Russia-Ukraine Crisis: Global impact and lessons for India

Russia has made it clear in its communication that any attempt to bring Ukraine into the NATO fold will have consequences

Russia-Ukraine Crisis: Global impact and lessons for India
The Ukraine intervention is directly challenging the US and NATO.

By Lt Col Manoj K Channan

“War is good, it teaches you a bit of geography and a bit of contemporary history too”

Russian intervention in Ukraine has been seen as a serious breach of international treaties and a violation of a sovereign country. Putin has been painted the villain by the Western Leaders and the electronic and print media, including those in India.

Russia believes Ukraine was an artificial creation of the Bolsheviks after Brest Litovsk in 1917 and “never had a tradition of genuine statehood”. A choreographed effort to show that all key countries agree on far-reaching sanctions, words “massive” and “devastating” are being repeated ad nauseam, as if it were an agreed script. But this Potemkin unity is unlikely to alter the Kremlin calculus. The West cannot activate serious measures because it risks an asymmetric response, a lighter variant of ‘mutual assured destruction’ from the Cold War.

Let us take a step back and revisit the famous quote of Henry Kissinger “to be an enemy of America can be dangerous, but to be a friend is fatal.” This is historically proven and is now more often repeated and is factual. Issue of violation of Ukrainian sovereignty is not the decisive issue as the West has violated the sovereignty of many countries, Yugoslavia, Serbia, Iraq, Syria, Libya, Panama, Cuba, Vietnam, Laos, Cambodia, to name a few and very recently Afghanistan, where after spending trillions of dollars and as fate would have it came to an agreement with the Taliban and left the Afghan nationals in a lurch.

If the US and its NATO allies could find the above-mentioned interventions in their National Interest, why would the definition change for the Russians? Post the implosion of the erstwhile USSR in 1991, the cold war era came to an end as most of the Warsaw Pact countries, having become independent countries, joined NATO.

The Ukraine intervention is directly challenging the US and NATO. Russia has made it clear in its communication that any attempt to bring Ukraine into the NATO fold will have consequences. President Joe Biden and his administration did not give this assurance, which would have definitely de-escalated the situation. Instead, warlike stores were supplied, hoping that the Ukrainian forces would be able to stall the offensive. US / NATO have been condemning the intervention but have not clearly stated the red lines which could have disastrous effects globally.

Russia has been supporting the separatists in the Eastern region of Ukraine and as per media reports, these separatists were being engaged by the Ukrainian forces, on their request, President Putin sent in the troops.

The Putin – Xi Jinping meeting on the sidelines of the Winter Olympics seems to have been the occasion to orchestrate and set the stage for the intervention. Both the leaders see the US and European leadership as weak and incapable of taking a hard decision. Xi must have given Putin a green light of sorts over Ukraine. Otherwise, Russia would not have pulled most of its military forces out of the Far East to wage war in the West, leaving the Chinese border exposed.

The US has pulled back from various flashpoints and is no more in the leading position of a global policeman. To do a turnaround and put boots on the ground is the least likely option.

If one were to observe China, it has been replaced by Russia as the bigger evil and as one international analyst stated, Europe has witnessed the cold war, with Russia’s intervention in Ukraine finding their feet closer to the fire and wouldn’t want to be caught in this imbroglio.

China is focused on challenging the US to become the world leader and is using its diplomacy, including coercive, to turn over the fence-sitters on its side. The US focused on Russia allows China to continue its intrusions and dominance of Taiwan, Hong Kong, the South China Sea and the Sea of Japan. China has its interest in Afghanistan and is engaged in eyeball-to-eyeball contact along the Line of Actual Control with the Indian Army.

What are the likely options that China may exercise during this crisis?

The two critical areas which need to be watched closely are mentioned below.

The option along the Line of Actual Control is limited and as in the case of Russia, China too has violated and ignored past bilateral treaties and continues to ignore the settling of the border dispute. The Indian Armed forces will respond and strongly and that is something PLA will not like to explore at the moment.

Any attempt to invade Taiwan would be crossing a red line as far as the US is concerned, while it must be understood that the US is limited in its ability to take on two nuclear powers by itself.

Markets, Inflation and Supply Chains – What OSINT reveals

•          Oil prices could hit $120 to $140 per barrel, well above current levels. 

•          Natural gas prices are also likely to keep climbing. Europe is a captive of Russian gas, and as a result, it dares not eject Russia from the SWIFT system of international payments because it would suffer a more immediate crisis than fortress Russia itself.

•          Given the current high rates of inflation, and corresponding concerns about it feeding higher inflation expectations, it’s possible that this adds to the list of reasons for policymakers to raise interest rates.

•          Washington threatens to cut off Russian access to the global market for semiconductor chips. This would be the modern equivalent of a 20th-century oil embargo since chips are the critical fuel of the electronic economy. It would gradually asphyxiate Russia’s advanced industries, and would in theory reduce Putin’s regime to a stunted technological dwarf. But this too is a dangerous game. Putin has the means to cut off critical minerals and gases needed to sustain the West’s supply chain for semiconductor chips, upping the ante in the middle of a worldwide chip crunch. Furthermore, he could hobble the aerospace and armaments industry in the US and Europe by restricting the supply of titanium, palladium, and other metals. By controlling Ukraine, his control over key strategic minerals would be even more dominant, giving him leverage akin to Opec’s energy stranglehold in 1973. The Kremlin could unleash an inflation shock every bit as violent as the first oil crisis, with a recession to follow.

•          US semiconductor companies were at risk until the critical materials firm Technet revealed the extent of US dependency on Russian supply of C4F6 gas, neon, palladium, scandium. Some 90pc of the world supply of neon, used as laser gas for chip lithography, comes from Russia and Ukraine. Two-thirds of this is purified for the global market by one company in Odessa. There are other long-term sources of neon in Africa but that is irrelevant in the short run. Technet said Russian C4F6 gas is used for etching node logic devices. Palladium is used for sensors, plating material and computer memory (MRAM). The world’s biggest producer of titanium is VSMPO-AVISMA, located in the ‘Titanium Valley’ of Western Siberia. It is owned by ROSTEC, the state conglomerate controlled by Sergey Chemezov, an ex-KGB operative who served with Putin in East Germany. Russia and Ukraine together account for 30pc of the global supply of titanium.

•          This understates their hegemony over the production chain. VSMPO-AVISMA supplies 35pc of Boeing’s titanium, mostly for 737, 767, 777, and 787 jets. It is used in engines, fans, disks and frames, prized for its resistance to heat and corrosion, and for its ratio of weight to strength.

•          The US Bureau of Industry and Security published a report last October warning that VSMPO-AVISMA was providing titanium sponges to customers in the US at “artificially low” prices, with Russian state support, enabling it to capture a “significant share of Boeing’s business”. This should have raised a red flag. Weeks later Boeing committed to even deeper ties with the company. In effect, Russia has been doing what China did earlier with rare earth metals: establishing a lock hold by selling below cost and knocking out the Western supply chain. The report said Russia is increasingly able to use this dominance “as a tool of geopolitical leverage”.

•          The Bureau warned that the US is down to one ageing plant capable of producing titanium sponge at scale, and no longer has any titanium reserve in the National Defense Stockpile. It relies on supply from a hostile state-controlled entity to build US fighter jets, rockets, missiles, submarines, helicopters, satellites, and advanced weaponry. The report called for urgent measures to rebuild domestic production and acquire strategic reserves. What a shambles.

•Airbus is even more vulnerable. Half its titanium sponge comes from Russia. Britain’s aerospace industry depends on Russian supply. VSMPOAVISMA has an operation near Birmingham, making commercial alloys for aerospace, medical technology, and the military. Putin knows that the pain threshold in the West is low after the fiasco of US sanctions against the aluminium producer Rusal in 2018. The US Treasury thought aluminium was a fungible commodity and that cutting off Rusal supply would not matter much. It learned a harsh lesson in market reality: global alumina prices doubled; the supply chain seized up, and there was collateral damage everywhere. The bureaucrats had failed to understand the stringent certification process in the industry. But the point is deeper. Russia cannot be strangled because it is systemically central to the world economy. Nor can Washington easily deny Russia semiconductor chips over the long run. The country has its own home-grown chip companies, led by Baikal and Micron. They can make midgrade chips down to 28-nanometres (nm), adequate for mobile phones and the like. These companies could undoubtedly raise their game if it were a top national priority. Russia cannot make 5nm and 7nm wafers needed for 5G mobile, artificial intelligence, or CPU and GPU technology. The US controls the global ecosystem of advanced chips and could prevent Taiwan’s TSMC or Korea’s Samsung from supplying Russia. It would hurt over time. But the semiconductor chain is notoriously complex and populated by middlemen. There would be all kinds of workarounds: Russia wouldn’t be able to get the cutting-edge stuff but it could get by with intermediate chips for most of its weapons. They can always fall back on the Chinese, and this would dilute the sanctions. It would not be easy for Russia because you can’t just switch over. Everything has to be redesigned to accept the Chinese chips, and they’re not the best either. It would set them back two or three years. Chinese companies were reluctant to breach US sanctions after the annexation of Crimea in 2014. It is a different world today. Xi Jinping has made it illegal for them to comply with US extraterritorial sanctions.

•          Focus on potential impacts to commodity trade flows over the coming months. We would expect a diversion of Russian exports of commodities away from Europe and North America, and towards China. Some experts are estimating that 15 million tons of wheat exports from the Black Sea region could be at risk if there were disruptions. Ukraine may still have 7 million tons of wheat available to add to Russia’s export quota of 8 million tons, he wrote in a report.

•          Let’s consider a roster of commodities in which Russia and Ukraine have a significant presence. For example, the region is a major global supplier of wheat, corn and sunflower oil and Ukraine’s rich, fertile soils have earned its nickname as the breadbasket of Europe. The country is the second-largest global grain shipper, while Russia often tops the ranking for wheat exports.

•          Russia is also one of the world’s most important sources of metals including aluminium and nickel. Aluminium consumers are already facing growing shortages during a booming period for demand, with surging orders from sectors including construction and packaging helping to drive inventories in European warehouses.

•          Palm oil also rocketed to a fresh record in Malaysia, climbing past 5,800 ringgit ($1,386) a ton on concern the global vegetable oils market would tighten further. Russia and Ukraine make up 80% of global sunflower oil exports.

•          Once you drill into the menu of western sanctions, it becomes painfully clear that the economic deterrent does not add up, either because the measures are less than they seem or because retaliation risk makes them unusable.

Lessons for India

It is clearly visible that a Nation with a weak Military will not be able to sustain itself against a technologically advanced adversary, it is therefore important that the civil-military gap be bridged. Leadership should be professionals and not with political leanings for personal gains. The defense services allegiance must remain to the constitution and not to the ruling dispensation / political party.

To sum up, while all the variables are known, President Putin and President Xi Jinping have played their cards, considering the OSINT factors, it is more of a stalemate, unless, the US and Europe want to engage the Bear and the Dragon in a mutually assured destruction conflict. President Putin may install a regime of his choice, how long will it last and dance to the tune of Moscow is unknown. The possible backlash is to replace Putin with someone more moderate, which is unlikely under the current circumstances.

(The author is an Indian Army Veteran. Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited).

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First published on: 27-02-2022 at 09:52 IST