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A Grey Swan: Is There a New Conflict in Donbass?

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The prospect of a new exacerbation in Ukraine’s Donbass region has worried market players. It is difficult to talk about the strong influence of bellicose statements on the currency and stock markets. However, investors have again started talking about “geopolitical risk”. The key concern stems from the fact that the resumption of a large-scale armed conflict will inevitably lead to new sanctions against Russia. Moreover, the scale of such restrictions is difficult to predict, which gives rise to the uncertainty of expectations. Should strict sanctions be viewed as a baseline scenario? What is to be expected from the development of the situation?

Ceasefire violations in Donbass were already evident in winter. The ceasefire has been in effect since July 27 last year. However, on March 31, in the Contact Group on Conflict Resolution, the Ukrainian side raised the issue of a new ceasefire statement. In fact, this meant that Kiev considered the existing agreement invalid, citing cases of shootings and military losses. Moscow criticised this initiative. All this is happening against the background of the concentration of Ukrainian troops in the conflict zone. Russian troops are also moving to the state border. Statements by Ukrainian officials, who cited a conversation between ministers, about US support in the event of a war with Russia, added fuel to the fire.

A military exacerbation may well be viewed as one possible scenario. At least it is not devoid of precedent. During the August 2008 war in in Georgia, Mikheil Saakashvili launched a military campaign, citing the support of the United States, among other things, as one of his motivations. Later it turned out that such support was only conditional, but confidence in it could become a trigger for radical decisions. There is also the experience of the recent war in Nagorno-Karabakh. For a long time it was believed that it would be difficult for both sides to win in the conflict. As a result, Azerbaijan won a victory using new tactics: with the help of unmanned aerial vehicles. Ukraine also plans to use Turkish drones, although they have not yet appeared in large quantities in service in the Armed Forces of Ukraine. Kiev may also believe that a new conflict will have a high cost for Russia. Even in the event of the defeat of the Ukrainian Armed Forces, Moscow is unlikely to go beyond the existing boundaries of the DPR and LPR. New sanctions will be imposed against Russia. Perhaps the Ukrainian leadership also hopes for good luck. Even tactical successes in Donbass will strengthen the Ukrainian position.

However, this scenario is still extremely risky for Kiev. In recent years, Russia has shown that it is ready to take decisive action. Force can be used without undue hesitation. Moscow understands that the West will side with Ukraine in any scenario. But political support is one thing, and military intervention is quite another. The United States and its allies are unlikely to agree to such an intervention. Even the supply of lethal weapons will have its limits. Without a doubt, they increase the combat readiness of the Armed Forces of Ukraine. However, they are unlikely to allow it to achieve qualitative and quantitative superiority, even on the scale of the alleged theatre of military operations. The Russian army has undergone a high degree of modernisation. It is capable of rapidly concentrating well-trained and well-armed small units, units and large units. The threat of sanctions will also fail as a deterrent. There’s no doubt they will damage the economy. However, Moscow is unlikely to be stopped if it comes to a military conflict. In addition, Russia has a certain amount of space to vary the degree of its involvement. It can range from active support of the forces of the LPR and DPR to direct involvement in the conflict and the defeat of the Armed Forces of Ukraine in the conflict zone.

Apparently, the Ukrainian leadership does not intend to bring the matter to a direct clash. It is escalating the situation, trying to attract the attention of Western partners and gain points for the future. Most likely, the Kiev authorities initiated the current manoeuvres of their own accord, and they are not the result of the “insidious game” of the West. However, the American and EU diplomats may well use such manoeuvres to put pressure on Russia. The main threat is the loss of control over the situation, should the symbolic whipping turn into a real conflict.

In the end, full-scale military operations in Donbass in the near future are not the baseline scenario. Russia is a strong adversary; the risk of big losses for Ukraine are great. Accordingly, it is hardly worth considering a scenario of a sharp tightening of sanctions against Russia. No radical aggravation—no radical sanctions.

At the same time, politics likes surprises. Erroneous assessments, the personal ambitions of leaders, the peculiarities of group decision-making with their “shift to risk”, random incidents and much more can give rise to an extreme scenario. War in this case is a “grey”, rather than a “black swan”. It is unlikely, but its parameters are quite clear. Low chances of winning a war can be offset by high expectations of its consequences. Is it not an attractive scenario to give Russia a military slap in the face during an election year? However, in Moscow, such a scenario is also, apparently, expected. With appropriate organisational conclusions.

From our partner RIAC

RIAC Director of Programs, RIAC Member, Head of "Contemporary State" program at Valdai Discussion Club, RIAC member.

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Eastern Europe

New opportunities in the South Caucasus after the 44-day war and China’s BRI

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Authors: Araz Aslanlı and Yunis Sharifli

The entry of the South Caucasus into the modern system of international relations coincided with the transformation of China into one of the major participants in the international economy.The process of disintegration of the USSR, which accelerated in the second half of the 1980s, and the independence of the countries of the South Caucasus in 1991, meant both certain opportunities and certain problems/risks for China. Primarily, the independence of the region’s states meant at least new opportunities for China, which wanted to have new markets and corridors on the way to becoming a global economic power. China wanted to diversify its resources using the region’s energy resources.For China, the South Caucasus was also an important part of the East-West corridor. On the other hand, certain states could pursue policies that would concern China over the South Caucasus and Central Asia. For example, through these two regions, they could create problems with Iran, one of China’s alternative energy sources, and so on.

At this stage, the war situation between Azerbaijan and Armenia enabled China, like any other external force,  to increase maneuver capability and influence over the two countries. On the other hand, like any outside power, China was faced with certain choices (expressing its position on issues of interest to Azerbaijan and Armenia, especially during the voting in international organizations, etc.). At the same time, it caused certain problems in the East-West corridor, to which China attaches great importance. It was about the closure of the Azerbaijan-Armenia-Turkey line, which is a shorter route, as well as the fact that Armenia and the Armenian lobby regularly create problems for the Azerbaijan-Georgia-Turkey alternative projects.

In the first stage, it is possible to see traces of all this in China’s policy towards the region. The fact that China is one of the countries most committed to the principles of territorial integrity and non-interference in internal affairs in international relations has had a positive impact on Sino-Azerbaijani relations.Azerbaijan is one of the few countries whose almost all high-ranking officials have regularly expressed full support for the “one China” principle.Certain public attitudes towards the East Turkestan issue in Azerbaijan, although not at the official level, Azerbaijan’s energy relations with the West and China’s sale of Typhoon missiles to Armenia, which is occupying Azerbaijani territories, were among the notable events.

Although China was one of the first countries to recognize Georgia, relations between the two countries are not very close. However, China and Georgia (Azerbaijan can be included in this list) continue their common policy, especially in terms of the Silk Road project and the importance they attach to territorial integrity.In this context, it was interesting that after the events of August 2008, the Shanghai Cooperation Organization, in which China is the leading country, did not make a decision in support of Russia’s position, despite its efforts.China, which shares all its concerns about its territorial integrity, has either voted in favor of Azerbaijan’s proposals or abstained at the UN.

Belt and Road Initiative and the South Caucasus

The Belt and Road Initiative (BRI), announced by Chinese President Xi Jinping in 2013 in Astana, Kazakhstan (now Nur-Sultan), has aroused interest in the countries of South Caucasus from the first day.In particular, the presence of various transport projects within the initiative and plans to intensify interstate trade by promoting infrastructure development between the countries attracted the attention of the countries of the region.Each of the South Caucasus countries has signed various agreements with China to join the BRI and take advantage of this initiative.All three countries signed agreements related to the initiative in 2015.During the visit of the President of the Republic of Azerbaijan Ilham Aliyev to China in 2015, a Memorandum of Understanding was signed between the two countries on the joint promotion of the establishment of the Silk Road Economic Belt. (E-qanun, 2016). Georgia was also one of the countries that signed a memorandum on the development of the BRI in March 2015 (Agenda. Ge, 2019).Finally, in 2015, Armenia signed a Memorandum of Understanding to promote cooperation in the construction of the Silk Road Economic Belt (President, 2015).

The countries of the South Caucasus are located in the “China-Central and West Asia Corridor”, one of the six main economic corridors of the BRI, also known as the Middle Corridor (Guliyev, 2021).Covering 4,256 km of railways and 508 km of sea routes, this corridor stretches from the China-Kazakhstan border to Azerbaijan (via the Caspian Sea) and from there to Georgia and Turkey(Middle East Institute, 2019).In particular, after the re-independence of both Azerbaijan and Georgia, they focused on infrastructure development to take advantage of their geopolitical and geostrategic positions.Baku-Tbilisi-Kars (BTK) and Baku International Sea Trade Port (BISTP), two of Azerbaijan’s leading infrastructure projects, have played a key role in the active functioning of the Middle Corridor and the growing strategic importance of the region to China.

The Middle Corridor has various advantages over other corridors. First, the shipment of Chinese goods to Europe via the Middle Corridor is faster than the Northern Corridor through Russia.Goods traveling on the Trans-Siberian route reach Europe in 20 days, while goods moving through the Middle Corridor reach the same destination in 12 days. Besides, the non-compliance of roads and railways in the Northern Corridor with modern standards, while the roads and railways of the Central Corridor countries in line with modern standards, make the Middle Corridor more strategic and profitable than the Northern Corridor.Finally, the instability of US-Russia and US-Europe relations calls into question the political security of the Northern corridor.Second, the Middle Corridorhas also many advantages over the Southern Corridor through Iran.First, goods shipped from China to Europe via the Southern Corridor reach the same destination in 14 days, while goods shipped from the Middle Corridor reach the same destination in 12 days (Kamel, 2018).As in the Northern Corridor, the Southern Corridor’s infrastructure problems, strained US-Iranian relations, sanctions on Iran and instability in the country call into question the security of this corridor.Finally, the Middle Corridor has advantages over sea routes. For example, goods shipped from China to Europe by sea reach their destination in 36 days(Humbatov, 2018; CSIS, 2018). In general, the Middle Corridor can reduce China’s dependence on Russia for transport routes, and in the Southern Corridor, it can safely ship its products to Europe without the use of sanctioned Iran’s geography (The Information Corridor, 2020).

During the pandemic, the importance of air and sea routes decreased (International Finance Corporation, 2020). In contrast, during the pandemic, railroads emerged as the most reliable means of transportation.Railways are cheaper than air, shorter than sea, and safer than goods shipped by highway (Eurasianet, 2021).In this regard, the strategic value of the Middle Corridor, especially the BTK, has increased during the pandemic.During the pandemic, a container transfer system was installed at the Canbaz station on the Turkish side of the Turkish-Georgian border to increase the capacity of the railway line to 3,500 tons due to increased demand for BTK freight(RayHaber, 2020).The increase in the freight capacity of the BTK railway and the growing demand for freight on this railway have further increased the strategic importance of Azerbaijan and Georgia against the background of the BRI.The active participation of Azerbaijan and Georgia in the Middle Corridor has strengthened their strategic positions within the East-West trade corridor. However, Armenia, which is under siege due to the Azerbaijani-Armenian conflict, has not been able to take advantage of this corridor, and in addition, due to the blockade, relations with China have developed weaker compared to other countries in the region.However, the Zangazur railways, which are expected to resume operations based on the tripartite agreement signed as a result of the Second Karabakh War, may change Armenia’s position in a positive direction in the future.

Zangazur railway and its impact on China’s relations with the countries of the South Caucasus

After the 44-day war, which resulted in the liberation of Azerbaijani territories from Armenian occupation, one of the most notable factors in the declaration signed between Azerbaijan, Armenia and Russia was the revitalization of the Zangazur corridor (both railway and highway).The launch of the Zangazur railway will allow Armenia, which has been under blockade for years, to join the regional projects and utilize the full potential of the Middle Corridor.The reconstruction of the Zangazur railway is in line with China’s plans within the BRI and increases the strategic value of the South Caucasus region and its comparative advantage over other corridors from China’s point of view.

The Zangazur Corridor creates new opportunities for China in the region in the context of political, economic, and security aspects.First of all, the launch of an alternative and shorter railway in the region, along with BTK railways, is in line with China’s plans to diversify its export and import routes to ensure economic security (The Jamestown Foundation, 2021). In addition, the launch of the alternative railway will further increase the carrying capacity of the Middle Corridor by rail and highway, which will further increase the strategic importance of the Middle Corridor compared to other corridors and contribute to China-Europe trade through the land.

The resumption of the Zangazur railway can bring Armenia back to the region, contribute to the strengthening of stability in the region, and intensify the further development of Sino-Azerbaijani and Sino-Armenian relations.At present, goods sent from China to Armenia are shipped by sea and enter Armenia from Georgia (Vinokurov and Tsukarev, 2017).However, in the case of the relaunch of the railway, goods from China can be sent to Armeniamore shortly and profitably, which can contribute to the further development of relations between the two countries.From Azerbaijan’s point of view, the opening of the Zangazur railway could further strengthen Azerbaijan’s strategic position in the region as a transit country along the East-West and North-South corridors, and increase Azerbaijan’s strategic value from China’s point of view.Finally, the new railway could contribute to the development of China’s relations not only with the countries of the region but also with Turkey, a regional power.In particular, it can contribute to the development of relations, both politically and economically, by intensifying the flow of goods from both China to Turkey and from Turkey to China, strengtheningthe level of weak interdependence between the two countries. Additionally, to the BTK and BISTP, the launch of Marmaray in Turkey has further intensified trade relations between China and Turkey (Habertürk, 2019). In the future, the opening of the Zangazur railway can further strengthen relations between the two countries from an economic point of view.

As a result, the recent short-lived crisis in the Suez Canal, which has once again highlighted the negative aspects of sea routes, has further increased the value of railways for China.In addition, in the first quarter of 2021, freight traffic along the BTK and the Middle Corridor increased by 104% compared to 2019 to 396,778 tons, indicating that the demand for the Middle Corridor is growing every year (Azernews, 2021). In the future, the launch of the Zangazur railway will further increase the strategic value of the Middle Corridor compared to other corridors, passing through more stable countries amid existing US-Russia, EU-Russia, and US-Iran tensions.This situation could lead to an increase in China’s economic and political presence in the South Caucasus.Reducing transit costs and resolving bureaucratic problems between countries can lead to regional countries benefiting from Chinese investment, promote Sino-European trade, and develop win-win cooperation between the countries of the region and China.

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Eastern Europe

A Counter-Enlightenment Creeps Through Eurasia

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We live in the age of counter-Enlightenment. What seemed like a collection of dispersed autocratic and simply illiberal states, has now coalesced into a fully blown ideological movement premised on not only resisting liberal internationalism on an ad hoc basis but exporting authoritarian models of governance.

Illiberalism’s flag-bearers in China and Russia have also shown they can harness modernity. What was deemed an asset peculiar to the West — because progress was considered a direct result of liberal norms and vice versa — is now being fitfully mastered by its enemies.

Yet the bad news comes with a good news rider. If the United States wants to maintain global influence, it cannot simply seek to maintain the old world order. The appearance of serious rivals with a hostile ideology will stiffen America’s resolve, as happened in the Second World War and in the Cold War. For the past decade or more, this ideological motivation has been lacking because China’s competition was mostly still viewed as fitting within the framework of the liberal world order. China, the West wrongly believed, could be lured into better behavior by the self-evident benefits of cooperation.

Westerners expected poor economic conditions to liberalize or even bring down the Chinese and Russian regimes, but the reality is quite different. China gathered strength after the 2008 financial crisis and raised its profile through vaccine diplomacy during the covid-19 pandemic. Russia, despite suffering extensive sanctions, is growing more assertive in the South Caucasus, Black Sea, and parts of the Middle East. Even in the case of Iran, its most active foreign involvement coincided with Western sanctions.

Illiberalism has been wrongly described as unstable and as a transitory stage in the evolution towards the liberal-democratic model. But armed with modern technology, it is resilient and resourceful, and is a much longer-term challenge than the crude communism of the past. Failure to deliver on its promises ultimately killed the communist dream, but failure to deliver in quasi-capitalist illiberal states will not bring down the order as quickly as some would think.

China and Russia’s example makes illiberalism fashionable among the struggling states of Europe and Asia. In Georgia, yet another far-right movement — Unity, Essence, Hope — was just created which repudiates the tenets of liberalism and advocates the reversal of the entire political system and what is more important, seeks closer ties with Russia. Their arguments are more nuanced though. Fearing a backlash, they explain the need to work with Russia from geopolitical necessity.

In Armenia, upcoming parliamentary elections will usher in closer ties with Moscow, regardless of which side wins. This will mean greater dependence on illiberal Russia which will likely include considerable backsliding in democratic reforms. After all, Russia has been uncomfortable with Prime Minister Nikol Pashinyan’s overtly pro-democracy government since 2018.

In Ukraine, internal reforms have stalled, and corruption is still a country-wide challenge, while neighboring Moldova is notoriously divided.

All these problems are abetted by Russia’s military presence on their sovereign territory and by troubled economies which create space for China’s strings-attached cash infusions. The governments in these post-Soviet states are manifesting the ability to appropriate the liberal concepts on state and economy to advance their illiberal agenda. Take Georgia or Armenia. Both hold elections, and are democracies to varying extents. But instead of ushering in political plurality and peaceful changes of government, these provide fertile ground for ruling governments to employ state power to entrench their positions. Both see accusations of alleged vote-rigging or the use of state finances to intimidate the opposition, a classic case of creeping illiberal practices under the guise of democracy. Hungary’s Prime Minister Viktor Orbán boasted as early as 2014 that, “the new state that we are building is an illiberal state, a non-liberal state.”

The West has to look at this challenge from a wider historical perspective. Hopes for the eventual abandonment of the illiberal governing model are not self-fulfilling. Bolstering the liberal order by strengthening rules-based policies is one approach. Another is to show that liberalism is more attuned to economic and governance progress. The means to shore up state institutions in those fragile countries should be sought.

The West should support fragile the fragile states of Georgia, Ukraine, Moldova, and Armenia because there is still some hope they can take a better path. Recently Georgia’s politicians resolved a major political crisis by re-entering the legislature after months of boycotts. In Armenia, the decision to call snap parliamentary elections lowered political tensions. Illiberalism in the region — all Armenia’s and Georgia’s neighbors are less-than-liberal states — could easily engulf these tiny islands of liberal democracy.

Illiberalism is essentially a counter-Enlightenment and is seen by autocrats as a return to normalcy in human and state relations. They hail the primacy of state and strongman rule, or clique rule, and create something eerily reminiscent of illiberal governments between the two world wars, when smaller and newer European democratic systems were unable to survive pressures from within and without.

President Joe Biden’s insistence on upholding democratic and liberal ideals suggests the U.S. is willing to battle illiberalism. Whichever model prevails will ultimately define our world and will be decisive for smaller states bordering illiberal powers. Military power matters, but the battle for hearts and minds is just as important.

Author’s note: first published in cepa.org

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Eastern Europe

Baltic States are the territories of geopolitical games

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nato baltics

The large scope of military exercises which NATO conducts today is not only a signal to its opponent, Russia, but also the attempts of the Alliance to keep interest of its member states and justify its existence. Such political and military organization like NATO cannot work without reforms and transformations. So, NATO finds new territories to train its new initiatives and gain a foothold in new places.

Thus, on 7 June 2018, Allies agreed a NATO Readiness Initiative. Allies have committed, by 2020, to having 30 battalions; 30 air squadrons; and 30 naval combat vessels ready to use within 30 days.

The initiative aims to enhance the readiness of existing national forces, and their ability to move within Europe and across the Atlantic — in response to a more unpredictable security environment. It is said that this is not about new forces but about increasing the readiness of forces Allies already have — forces that could be made available for collective defence and crisis response operations.

The initiative builds on a series of steps taken to increase the readiness of Allied forces. Over the past few years, the Alliance has tripled the size of the NATO Response Force to around 40,000 troops, with a new 5,000-strong Spearhead Force at its core. NATO has also deployed four multinational battlegroups to the Baltic States and Poland, increased its presence in the Black Sea region, and set up a number of small headquarters to link national and NATO forces.

The Baltic States which are close to Russia were chosen for the purpose to deploy foreign troops as long as possible. Though permanent military presence is not stipulated by international treaties.

NATO tries to turn rotational basis of military presence to permanent one, constantly conducting military exercises. The scope of such Alliance’s military activity in the region is so huge, that foreign soldiers become regular visitors to bars, restaurants and shops in the Baltic countries. When this facts became common for the locals, it was too late. The more so, under the cover of military exercises, old military equipment was delivered to the Baltic States, where it remains for an unspecified period of time. Military contingents present on the territory permanently, rotating each other. The more so, these countries are used as transit states for foreign heavy armored vehicles, harming the environment.

Lithuania, Latvia and Estonia don’t belong to themselves anymore. They are just territories of others’ geopolitical games and military preparations. The status of a host nation, where foreign troops are based, by the way, turns them to the main target of potential aggressor.

Probably, it is time to think about the population of the Baltic States, and not about foreign geopolitical interests?

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