Author: Manu Steens
In this post I write my own opinion, not that of any organization.
At the moment we live in very uncertain times. For Ukraine and for Russia, that’s how it seemed from the latest controversy of the Wagner sidestep. There are dissatisfied people and not everyone wants to shoot the other one any longer, they say. Some followed one boss, others are welcome to the other boss. End game: Russia turns out to be more stable than the West likes, and Putin’s position comes out of the embarrassing situation strengthened. For comparison, see de Gaulle’s situation with Algeria in 1961.
The retreat of the rebellious Wagner troops under the pressure of Russian solidarity is now a fact. In addition, an intervention by Belarus was welcome for the Wagner boss. He promised him that he would find safety in Belarus. Nice gesture. He can secure his own life in the wasp’s nest that the would-be coup has become. What is there to it? My suspicion is that at Putin’s simple request, that security is no longer assured. The man is not a problem that cannot be solved with a fresh cup of tea or a poorly closing window in his future bedroom. After all, Belarus has sworn allegiance to Russia. However, it is unclear whether there is $6.2 billion involved (it was not denied at the time of this writing) and who has it. If necessary, someone else ends the problem with another contract.
The future of Ukraine is now uncertain. Putin’s plan, I think, was to give Ukraine a blow once and for all that it didn’t like, and then to rebuild it to bind the state, as he did with Chechnya. However, they are a different people, with a different backing at international level. One punch became many, and the country has been torn to shreds. No one wins a war that is a slaughterhouse. Reconstruction as currently estimated (between USD 400 billion and USD 1000 billion) is unaffordable for the economy of Russia as it is currently known by the EU. (In his article in VRT of 20/04/2023, Lukas Lecluyse writes: “Nevertheless, the sanctions generally have a negative impact on the Russian economy. This is evident from figures from the World Bank, the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD). For this, GDP, the gross domestic product, is often taken into account. It is estimated that Russia’s GDP would have fallen by 2.1 percent by 2022… That decline would continue in 2023. According to the OECD’s projection, the Russian economy would fall further by 2.5 percent in the most extreme case. The World Bank’s figures show a different picture: GDP is expected to fall by “only” 0.2 percent this year. The IMF thinks that the Russian economy will not shrink at all, on the contrary. The fund announces economic growth of 0.7 percent.” See https://www.vrt.be/vrtnws/nl/2023/04/20/oorlog-rusland-oekraine-economie-sancties-tanks-nederland-denema/ and Gross Domestic Product (GDP) 1.779 billion USD, https://www.flandersinvestmentandtrade.com/export/landen/rusland/cijfers). Even for the EU, this is a huge amount, which will keep the money presses running at full speed. I make abstraction from the idea that a party wins the war and start from the idea that there will be an end.
In addition, Ukraine does not receive the military equipment, as it has to pay back in the long run. That will break up the country. Whoever wins the war gets a gigantic destroyed terrain that can be rebuilt from scratch. It is also a tough one for the EU. Moreover, these estimates have been made on the basis of the value of a dollar and an Euro that will not suffer from a successful rise of the future BRICS currency. The agreements for a BRICS currency are in the process of being drawn up.
So far as for the context in which two uncertainties are important to me.
These two uncertainties that I want to plot against each other are:
- whether Russia will rebuild Ukraine after the war or not;
- whether the BRICS currency has a strong rise from the beginning and thus brings down the value of the dollar and to some extent the Euro or whether the BRICS currency remains relatively unimportant in the short and medium term (up to 5 years).
Four possible futures follow from this:
- China cabinet
- S*!t hits our fan
- Cold war
- A little warm War?
- China cabinet: In this scenario, the Russian economy is stronger than I estimate it to be, and the BRICS currency remains a weak currency at first. There may be a change of roles at the top of Russia, perhaps not, and neither the EU nor America will have much additional hindrance to their own trade relations with Russia after the war in Ukraine. The EU is already paying for reconstruction and will continue to contribute to it. Russia pays most of it. The money presses of the currently strong Western currencies are running at full speed. However, this encourages a new inflation, which gives China the opportunity to contribute to the reconstruction and strengthen its position in the world as a trading partner in the EU and in the world. The price of energy remains fragile. The reconstruction will keep the world economy running at full speed. This is used as an excuse for the use of fossil energy sources. The world political situation is unstable and can be handled cautiously. Lack of mutual cultural understanding of other parties keeps a fuse above the powder keg.
- S*!t hits our fan: The ‘free West’ is in trouble. Due to a rapidly increasing importance and value of the BRICS currency, the Euro and the US Dollar come under heavy pressure, which they cannot keep after some time. They diminish in value. The West does not continue to retain its political added value on a global level and more and more countries are joining the BRICS. As a result, Russia’s economy is strengthening more, as is its political grip on the world. A new global player is emerging from the BRICS currency, with new countries from Latin America and Africa applying to join it. With China, India and Russia, they are a successful counterweight to the West. The Euro and the US Dollar are devaluing at a solid pace, the poorest in the West have been hit the hardest. The price of the reconstruction of Ukraine is no longer stated in US Dollars or Euros but in the new BRICS currency. The US is becoming politically isolated and the same is threatening the EU. The West has been militarily weakened by a weakening of its economy. Cybercrime/war has become ubiquitous from all parties. An alternative to NATO emerges from the new BRICS countries. The population in the West is getting tired of ‘it’ and there is a threat of civil disobedience in the West. This may be accompanied by a flight of the well-to-do and intelligentsia.
- Cold War: Russia is losing internal support from its own people who are tired of the damage to the Russian economy caused by trade embargoes from the West. A permanent trade embargo by the West is hampering the global economy and the Global Supply Chain is coming under severe pressure in some parts of the world. This represents an opportunity for China to bring stability to the Global Supply Chain in the BRICS countries. It thus strengthens its economic position in Asia, Africa and Latin America. It is moving towards the European market. India is increasingly playing China’s card and is coming to a political break with the USA. A terror problem arises: even more (classic) weapons from the war end up in the hands of the mafia all over the world. Russia can see nuclear weapons technology and nuclear energy technology as a point of growth at the political level, to ensure the “friendship” and financial support of other states that crave such technology and weapons. This results in a very unstable world policy, in which the maps have been heavily rearranged. The EU will have to provide financial responsibility for the reconstruction of Ukraine. It does this in order to strengthen its own interests with those of a number of Eastern European countries through reconstruction. This will start new inflation waves of the Euro. This results in somewhat of a relative strengthening of the BRICS currency.
- A little warm War ? Here Russia will develop a firm grip in world politics together with China. It will take decades to finance its part of Ukraine’s reconstruction. The US Dollar and the Euro seem to be weakening. Due to an increased influence of the BRICS countries and possibly new entrants, the influence of NATO weakens. An alternative to NATO emerges from the BRICS countries and this isolates the West. A number of parties are leaving NATO. The USA is militarily folding back on itself. It obliges the EU to provide military support for itself in addition to the payments for the reconstruction of Ukraine. Political tensions within the Western bloc occur when Europe chooses to create its own weapons systems ‘in-house’ and no longer be dependent on the USA for weapons technology. Europe is becoming more independent of the USA. However, it needs time to adapt its economic strategy and, moreover, to evolve militarily. As a result, it loses time and energy to keep its grip firmly in world politics. This creates a political and economic gap, to which China and other BRICS countries under her leadership are cleverly responding.
It follows from these ideas that the situation is fragile and the West as a power bloc is in a state of a kind of phase transition. The linear reasoning based on the power of the US Dollar and Euro comes to an end here. Moreover, the media pay too little attention to the future BRICS currency as a new currency. Phase transitions are known as complex systems. They are unpredictable, if it is the first time that one notices or such a phenomenon occurs. After all, it has not been studied historically. There is no historical past that we can look back on to create a sense of the opportunities and consequences of the interplay of events. Risks are therefore difficult to assess. Perhaps the risks outlined above are still cautiously formulated.