These weeks that are passing now are Lenin weeks. He said, “There are decades where nothing happens, and there are weeks where decades happen.” Why? Let’s remember that the word “Ukraine” means borderland. The people of the borderlands of the world are realizing something important. If tiny little Ukraine can take on a nuclear superpower and win, maybe they can take on their rulers too. Let’s call this “The Ukraine Effect”. This is why we see the leaders in many Russian Republics moving away from President Putin, even the much-feared leader of Chechnya, Kadyrov. He’s been Putin’s close ally, but now he, and the mothers of Chechnya, are saying no to any more conscription or war, at least for now. In other Republics, the border people are pushing for more independence from Moscow now. This is why we are seeing a revival of new border clashes in places with old grudges against Moscow, like the Kyrgyz-Tajik border. But, it’s not just happening in Russia. The women of Iran are outraged that the theocracy murdered a woman for displaying her hair without the hijab covering it, are now marching right up to the police with their locks flowing, followed by crowds that vastly outnumber the security services. It’s not just small border countries that are being changed by The Ukraine Effect. It’s the big one, China, too. Rumors are flying about Xi and Putin, both of whom went missing at the same time over the last weekend.
One rumor is that they were together, planning the next steps. China can emerge as a peace broker while at the same time blessing Russia’s annexation vote. Although this strategy does not work if the Ukrainians win back Donetsk, which press reports say they are. Take note that Xi perfectly well understands that Russia is now extremely weak. It has fully revealed that it does not have a superpower military. It just has superpower weapons. With the Russian military running away and leaving all their equipment behind while young Russians flee the country by paying exorbitant prices for air tickets and Googling “the best way to break your own arm” to avoid conscription. The Ukraine Effect now has many border states and interior republics balking at supporting Moscow any further. Xi’s speech in Samarkand at the SCO meeting on September 17th dropped a lot of important hints about the future. One of these was that Central Asia, the “pearl of the Silk Road”, used to be Russia’s back yard but now it’s China’s front yard. In other words, China is slowly encroaching on the stans now, preparing for the possibility of a collapse in Moscow’s ability to command the country let alone the peripheral countries, from the center. This will be a game changer for China. If China cannot grow through innovation and government programs, as has worked for a while in the past, then maybe it can grow through the acquisition of control over locations that have lots of important resources: water, arable land, and humans who will work productively. The stans can remain nation states but China will slowly and quietly become more influential in local decision-making. The question is what happens to the Russian Republics after the current President? Can Russia hold the Russian republics together after this? Probably not. China smells a massive opportunity if Moscow implodes and there is a power vacuum. Let Putin hold his signing ceremony over the new Russian territory tomorrow. It’s theatre.
Another rumor was that President Xi was detained upon returning to Beijing from the Shanghai Cooperation Organization speech. It was his first trip out of the country since COVID. Everyone has now dismissed this possibility and attributed the story to his arch-enemy Falun Gong. Word was that Xi’s old rivals Hu Jintao and Wen Jiabao together took control of the President’s Security Services, the Central Guard Bureau and placed Xi under House arrest. But, it is also true that Xi has been facing an ever more concerned CCP. The Party Conference is scheduled for November. The idea is that he will be appointed Chairman for life. But, some in the CCCP have been uneasy about the fact that the military has been reporting to him personally for some time and no longer to the Party. In a Machiavellian twist, it may be that even Xi staged the rumors of his own arrest in order to reveal any such uneasy and remaining opponents. In other words, it was a Night of the Long Knives. It was an internal purge rather than a coup. This feeds into Xi’s measured and stateman-like response to Putin’s threat that he might deploy nuclear weapons. Xi suddenly did a volte-face call for a “truce” and “ceasefire through dialogue” between Russia and Ukraine. That put a limit on the “no limits friendship” between him and Putin. But, it could be that Xi positions to support the referenda in Donetsk and the Russian claimed territories. This would create a fine precedent for Taiwan and allow Xi to be a peacemaker at the same time. Then Xi is beautifully positioned with several wins: The Stans, the internal Russian Republics, especially in the East and Taiwan. Xi has also clearly created a direct dialogue with Erdogan in Turkey that is going to give China an easier reach all the way to the Mediterranean, where China has been investing in transportation infrastructure for some time. Turkey also helps Xi manage the domestic Uighur issue more easily. Xi gets rid of internal opponents and not only keeps the Chairman title for life but the People’s Liberation Army Navy continues to report to him personally. All this makes it a whole lot harder to get rid of Xi. It seems that the planning to de-authorize Xi started this summer at the annual Beidaihe “summer summit”. Read this backgrounder on the intrigue that surrounded that summit this year. At any rate, he’s winning now. This is masterful chess.
The Ukraine Effect and events in Iran are related too. The public there have also realized that Ukraine’s success means that they may not have to endure the theocracy forever. Maybe it’s just a coincidence that Tehran chose this moment to crack down on women who were not hiding their hair with a hijab. But, now women are walking arm in arm directly toward enforcement officials with their hair uncovered and flowing and followed by groups that vastly outnumber the authorities. The protests against overlords everywhere are accelerating because of the Ukraine Effect.
Let’s put this bluntly. We are witnessing the end of the Soviet Union. We thought it ended the day after Christmas in 1991 as a result of President Gorbachev’s Christmas Day speech. It now seems clear that we in the West were extraordinarily naïve. We thought that the demise of the Soviet Union as a body politic meant that Russia and its constituents would simply adopt democracy and capitalism and join the family of nations. Instead, Russia, having no experience of democracy or capitalism, fell under the control of savvy operators particularly from the world of intelligence (Siloviki), organized crime (The Vory), and those we now call oligarchs. The fragile and inept old structure was simply taken over rather than reformed or modernized. President Putin and his allies juiced it for 22 years but didn’t share the proceeds with anybody else, especially not the Russian military or the Russian people. Then, when Putin started turning on his own team in the last few months, it became clear the that the Russian people, particularly youth of military conscription age, would no longer comply with Putin’s ever-growing demands for sacrifice. Russians have seen purges before and they know how they end. The fact that Ukrainians did not greet Russians with open arms was the least of Putin’s problems. The deeper issue now is that talented Russians with skills and assets suddenly find themselves fired by Western companies and unable to send or receive money or even to talk on the phone without fear of being arrested. The intelligentsia still matters in Russia.
But, Putin’s threat to deploy a nuclear weapon may turn out to be a great gift to modern history, scary as it is. Once he threatened Ukraine and the world with a nuclear strike, it became clear that he'd backed himself into a corner and the Russian military and the Russian people are not going to go down in flames with him. There is no loyalty there, especially now that the officer who carried Russia’s nuclear codes was found dead in an apparent suicide, (impressively accurate with his two bullets to the back of his own head), and the oligarchs are all falling off buildings and falling down stairwells and being run over by boats. Seems like biological agents and neurotoxins take too long to work in comparison with these other methods these days. Meanwhile, the youth of Russia are voting with their feet, running away from being gang-pressed onto a battlefield and from the risk of the 15-year jail time, they’ll now face if they don’t join the battlefield. Mothers in Russia, especially those from poor remote Russian republics like Tuva and Chechnya, have had enough too of seeing their sons dying and enough of “protecting the territorial integrity of the (Russian) homeland”. When Muscovites turn on Russian security services within site of the Kremlin, and The Moscow Times reports it, something has gone very wrong.
Little did Putin realize the impact of his own words. When he said, "If Russia feels its territorial integrity is threatened, we will use all defense methods at our disposal, and this is not a bluff”, he was finished, as US Navy Admiral James Stavridis pointed out. Putin aimed these words at Ukraine and NATO, but they were heard by Russians and by Putin’s now former friends.
As a result of all this, we are witnessing the deglobalization and decentralization of political power, having already seen the de-globalization and decentralization of economic power. It seems very likely that both Russia and China are no longer going to be as “Communist” as they have been. Both will have no choice but to devolve power to their Republics and focus on delivering better economic outcomes. We thought we had witnessed the end of the Soviet Union and the end of Communist China. But, maybe that really never happened. Maybe they changed the logo but the internal system and processes never really changed at all. The true end of the Communist era in Russia is now. China will now have the latitude to be a little less Communist because it has new markets. Remember when China pushed to open Burma? They wanted a new market with resources. Well, if Burma helped China grow, then the Stans plus some of Russia will turbocharge it!
But, none of this is a pure victory for the US and the West. They too are going to see revolts from their supporting states as a result of The Ukraine Effect. The US has never run its empire as formally as the other superpowers have. But, the US still has groupings of allies that have subordinated their interests to the US. Now we see the start of new military and geopolitical and political alliances which indicate rather less willing to do whatever Washington wants. Notice that the Scandinavians are banding together to more heavily rely on a Northern military Command of their own. NORDEFCO is made up of Finland and Sweden Norway, Denmark, and Iceland. Having seen that NATO wasn’t jumping to protect Ukraine, they realized that NATO might not jump to protect them either. Washington’s view is that a direct confrontation with Russia would go nuclear fast, therefore they had to stay on the sidelines. Now everybody gets it. Nobody is going to risk a nuclear confrontation for a small country anywhere, even in Europe. Also, how is the US going to defend these cold states when its Coast Guard only owns one icebreaker? China and Russia have both been increasingly encroaching on Scandinavia. So, they are creating their own defense club. They also have their own ability to deal with real threats from both Russia and China. Jokes and memes have been going around for some time intimating that Finnish snipers would have no problem dealing with the Russian, again. The last time Finns had to face off with Russians directly in WWII, the Finns decimated the Russians. In 2017 somebody found the diary of a Finnish sniper called Simo Häyhä who apparently used Finnish-made weapons to kill more than 500 Russians all by himself. The Scandi’s now have their own weapons firms and are producing much better quality stuff than the US, especially in naval matters. The Vikings have been quiet for some centuries. But it looks like they are returning to the stage as a more independent force now.
Similarly, Australia and New Zealand and a host of Pacific island nations have found themselves caught in between China and the US with both sides demanding to know “whose side are you on”? They are now considering their own national interest. Being on side with a particular superpower is neither as smart nor easy as before.
Even Britain has politely coughed and started to ask whether Washington’s blustery approach which assumes “we’ll win this because Russia will run out of money and steam and support”. It might. Now that the Queen is gone and we have a new British King and a new British Prime Minister, we cannot be surprised if the British start thinking again about what really is in their national interest. Do they want to continue to be caught between the US and China, especially if China is creeping toward them geographically? It would be worth re-reading Sir Stephen Lovegrove’s speech at CSIS last July. In it, we can hear the British National Security Advisor trying to nudge the Americans in this White House beyond their day-to-day approach and start thinking about the new international economic order or disorder that is about to emerge. Having the President say “don’t, don’t, don’t” use nukes to Putin, isn’t the kind of proactive problem-solving they think is needed. The Scandinavians and the British and everybody else remain wary that Washington is now capable of repeatedly producing Presidents that are not very interested in American foreign policy. The fact that the White House is swinging back and forth between political extremes is itself extremely worry-making for its allies. Do America’s allies see a possibility of an America that turns on itself? Half of America does not want to live with the other half anymore. What will NATO do if America too becomes less internally stable, just like Russia and China? If the periphery of Russia is becoming less stable and China is creeping toward Europe, NATO members are going to have to come up with a new strategy either with or without the US.
So, now is not the time to prepare for a Ukrainian Victory. It is time to prepare for a world where the superpowers are all experiencing de-centralization and re-localization of politics and geopolitics.
This is all short-term extremely alarming and long-term probably seriously positive for the world economy. We may now be on the brink of a wave of economic and political forces that can generate much more economic growth, much more innovation, and much more disinflation if not deflation. When the Soviet Union supposedly fell, billions of new workers came into the world economy and pushed down wages and prices. This is about to happen again but on a larger scale and with better connectivity and technologies to support it this time. When China entered the world economy after Deng Xiaoping gave the Chinese permission to be capitalists, China and its neighbors also lifted the performance of the world economy while killing off inflationary pressures. A repeat of this labor/innovation event is exactly what the world economy needs. Bill Ackman is right when he says immigration into the US would help reduce inflation. Worker immigration into the world economy will reduce it globally. If the superpowers are diminishing and devolving, then we’ll get a new peace dividend. These two alone tell us that today’s tricky headlines are going to be followed by a geopolitical landscape that is truly investable. But, to get this right, the world needs to be forward-thinking and help all the superpowers avoid the mistakes of the past.
Finally, let’s consider how superpower nuclear threats have always ended. Every time we get close to a true nuclear exchange, everyone loses their nerve. Next thing you know the leaders are giving each other bear hugs in some neutral country like Iceland or Finland. Nixon hugged Brezhnev. Reagan hugged Gorbachev. The images made the markets rally on the expectation of a peace dividend. China wants to grow. It does not want a nuclear confrontation with the US, and China is calling the shots for Russia now. China is going to hug Putin so hard that much of Russia and Central Asia will fall under China’s influence. Will Putin be held accountable? That’s another question for another day. Will the world economy be welcoming Russians back, perhaps with China as their new overlord? Can we imagine a photo of Xi and the next Russian President in a bear hug? Can we imagine the next Russian President in a bear hug with the next American President? I can.
Subscribe to stay informed on new developments as they bubble up.
Please contact me about public speaking events via LinkedIn or my website DrPippaMalmgren.com.
As usual, a provocative look by Pippa at the current situation. I think I generally agree with the first 3/4 of the article. I do not agree that a better world is coming with the superpower decentralization. I think chaos is coming with 'strongmen" appearing everywhere.
I also think the coming dramatic deterioration in Western economic circumstances is going to lead to reactionary governments and massive civil disturbances. The financial system is clearly close to breaking point yet again and this time the debt situation is MUCH worse than in 2008. The strong dollar is causing chaos in the currency markets and it doesn't look like it is even close to being over as of this week. Stock markets most likely have another lunge lower to come before bottoming. The Cus social safety nets are already close to breaking points and the coming steep recession will entail mass "QE" to save the day.
So I fully agree that as Pippa quoted the line that "There are decades where nothing happens...." etc etc. But I see nothing but chaos going forward. Yes there will be brief respites, but the "people" are getting antsy EVERYWHERE. Pitchforks are being sharpened, torches are being dipped in kerosene and the public is polarizing dramatically. A better future is not on the cards for any year this decade and probably the next. Once again to quote Tomlin...... "Its going to get a lot worse before it gets worse".
It wasn't smart of US to push Russia (resources) toward alignment with China (resource demand) since 2014. The opposite would have been brilliant.
The US $ (reserve currency and trade invoicing) is the only main advantage US has ever had. Not a single country at this point is going to put up with this nonsense...
Financial Times (2019) "Mark Carney BOE calls for global monetary system to replace the dollar". https://www.ft.com/content/a775b55a-c5c2-11e9-a8e9-296ca66511c9
the rest of your narrative is just that - stories and propaganda.
with love, from a Ukrainian American citizen.