On 24 February 2022, war returned to Europe. The outcome of Russia’s criminal attack on Ukraine is still unknown. But it is not too early to draw first lessons and to start considering the shape of things to come.
Geopolitics eats strategy for breakfast. That makes it crucial to see what is coming.
The problem is, we do not see what we do not want to see, no matter the evidence. In the months leading up to the war, the potential for war was hard to miss. The United States and the United Kingdom raised the alarm and backed up their concerns with hard evidence. Third parties, such as the Russia-based Conflict Intelligence Team, an open-source initiative, provided corroborating information by trawling social networks and analysing commercial satellite data.
At the same time, Russia’s leadership set out to create a pretext for war by making a reduction of tensions that Russia itself had created contingent on terms so far-fetched that they were clearly designed to be rejected.
It was all there in plain sight.
And yet many of us refused even to consider the possibility that Russia was bent on war. Smart people did not want to believe the evidence or dismissed it as Anglo-Saxon propaganda. Entire nations – my own, Germany, at the forefront – deceived themselves that Russia could never do such a thing. Others argued that waging war would be irrational, blithely ignoring that Russia had learned that war does indeed pay.
All were caught out, as were presumably many companies.
One of the most critical tools of political risk analysis and mitigation in global strategy is the use of scenarios – especially those that seem unlikely but would be highly impactful.
In the present case, there were enough reasons to consider a scenario in which Russia attacked Ukraine. Unfortunately, scenario-building exercises often collapse into what is desirable rather than cover what is possible. Our hopes and desires become our blinders.
As the fighting continues, several scenarios are worth considering. Most likely is that Russia will conquer all of Ukraine and then occupy it or annex key parts while installing a puppet government for the remainder of the country. Less likely is that, against all odds, David will slay Goliath.
Russia loses big
In these scenarios, it is probable that Russia will ultimately emerge much diminished, not only in reputation, but economically and, for lack of resources, militarily.
Putin’s dreams of superpower status were always delusions of grandeur: A country of 145 million and a 2021 GDP (at PPP) of about US$4.3 trillion does not play in the premier league with China (1.4 billion, US$26.7 trillion), the US (333 million, US$22.7 trillion), and, perhaps one day, a united European Union (447 million, US$21.5 trillion). Indeed, Russia’s economy is smaller than Germany’s, a country that is hardly a world power.
And when the dust settles, Russia’s economy will be set to fall behind even further. Western sanctions after Russia’s invasion of Crimea in 2014, tame as they were, have probably reduced Russian GDP growth by 2.5 to 3 percentage points per year.
Sanctions this time are orders of magnitude more severe. Not only will they make it much harder for Russia to gain access to technology and finance, they will also induce even more Russians to leave their country. According to recent estimates, 22 percent of Russians overall and almost half of the young want to emigrate. As sanctions bite, these numbers will no doubt swell. These effects would be amplified by a Russian occupation of Ukraine, which would both drain Russian resources and alienate Russian citizens further.
At the same time, Europe is working to wean itself, at long last, of Russian energy imports. And Western businesses will find it hard – legally and politically, but also morally – to continue doing business with an international pariah state.
Russia will be an isolated developing country with nuclear weapons – North Korea writ large.
China gains, somewhat
And like North Korea, a besieged Russia will turn to China for help with sustaining its economy. China will oblige.
A Sino-Russian axis has been in the making for some years now, culminating in Putin’s 2022 visit to China during which both sides proclaimed that their partnership had “no limits”. Accordingly, China has refused to denounce Russia’s war of aggression, despite China’s usual professions about the sanctity of sovereignty. And Chinese public opinion is strongly in favour of Russia – with the absence of censorship of social media cheerleading for Russia indicating Communist Party approval.
China gains in multiple ways. One is that it has just seen how the West might respond to a Chinese attack on Taiwan, and it will adjust accordingly. In particular, China will have to consider whether it is safe to park its foreign currency reserves anywhere in the West, having seen how they can be frozen overnight.
A major win for China is that Russia has just become eminently more dependent on China. If Russia wants to continue to sell oil and gas, China is the natural destination. If it wants access to technology or imports more generally, China may send its own goods or act as Russia’s blockade runner. China is Russia’s lifeline.
Russia may manage to scrape by this way, but at the price of giving China extreme leverage. At best, Russia will be selling oil and gas on the cheap to China. At worst, Russia will turn into a quasi-tributary state of China. A cynic may wonder whether Xi may have encouraged Putin to move against Ukraine.
More decoupling, also of China
But it is not all cheer for Beijing. Trends towards decoupling China from the West (and de-globalisation in general), already under way, are likely to accelerate.
A key reason is the likelihood of China helping Russia circumvent Western sanctions. The very point of sanctions on Russia is to decouple the Russian economy from as much of the world as possible. If China is seen as preventing this, a logical next step is to move towards decoupling China.
US law provides for so-called secondary sanctions. To the extent China helps reduce the impact of US sanctions on Russia, the country could become subject to US sanctions itself.
Europe may follow suit. Most of the continent (and the UK) now sees Russia as an adversary that needs to be contained rather than engaged. To the extent China is seen as working against this objective, relations between China and Europe are likely to suffer – my enemy’s friend is my enemy.
For Western firms, the challenges of staying in business in and with China may soon reach new heights.
A world of relative gains
This new landscape will emphasise relative over absolute gains.
Applying a logic of absolute gains, as in economics, measures such as sanctions and decoupling are irrational if they inflict losses not only on the target but also on their originator. And steps that let both sides gain are welcome, even if the other side gains more.
However, for international security, the crucial question is: How can we make our country and our allies better off relative to our opponents? In this logic, measures leading to losses are acceptable if the other side loses more. Steps bringing gains are unacceptable if they would allow an adversary to gain more.
This is no longer a landscape where win-win solutions are universally welcome. Rather, vis-à-vis the other bloc, win-lose is the objective. Businesses need to become familiar with this logic and shape their expectations and global strategies accordingly.
Much of the above assumes that Russia will stay on its current trajectory. But many in Russia, apparently including some in positions of power, are aghast at the war. A change in leadership and foreign policy remains a possibility.
While such a change seems unlikely at this point, these power transitions are notoriously difficult to predict. Should it occur, Russia and the world may well find themselves on an altogether different trajectory again.
Of course, it is also possible that the war may turn into a wider conflagration. It is worth remembering that Hitler, whose actions seem to have provided at least part of Putin’s playbook, did not intend to start World War II by invading Poland. Nuclear deterrence, under the crucial assumption of rationality on both sides, should prevent this war from turning into World War III. Whether it does, we may soon know.
Michael A. Witt is an INSEAD Senior Affiliate Professor of Strategy and International Business. He is the programme director of International Management in Asia Pacific, one of INSEAD’s open-enrolment Executive Education Programmes. He holds a Ph.D. in Political Science from the Department of Government (GSAS), Harvard University.
 I use “Western” not as a geographic designation, but as shorthand for the camp of countries aligned with the United States against Russia.
 Though China hardly has a monopoly on hypocrisy.
Edited by:Isabelle Laporte
Please support Ukraine https://u24.gov.ua/.
That is President's Zelensky official aid platform.
I have been closely monitoring the situation just like you with so much worries for people's lives. I can see the language you have used in the article is objective and careful. However, I would like to mark out a few points:
(1) 'Russia will turn into a quasi-tributary state of China': I would say personally I don't see this could happen anyhow. Russia is a country that is proud of expansion. In history, Russia had seized China's territory of 1.3 million square km in a single treaty (unfairly signed). In the year of 1969, Russia threatened China with Nuclear invasion for the matter of an island. I would day it would be 'humiliating' for such a country to be quasi-tributary state of China.
(2) 3 days after the war, the very official China media announced ' China- US collaboration cannot be obstructed'. Following this article, some social media accounts that openly support Russia has kindly shut up. The official declaration of China if you noticed in many occasions, is consistent: China doesn't support the behaviour of illegal occupation of other country's territory. This sent a signal to Russia. So my judgement is Russia won't occupy Ukraine (except for the declared area), and Russia fairly know that the occupation takes too much resources which it cannot bear.
(3) All wars are ugly. There are no exceptions. Then why still people start the war and who can possibly stop it. I would say the super power country need to take up more responsibilities. Unfortunately this has not happened. The super power country, the rule maker, if itself doesn't obey the rule, by invading other countries using make-up excuses, by impoverishing other small countries without anyone daring to criticise it, then it is hard for other countries not to follow. Super power countries need to take up more responsibility to the humanity maintaining and to the peace of the world.
(4) There is another country you forgot to mention who is also the winner of the war, maybe the biggest winner, U.S. By creating the tension of safety concern, NATO this time makes buckets of gold. Just like what Franklin (formal U.S. military analysis for Pentagon) mentioned, the war serves NATO as both chicken and egg. NATO can successfully take the cold war further and in turn bring more economic gain to the MCCI ( Military-Industrial-Congressional Complex).
In the end, who suffer? The Europe, the people. When I saw Ukrainian kids and women leaving the country without their men, when I saw people fleeing the country with their colourful clothes in great contrast of the burnt bridge and ashes around, I cried. The Ukrainian military failed to build the Humanity passages for 200 thousands of people. If people say there is no right or no wrong in the world but only self-interest, allies, powers then naturally there is no fairness, no law, no humanity and no peace. And the only thing left is ' Jungle Rule'. We are in the middle of struggling to survive without further evolving. The order needs to be established, civilisation needs to built by people, country who is more capable.
Finally, recommend a book < Afgan Modern: The History of a Global Nation.>
Thanks, Michale. Happy to share.
Have a nice day. Cannot cherish the moment of peace more in life.
I have a book open in front of me "Soviet Posters, The Sergio Grigorian Collection". An hour spent absorbed in historic soviet propaganda and you start to feel very small indeed. I'm sure Putin has a room pasted with these posters that he retires to in moments of doubt. There is no doubt that Russia/China friendship will endure. This has deep roots. Much of Putins antics are to gain "respect" from China and be regarded not only as an enduring friend but a STRONG friend. Unfortunately from the sacrifice of Ukraine the new order will emerge on Russian terms. I lived in the Czech Republic for six years and after the fall of the soviet regime the "monsters" who were in charge switched gear effortlessly into democratic politics and business. The romantic period of Vaclav Havel short lived. In Ukraine those with power and influence will be quick to join the winning and Zelensky will be forgotten. Putins strategy for Russia, like China, is long-term. He'll plough forward as and when weakness and opportunity presents - to make Russia great again.
Thanks for your reply on my earlier comment, Oliver. You hit the nail on the head, when you say 'might is right'. Because the People's Republic is so much mightier than the sovereign nation of Taiwan, so few countries recognise Taiwan.
But let's not confuse that with legitimacy. And that's why China can cling on to the mirage that Taiwan is NOT an independent and sovereign nation.
Oliver: You say "Russia's righteous demand for security". OK, I agree that's legitimate. But considering there had been no military altercation, no physical threats against Russia, I'd say Russia was reasonably secure. So to then decide that the only assurance to its security is aggressive destruction of a country's infrastructure, killing of civilians, uprooting over a million innocent people is the way to ensure more security is an uncivilized, irrational, fantasmagoric plan.
If what you say is true regarding how benign Nato is, why does it have to expand eastward and encircle Russia? Also as for the "defensive" nature of Nato, I am not sure the people of Yugoslavia, Syria, or Afghanistan would agree. Ultimately, I think you know what Nato is about in your heart of heart but whether you choose to acknowledge that, it's a different matter.
the points made about China by the writer have very large gaps and misanalysis.
For one, regardless of China's attitude towards Russia's actions, the US and the west in general are bent on containment and hostility towards China rather than engagement. The Ukraine crisis has nothing to do with that fundamental posture that has been articulated and actioned very clearly for some time now.
Two, if China doesn't support Russia, it has one less ally and partner because a friend in need is a friend indeed and if China keeps its distance now with Russia, it will alienate Russia while gaining nothing from the west. Anyone who read the mainstream western press or listen to what western politicians say should be crystal clear about this.
Three, very important to China but overlooked by the west, the decision to support Russia is a moral one as much as a strategic one. The western hysteria over the crisis conveniently overlooks the fact that Nato expansion is the root cause of the crisis and Russia acted only because it's pushed into the corner. This is nothing irrational and in fact widely predicted years ago by Russian experts like Jack Matlock, former US ambassador to USSR. Moral righteousness is an important consideration in Chinese thinking and China itself has a nearly perfect analogous situation in Taiwan. In fact, China's completely legitimate position on Taiwan is already smeared and vilified by the west. Taiwan is being used in the exactly the same fashion Ukraine has been used as a pawn and a sacrificial lamb by the US and the west.
If China doesn't support Russia's righteous demand for security, how can it secure support for its righteous demand for reunification. As a German, this writer seems to have no empathy with the aspirations of a divided country.
In short, China has taken a position consistently with its values and its strategic interests. No western manipulation will change its calculation. This is not just the consensus of the Communist Party leadership but the consensus of the Chinese people - hence the support for Russia witnessed online and elsewhere.
Dear Oliver, there is nothing perfectly legitimate about China’s position on Taiwan. Although it is recognised by few as such, Taiwan functions in every possible way as an independent and sovereign nation, just like the People’s Republic. If two independent and sovereign nation want to merge into one, it will require the free will of the people of both nations, and their agreement to the conditions. Any display of military power exerts duress and limits the free will, and can therefore never lead to legitimate unification. I will not speak for the people of Taiwan, but I think they’re doing fine for themselves, and are happy under their current system - even if many of them continue to maintain strong ties to the mainland.
one minor point to add - about 14 countries in the world recognize Taiwan as a sovereign country, none European country including Germany or the US recognize it as a sovereignty. Convenient to overlook that in the current western discourse but 179 countries around the world recognize only one China. That goes your argument about united two sovereign countries. It's a nothing but a mirage.
Maybe you should also make the same argument about the civial war in the US. Apart from the hypocritical double standard which the "just and fair" west applies to the international relations, your opinion doesn't really matter, does it? Might is right - isn't this the practice of the west for the past 3-4 hundred years. Too bad you are now on the receiving end of it.
Sai Ram Nilgiri
I see Oliver has the right to his thinking. Hostility towards China is when you do not respect international law. Hong Kong was supposed to have a term to transition. And what has China done? Walked all over. China has benefited from western know-how and technology done in ubrimae fidae (in good faith). And what has China done? Taken it and now showing the finger. It has played games with western companies saying you have to prove your commitment to China. Pity the west did not read you well enough. "Gaining nothing from the west?" You already show it. A moral one - and by invading Ukraine and keeping it, Putin is still at the doorstep of NATO with Poland. Even madness has its limits. And China's love for "chien chien" (money) will not stop it from doing anything amoral.
If Russia could believe it is a super power, Europe should mean nothing to it. Fear is a contagion of the insecure. Moral righteousness in Chinese thinking? Really? Power corrupts and it comes at the cost of human lives. The UN needs $1.7 billion for this one man's creation of a crisis. I am sure China has a heightened morality to cover the cost of this crisis and restore human dignity.
I do not intend to bash any country. We don't have a right to pollute this world and destroy it. We are the worst species on earth. Killing for superiority. It is being responsible and appreciate human life. Calling out despots and madness is a moral cause.
Interesting how the west characterizes the Hong Kong situation as a democracy movement (you should see the violance unleashed by "peaceful" protestors) while labeling the Jan 6 Capitol Hill protests as insurrection - I guess you alone have the moral authority to decide what is right or wrong. It may work when you can dominate over others like the Iraqis or Afghans, but it works a little less well with strong countries like Russia or China.
thanks for your comments. I will let them speak for themselves.
One thing I would like to dispel, though, is the notion that there is any parallel here whatsoever between German reunification and the Taiwan question. It is hard to image two more different cases, on so many dimensions.
Most importantly, West Germany *never* threatened to take the East by force. East Germany *asked* for reunification and did so freely, with huge popular support in the East (and against lots of reluctance in the West).
Taiwan has no intention to ask for reunification. Indeed, the proportion of Taiwanese in favor of joining China is minute—1.6%, according to a poll in November 2021 (link below).
So China holds a gun to Taiwan’s head and demands that it submit. The parallel is not German reunification, but Russia’s invasion of Ukraine.
Knowing how these things go, your fallback option will now probably be to say that "Taiwan is a renegade province" and Chinese military action is justified as an anti-secessionist operation. I will not respond to that other than to flag that that further invalidates your point about parallels with Germany.
OK, another flawed (though predictable) analogy.
First of all, are you really comparing the question of Taiwan, a peaceful and prosperous place that is Asia’s best-working democracy (as per EIU Democracy Index), with the Southern secessionists who broke from the USA to maintain and keep spreading slavery?
Second, Lincoln interceded immediately. Taiwan has been doing its own thing since 1949.
Third, you say that in the South, "the overwhelming majority of its population” favored secession. Not so. In fact, only Tennessee went to the people for a vote. They voted AGAINST. Elsewhere the people were not asked.
The decisions to secede were made in various state conventions (including in Tennessee, which overruled its own people).
These, however, were not representative of the people. For one, women were not allowed to vote. But more importantly, a very large proportion of the population was slaves—in some areas, more than 2/3 of the population (see link at bottom). Of course, they had no say.
So your assertion that "the overwhelming majority of its population” favored secession is demonstrably wrong.
Even if Lincoln had not been justified, that would not create a justification for anyone else to do the same. To argue otherwise falls into the tu quoque fallacy: You did something wrong, so I can do the same thing. Children love doing this: “He did it, too!”
Obviously this is not a defense or justification. If A murders a person and gets away with it, B cannot go out and murder another person and then argue s/he should not be punished because A did not. Both murders are wrong. So trawling through history for unpunished wrong-doing by Western powers, of which there has been plenty, is a dead-end.
At INSEAD, we welcome the expression of all kinds of views (a courtesy that, incidentally, China would not extend to us, or indeed its own citizens). As one of the world’s top academic institutions, however, we do expect that arguments be logical and well-researched and that they show evidence of reflection. Do your homework, please.
I wouldn't belabor the points about why Taiwan is a part of China and will be reunited. As for your point about self determination, maybe you should tell Lincoln that the confederate had the right to independence as the overwhelming majority of its population favored that.
I inadvertently dropped a sentence after "but Russia's invasion of Ukraine." The next sentence was meant to add: "And according to international law, that is an illegal war of aggression."
Leave a Comment
30/09/2022, 10.11 pm
The Ukrainian military and political leadership had been able turn the tide around and inflict devastating strategic losses on the Russian military. The Ukrainian military was able to quickly acquire the knowledge and expertise of the NATO & Western military equipment & weaponry in a very short timeframe and effectively use it against the Russian forces. The results are impressive and visible: Within days the Ukrainians will be able to take over Lyman and further penetrate the Lugansk/Donbass southern frontlines. Strategically this is a very important move. However, will Putin who feels cornered with his military failures use the tactical (smaller scale) nuclear weapons to change the course of the war? With the sham & fraudulent referendums it feels like Putin is all in… In addition, with forced mobilization of Russians it feels like Putin is playing this game with the usual Russian military playbook he utilized in Georgia, Chechnya, Crimea and Syria: win the war by spilling more civilian blood, inflict more civilian terror, rapes, murder of civilians and keep committing more war crimes to further inflict more fear and terror.
At this point the NATO nations should issue more direct and stricter threats against Putin and even consider closing the borders to the Russians who are escaping the country. These same people, the vast majority of them (75%-80%) supported Putin’s bloodshed and war vs Ukraine and now they also need to held responsible. They need to stay in Russia and protest there against Putin regime and not simply escape and claim refugee status, when they absolutely do not deserve it.
This war will end within few months or a year at maximum, however it might be possible that Putin feeling cornered utilizes the tactical nukes (vs strategic). This will be the last and final nails to his coffin and this will forever destroy Russia as a country. If Putin makes this strategic mistake, there will be no more Russia and instead of it we will have 10+ more independent republics. And maybe this is the best outcome for the world peace and long-term stability on the Eurasian continent?