Wednesday, 13 April 2022

Greed, Grievance & Putin´s War

 From Putin´s abstruse historical perspective, Russia´s military invasion of Ukraine is more akin to civil war than to a war between two sovereign nations. Putin´s war has been explained by either his greed or by Russia´s grievance as NATO has expanded East closer to Russia´s border over the past decades. “No grand theory can explain the Ukraine crisis”?[1] Take a little one then[2], the seminal Collier-Hoeffler Model, a model well known in conflict and development research[3]. It suggests to emphasize Putin´s greed and to act accordingly through aiming at his wealth via targeting his oligarch trustees.

Using a rich dataset of wars (mostly for Africa) during 1960–99, Paul Collier & Anke Hoeffler found political and social variables that are most obviously related to grievances had less explanatory power than economic variables. For the current Ukraine context, it means that we should give little credence to views that look at NATO´s enlargement as a root cause for Russia´s military invasion(s). Rather, we should emphasize economic motives for Putin´s war and identify targeted economic instruments to stop him, beyond and above rapid military equipment of Ukraine to withstand brutal Russian assault.

Putin has excelled at manipulating the psychology of grievance. For years, he cultivated a narrative of humiliation by the West. That narrative supported Russia´s occupation of Crimea in 2014, when Putin´s popularity levels shot up to their highest ever levels. Again, Putin's approval rating seems to have soared since he sent troops into Ukraine late February 2022. Economic sanctions by the West hit the population, not Putin, and are adding to Putin´s popularity.

Large-group psychology and social conflict have been investigated by psychiatrist Vamik Volkan who conducted fieldwork in regions of war and unrest. Volkan found that if societies don’t work through their sense of loss (of power, status, or prestige) through a process of mourning, it can become central to group identity – which in turn makes them vulnerable to manipulation by destructive leaders who play on old wounds. Apart from Putin, Serbia´s Milosevic and Trump (MAGA) are similar cases[4].

No doubt, Putin is greedy (and very wealthy).[5] According to financier Bill Browder,  since “Khodorkovsky's conviction (in 2003), Russian oligarchs went to Putin and asked him what they needed to do to avoid sitting in the same cage as Khodorkovsky. From what followed, it appeared that Putin's answer was, "50%" He wasn't saying 50% for the Russian government or the presidential administration of Russia, but 50% for Vladimir Putin personally."

In Ukraine, Putin´s greed can be satisfied by the extortion of the victim´s natural resources (cereals, oilseeds, gas) because annexation would make Russia a world leading supplier of fossile energy and staple food. A recent Information Note published by FAO (Food and Agriculture Organization of the UN) has highlighted the critical role that Russia and Ukraine play in global agriculture. In 2021, both countries combined held major percentage shares of global exports in wheat, barley and sunflowerseed oil (between 30 and 60%). The annexation of Ukraine would give Putin a huge extortion potential as a quasi monopolist over staple food items, most crucially important in poor Africa and Asia.

The annexation of Ukraine would also consolidate Russia´s de facto monopoly of gas exports to Europe as it would capture the all important pipeline North Stream 1 run by Ukraine´s Naftogaz. Russia has been also denying Central Asian countries access to its own gas transport network, and consequently depriving them of access to Ukrainian transport towards Europe.

Sanctions are unlikely to be the best way to stop Putin. Bill Browder (the largest foreign investor in Russia until 2005, and now a leading campaigner to expose Russia's corruption and human rights abuses), likens broad economic sanctions to nearly killing the patient to target the cancer. Instead, he has suggested to sanction Putin´s oligarch trustees, probably along international adoption of the US Magnitzky Act ((named after his murdered Russian lawyer, Sergei Magnitsky).

Since Russia's aggression against Ukraine, Europeans have already frozen billions in assets belonging to oligarchs. Recently, the EU Commission drew up an initial balance sheet: By April 8, assets of oligarchs and companies worth a total of 30 billion euros had been frozen in the member states. According to the Commission, these include ships, helicopters, real estate and works of art worth almost 6.7 billion euros. In addition, transactions worth around 200 billion euros had been blocked.

Some countries are obviously further along than Germany in tracking Putin´s Mafia. Italy has long recognized that fighting anti-money laundering is a prerequisite for successfully combating the Mafia. Germany, by contrast, is a notorious bad performer in reviews by the experts of the Financial Action Task Force (FATF)[6]. Experience in the fight against organized crime also helps Italy freeze the assets of Russian oligarchs, with the powerful Guardia di Finanza having far-reaching rights.

So apart from military resistance and secret service sabotage against Putin: Make Putin Poor Again!

[1] Janan Ganesh (2022), “No grand theory can explain the Ukraine crisis”, Financial Times, 12. April.

[2] Paul Collier & Anke Hoeffler (2004), “Greed and grievance in civil war”, Oxford Economic Papers 56, 563–595.

[3] A seminal paper on violent civil wars, has been the focus of much of the greed-grievance debate. The model argues that certain natural resources such as oil are tied to increased likelihood of conflict onset. The links between natural resources and conflict were confirmed by the data, apart from the level of per capita income and the rate of economic growth. Primary commodity dependence raises the risk of civil war exponentially until it peaks with exports at around 30 percent of gross domestic product (GDP).

[4] Alex Evans (2022), “Putin and the psychology of grievance”, The Article, 1st April.

[6] The FATF is affiliated with the Organization for Economic Cooperation and Development (OECD) in Paris and is considered an important international body for combating money laundering and terrorist financing.

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