals and Nationalists

 

Putin’s actions make no sense. That is his strength

 Tim Harford in The FT

Is Vladimir Putin mad? Russia’s president has launched a costly and unprovoked war, shocked his own citizens, galvanised Nato, triggered damaging but predictable economic reprisals and threatened a nuclear war that could end civilisation. One has to doubt his grasp on reason. 

Doubt is part of the point. In The Strategy of Conflict, written in 1960, the economist Thomas Schelling noted: “It is not a universal advantage in situations of conflict to be inalienably and manifestly rational in decisions and motivation.” 

A madman — or a toddler — can get away with certain actions because he cannot be deterred by threats or because his own threats seem more plausible. But Schelling’s point is more subtle than that: you don’t need to be mad to secure these advantages. You just need to persuade your adversaries that you might be. 

The idea is vividly illustrated in The Maltese Falcon, Dashiell Hammett’s 1930 novel and John Huston’s 1941 film. Our hero, Sam Spade, knows the whereabouts of the falcon, a priceless artefact. When the villainous Kasper Gutman tries to intimidate him into revealing the secret, Spade is not intimidated. If Gutman kills him then the precious falcon will be lost forever. 

“If I know you can’t afford to kill me, how are you gonna scare me into giving it to you?” Spade challenges Gutman. 

“That’s an attitude, sir, that calls for the most delicate judgement on both sides,” Gutman says. “Because, as you know, sir, in the heat of action men are likely to forget where their best interests lie and let their emotions carry them away.” 

Spade doesn’t seem too worried by this, perhaps because Gutman appears calm. Gutman might have had more success if he seemed unhinged. Then again, Gutman’s henchmen are pointing pistols at Spade and twitching with rage, so even if Gutman keeps his cool, the threat that someone might get carried away seems plausible. 

Schelling was a wonderful writer and thinker, but it gives me little pleasure to be dusting off his books. When I first encountered his ideas on nuclear deterrence, it was the mid-1990s. The cold war was over, the threat of a nuclear exchange seemed largely past and Schelling’s ideas could be enjoyed in much the same way as Hammett’s: as witty, surprising and reassuringly unreal. When Schelling shared the Nobel memorial prize in economics in 2005, it was with a sense that his clear-eyed ideas about nuclear deterrence had helped human civilisation dodge a bullet. 

That nuclear bullet is now back in the gun and Putin is waving it around unnervingly. He wouldn’t . . . would he? I don’t know, which is just the way Putin likes it. 

There was always something surreal about maintaining nuclear weapons as a deterrent. Surely such weapons could never be used, because the consequences were too horrible? And if the weapons could never be used, what sort of deterrent did they provide? 

Yet the deterrent is real enough because even a small risk of escalation is a risk worth taking seriously. That risk can come from a number of sources. There’s malfunctioning equipment: in September 1983, Soviet officer Stanislav Petrov’s early warning radar told him that the US had just launched ballistic missiles at the Soviet Union. He realised that was unlikely and ignored the warning. Petrov’s heroic inaction was made all the more remarkable because it came at a time of escalated tensions between the superpowers. 

Another risk is that a senior decision maker is insane, rather than merely feigning insanity. 

Then there is the risk of things getting out of control somewhere down the chain of command. During the Cuban missile crisis in 1962, the US decided to stop and search ships sailing to Cuba — a potential flashpoint if the result was the sinking of a Soviet ship. President Kennedy and defence secretary Robert McNamara asked the US Navy to soften this “quarantine” in a couple of ways. 

In fact, as the classic book Thinking Strategically explains, the US Navy told McNamara to mind his own business, and the blockade was riskier than Kennedy had intended. Unthinkable threats become thinkable in such circumstances. 

Putin holds a weak hand, except for the one card that no rational person would ever choose to play. But the essence of brinkmanship is to introduce a risk that nobody can entirely control. If the risk becomes intolerable, you may win concessions. I am 99 per cent sure that Putin is bluffing, but a 1 per cent chance of the end of the world is and should be more than enough to worry about. 

Faced with Gutman’s warning that someone may get carried away, Spade coolly responds, “then the trick from my angle is to make my play strong enough to tie you up, but not make you mad enough to bump me off against your better judgement”. That is the trick the western world is now attempting to perform. By Putin’s design, it is not going to be easy.

Why Billionaire Philanthropy Won't Solve Anything

 

More on Putin, Russian and Ukraine

 

China, Russia and the race to a post-dollar world

Rana Foroohar in The FT

Markets often react strongly to geopolitical events, but then later shrug them off. Not this time. Russia’s invasion of Ukraine is a key economic turning point that will have many lasting consequences. Among them will be a quickening of the shift to a bipolar global financial system — one based on the dollar, the other on the renminbi. 

The process of financial decoupling between Russia and the west has, of course, been going on for some time. Western banks reduced their exposure to Russian financial institutions by 80 per cent following the country’s annexation of Crimea in 2014, and their claims on the rest of Russia’s private sector have halved since then, according to a recent Capital Economics report. The new and more aggressive sanctions announced by the US will take that decoupling much further. 

It will also make Russia much more dependent on China, which will use the US and EU sanctions as an opportunity to pick up excess Russian oil and gas on the cheap. China is no fan of Vladimir Putin’s war. But it needs Russian commodities and arms, and sees the country as a key part of a new Beijing-led order, something Moscow is aware of. 

“China is our strategic cushion,” Sergei Karaganov, a political scientist at the Moscow-based Council on Foreign and Defense Policy, told Nikkei Asia recently. “We know that in any difficult situation, we can lean on it for military, political and economic support.” 

That does not mean China would break US or European sanctions to support Russia, but it could certainly allow Russian banks and companies more access to its own financial markets and institutions. Indeed, just a few weeks ago, the two countries announced a “friendship without limits”, one that will certainly include closer financial ties as Russia is shut out of western markets. This follows a 2019 agreement between Russia and China to settle all trade in their respective currencies rather than in dollars. The war in Ukraine will speed this up. Witness, in the past few days, China lifting an import ban on Russian wheat, as well as a new long-term Chinese gas deal with Gazprom. 

All of this supports China’s long-term goal of building a post-dollarised world, in which Russia would be one of many vassal states settling all transactions in renminbi. Getting there is not an easy process. The Chinese want to de-dollarise, but they also want complete control of their own financial system. That’s a difficult circle to square. One of the reasons that the dollar is the world’s reserve currency is that, in contrast, the US markets are so open and liquid. 

Still, the Chinese hope to use trade and the petropolitics of the moment to increase the renminbi’s share of global foreign exchange. One high-level western investor in China told me he expected that share would rise from 2 per cent to as high as 7 per cent in the next three to four years. That is, of course, still minuscule compared with the position of the dollar, which is 59 per cent. 

But the Chinese are playing a long game. Finance is a key pillar in the new Great Power competition with America; currency, capital flows and the Belt and Road Initiative trade pathway will all play a role in that. Beijing is slowly diversifying its foreign exchange reserves, as well as buying up a lot of gold. This can be seen as a kind of hedge on a post-dollar word (the assumption being that gold will rise as the dollar falls). 

New US limits on capital flows to China on national security grounds may speed up the financial decoupling process further. If US pension funds can’t flow into China, self-sufficiency in capital markets becomes ever more important. Beijing has been trying to bolster trust and transparency in its own system, not only to attract non-US foreign investment, but also to encourage an onshore investment boom in which huge amounts of Chinese savings would be funnelled into domestic capital markets. 

While sanctions against Russia herald more decoupling, it is also possible that the economic fallout from the war (lowered demand, even higher inflation) would push America and other nations into succumbing to pricing pressures that would favour Chinese goods. While there is likely to be a lot of political posturing on both sides of the aisle about standing up to Russia and China, it takes a long time to decouple supply chains. Policymakers in Washington have yet to get really serious about it. 

Beijing, on the other hand, is quite serious about the new world order that it is pursuing. In his 1997 book, The Grand Chessboard, Zbigniew Brzezinski, the former US national security adviser, wrote presciently that the most dangerous geopolitical scenario for the west would be a “grand coalition of China, Russia, and perhaps Iran”. This would be led by Beijing and united not by ideology but by common grievances. “Averting this contingency, however remote it may be, will require a display of US geostrategic skill on [all] perimeters of Eurasia simultaneously,” he wrote. 

Financial markets are going to be a major field of battle. They will become a place to defend liberal values (for example, via sanctions against Russia) and renew old alliances. (Might the US and Europe come together to forge a strategy on both energy security and climate change?) They will also be a lot more sensitive to geopolitics than they have been in the past. 

The Truth About the War in Ukraine - NATO's Over, Russian Lives Don't Matter!

 

Why the Buddha would be frowning at Ukraine today

Shekhar Gupta in The Print


Strategic studies quiz: Why was the code to inform Indira Gandhi of the successful Pokhran-1 nuclear test ‘Buddha is smiling’? While you think about it, let’s switch to Ukraine.

By the time you are reading this, Kyiv would have capitulated. The question that’s been asked often in the past few days, and will continue to echo for decades to come is, would it have been so simple for Putin’s Russia to crush Zelenskyy’s Ukraine if it hadn’t given up its nuclear stockpile after the Budapest accord in 1994.

This was done in return for security guarantees by the US, Europe and Russia. One of the guarantors has now invaded Ukraine; one, Europe, is looking for a place to hide and ruing its possible loss of cheap gas; and the third, the US, is doing no more than pour tender love and care. Would Ukraine be such a pushover if it had that stockpile?

Now, let’s turn this question inwards at ourselves. Was India prescient or imprudent to not only build nuclear weapons but to declare itself a nuclear-armed state? Over the decades, this has seen a robust debate among four schools. One, the Homi Bhabha-era hawks who believed India should have built its nukes in the early sixties, even pre-empting China. Former foreign secretary Maharajakrishna Rasgotra had even stated in public interviews and seminars that President John F. Kennedy had offered to help India develop and detonate a device, but that Jawaharlal Nehru turned him down.

The second school is the opposite: Nuclear weapons are ugly, immoral, unusable, unnecessary and an affront to humanity. That school has faded lately, especially after Pokhran-2 in 1998. Some of it has morphed into a new thought process: Now that nuclearisation is a done deal, let’s work to keep it to minimum deterrence and be active and willing members of all global arrangements, including Comprehensive Test Ban Treaty (CTBT) of sorts.

The third believes that India was better served by nuclear ambiguity. That Indira Gandhi had already shown the world our capability in 1974 with Pokhran-1. The 1998 tests were unnecessary political chest-thumping that gave Pakistan the opportunity to test as well. As a result, South Asia had two self-declared nuclear weapon states.

The fourth is the team that won. That mere demonstration of capability in 1974 was not enough. It was self-inflicted double defeat. India exposed itself to sanctions, yet did not assert itself as a weapons power. To call this Peaceful Nuclear Explosion (PNE) was pure hypocrisy that impressed none. Not even India’s public opinion at a juncture when Mrs Gandhi needed desperately to shore it up. It was essential to weaponise, thump our chests, throw the gauntlet at Pakistan.

The first school did not find much purchase in the fraught 1960s, and the second was rendered irrelevant after 1998. The third and fourth need to be debated, particularly with the Ukraine staring us in the face. Similar questions were also raised when the US invaded Iraq twice, the second time on the pretext that it had nukes. Would Bush senior or junior have risked invading Iraq if it actually had any weapons of mass destruction (WMDs)?

Never mind that it wouldn’t have the wherewithal to send them to Washington. But just the threat of a nuclear reprisal for the invasion against any of the US’s Middle-Eastern allies would have done. Ukraine now has become an enduring advertisement for the WMD-sovereignty link. It is making many nations, comfortable today in the aura of guarantees, uncomfortable. Surely, no country with the nukes now, or one that’s nearly there — North Korea, Israel, Iran or any other — will ever give these up. They will remember Ukraine. 

Did India gain or lose from opening its nuclear cupboard and exposing its wares to the world? The criticism is that it enabled Pakistan to find formal parity. The answer is, nobody had any doubt that Pakistan was already a nuclear weapon state. The Americans had given their last certificate of what was often called “nuclear virginity” to Pakistan in 1989, and refused to renew it.

In the 1990-91 stand-off, Pakistan had also employed the nuclear blackmail against India. It is something books have been written about (Bob Winderm and William Burrows, Critical Mass: The dangerous race for super weapons in a fragmenting world), then-CIA deputy chief Robert Gates has spoken about it, and investigative journalist Seymour Hersh has written a detailed piece too. I too have explained it in several of my writings since.

But, the Pakistani threat, which Robert Gates also brought to India from Islamabad on his conflict resolution visit, was that they will use the nukes in the beginning of the war. The reality dawned on V.P. Singh’s government that India did not have an immediately deliverable weapon in retaliation. Over the decades, proven capability had not been developed into a credible weapon and delivery systems.

That crisis passed, but this had ended any doubts across our political spectrum, with all its divisions, that India needed the weapons fast.

Eighteen March 1989 is a significant day in Indian strategic evolution. Intelligence reports were now confirming that Pakistan was indeed a screwdriver’s turn away from a deliverable bomb. On this day, the IAF was holding it customary firepower demonstration, this one involving 129 aircraft, at Tilpat, a firing range not far from Delhi. At the demonstration, Rajiv gestured to top civil servant Naresh Chandra to follow him into a tent. He was so secretive he even shook off a curious Rajesh Pilot, then a minister. There, he told Chandra of his concern and assigned him to head an elite group, mostly of scientists, to take India to full weaponisation. I wrote about it in some detail in these 2006 articles.

The group included top nuclear scientists R. Chidambaram, P.K. Iyengar, Anil Kakodkar, K. ‘Santy’ Santhanam, missile specialist A.P.J. Abdul Kalam and then-DRDO chief V.S. Arunachalam. They were to be funded mostly covertly out of a fund for “science and technology” under the Planning Commission. A lot of the operations were undercover and covert. Santhanam, for example, was given a discrete senior posting in RAW. Kakodkar later disclosed to me in this Walk the Talk on NDTV that he had to even travel overseas under assumed names and passports. 

That baton passed brilliantly between seven prime ministers across a decade of political instability. And in 1998, Pokhran-2 happened, followed by Pakistan’s tit-for-tat in Chagai. Two decades after that, where did the two new nuclear powers stand? India mostly accepted as a legitimate nuclear weapons power, admitted to most multilateral arrangements, rid of all the sanctions and an American strategic ally. And Pakistan? It wasn’t such a bad idea to open the cupboard then.

Finally, here’s why they said ‘Buddha is smiling’ for Pokhran-1. It seems that some time in the epoch of Buddha, the ancient kingdom of Magadh launched a war of conquest over its neighbour Vaishali. While Magadh was the usual monarchy that built a big army and collected the weapons for the assault, Vaishali was some kind of an anarchic street democracy where people spent all their time arguing over whether to fight, how to fight, who will fight.

Sure enough, Magadh annihilated and massacred poorly armed Vaishali. When the news got to a meditating Buddha, it seems, he frowned in disapproval. Meaning that to keep the peace, a kingdom has to be fully prepared for war, or it will meet Vaishali’s fate. Since 1964, India was the Vaishali to China’s Magadh. Now you know why Buddha would now be smiling? Or why he would be frowning at Ukraine’s fate?