History doesn’t repeat itself but it does rhyme (Mark Twain).

I post mainly photographs with a bit of narrative. Sometimes I post narrative with a photograph or two thrown in. Generally I try to do so with some humour in the mix. Less frequently still I try to write about current affairs. That is dangerous in the sense that I may well express views that run contrary to those of the reader. Offence may be taken. Today is such an occasion.

I often counsel people, in my capacity as a coach or NED, that the biggest threats rarely come from the direction in which we are all looking. It is usually something seemingly innocuous that flares and catches us unawares. Whilst the world looks at the inexorably escalating tensions in the East few people have been looking seriously at the events in the Ukraine as a potential seismic geopolitical event.

Now perhaps the feeling has changed. I have been thinking a lot about the situation. For two reasons. Pure curiosity and to reflect on what an unexpectedly adverse outcome might mean for the financial markets and my pension fund.

I hear echoes of two crises past. Cuba 1962. and the Arab oil embargo 1973/74.

Ukraine is not on America’s doorstep but there is still an expectation, rightly or wrongly, that the USA will step in. There is perhaps some irony that the man who sparked the Cuban missile crisis, Nikita Khrushchev is the same man who gave Crimea to the Ukraine in Soviet times.

The oil crisis was in my mind because of the energy links that run from Russia to and through the Ukraine into Europe. As recently as 2006 Russia cut supplies to Europe, a clear sign that they can and may do so again. However, as with the crisis in the 70s it would be a double-edged sword. Following America’s backing of Israel in the Yom Kippur war OAPEC raised prices by 70% to over US$5 per barrel (yes, 5!).  Production was cut by 5% and oil prices rose to US$12 per barrel. The impact was said to be a 2.5% reduction in US GDP. However it crystallized in Western minds the importance and urgency of energy self-sufficiency, energy efficiency and the need to find alternatives to fossil fuels. We are still on the quest.  And of course if a supplier delivers less then they receive less income although much may be offset by higher prices. In Russia’s case I suspect they cannot afford to cut off supplies for long. Not only would they receive no payments but they would also be hit through their stock market and currency.  The last week or so has provided ample evidence of that. In the meantime a potential domestic benefit of a financial bailout of Ukraine would almost certainly be that Gazprom will be paid the US$2bn of arrears it is owed. This is perhaps a case where Russia has someone literally over a barrel (of oil).

Putin’s nationalism and his political strength rest to a degree on Russia’s status as a petrostate. Economic hardships are rarely popular with the populace. People will worry about restoring the Soviet Union only if they are safe and have full bellies and warm beds.  Putin will be acutely conscious of domestic risks as well as external threats. He will want to balance the achievement of his geopolitical goals with ensuring his personal security. He clearly likes to be the focus of attention but he will want to be so for the right reasons and not because the Russian people are suffering in the wake of his annexation of Crimea.

But to return to Cuba. Obama is cast in the role of weak president. I do not judge him. I read yesterday the memorandum written post the Cuba crisis by one Robert F. Kennedy. Thirteen Days: A memoir of the Cuban Missile Crisis. There are some interesting themes and quotes that might stand well today:

Keep strong, if possible. In any case, keep cool. Have unlimited patience. Never corner an opponent and always assist him to save his face. Put yourself in his shoes – so as to see things through his eyes.

On the military hawks:

These brass hats have one great advantage in their favor. If we do what they want us to do, none of us will be alive later to tell them they were wrong.

What guided all his (JFK’s) deliberations was an effort not to disgrace Khrushchev, not to humiliate the Soviet Union, not to have them feel they would have to escalate their response because their national security or national interests so committed them.

[Robert McNamara] The Secretary of Defense testified to Congress in 1964: “in the first hour [of all-out nuclear war] one hundred million Americans and one hundred million Russians would be killed.

Tellingly, when Kennedy told his allies what he was proposing to do and why, Macmillan, Adenauer and de Gaulle ….. accepted our recitation of the facts without question and publicly supported our position without reservation. Had our relationship of trust and mutual respect not been present, had our NATO allies been skeptical …….our position would have been seriously undermined.

I pause here to reflect on the status of the relationships today. It strikes me as inconceivable that such a statement could hold up now. The statesmen in Europe are long gone. Macmillan and John F. Kennedy were close friends despite the age gap. And Obama continues to preside over one of the most iniquitous surveillance regimes in the world. There is little trust in or goodwill towards him in Europe, I suspect.

Kennedy also had uppermost in his mind the lives at stake as McNamara alluded to. He examined his conscience, scrutinizing whether there existed a moral and ethical case for a military response. Robert Kennedy stated:

With some trepidation, I argued that, whatever validity the military and political arguments were for an attack in preference to a blockade, America’s traditions and history would not permit such a course of action. ……. They were nevertheless, in the last analysis, advocating a surprise attack by a very large nation against a very small one (Cuba). This I said, could not be undertaken by the U.S. if we were to maintain our moral position at home and around the globe.

Now Crimea is not Cuba by any stretch of the imagination but the thought processes of the Kennedy brothers are remarkable for their integrity and courage. Even if JFK did go to Berlin and announce that he was a doughnut (Ich bin ein Berliner), I can’t hold that against him. And he was acutely aware that Berlin and Turkey were both pawns in the Khrushchev game over Cuba. If he had struck against Cuba either or both of West Berlin and Turkey would have been ‘in play’.

The glaring difference between Cuba and Ukraine is this question: does the USA have a dog in the fight? The United States is not under direct threat. Ukraine is not part of NATO. It is not a member of the EU. What is the role of the USA in this conflict? Perhaps as STRATFOR believes the Russians are fearful that the USA will try to bring Ukraine into NATO and then Russia has another border, where it feels increased vulnerability.

Is Ukraine so geopolitically important to the USA that it should hold itself out as the great protector? The protector of whom? Historically Crimea was part of Russia from 1783 until Khrushchev handed it over in 1954. 58% of the population is ethnically Russian.  Why does Putin want Crimea back? Russia already has a lease over the Sevastopol base there until 2042. Putin it seems fears closer links between the EU and Ukraine. He does not want an EU ally, partner or member on its doorstep. This appears to me as a flexing of nationalist muscles, an effort to take back what is, in his view, rightly Russian, gifted away by Khrushchev. A stepping-stone on the road to clawing back what he can of the Soviet Union? Does the USA fear that the Western borders will be next? Poland and the Baltic states, perhaps.

It is hard to see how sanctions will work. Possession is 9/10 of the law and it is difficult to see Russia withdrawing. What purpose will they serve? Well better to do something than nothing and in any negotiations of this nature it is natural to try and make life as uncomfortable as possible for your antagonist. Travel bans, assets freezes, visa restrictions are individually modest steps but they buy time and keep the conflict in the arena of diplomacy and economic wrangling rather than leaping directly to a military solution. Jaw, jaw not war, war. Sanctions can be ratcheted up over time.

John F. Kennedy went to extraordinary lengths to avoid giving Russia an excuse to escalate the Cuban crisis. Obama may be best served doing the same. Robert Kennedy was all too aware that it was unsafe to assume that the man on the other side was rational – think North Korea today. Buying time gives European countries breathing space to put in place contingency plans if energy supplies are cut. It certainly would not be easy and the impact would be devastating on the back of the continuing financial train crash, the wreckage of which is still strewn all over the place. If the Arab oil embargo caused a 2.5% GDP hit in 1973/74 then the shock waves that would ripple out across Europe today would be far worse. In some respects that is a good thing. The world is so interconnected economically that Russia would suffer along with the rest. Slowly but surely we are seeing globalization unwind. A return to autarky [national economic self-sufficiency and independence].  The global financial system remains unstable, fragile and vulnerable. Nobody would be immune.

I write this to help my own thinking rather than to offer it up as a flawless analysis of the current situation. I make no judgment on whether Obama is weak or strong. You can only play the hand you have and frankly Russia holds most of the cards. Sanctions, yes but ousting Putin is beyond my vision at the moment. Who will go to war over Crimea? Better perhaps to belatedly think about what Putin might do next. South Ossetia, Crimea……. ? I open this up to debate.

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29 thoughts on “History doesn’t repeat itself but it does rhyme (Mark Twain).

  1. At the moment the drop in the Russian stock market has cost billions. I am not sure how Russians are taken that. Communism has long gone as has Lenin’s mausoleum at the Red Square. I feel that the situation is different now than during the Cuban crises. Putin is a little man with a huge ego that might have blinded him to the domestic situation at home.
    We will see how this will turn out. Cool heads, hopefully, will prevail.

    • I agree Gerard – this is not Cuba in the sense that there is no nuclear threat. The recognition of Mutually Assured Destruction would hopefully keep that off the table and the USA has no reason even to contemplate such steps. But we are back to the cold war style confrontations. The Russians lie as glibly today as they did when Khrushchev, Dobrynin and Gromyko were around. The bigger threat is economic turmoil and a more belligerent Russia. But the demands on Obama for a ‘strong response’ are already audible and I am not sure he can play his hand as well as Kennedy did, even with less at stake. My best guess is that once again we will muddle through this crisis because everybody has a vested economic interest in doing so. Strong economies = good politics. Perhaps the West will find a way of ceding Crimea to Russia gracefully and without loss of face. The challenge is going to be finding a solution that does not invite Putin to believe he can them move on to his next target with impunity.

  2. Excellent Andrew. Well versed on past and present world problems and discord. I say keep with the sanctions and hit Russia where it hurts most- the bread basket. And Obama and Europe should not give an inch. I think Putin is as sly as a fox. What he is doing now is just peanuts by taking over Crimea so that he can build Russia to its former glory.

    Frankly, I would not want to be in Obamas shoes. He is catching flak over the health care implementation and now everyone is calling him a weak president. Our two party system does nothing but bicker and point fingers at each other. They never seem to solve any meaningful problem. It is continued mud slinging and the repubs and dems do not get a cotton picking thing accomplished. What ever Obama does will be chewed on and spit out- no matter. My hope is that he keeps a level head and follows in JFK’s footsteps when dealing with Putin.

  3. Andrew, thank you for this interesting and thought provoking read. I am most definitely not a “political person” so I’ll leave further commentary to others. I will though increase my cash position to insulate myself from potential downdrafts in the markets. There will be buying opportunities presenting themselves at points during or after this Ukraine “thing”.

    • I have done the same, Barry. I sold a reasonable sized position 10 days ago to raise my cash holdings. The markets are very unpredictable though. I expected some reaction to the first default on a public issue bond in China but so far it has been shrugged off. I think in the long run it is a good thing but I can’t predict the short/medium term consequences. Mr. Buffett says he ignores everything of this sort and who am I to argue. I am just hoping to buy in a better level.

  4. I think the key to however this will be dealt with lies in the will of the European countries. So many rely on Russian supplies of gas that they are in a tough position. But so is Russia as that is their largest source of revenue. Personally, based on past history more recent than the missile crisis, I don’t think many European countries have the intestinal strength to place anything meaningful in the way of sanctions.
    Putin has long shown his desire to regain a position of power on the world stage at least the equal to the US. But his position is not as strong as he thinks and in the long run that should temper any fears of a march through the old USSR countries to former glory.
    I believe Obama to be a pretty smart person and he realizes that a whack upside the head of Putin will only strengthen his resolve to continue. In a situation like this it is best to know your adversary, don’t back him into an inescapable position and allow him a way to stand down without appearing to give in. Something most of the hawkish in the US don’t respect…they’d rather grind their heels into him in the false assumption that it will cow him.
    I am not all that well-versed in international politics, or even domestic for that matter, so I will just let my superficial observations stand. I don’t see WWIII coming from this. But the world economy is pretty fragile and this isn’t going to help and I think that is the bigger threat.
    I really don’t see anything offensive in what you wrote, Andrew. Possibly my doubting of European resolve is a little but I will be happy to be proven off base. I find the “agree with me or your an idiot” tone in modern politics, most especially here in the US, to be a slippery slope down the civilizational chute into the historical trash bin. Anyone who can’t put up with another sharing an honest opinion without derision and insult isn’t much of a friend or fellow citizen and leaves small hope for any meaningful outcome of the discussion.
    I am sure some of what I just wrote is a bit of nattering and maybe poorly constructed but I am quickly losing interest and faith in most things political. Plus I am pretty upset that I spent two hours out looking for images and came up empty.

    • Steve, I am not sure how the Europeans will react. They are in the worst position of all. They have the bear on their doorstep, the Germans get about 30% of their gas from Russia I believe and they have very fragile economies. Which is the least bad option seems to be as good as it gets.

      I won’t judge Obama for another 10 years – 2 years left in office then 8 years of the next president(s). He inherited an unholy mess and he has the unenviable task of trying to bring spending under control whilst doing more on every conceivable front, domestic and overseas. It is easy to throw bricks from the sidelines when you have little or no accountability. I doubt if the Cruz missiles bother him. They probably bother the GOP more. Much more important I think is to go out and make good pictures.

  5. It is only ever sensible (and practical!) to look at any world event demanding attention through the lens of history; and your doing here so points up why Crimea’s population has so high a proportion of ethnic Russians. I, being the world’s worst history student – but wishing I weren’t – am ever grateful for input of this kind, Andrew.
    Putin’e ego is, it seems to me, the central problem; inasmuch as he simply can’t be relied upon to behave in any way other than whichever will cover him in the most ‘glory’. I suppose that should at least provide the boffins with some help … :-\

    • The lens of history is indeed the best judge M.R. and trying to assess in real time whether Obama is doing a good job is fraught with challenges. History has not been kind to many of his predecessors: LBJ, Nixon, Carter to name but a few in my lifetime. Each President has been controversial in his own way. I said to Steve I think we have to wait ten years or more to start seeing Obama with a sense of perspective which will include the consequences of what he does until the day he steps down. That said, the Crimea story has some way to run yet, I’m afraid.

      • I trust you will continue to post your thoughts such as these, regardless of ‘offence’ caused, Andrew. Over this weekend I was advised of a reblog via a bloke who seems perfectly normal; but the site from which the reblog comes is actually alarming in its political persuasion’s being rammed down one’s throat. It seems that the right wing does not care a jot re offending anyone: keep that in mind and “Nike”.
        [grin]

  6. Thank you for this thought provoking blog. We have returned to the U.S. from Australia. I watched a US “news” channel long enough to hear Obama called “a wimp” and “mother jean wearing wuss” while Putin is “a real leader” and “a bear”.
    The only way I can sleep at night is to believe that cool heads will prevail.

    • Name-calling is ok in the kindergarten where the children know no better but it hardly belongs on national news or political debate. I hope cool heads prevail but the last thing the global economy needs now is a shock. There is not much room to manoeuvre but often there is much going on behind the scenes to which we are blind. That was true over Cuba and maybe it will be true with Crimea. I hope so.

    • Caroline, that sounds very like an email that was doing the rounds a couple of weeks back, full of images of the gtwo blokes and comparing their stances, yes?
      I now think it was a VERY poor example of someone’s attempting irony. At least, I hope it was …

  7. On the other hand how would the US react if Greenland (or Mexico)did a turn around and decided they would be part of Russia, build a bridge to the Russian mainland and export all their resources to Russia?
    We have to start worrying if Latvia, Lithuania and Estonia are in the sights of mother Russia.

    • Greenland was historically Danish but may be independent now, I will have to check. Perhaps Alaska would be a more worrying thought although arguably the Russians are welcome to Sarah Palin.

  8. Are there any ethnic Russians in Alaska? Just asking? Very thoughtful post Andrew. If Putin doesn’t want an EU ally right on his border – will Crimea be enough? It seems this all started with Putin’s interference in internal Ukrainian affairs by buying/forcing a deal on the now ousted leaders. With other power and territorially hungry dictators the last conquest has never been enough. Where is the balance between appeasement and confrontation?

    • That is the exact question that must be going through minds in government all over Europe. If Crimea, what next. It is why the hawks want confrontation. But with what consequences? I am happy I am not a politician. Peace in our time?

  9. You make several very valid connections, Andrew. I’m still sorting and studying as much as I can and trying to make my own sense of all that is happening. Kennedy and Obama, the challenges and dangers then and now, the quick judgements of strength vs. weakness.
    This is not our country’s first rodeo (a poor expression, but most Americans understand the pros and cons of the lock’n load mentality). I’ve learned that weeks or months from now the govt. officials and news providers will be putting new spin on what they’ve said this week and last week.
    Hindsight is 20/20, and everyone will be taking credit for clear vision in the future.
    Thank you for your comments to consider.

    • Thanks Marylin. Politicians do have an amazing capacity to reinvent what they said. Luckily most of the more outrageous statements are now recorded for posterity. So the likes of Dan Quayle and Sarah Palin along with a host of others will forever have to be reminded of their gaffes and forecasts.

  10. Here in the UK we are extremely unsettled by the Ukraine situation. The consensus seems to be that Putin will be content to grab the Crimea, and will probably get away with it. The problem will be if he goes on to try and split the rest of the Ukraine. Meanwhile there is now a very uncomfortable polarisation of different allegiances within the country.
    Personally, having read both his books, I have a great respect for Obama. If a president has such appalling enemies as Fox news and the tea Party crowd within his own country, it is not surprising that his achievements are less than was hoped for. As you say, time will tell. We are all a lot safer with Obama at the helm than either of the Bushes.

    • “We are all a lot safer with Obama at the helm than either of the Bushes.”

      I agree, Hilary. I have not read Obama’s books but I’m sure he is a decent man. I am sure Bush snr. and jnr. were well meaning too and senior was better than junior. Reading the Robert Kennedy book however underscores the importance of the quality of advisors and ultimately the strength of character and conviction of the President.If JFK had followed the recommendations of the Joint Chiefs of Staff the world would be a very different place today. I wonder if deep down both Bush and Blair were on some sort of moral crusade that overrode all else. The means justified the ends even if it required alleged dishonesty to achieve them. Is it any wonder that people are largely so disillusioned with politicians and that the best people don’t go into politics.

  11. I used to live in Ossett. But not south Ossett. OK, flippant comment over.

    I’ve clearly missed something here, or it is far too subtle, but I really don’t see any personal opinions floating around here, certainly not remotely like some of the posts I write. Seems fairly analytical and objective and over my head.

    I’m not sure why you picked those two specific echoes. I would probably have chosen different ones. From what I have read, ie little more than on your blog, this is simple power grabbing, of whatever type or or whatever reason. You can call it many things, but it all boils down to the same greed at the end of the day. I’ve written about modern-day colonialism/imperialism. We no longer call it that, but it’s the same thing, certainly the outrageous invasions that America carries out to grab oil/power/both.

    And your interest in this is? … your financial investments? I see from the comments that you sold some investments because of the unpredictability on the financial markets.

    Whatever, it was an interesting change as a post. Didn’t you have any Russian birds to add (no not the ones from the ghastly adverts).

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