Tokyo stocks retreat amid geopolitical, economic uncertainties
Tokyo stocks retreated on Wednesday as investors grappled with heightened uncertainties surrounding US monetary policy and geopolitical tensions between Ukraine and Russia.
As the Russian invasion of Ukraine approaches its six hundredth day, battle fatigue seems to have set in not only in the warring nations but the world over.
As the Russian invasion of Ukraine approaches its six hundredth day, battle fatigue seems to have set in not only in the warring nations but the world over. There have been demonstrations against the war in Russia, while several senior Ukrainian officials have resigned, and six more, including the Deputy Defence Minister, have been dimissed, allegedly on charges of corruption. The protracted war has pushed up food, commodity and energy prices everywhere delivering a body blow to the global economic system that was slowly recovering from the depredations of the Covid-19 pandemic.
No wonder both Russia and Ukraine are losing support in the world community. Ukraine is much worse affected; stead-fast allies like Poland have jumped ship, while some erst- while Russian satellites like Slovakia have openly come out in Russia’s favour. NATO countries, earlier staunch supporters of Ukraine, are counting the costs of not importing cheap Russian gas. Russia had few backers beyond China, which is now beset with economic woes, brought about by consistent Western opposition.
More disturbingly, for Ukraine, an undercurrent is build- ing up in the US against getting more involved in the Russia-Ukraine war; many Republicans including presidential hopefuls, ex-President Trump and Vivek Ramaswamy, seem to be in favour of abandoning Ukraine to its fate.
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The unprecedented removal of Kevin McCarthy as Speaker of the House of Representatives, brought about by a small number of Republicans holding extreme anti-Ukrainian views like Matt Gaetz and Marjorie Taylor Greene, is a warning signal for Ukraine, whose funding will run out by December. The convention that only legislation supported by a majority of the majority can come to the House floor may delay military aid to Ukraine, to a date after the deadline.
A zero-sum game is being played out. Thwarted in its quest for a quick victory, Russia is now targeting essential Ukrainian infrastructure like dams, power plants and hospitals. A beautiful country before the war, Ukraine is now a graveyard of bombed out buildings.
Since the war began, Ukraine has lost 7 million people almost 20 per cent of its popula- tion of 37 million, to an exodus to safer countries.
The protracted modern war has inflicted a terrible cost on Russia and Russians, in terms of men and material. The newly emergent Russian economy is wobbling, the central bank interest rate has touched 13 per cent, the rouble has breached the psychological barrier of one hundred roubles to a dollar, Western goods are no longer easily available in Russian markets, mercenaries are going home, young men are dodging the draft, and convicts are being sent to the war front. Once smug in the knowledge that their combined GDP was ten times that of Russia, and genuinely believing that with their support Ukraine would come out on top, the NATO alliance is being forced to rethink its strategy.
The long-delayed Ukrainian counter offensive, launched in June 2023, with state-of-the-art weaponry from 45 countries, such as German-made Leopard tanks, appears to be petering out, with hardly any territorial gains for Ukraine. No doubt, significant damage has been inflicted on Russia, with huge losses to her Black Sea fleet and ports, many top commanders being killed and a big air defence system knocked out in Crimea.
As collateral damage, Turkey and Azerbaijan acting in concert, thumbed their noses at Russia by engineering the take-over of Nagorno-Karabakh by Azerbaijan. Yet Russia is nowhere near being knocked out; it has revamped its defence industry which is producing much more hardware at a much cheaper cost than what donors are able to supply to Ukraine. As Napoleon and Hitler realised to their cost, Russia is a tough nut to crack.
An early end to the war that Ukraine had hoped for is ruled out and the question before Kyiv is now one of survival. While addressing the nation, President Zelenskky said, “We need to learn to live with (the war). We are prepared to keep fighting for a long time… Like in Israel, for example. We can live like that.” However, it may be difficult to fulfil this promise because un like Israel, which produces the bulk of its weaponry, Ukraine is almost fully dependent on Western largesse, which is now in the zone of uncertainty.
So, as a first, Ukraine needs to rebuild its defunct arms industry. However, this may be dif- ficult given the parlous state of the economy. While Ukraine’s military spending has leapt from 5 per cent of GDP before the war to 26 per cent, its trade is severely affected by the Black Sea blockade by Russia. Additionally, Ukraine’s working age population has shrunk from 16.7 million in 2021, to 12.4 million now.
The US has given $75 billion to Ukraine since the Russian invasion, but further aid is increasingly in doubt given the opposition of a growing number of Republicans in the Congress, to giving more money to Ukraine.
The gravity of this issue can be understood by a letter written to the US President by Jim Risch, the top Republican on the Senate foreign relations committee, and Michael McCaul, the chair of the House foreign affairs committee: “Your administration has failed to articulate a strategy outlining how US assistance to Ukraine will help them achieve victory over Russia, while also prioritising and advancing American interests … A pledge to support Ukraine ‘for as long as it takes’ is not a strategy.”
The stakes for Europe are humongous because European governments cannot afford to accept the war in Ukraine as the new normal. But a negotiated settlement is not on the horizon, because from the European point of view, this may not be an opportune time to negotiate since Russia is firmly in control of the territories it had occupied in Ukraine.
The West would rather have Ukraine in a dominant position, so that they can set the terms of settlement, which would necessarily include restoring Ukraine’s territorial integrity and putting an end to Russia’s expansionist ambitions, manifested in its two invasions of Ukraine in 2014 and 2022, and frequent interventions in former USSR countries.
Except USA, no NATO country appears interested in the long term solution of strengthening Europe’s defences, which can be achieved only by spending more on defence and upgrading European military infrastructure. Sadly, for Ukraine, support from NATO and the European Union is not absolute; during the Vilnius NATO summit in July, Ukraine was not offered NATO membership, with its attendant iron-clad security guarantees. Ironically, the United States and Germany, two of Ukraine’s most vociferous supporters, led the opposition to Ukraine joining NATO.
It seems more than likely that the Russia-Ukraine war would soon reach a stalemate, with Ukraine being unable to drive out Russian invaders, even while preventing further Russian advances. The aftermath of the strife can only be speculated upon. One scenario could be that Russia keeps the territory that they have captured and the free part of Ukraine is integrated in the Western bloc, like the division of East and West Germany after the Second World War. But, with NATO not willing to grant membership to Ukraine, this outcome appears unlikely.
While President Zelenskky has drawn a parallel with the Arab-Israel war, Russia is not an easy prey like the Arab states. Rather, Russia is in a pole position, by virtue of its vast nuclear capabilities, which Ukraine lacks. The third outcome could be division on the lines of North and South Korea, where hostilities are kept alive but both countries pursue their own agenda. Sadly, in all three scenarios, considerable loss of human life and unimaginable human misery is guaranteed.
It is disheartening to note that despite its many advances in diverse fields, humankind still does not understand the cost and futility of war. “Every gun that is made, every warship launched, every rocket fired signifies in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its labourers, the genius of its scientists, the hopes of its children.
This is notawayoflifeatallinanytrue sense. Under the clouds of war, it is humanity hanging on a cross of iron.” (US President Dwight D. Eisenhower: Address “The Chance for Peace” deliv- ered before the American Soci- ety of Newspaper Editors, 16/4/1953).
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