The Long War: Ukraine's Coming Collapse And Other Issues

I spent most of today doing yardwork and reading a number of long articles. In a broad sense much of the material I’ve been reading follows on from the post yesterday that dealt with the programmatic article in The Economist—a virulently Neocon and anti-Russian outlet. I say the article is “programmatic” because it appears to reflect the thinking of the most war mongering American Neocon views—those usually associated with Victoria Nuland and the Kagan family. The article frankly acknowledges that the American war on Russia is, so far, a failure. However, it then categorically rejects the very notion of a negotiated peace with Russia. Instead, the program that is proposed is that of a “long war”—as much as seven years by some accounts.

The post yesterday, The Economist Rolls Out 'Nuland's Plan B,' And It's A Doozy, deals with the almost total disconnect from reality that we see in that article. Also yesterday, and too early to take account specifically of the article at The Economist, Yves Smith came out with a must-read post that goes into the same issues. Without mentioning The Economist, Smith‘s piece offers a powerful rebuttal to the very idea that such a long war is possible:

The Coming Ukraine Collapse and the “Rebuilding” Headfake

As you’ll see by reading the full article—which I strongly urge—Smith argues that a long war is impossible simply because Ukraine is facing collapse on multiple levels—military, economic, and demographic. Here are a few out of context sentences that set the general tone:

The war is now entering a critical phase, with experts now warning of a breakdown of the Ukraine military in the not-terribly-distant future or using formulations that amount to the same thing.

This outcome is not a surprise to anyone who has ventured outside mainstream reporting to find sources that have been paying attention to what is happening on the battlefield and with weapons supplies.

As the offensive has quietly slowed down, Ukraine’s support [in America] is also breaking down.

European support is also buckling.

The fact that the US is unwilling to make any concession to the key Russian demand of no Ukraine ever in NATO means Russia will prosecute the war until it has subjugated Ukraine, by whatever combination of conquest, installation of a captive government, and economic destruction needs to happen.

Smith then goes into detail as to why a “rebuilding” of Ukraine is no more than a cynical cover for looting an already prostrate country—economically and demographically devastated—and concludes:

In other words, the Ukraine tragedy will not be over if and when the war ends. Americans should be embarrassed that we plan to add investor looting to the damage, ...

Today, Smith’s site, Naked Capitalism, also carried an analysis by Andrew Korybko of what lies behind the increasing friction—not to say, open hostility—between Poland and Ukraine:

Poland Hinted That Germany Is To Blame For Its Dispute With Ukraine

To understand where the Polish government is coming from, Korybko maintains, it’s necesarry to realize that, ever since the partitions of Poland by Germany (Prussia), Russia, and the Austro-Hungarian Empire, Poles have been obsessed with the question of how to maintain Polish independence, situated between two such powerful neighbors as Germany and Russia. That is the animating concern behind Poland’s rabid participation in America’s war on Russia. But, recent developments have also fanned Polish fears of Germany as well—it’s supposed NATO ally.

Between the two world wars, Poland sought to recreate, under Polish hegemony, the territorial extent of the old Polish-Lithuanian Commonwealth, stretching from the Baltic to the Black Sea—across Ukraine. This was the grand strategy of Józef Piłsudski, the charasmatic military leader behind the rebirth of Polish independence. But the idea that Poland could compete with either Germany or Russia based almost exclusively on territoral extent was a cruel delusion—Poland as it then existed lacked the resources to compete economically—and, therefore, militarily in the modern world—with either of its powerful neighbors. The idea that all these fractious nations would willingly accept Polish hegemony, be a part of Poland’s “sphere of influence”—then as now—was a non-starter:

Piłsudski's post-World War I Intermarium concept ranging from the Baltic sea in the north to the Mediterranean and Black Seas in the south. In light green: eastern parts of Ukrainian and Belarusian lands incorporated into the Soviet Union in 1922.

Piłsudski’s ideas live on in the fevered thought of the inner circles of Poland’s current ruling Law and Justice party. That doesn’t necessarily translate into widespread public support of such geopolitical schemes. The Poland that emerged from the post WW2 and Cold War years was very different from the multi-ethnic republic of the interwar years. Modern Poland is extremely homogeneous—although now with a large and unwelcome Ukrainian minority. Until the American war on Russia began, Poles had little taste for war against their neighbors. Korybko notes that the disaster of the war on Russia, and Polish participation in that war, is leading to political trouble for Law and Justice:

The upcoming elections on 15 October will play a pivotal role in this respect since the return to power of the “Civic Platform” (PO) opposition would end the ruling “Law & Justice” (PiS) party’s plans to replicate the late Jozef Pilsudski’s policy of remaining equidistant from Germany and Russia via a regional sphere of influence. If the incumbents win re-election though, even if they have to form a coalition government with the anti-establishment Confederation party, then they’re expected to largely retain this course.

Actually, Korybko misrepresents Law and Justice aims. I don’t believe that they truly plan to replicate Piłsudski’s grand scheme—although they have made some motions in that direction. Instead—and Korybko tacitly admits as much—their grand plan is to serve as America’s military proxy in Europe, for the greater glory of Poland, of course. In it’s own way, it’s as delusional or even more so that Piłsudski’s plan.

That’s the background to Korybko’s interesting article. Korybko works from an interview given by Polish Deputy Foreign Minister Arkadiusz Mularczyk. What emerges from the interview is that the Law and Justice government—which has always been openly antagonistic towards Germany, believes that Germany is seeking to ally with Ukraine to reduce Poland to vassal status. Poland wants the US to side with Poland to prevent this German power play and a return of German hegemony over Europe. Here are some brief excerpts from the longer article:

Mularczyk’s argument is intriguing for several reasons.

• First, it absolves Zelensky of full responsibility by portraying him as a German puppet, which

• secondly revives Poland’s traditional paranoia about that country’s geopolitical intentions.

• Third, it replaces prior fears of a secret German-Russian deal over Poland with a new German-Ukrainian one.

• Fourth, it implies that oligarchs put Zelensky up to this, which finally suggests that he can crack down on them and other pro-German forces to resolve this dispute.

…

It’s also interesting to draw attention to his emphasis on Germany’s suspected cultivation of influence among Ukraine’s agricultural oligarchs. That point implies that Poland is well aware of who truly calls the shots behind the scenes in that country, namely shadowy but very powerful forces much more than its public representatives. Apart from the oligarchs, who operate in a wide array of industries, this also includes various factions among its military and intelligence services.

Germany’s supposedly secret alliance with Ukraine’s agricultural oligarchs show that it’s trying to pull Zelensky’s strings via these forces, …

... In effect, Mularczyk wants Zelensky to purge German agents of influence on a US-backed anti-corruption pretext.

He’s unlikely to do this on his own at that Polish official’s thinly disguised request, which is why it’ll ultimately come down to whatever the US decides to do. The Biden Administration can either turn a blind eye to its German liberal–globalist allies’ dual power plays over Ukraine and Poland or pragmatically support [Poland] in order to maintain the geopolitical balance in Europe by averting German hegemony. Whichever of these two options it chooses will have far-reaching implications for US grand strategy.

It sounds like NATO’s unity is starting to crumble at a critical point—the geographical interface between NATO and Ukraine, in Poland. And so we see the importance of Poland’s October 15th elections. Law and Justice is still, easily, the largest party—but it may not be able to form a government without coalition partners. The most likely partner in such a case would be the war-on-Russia-skeptical Confederation Party, which is currently polling in third place with 11%. This would appear to be a clear signal that Poles are becoming more and more dissatisfied with the national security establishment’s enthusiasm for war with Russia. That doesn’t translate to pro-Russian sentiments, but it does mean that many Poles believe that their country’s interests are not being served by its reliance upon Neocon America. Which is to say, the Polish elections bear watching. Nothing ever stays the same.

Along those lines, M. K. Bhadrakumar has an interesting article about Putin’s new headaches in the Caucasus and Central Asia.

Russia scrambles as EU surges in Caucasus

It’s a complex region. I can only offer these brief excerpts:

The EU’s strategic interest is for Armenia and Azerbaijan to minimise Russian influence in Transcaucasia. With so many powerful geopolitical players involved in the Caucasus region, the situation is delicate. …

Russia will fear for the security and stability of its Muslim republics in the Caucasus if Western intelligence sets up shop in that volatile region with a violent history. It is no secret that the US fuelled Moscow’s two Chechen Wars (1994-2000.)

Taking advantage of Russia’s preoccupations in Ukraine, the US and the EU have inserted themselves aggressively into the Black Sea region and the Caucasus. Armenia is a low hanging fruit. The 2018 colour revolution (“Velvet Revolution’’) presented itself as an opportunity for Armenia to realign its foreign policy in the European direction without any overt belligerent anti-Russian or pronounced pro-Western geopolitical orientation.

...

Earlier this week, the US made a diplomatic breakthrough with the inaugural presidential meeting of the so-called C5+1 Leaders’ forum — Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan and the US — chaired by President Joe Biden on the margins of the United Nations General Assembly in New York on Tuesday.

Biden called it “a historic moment” for their cooperation “that is grounded in our shared commitment to sovereignty, independence, territorial integrity” — an oblique reference to the US agenda to roll back the Russian dominance in the region. In the US assessment, the ex-Soviet regional capitals feel uneasy that Russia’s military intervention in Ukraine is setting a bad precedent, as all Central Asian countries have ethnic Russian populations.

...

There is a convergence of interests between Russia and Iran over area denial to the US in strategic hub that the Caspian is. But oil-rich Azerbaijan makes an ambivalent partner for Moscow, while Tehran has a troubled relationship with Baku. It is entirely conceivable that the EU and the US will promote Armenian- Azeri rapprochement (which Turkey is also promoting for own reasons.)

The prospect of a long-term western presence in the Caspian and Central Asian regions through the Black Sea and the Caucasus poses a profound challenge for Russian diplomacy. The paradox is, while the West failed to defeat Russia in the Ukraine war, it is gaining ascendancy on Russia’s “near abroad” in an arc of encirclement.

My tentative view is that the potential economic benefits of the expanding BRICS and Eurasian trade routes still offer Russia advantages.

Finally, Tom Luongo has a summary of major economic/monetary events this week.

Approaching the Bond Yield Event Horizon

As so often, much of this is over my head. Luongo is talking about two things: The dance going on between McCarthy and Gaetz over the possible government shutdown, and Powell’s decision to leave rates for the time being. In regard to the second matter, Luongo notes:

Powell did exactly what I expected him to do. He didn’t raise rates and he cut a very hawkish jib at the podium. The FOMC didn’t raise rates because they didn’t need to. The announced oil production cuts by Russia and Saudi Arabia created a big rally in oil prices which ensure there will be another round of inflation in the West beyond the Fed’s control.

...

Because Powell is encouraging savings and demand for short-term Treasuries he’s supporting his “Higher for Longer” rate policy. Since the June Debt Ceiling resolution, the US yield curve has been normalizing. The long end has stayed suppressed but the inversions are tightening.

What it’s doing is forcing his opponents into even more panicky moves.

…

His [Powell’s] main obstacle to this [normalizing monetary policy] is government deficit spending. Nothing has changed on this front. Biden and the rest of the vandals in D.C. who have their own interests and/or the interests of Davos to break the US through fiscal and legal shenanigans, are committed to running up the bill as far as they can.

They have much of the GOP complicit in this scheme and that’s what the guys like Matt Gaetz are trying to stop.

That’s just an out of context snippet, and it’s surrounded by discussion of the bond market that I won’t even attempt to summarize.

However, the conclusion definitely caught my attention—for the long term:

Rising energy prices, now a 3-month old phenomenon, should produce an uptick in inflation this fall, giving Powell the cover he needs to tighten the screws on the offshore dollar markets and give depositors even more incentive to pay down debt, save at higher rates, and force Congress to face their lack of reflection in the mirror.

We’re staring at the black hole and are about to cross the event horizon into a period of, at best, stagflation and, at worst, outright deflation. No matter what happens, it won’t be hyperinflation. The USDX is very clear on this folks.

You know who wins when prices fall? You do. You know who loses? The ones who stole your futures with free money.

Yes, the Fed created this problem during COVID, on this point I wholly agree with both Hunt and Booth (see linked interview above). But at the same time if Powell’s thinking is let’s take everyone to the edge of the abyss and see who jumps, then that wouldn’t be so bad either.

The next year should be fraught with interest. I think “fraught” is the right word.