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  • A partitioned Ukraine could emerge prosperous, like West Germany

    Wars, after all, are won by economies, not armies. Growing up on a British Army base in West Germany, I was conscious, even as a child, of being situated in a country that was booming. When the Berlin wall fell, the huge difference in economic development between West Germany and East Germany was something that could be elucidated not only through data, but also visually, by observing the drab buildings and beaten down citizens from the east. While it may be impossible to replicate the West German economic miracle today, a partitioned Ukraine can nevertheless move on to secure a brighter, more prosperous future for its citizens. It is worth remembering that the very point of the Maidan movement which started in 2013, was to secure prosperity for Ukraine through greater economic integration into Europe and the wider world. That hasn’t happened, not just since 2022, but since 2014. It is no great surprise that Ukraine’s economy today  is smaller than it was  before war began. Yet Ukraine has received over  $380bn in foreign aid  during that time. Imagine Ukraine’s prosperity today, if the $190bn economy of 2019 has received a foreign injection amounting to 200% of GDP? Most of that money has vanished into thin air and the flames of war. Some of it will have gone into rampant  corruption . Hardly any of it has gone into productive investment. Yet investment was a key pillar of West Germany’s success.  Investment alone contributed  an average of almost 2.2% per year to GDP growth in West Germany in the 39 years before the Berlin wall fell. As I’ve  reported before , investment is an issue that Ukrainian leaders have consistently failed to grip since 2014, when the policy of western-backed confrontation with Russia began. With cities and over half of its  electricity generation  destroyed, there is huge scope in Ukraine to generate catch up growth by investing in the basics of infrastructure. Indeed, it is the degradation of Ukraine’s infrastructure that is  slowing the growth  that it can create today. Investment needs people. A major factor in West Germany’s success was the rapid increase in its population after the war. West Germany’s labour force rose by  almost 44%  in the decade from 1950-1960, with much of the labour coming from disaffected Germans in the east. Ukraine could benefit from that same windfall of labour should it decide to end the war, having seen huge depopulation since the outbreak of war of up to  10 million  people. Agreeing a ceasefire would allow the slow process of Ukrainian citizens returning to their homeland including the at least 1 million men of fighting age who have avoided the draft. The return of citizens would also relieve the drag on Ukraine’s current account deficit from Ukrainians spending their money in foreign countries. West Germany kick started business productivity and exports, seeing export growth average 17.5% between 1950-55 as businesses reformed and increased productivity. Germany remains, today, a global exporting powerhouse. Despite its productive agriculture, rich mineral wealth and talented workforce, Ukraine has been stuck in a toxic combination of low investment and import dependence (see my earlier article) since 2014. Ukraine’s  Finance Minister  recently said that 30% of businesses in Ukraine have stopped functioning while 45% have decreased production. This lack of a clear economic strategy from Ukraine’s leaders is not a factor of the current war; Ukraine’s leaders haven’t set out a clear strategy for growth over the past decade. That lack of economic leadership will continue at least for as long as this war continues. Yet the military facts on the ground have not changed significantly. That delicate balance, in which Russia is making progressive, but nonetheless small gains, is held in place both by Ukraine’s dire military logistical situation and by Russia’s decision not to go all in. There is a palpable sense from Russia military bloggers of the Kremlin wanting to avoid a large scale mobilisation, and steering clear of the  extreme tactics  that Ukraine has pursued to press gang men into military service. However, with Russia set to  spend even more on defence  in 2025, the imbalance in the two forces may shift further in its favour, whoever wins the U.S. Presidential election. So the situation, inexorably, will continue to worsen against Ukraine. Having been fairly static for the past month, because of the distraction of Kursk, the front line in the Donbas is shifting westwards again at an increased tempo. The  fall of Vuhledar  in the south has precipitated a rapid (by the slow standards of the front line) push north, the  Pokrovsk salient is broadening , and Toretsk is being gradually consumed. Ukraine today has become locked in self-fulfilling militarism and a state of dependency on outside help, focussed only on the chimera of victory against Russia. Zelensky’s personal fate is closely linked to the continuation of the war, the cessation of which would bring a close to martial law in Ukraine, and the consequent pause in elections. Yet looking back, West Germany’s economic miracle, or  Wirtschaftswunder , started when German leaders took back economic control; they did so after a period of disastrous military rule that saw  cigarettes  become a tradeable currency. Ukraine is not at that stage, yet. However, it’s worth remembering that one of the reasons East Germany failed as a state project was that few people of working age wanted to live there. Indeed, it’s this  feeling of being left behind  which has fuelled a rise in popular support for the BSW and AfD parties. Ukraine needs its people to come home and to reengage in the reconstruction and political rehabilitation of their magnificent country. Nothing, no Ukrainian victory plan, no injection of additional weapons or authorisation to strike slightly deeper into Russia, will change the basic mathematics of Ukraine’s disadvantage. Wars, after all, are  won by economies , not armies. The cold, unpalatable reality is that some form of partition will be imposed on Ukraine when hostilities finally draw to a close. When that happens, Ukrainian leaders will need, finally, to refocus on their economy, as West German leaders did in 1949. This article was published in Strategic Culture .

  • It was a mistake to make the Moldova election about Russia

    Below a copy of my article published by Responsible Statecraft today. Moldova’s election result has left incumbent President Maia Sandu damaged. An EU referendum delivered only a wafer-thin vote in favor of membership of the bloc. And in the first round of a presidential vote that Western commentators predicted Sandu might edge narrowly, she fell some way short of the 50% vote share she’d need to land a second presidential term. She will now face a unified group of opposition parties in the second round with her chances of remaining in office in the balance. Where did it all go wrong? Sandu’s mistake was in making the Moldovan election about a binary choice between Europe and Russia. Even before the final votes were counted, Sandu was claiming widespread electoral fraud sponsored by pro-Russian oligarch Ilan Shor. Reports that pro-Russian groups paid voters to come out to vote are credible. If that achieved anything, it was to mobilize voters in Moldova naturally inclined to want ties with Russia, rather than flipping votes of pro-Europeans. With a 33% turnout needed to legitimize the plebiscite, a final roll of just 50% hinted at widespread voter apathy in Moldova. In a country where only 9% of the population identifies as ethnically Russian, an almost 50% vote against EU membership illustrates wider concerns that the government in Chisinau has not addressed domestic issues important to ordinary people. For example, many Moldovans are worried about the race to EU membership undermining small farmers and local traditions. Sandu’s claims of interference must also be set against a concerted effort by Moldovan authorities to make it harder for Moldovan voters in Russia and breakaway Transnistria, to vote. A mere 10,000 ballot papers were sent to Russia, where the Moldovan population is thought to number over 150,000 people. The population of Transnistria is 367,000, but they were only allowed to vote in Moldova itself. (For the record, Moldova insists that Transnistria is part of Moldova .) Meanwhile, Shor’s political party was banned and media channels linked to him closed down. In the end, the pro-European referendum passed with a tiny majority, made possible by a large number of pro-European votes by members of the Moldovan diaspora, who don’t live in Russia. This will make it difficult for Sandu to claim a resounding endorsement of future EU membership. It will almost certainly stoke anti-EU sentiment in the Russia-backed breakaway Transnistria where a majority of the ethnically diverse population wants closer ties with Russia . Pro-Russian sentiment will also be fueled in the autonomous status of Gagauzia in the south, where 95% of voters did not choose a European future in the referendum. Of course, the Transnistria question, nor, to a lesser extent, that of Gagauzia, shouldn’t necessarily create a bar on possible future EU membership by Moldova, as Cyprus has shown. But by making the referendum about ethno-nationalist politics, Sandu will have stimulated the secessionist tendencies there, making the process of EU integration more problematic. She also exposes herself to the accusation of letting Moldova become a geo-strategic test-tube for Western influence, something that Russia will undoubtedly look to exploit. European Commission President Ursula Von der Leyen was in Chisinau shortly before the vote exhorting Moldovans to express their free choice. NATO Secretary General Mark Rutte chose to weigh in with concerns about Russian efforts to derail Moldova’s European future. These pronouncements are imbued with notions that Moldovan membership of the EU would stabilize Europe’s eastern border and strengthen security against Russia. But that ignores the lessons of history. Those same arguments were used in Ukraine in 2014. Making the Moldovan election a zero sum tussle between Europe and Russia — rather than a vote about what ordinary Moldovans want to see happen domestically — risks making Moldova a new, much smaller, more economically vulnerable, version of Ukraine. And the critical point is that Sandu has yet to make the economic case that EU membership, rather than Moldova maintaining balanced relations with all countries, including Russia, will provide the boost that the country needs. A pro-European report from 2014 shows that significant economic benefits accrue to countries in anticipation of possible membership, but that EU membership won’t necessarily benefit every new member, mentioning Greece. The reality is that annual economic growth in Moldova since the signing of the Deep and Comprehensive Free Trade Agreement with the EU in 2014 has been significantly lower, on average, than in the first 10 years of the Millennium. That anticipation effect has not yet been seen in Moldova. A key reason is that Moldova’s trade with Russia has fallen sharply since the DCFTA was signed. Sandu talks about 65% of Moldovan exports going to Europe as a triumph. In fact, Moldova imports twice as much from Europe, stoking a stubborn current account deficit. To some extent, that has been offset by inflows of foreign investment into Moldova. But it is nevertheless clear that strengthened relations with Europe haven’t been enough to make up for the cutting of trading relations with a country — Russia — that had previously been a key trading partner with Moldova. The other key reason is demographic. Moldova has the fastest shrinking population in the world. Over a quarter of Moldova’s population have taken advantage of EU citizenship, by virtue of their entitlement to Romanian passports. That has led to an emptying of talent from Moldova as young, talented workers seek better pay elsewhere, mostly in Europe, but also in Russia. The economy would need to be growing at a brisker rate than it is to entice the most talented Moldovans back to their country. But, making Moldova the next frontier state for the West’s battle with Russia will place a heavy drag on encouraging diaspora Moldovans to return. Moldova is a country that I am deeply fond of and have visited many times. As it happens, I have always considered that it is a country that would benefit from closer economic ties with Europe. I also believe that a politically stable and economically prosperous future for Moldova rests on that beautiful country maintaining close relations with Europe and with Russia. Maia Sandu may come to rue her failure to make this election about Moldova itself.

  • Britain is losing the spy game to Russia

    I had a sense of déjà vu with Russia’s decision to kick out six alleged British spies in August. After the Salisbury nerve agent attack in March 2018, I sweated for a week in Moscow, waiting to hear if I’d be kicked out in the diplomatic tit-for-tat. Russia’s announcement was timed to embarrass Keir Starmer as he travelled to Washington last week for talks with Joe Biden. It was also a blow to the critically small pool of Russia experts in the British government. In the hostile goldfish bowl of UK-Russia relations, both sides are constantly on the lookout for ‘undeclared’ intelligence officers (i.e. spies) working covertly by masquerading as diplomatically accredited staff in the respective Embassies. We kicked out the Russian Defence Attaché earlier this year. The Russians run a huge ‘guess-the-spy’ game around the clock, with all manner of covert and overt surveillance. I was regularly followed by Russian intelligence, including a fun chase round central Moscow on the day that the post-Salisbury expulsions were announced, with my kids in the back of the car.   Russia’s domestic intelligence service the FSB gleefully revealed details about the six expelled British diplomats and their inexplicable jogging habits around Moscow’s third ring road or curious meetings in towns close to Moscow. In a strange departure from the convention of keeping the details out of the public gaze, the names and photos of the expelled Brits have been flying around social media.  That’s why Russia’s Ambassador Andrei Keilin was hauled into the Foreign Office for a tongue lashing. But there was a big dose of ‘nothing to see here’ in the revelations. Russia hasn’t caught anyone red-handed, not now, or recently, even though they’ve laid on the charm with honey-traps and kompromat. Yes, both sides work hard to gather secrets; the Head of MI6 recently called on Russians to spy for Britain.   The relationship between diplomacy and intelligence is symbiotic; UK and Russian intelligence do have ‘declared’ channels to talk when they really have to.  But the Russians are winning in the real ground game of espionage and diplomacy anyway. Much like in war, having an edge can come down to a bigger supply of the right people with the right skills in the right places. And Russia has a significant advantage over us in the number of staff they employ in the UK compared to our outfit in Moscow. It’s quite simple. Russia only employees Russians at its Embassy. Most staff at the British Embassy in Moscow are also Russian, because of the Foreign Office’s model of employing less expensive local staff. That’s a good model in friendly nations. Less so in Moscow where the FSB has been known to harass locally employed Russian staff.  When I left Moscow in February 2019, almost 90 per cent of the staff across the Russia and British Embassies were Russian.  Add to that, a community of over 150,000 Russians in the UK against a small number of British expats in Russia.   There are seldom more than a few dozen diplomatically accredited Brits at our Embassy Moscow.  After Salisbury, the loss of twenty-three colleagues cleaned out the political wing of the Embassy, leaving a few people like me, with mere months left on their postings, in a two for the price of one deal. Kicking out six political officers in August will have put a bit dent in the Embassy’s ability to function again. Where those officers liked to go jogging in Moscow is really a secondary issue. I took a lunchtime run from the Embassy once surrounded by a crowd of twenty agents, in one of the weirder stunts they pulled on me. The point is, it will take months for replacement staff to get diplomatic visas, if they ever do. So, this is really about degrading the UK’s ability to have a functioning Embassy in Moscow. Russia plays this game better than us.  Fewer Brits in Moscow, means less insight for London policy makers and weaker advice being put to David Lammy. And the UK struggles to generate officers with the right skills to fill the jobs we have at the Embassy in Moscow, as Russia expertise has been hollowed out over the last three decades. The Foreign Office has a poor record in ensuring political staff arrive in Moscow with the Russian language and diplomatic skills they need. I saw no real thought put into a strategic workforce plan to maintain a pipeline of Russia expertise over the longer-term. British universities are slowly cutting back on Russian language degrees.  When I arrived in Moscow in July 2014, the Foreign Office spoke often about the need to ‘rebuild’ after a period of post-Cold War disinvestment. This challenge has yet to be gripped with any vigour or purpose. Russia, on the other hand, has no shortage of English-speaking staff queuing up to work in London. They are generally better qualified, as their Foreign Ministry invests seriously in its Diplomatic Academy and runs a feeder Diplomatic University, which some people call ‘spy school’.   There is a wider problem, too. In recent days, Russian military bloggers have taken great delight in circulating what they claim to be detailed organisation charts of the ‘massive’ Foreign Office’s Eastern Europe and Central Asia Directorate (EECAD), following an FSB information hack. But in my experience, most staff in this Whitehall Russia machine lack real experience of working on Russia or with Russians. So, Starmer and Lammy are chest-beating their way around the world, reliant on advice from kids in London and a barely staffed Potemkin Embassy in Moscow. Little wonder they’ve brought no new ideas of their own to the table. Meanwhile, Russia is gaining friends in the global south with a systematic and well organised diplomatic charm offensive, as war rages in Ukraine. By putting insufficient emphasis on our diplomatic capabilities, the UK has rendered itself a global bit part player on Russia behind the US, China, India, France and Germany. We need a better plan for Russia expertise if we really want to outsmart Putin. This article was published by the Spectator on 20 September 2024.

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