Monday, March 17, 2014

West - Still Coming to Grips

As the Market would open this new week with a full realization of 'annexation' of Crimea by Putin, Western Capitals may announce sleuth of sanctions. But there are still doubts whether Western Leaders would be able to put forward an emphatic response. 

American companies doing business in Russia are going to get impacted and it is not clear all those chest-thumping Republicans will be able to withstand Business pressures when losses of billions of dollars come to due for few American Corporations. Same with Germany. Chancellor's upbringing in East Germany and her highly credible conservative instincts make it possible that finally she will cross the line and make ready her country for the business loss with Russia. But it has not happened yet. Weakest link is UK PM Cameron. Neither does he have much political latitude in being strong in the event of London losing business of Russian oligarchy, nor is he a political visionary. That is where what Garry Kasparov says rings the bell. (Politico did an excellent job in publishing this article, first time I saw Politico getting out of the 'beltway-politics-as-sports' mentality and attempting to take an authentic position on an important issue, albeit implicitly.)

The other question is, it is still not clear whether West is ready for a long game, which is clearly needed here. In a year or so Obama will be a lame duck President (some can credibly argue that he is already a lame duck President incapable of pushing anything worthwhile through American Politics) while Cameron would be facing the music from Scottish People in few months followed by slaughtering at UK General Elections. Contrary to what many experts argue that it should be America who needs to lead here, I agree with Senate Majority Leader's instincts in this case  - it is Europeans, especially Germany, which has to set the course because 'for them the stakes are maximum'. Listening to Sen. Rand, one can hear perennial 'isolationists' arguments of America. Still President Obama has to play his 'leading from behind Merkel' policy and keep urging Europeans to stay united and effective. Least what he can do is keep reminding Europeans what Kasparov so painfully reminded in his article. 

There still does not seem to be any longer term political consensus, both in Europe and America, about how to remove Europe's dependency on Russian Energy supplies. Though America has bountiful of Natural Gas, it is possible that Asian customers pay more than Europeans. But can both Europe and USA see the strategic advantage in using Norther American energy sources (or else huge Solar Plants in Morocco and Algeria with electricity transferred to Europe, but nah, European Environmentalism would never allow any such ambitious projects)? Do tax payers dollars have a room to play here, like Marshall Plan after WWII,  since it could be a much more effective way of buying security in Europe rather than simply installing more maddening nukes. The way American Politics is argued these days - anything purchased or financed by tax dollars is condemned - it is hard to see how any such strategic thinking and execution is possible with American and European politicians. 

This is the same Congress which does not get the elemental tactics like letting China play a bigger role at IMF so as it becomes considerate to West's concerns about Russia, by way of USA backing IMF reforms. These Republicans are so blind to national interests due to their unending political desire of pulling down Obama that they have been opposing for years legitimate request of the Administration to move around $63 Billions from emergency account to general poll so as USA can pay its increased quota of IMF and make the way for reforms at IMF. CBO estimates the actual cost of IMF reforms little bit over 300 Million dollars! Administration had to resort to the hard tactic of attaching this request to Ukrainian 1 Billion Load guarantees and no surprise even such a paltry aid package to Ukraine has stalled in Congress! 

Putin has exploited these weaknesses of Western countries and he will continue to reap fruits of it until Western leaders finally come to grips of what is drawn in front of them. Effectively it is Cold War, their wishing otherwise do not change the reality.

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