4 Shires Investment Commentary Winter and Spring 22

Page 8

Russia and Ukraine

The recent invasion of Ukraine by the Russian army has placed European security into sharp reverse. The days of peace since the end of the Cold War and the Yugoslav war of the 1990s have ended. In this article we will look at: • Why Russia has invaded Ukraine • How long could the conflict last • What this means for geopolitics

• What this means for the world economy • What this means for investors

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Why has Russia invaded Ukraine President Putin has long resisted the eastward expansion of NATO into the countries of the former Warsaw bloc, or those that were behind the iron curtain. He has been even more sensitive about any encroachment into the independent countries that were once part of the Soviet Union, such as Ukraine and Georgia. Putin follows the teachings of Alexander Dugin, a radical theorist and far right thinker who proposes a rebuilding of the territories and influence of the Soviet Union. Dugin is also an admirer of the the methodology of Hitler, and some of Hitler’s methods can be seen in Putin’s strategy. Putin has been using the pretext of saying Russian minorities in former Soviet Union territories are under threat from local majority nationalities, which is rarely, if ever, the case. Perhaps he believes it is true, but it is most likely to be a pretext to exercise leverage used for territorial expansion. This has taken place in Abkhazia, South Ossetia,

Transnistria and now in the Donetsk and Luhansk Oblasts (regions) in Ukraine.

In the case of Ukraine, the illegal seizure of Crimea and the ‘independence movement of the Donbas’ has created a strategic problem for Putin. The Donbas separatists are little more than Russian created movements, aided and abetted by Russian special forces. The strategic problem is that Crimea is linked to the Russian mainland by a single bridge and the Donbass region does not have control over the whole of their administrative regions, the Oblasts. Putin now wants to carve a landbridge between the two, and since 2014 we have viewed the situation in Ukraine as unfinished business.

Putin tried to solve the problem by ‘cutting the head off the snake’ by removing the democratically elected Zelensky government and get a puppet government to recognise the conquered territories in the South of Ukraine. When this failed, he has now changed his war objectives.

How long could the conflict last Putin had hoped to conquer Ukraine with a lightning, one week push to take Kiev, expecting the Ukrainian government to fold rather than fight. This miscalculation came from the retraining of the Ukrainian armed forces since the seizure of Crimea and parts of the Donbass in 2014 and the antipathy of the Ukrainians to the Russians dating back to the Stalinist period. In the 1920s and 1930s over 1.5m Ukrainianes were murdered by Stalin in what is known in Ukraine as the ‘Holodomir’.


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