What is the key issue in Ukraine crisis?

I have studied this topic in numerous articles on this website: here, here, here, and here and stated that this case is much more comprehensive and profound than just the question of Russian actual invasion Ukraine, making it a multidimensional Rubic’s Cube. So far, this seems to have been too difficult for the majority of “experts and analysts” to understand, preventing to see the forest for the trees.

Michael Hudson is a research professor of Economics at University of Missouri, Kansas City and a research associate at the Levy Economics Institute of Bard College. His recent article “America Defeats Germany For The Third Time In A Century: The MIC, BARE, & OGAM Conquer NATO”, is to be found here or here. His analysis may open many eyes and minds to comprehend the world around in a new way. Worth reading his article.

Please, remember and note the text on the front page of my website:

Welcome to explore the fascinating world of Great Powers. You learn to realize that many things are not what they look like.

Once again, my “slogan” has proved to be so exact, touché!

Here below, I try to analyze the situation from different viewpoints, taking into consideration numerous dimensions, in order to fully understand the big picture of the case.

A dimension of great power competition

In this dimension between the present great powers, the US-Russia-China, such issues as polarity of international system, world order, spheres of influence, structural causes of political/military tensions between great powers have been under the scope of study. Polarity and world order are transforming, China & Russia partnership still becomes as a surprise to the West. All these aspects have been studied in various articles and sections on this website.

What seems to be quite obvious is that the partnership of China and Russia will strengthen and deepen all the time, even exceeding the level of the formal military alliance.

Furthermore, recent political actions and procedures among India, Pakistan, China, Russia, Vietnam, Egypt, South Africa, Brazil, Argentine and many others, indicate that political tectonics are now moving in confusing ways in Asia and Latin America, not to mention Middle East and North Africa.

A dimension of bilateral relations between Russia vs. the US

Relations right now are at historical low and off the rails, mutual suspicion and hatemongering has reached new highs. Toxic atmosphere in the Congress and Senate both between the American parties and against Russia is unprecedented. The American sanctions regime is based on the legislation, unlike in the EU (half-yearly political decisions), so any change in sanction laws is nearly impossible due to the current toxic atmosphere.

Midterm US elections in late autumn 2022 may upend the political situation, obviously the Republicans will take back majority both in Senate and Congress. This would make President Biden a “lame duck” for over two years, the rest of his presidency.  This is an ominous sign in the framework of present high-tense relations between the US and Russia.

A dimension of de-dollarization

This subject has been studied recently on this website, here. The question is of the status of US dollar as a reserve currency of international finance and monetary system, significance of SWIFT – financial messaging services as well as the process of de-dollarization run by Russia and China. The latest information tells that Russia and China are accelerating the de-dollarization process, which will have a fundamental impact on US dollar’s reserve currency status.

The latest sanctions, imposed by the US and EU, quickly prompted questions about whether targeting reserve holdings as an act of “economic warfare” may prompt a rethink by reserve managers across the globe- not least in countries that may face a potential conflict with US or EU governments – over where to bank their national assets/reserves.

No doubt, weaponizing the money and all financial assets for economic war against Russia, this will speed up the global process of rethinking and re-organizing national assets, away from US dollar and other Western fiat money towards tangible assets like gold to be held and hoarded locally. An interesting article of numerous Western finance experts about this phenomenon is available here.

A dimension of economy/sanctions regime/the US and EU

The world gasped in shock, when Western powers announced that “the nuclear option” would be used against Russia in retaliation for its invasion of Ukraine – sanctions against the country’s central bank and targeted expulsions of key banks from SWIFT. The US and European Commission are seeking to block seven Russian banks from SWIFT. The decision to sever Russia from SWIFT will mark the beginning of a serious payment and trade crisis for Europe.

Now, it seems that severe sanctions imposed by the EU and the US on Russia are backfiring badly, inflation is getting on unprecedented levels both in the EU and the US, energy shortages and other problems are turning to worse.

The inflation is escalating to new highs, in the US factually well over 10% (nearly 15% and in the near future even more), in the EU over 6% and very soon amounting up to 10%, Fed and ECB are forced to increase interest rate, perhaps more than once during this year, running the economy into recession and avalanche of bankruptcies, mass unemployment etc.

Other aspect of this sanctions regime is the energy crisis, which is especially dangerous in Europe, where the green energy folly has been destroying the whole European industry base. Oil and gas prices are skyrocketing, even coal price is increasing rapidly; what about crude oil $ 185 per barrel as JPMorgan predicts for 2022! Stagflation is coming both in Europe and the US.

It seems now that Russian oil and gas deliveries, due to massive Western sanctions, are becoming “toxic” so that Russian producers will face difficulties in selling their products. Buyers are afraid of US sanctions and because, in the short and medium term, substitute sources are not available, this in turn will make things even worse and riskier for Europe, shocking energy price spikes may turn into fatal. The European green energy delusions are making the situation even worse.

Due to heavily increasing energy prices, the fertilizer prices are also increasing rapidly, which means even more expensive agricultural production and increasing food prices. Obviously, we see shortage and other problems in food production in Europe, even the famine, just in next several years.

These sanctions will actually have a very detrimental effect on energy prices and food prices as well, which will precipitate a profound economic crisis in Europe, which has been already in a crisis before the Ukraine crisis. The economic outlook of Europe as the whole is getting gloomy and scary, obviously even the whole structure of the EU will be destabilized in next few years.

A dimension of historical background and bilateral relations between Russia & Ukraine

Russia and Ukraine, as nationalities / states / people / Orthodox religion, personal interactions etc., have over thousand years of common close history, which naturally is an integral part of their mutual coexistence. I advise each reader to study this history, it may open a fully new understanding to this case.

Russian and Ukrainian people are, in spite of all current troubles, more than “mental cousins” … in good and bad.

A dimension of other aspects

Germany’s new Bundeskanzler Scholz announced a significant statement of German re-militarization, not only the massive material budget expenditure but the principal authorization of sending German troops abroad independently for fighting missions, first time since WWII. This is a mega-class turning point in the German foreign policy. When this acute crisis is over, it remains to be seen, what “real impacts” this will have on the EU, on Germany-France power balance and in general on the development of relations between European states.

PS.

I closed my previous article with the headline & text:

Time of Great Chaos

Now that the Russian invasion of Ukraine is going, many are anticipating that it could be just a matter of time before China invades Taiwan. An attempt by Beijing to claim Taiwan by force has just become more likely and if China invades Taiwan, North Korea may decide that is a great moment to launch an invasion of South Korea. What may Iran’s present rulers ponder in this situation? It would be so easy for the dominoes to start falling. The existing world order is starting to come apart and a Time of Great Chaos is directly ahead of us.

This is still valid, with one clarification:

based on events of Ukraine crisis and imposed sanctions: before any Taiwan operation, China will re-organize all its necessary financial assets in such way that they are outside and non-accessible from the US jurisdiction. China’s “real nuclear option” would be starting the out-sales of US treasury bonds in quantities from its one trillion portfolios.