“The big problem today is that both sides have their reasons“, explains the economist Jacques Sapir, one of the greatest specialists on Russia in France, in relation to the war in ukraine. Sapir is a member of the Russian Academy of Sciences and the author of books such as The Russian crash of 1998, Economists against democracy, deglobalization and The great comeback of planning.
In dialogue with CashSapir makes a wide tale of a series of facts that offer explanations about what is happening in Ukraine, which is complementary to the rejection of the Russian invasion and the consequent humanitarian catastrophe.
Mention the internal conflicts in the Eastern countrywhich are the cause of the subsequent military escalation, along with the NATO’s relationship with Russia and in particular the failure of previous instances of negotiation with the United States. He warns that the economic impact of the sanctions applied by the European Union and the United States may not be relevant for Russia and explains that the current geopolitical context deepens Russia’s relationship with China. It also underlines that European dependence on Russian gas prevents a complete cut in the economic relationship.
1. What are the causes of the conflict?
–The causes are multiple, there are some that are internal to Ukraine. Since 2014, we had an uprising in the eastern part in reaction to the revolution of that year, which had declared that it would abolish the specific rights of the Russian-speaking populations and the population of Crimea. You have to remember that Ukraine is a very heterogeneous country in its population, where Hungarian, Russian, Ukrainian and Romanian are spoken. So much so that President Zelensky himself is a Russian speaker and has used that language on several occasions in this crisis. That does not imply that the Ukrainian nation cannot exist. But he does define that to strengthen it, it is necessary to strike a balance in a complicated context, which has not been done since 2014. Also, the Agreement of Minsk 2 never applied. Let us remember that this agreement, signed in February 2015 after the failure of the 2014 Agreement, implied a ceasefire and the withdrawal of heavy weapons from the front line, the release of prisoners of war, constitutional reform in Ukraine, which would grant self-government to certain areas of Donbas, and re-establish control of the state border to the Ukrainian government. This second failure caused the eastern regions to enter a regime of low-intensity conflict, creating a unstable situation in an even more serious context of tensions between NATO and Russia.
2. How do you analyze the development of NATO?
–In 1991, NATO promised not to expand beyond Germany, but in 1999 Poland, Hungary and the Czech Republic joined the treaty, which increased the feeling of insecurity in the Russian elites, which was reflected in Putin’s speech in February 2007 during the Munich Security Conference. At that Conference, he told the NATO countries that “you cannot consider that International Law is what you want, but rather that it must be the result of a consensus.” In December last year, Putin seems to have thought that the situation could not last any longer and offered an agreement to the United States, in which NATO undertook not to accept Ukraine’s accession. However, Washington rejected the proposal in February. From then on there was a break in Russia’s strategy, which led Putin to officially recognize the existence of the two independent Eastern Republics, the Donetsk People’s Republic and the Luhansk People’s Republic, which meant that it was no longer an internal Ukrainian problem and enabled Russia to intervene for its security. But he also launched a military operation seeking the destruction of the Ukrainian army. This is reprehensible because a conflict in Europe cannot be allowed. But Russia’s security demands cannot be ignored either. The big problem today is that both sides have their reasons.
3. What can be the impact of the economic sanctions taken against Russia?
Q: The sanctions began as symbolic, with no real effect. Banning debt taking in Russia is ridiculousbecause its debt is 17 percent of GDP, of which 80 percent is held by Chinese banks and 20 percent by Russian banks. The suspension of the Nord Stream 2 gas pipeline is also symbolic because it wasn’t working yet. But the truth is that neither the European Union (EU) nor the United States can do much. The EU is highly dependent on Russian gas, in particular Germany and Italy, and there are no possible substitutes, because the gas that may come from the United States or Nigeria can only be delivered by LNG and currently the European regasification facilities are working at their maximum capacity. The European Central Bank carried out a study by which it estimates that if there is a 10 percent drop in the gas supply in Europe, the EU’s GDP would drop 0.7 percent and that of Germany, 1.2 percent. Regarding the sanctions of the SWIFT interbank system, the Russians and the Chinese began to develop an alternative system seven years ago, with which I think the issue can be circumvented. Regarding the embargoes on microprocessors, these are manufactured in China and Taiwan, with which there are supply alternatives. In the same way, Russia could substitute Europe’s gas exports for Chinese demand, because the infrastructure is already ready.
4. As a reaction to the sanctions, is it possible that there will be Russian measures reducing its gas supply to Europe?
–Russia could reply by reducing its gas supplies, but for now we cannot expect a total cut. Russian gas is very important for certain European countries, such as Germany, where it accounts for 55 percent of consumption, or Austria and Finland, where it supplies all of the gas consumed. The resource is delivered under two modalities: long-term contracts, which represent 60 percent of the supply, and business in the daily spot market, equivalent to 40 percent of the total. Russian companies, essentially Gazprom, always said that they would honor their obligations under long-term contracts. But nothing prevents them reduce its deliveries on the spot markets, which would have devastating effects on the economy of the most dependent European countries. Although the reduction in exports could also have a cost for Russian companies due to a decrease in quantity, the increase in prices could compensate for the losses.
5. What impact do you expect on grain markets, particularly wheat?
–Ukraine and Russia are major grain exporters. Ukraine’s export capacity, even if the war ended these days, was annihilated. On the other hand, there is a growing demand in world markets this year, because China announced poor harvests and consumes a lot of wheat. That makes Wheat prices, which are at record highs, could continue to rise until the end of 2022, which would imply dramatic problems for developing countries that are highly dependent on world markets and will not be able to pay for their imports. An analogous reasoning could be raised for metals such as aluminium, cobalt and nickel.
6. How are the relations between the three world powers in this context?
–It’s possible that this brings China and Russia even closer, but that rapprochement had already been taking place since 2008/10. The crisis in Ukraine accelerates rapprochement, but does not generate it. In fact, in 2010 the Russian government published its 2050 energy strategy, in which it already foresaw the shift of its export destinations to Asia. The strategic error of the United States is notable. If they did not want Russia to intervene in Ukraine, they should have put troops in anticipation of that possibility. This reveals that this region was never at the heart of its strategy, as Taiwan and China are. This choice of priorities generates consequences. If what happens in Ukraine is secondary, they should not have been so blunt in their refusal to negotiate with Russia. That error was noted in the contradictory positions of Washington, which oscillated between provocative speeches and conciliatory statements. For example, on January 20, Joe Biden had said that if the invasion was minor, the United States would not intervene. But if Russia’s right to intervene in these two republics is recognized, it cannot be said that it is an invasion. Those statements drew criticism in Ukraine and anticipated what came next.
*Coordinator of the Department of Political Economy of the CCC