Putin and his ‘controlled chaos’ policy which Europe is falling for

Greece may be giving plenty in Europe sleepless nights but the real danger lies elsewhere. InRussia. Or to be more precise, in the mayhem Moscow is busy brewing. Ukraine is on the brink of economic collapse –  its foreign exchange reserves are dwindling fast and without a loan from the International Monetary Fund it won’t make it to the end of the month – and in its eastern regions the war rages on. The risk is that Vladimir Putin’s plan to drag the UE into the quicksands even more than it is already, might come to fruition. 

There’s plenty of method behind Putin’s apparent madness. The lies, the half-truths, the readiness to table discussions, followed by the prompt shut down of the same, the schizophrenic negotiations and telephone calls are all designed to highlight the weakness of Europe’s foreign policy. As Carl Gustav Jung wrote, “in all chaos there is a cosmos, in all disorder a secret order”. And it’s true. Putin, by negotiating with the French President François Holland and the German Chancellor Angela Merkel has essentially underminee the role of the High EU representative for Foreign Affairs and Security Policy, Federica Mogherini. NATO in the meantime, not to be caught twiddling its thumbs, has decided to increase its Eastern European contingent from 13,000 to 30,000 men, setting up positions in Bulgaria, Estonia, Latvia, Lithuania, Poland and Romania. A move which aims to stall Putin’s advance. As NATO General Secretary Jens Stoltenberg pointed out, “this is the biggest reinforcement of our collective defence since the Cold War”. Not the simplest scenario to manage.

Russia won’t be caught napping either and, besides the Ukraniansituation, it’s also trying to disrupt Brussels on another tense front in the Old Continent, meaning Greece. In the last few days Putin has invited the new Greek Prime Minister Alexis Tsipras to Moscow and there’s no doubt the invitation has its ulterior motives. He is well aware that negotiations between Athens and Brussels are at fever pitch. He knows that many, in the European Commission and European Central Bank, are tired of the way things are panning out in Greece. He is also fully aware that today, even more than in 2012, a possible exit (or even banishment) of Greece from the eurozone is in the offing. And that’s why he’s trying to entice Tsipras, so that the situation in the euro area becomes even more confused, and hopefully lead to a complete loss of credibility among international investors, which is exactly what would happen if Greece moved out of the eurozone.

Russia is betting on chaos because it’s to its advantage. The mayhem that it manages to create can provide significant retaliation against Europe, desperately seeking some form of economic recovery. Russia is like a rabid animal trying to infect as many of its kind as it can. Or for those acquainted with J.R.R. Tolkein’s saga, it reminds one of Balrog, who about to be defeated by Gandalf, does his utmost to drag him down into the abyss along with him. That’s how it reacts and within its own borders the idea that Europe is actually bent on destroying the country is catching on, matched by the belief though the country in itself can be economically independent. This last statement however, is blatantly untrue. Without the help of the Chinese central bank, which in recent weeks has approved a series of currency swaps with the Russian central bank, the rouble would have kept losing ground against the other currencies. And without the commercial agreements for the supply of natural gas signed over the course of the last year, once again with China, Moscow would be even more isolated.

As the head of the Russian central bank Elvira Nabiullina said last week, Russia has lost around 160 billion dollars (€141bn) due to the drop in oil prices from 100 dollars a barrel to the current 50. And after the rise in interest rates, now currently in double figures, the inflation rate in January has moved beyond the 15% mark on a yearly basis, against the 11.4% recorded in December. And if that wasn’t enough, the Russian Economic Minister Alexei Ulyukayev has downsized the growth forecasts for the current year. The contraction is expected to be in the region of 3 percentage points, but it could be even greater, as a note published at the end of January by the US bank Goldman Sachs indicates. The blame here is mainly to be pinned on capital fleeing the country, which Ulyukayer estimates will be around 115 billion dollars (€100bn) during 2015. In practical terms, as the Anglo-Asian bank HSBC has explained, the Russian economy is tottering on the edge. Particularly if China should decide to give in to US pressure and cut off the cash supply. At the beginning of January the foreign exchange reserves had fallen again, dropping below 400 billion dollars (€355bn) for the first time since 2007. To be precise, according to the Russian central bank, at the beginning of January they stood at 378 billion dollars (€335bn). Far below the almost 550 billion dollars (€490bn) recorded in September 2011. The more the noose is tightened around Moscow’s neck, the more Moscow thrashes, in its attempt to wreak havoc.

What’s to be done then? More than in the Greek affair, it is in Russia that Europe will understand what course it intends to take. Either it decides to take unpopular decisions, disregarding trade diplomacy and economic agreements with Russia and tries to put Putin firmly and resolutely in his place, acting as a cohesive unit. Or it will leave Moscow holding the whip hand. Europe is at a crossroads that could have serious repercussions on its future. The problem is that it doesn’t seem to want to realise it.