Disrupting Putin’s Game Plan

Karl-Theodor zu Guttenberg, Bogdan Klich

MAR 7, 2014
Newsart for Disrupting Putin’s Game Plan

MUNICHNo sooner did the Sochi Winter Games end than Russia bade farewell to the Olympic spirit by invading and occupying a foreign country. With its aggression against Ukraine, the Kremlin has breached the United Nations Charter, the Helsinki Final Act, and other international agreements, including the Budapest Memorandum on Security Assurances and the Black Sea basing agreement, which spelled out Russia’s relations with Ukraine.

Crimea has been turned into a military zone, and its inhabitants might soon find themselves trapped in the firing line if the crisis continues to escalate. Russians now face international diplomatic and economic isolation, thus exacerbating their country’s economic woes. And Russian President Vladimir Putin’s reckless gamble risks dragging the world into a wider conflict.

In light of Putin’s dangerous behavior, the West must rethink its stance toward him. Here is a leader who read a hidden, menacing agenda into a technical European Union document about export subsidies and anti-fraud provisions. More broadly, here is a paranoiac who sees an implausible coalition of liberal Russians, Ukrainian fascists, the CIA, and Islamist terrorists trying to thwart his preferences, if not topple him, at every turn.

Indeed, what we are seeing is not an unfortunate over-reaction to recent events, but a result of meticulous preparation. Armies do not mobilize 150,000 troops within days, or have vehicles and thousands of uniforms without insignias ready, or hold military exercises in peaceful regions of the world without warning.

It would be a mistake for NATO to respond to Russia’s provocations with similar saber rattling. After all, the United States and the EU still have a range of tools to modify Putin’s calculus, or that of those bankrolling his regime

Most important, the US and Europe must cooperate much more closely than they have so far. The impression of disunity on sanctions plays into Putin’s hands.

Some EU members, like Germany, must live up to the expectations they have recently raised. If German leaders are serious about instituting a “culture of responsibility,” they are obliged to act accordingly, even if doing so entails economic costs. The West should also listen carefully to Ukraine’s neighbor, Poland, which probably has the deepest insight into the complexities of the crisis.

Most important, it is essential to adhere to certain key principles:

Use diplomacy. Europe, the US, and Japan have already suspended their cooperation with Russia in the G-8. Similarly, the OECD should put Russia’s accession process on hold. Following punitive measures by the US, the EU has now decided on somesoft sanctions. But modest steps like suspending talks on visa liberalization will not impress the Kremlin much. Stronger signals, such as cancellation or suspension of agreements concerning the South Stream gas pipeline and a trade embargo on arms and dual-use items, merit serious consideration.

Impose targeted sanctions against those responsible for Russia’s Crimean incursion. An obvious tool here is to broaden the US Magnitsky Act, which prohibits the 18 people identified as being directly responsible for the detention, abuse, and death of the Russian lawyer Sergei Magnitsky from entering the US or using its financial system.

The Magnitsky Act should be amended to include the names of political and military leaders responsible for the invasion of Ukraine. Moreover, the modified bill should be adopted by the US and the EU simultaneouslythus delivering a credible threat to freeze the foreign assets of Russia’s government, state-owned companies, individual officials, and relevant oligarchs.

Engage Russians. The West needs to communicate to ordinary Russians the spuriousness of Putin’s zero-sum, us-versus-them narrative

Closer relations between Ukraine and the EU pose no threat to Russia; on the contrary, a Ukraine closely integrated with its Western neighbors could boost Russia’s economy as well. That may be irrelevant to a leader who is guided by visions of restored imperial glory, but not to the people under his rule. Knocking holes in the Kremlin’s wall of propaganda will not be easy, but it should not be impossible in our hyper-connected world.

Support Ukraine with financial aid – as the EU has now done –and by securing its upcoming elections. Military assistance should include, at a minimum, Western intelligence sharing and cooperation through the NATO-Ukraine Commission. Should the situation deteriorate further, the West should also provide medical aid and surveillance assets. If the 2008 Russo-Georgian war is any guide, NATO’s Cyber Defense Center should help Ukraine prepare for a large-scale digital offensive.

Defend NATO allies. NATO should discuss concrete steps to protect its members. Ukraine borders four NATO members (Poland, Slovakia, Hungary, and Romania), while a fifth (Turkey), along with Romania, borders the Black Sea

Moreover, Estonia and Latvia are alarmed at Russia’s geopolitical ambitions, especially given the pretext of protecting ethnic kin. Both have populations that are about 25% Russian – a legacy of their Soviet past. Finally, Poland and Lithuania border Kaliningrad, Russia’s exclave in the middle of Europe (and the scene of its most recent combat-readiness exercise).

This is a time for diplomacy, and NATO must try to avoid direct confrontation, but not at all costs. It must reckon that Russia’s actions might deliberately run counter to a peaceful settlement. The alliance cannot afford to launch a lengthy and heated debate about the deployment of its forces and capabilities only at the moment diplomatic efforts fail.

When Ukrainians stood up against their corrupt elite, they became the first people to put their lives on the line for the goal of EU membership. The result was unwarranted retaliation from Russia.

So this is not Ukraine’s war. Ukraine is the immediate victim, but it is by no means Putin’s ultimate target. This is a blatant attack on the principles of state sovereignty, inviolability of negotiated borders, and adherence to multilateral agreements that underpin today’s rule-based international system. Countering Russia’s aggression is thus the responsibility of all who would uphold that system.

Karl-Theodor zu Guttenberg is a former Defense Minister of Germany, Chairman of Spitzberg Partners LLC, and a nonresident distinguished statesman at the Center for Strategic and International Studies.

Bogdan Klich, a former Defense Minister of Poland, is a member of the Polish Senate and the founder of the Institute for Strategic Studies in Krakow.

Opinion Europe

Garry Kasparov: Cut Off the Russian Oligarchs and They'll Dump Putin

Target their assets abroad, their mansions and IPOs in London, their yachts. Use banks, not tanks.

By Garry Kasparov

Updated March 7, 2014 10:18 a.m. ET

For the second time in six years, Russian President Vladimir Putin has ordered Russian troops across an internationally recognized border to occupy territory. This fact must be stated plainly before any discussion of motives or consequences. Russian troops have taken Crimea and they are not leaving, despite the Ukrainian government's protests. Five hundred kilometers southeast across the Black Sea, Russian soldiers still occupy parts of GeorgiaSouth Ossetia and Abkhaziawhere they have been since Mr. Putin's 2008 invasion and de facto annexation.
Mr. Putin belongs to an exclusive club, along with Saddam Hussein and Slobodan Miloševic, as one of the very few leaders to invade a neighboring nation in the nuclear age. Such raw expansionist aggression has been out of fashion since the time of Adolf Hitler, who eventually failed, and Joseph Stalin, who succeeded.
Stalin's Red Army had its share of battlefield glory, but his real triumph came at the Yalta Conference in February 1945, three months before the end of the war in Europe. There Stalin bullied a feeble Franklin Roosevelt and a powerless Winston Churchill, redrawing the Polish borders and promising elections in Poland when he knew that the Communist government the Soviets were installing was there to stay.
  Although it is a poignant coincidence, there is more to this look back to World War II than the fact that Yalta is located in Crimea. Mr. Putin's tactics are easily, and accurately, compared to those of the Austrian Anschluss and the Nazi occupation and annexation of the Sudetenland in Czechoslovakia in 1938. There is the same rhetoric about protecting a threatened population, the same propaganda filled with lies, justifications, and accusations.
Most of the Kremlin's statements about Crimea could have been translated from German, with "Fatherland" replaced by "Motherland." Mr. Putin is also following the Stalin model on Poland in Yalta: First invade, then negotiate. Crimea will be forced to hold a referendum on joining Russia in just 10 days, a vote on the Kremlin's preferred terms, at the point of a gun.
  Mr. Putin's move in Crimea came just hours after now-former Ukrainian President Viktor Yanukovych scrambled up his puppet strings from Kiev to his master's hand in Russia. He left behind thousands of papers and a few palaces, evidence of the vast scale of his personal and political corruption. His ejection, bought in blood by the courageous people of Ukraine, made Mr. Putin look weak. Like any schoolyard bully or crime boss, he immediately found a way to look and feel tough again. The historically pivotal Crimean peninsula, with its large Russia-leaning population and geographic vulnerability (and a Russian naval base), was the obvious choice.
As I have said for years, it is a waste of time to attempt to discern deep strategy in Mr. Putin's actions. There are no complex national interests in a dictator's calculations. There are only personal interests, the interests of those close to him who keep him in power, and how best to consolidate that power. Without real elections or a free media, the only way a dictator can communicate with his subjects is through propaganda, and the only way he can validate his power is with regular shows of force.
Inside Russia, that force comes with repression against dissidents and civil rights that only accelerated during the distraction of the Sochi Olympics. Abroad, force in the form of military action, trade sanctions or natural-gas extortion is applied wherever Mr. Putin thinks he can get away with it.
On Monday, the markets plummeted in response to the news that Russia had invaded a European nation. Just a few days later, as cautious statements emanated from the White House and the European Union, most markets had rebounded fully. This was due to an illusion of a resolution, as if it matters little to the fate of the global economy that a huge nuclear power can casually snap off a piece of a neighboring country.
Thanks to their unfettered access to Western markets, Mr. Putin and his gang have exploited Western engagement with Russia in a way that the Soviet Union's leaders never dreamed of. But this also means that they are vulnerable in a way the Soviets were not. If the West punishes Russia with sanctions and a trade war, that might be effective eventually, but it would also be cruel to the 140 million Russians who live under Mr. Putin's rule. And it would be unnecessary. Instead, sanction the 140 oligarchs who would dump Mr. Putin in the trash tomorrow if he cannot protect their assets abroad. Target their visas, their mansions and IPOs in London, their yachts and Swiss bank accounts.
Use banks, not tanks. Thursday, the U.S. announced such sanctions, but they must be matched by the European Union to be truly effective. Otherwise, Wall Street's loss is London's gain, and Mr. Putin's divide-and-conquer tactics work again.
If Mr. Putin succeeds—and if there is no united Western response, he will have succeeded regardless of whether or not Russian troops stay in Crimea—the world, or at least the world order, as we know it will have ended. The post-1945 universe of territorial integrity has been ripped asunder and it will have a far-reaching impact no matter what the markets and pundits say over the next few days.
  For those who ask what the consequences will be of inaction by the free world over Ukraine, I say you are looking at it. This is the price for inaction in Georgia, for inaction in Syria. It means the same thing happening again and again until finally it cannot be ignored. The price of inaction against a dictator's aggression is always having a next time. And in this market, the longer you wait, the higher that price gets.
Mr. Kasparov is chairman of the Human Rights Foundation in New York.

Europe’s Middle-Age Trap

Edoardo Campanella

MAR 6, 2014

Newsart for Europe’s Middle-Age Trap

CAMBRIDGEEuropean policymakers have finally recognized the severity of their youth-marginalization problem. But, just over the horizon, there looms another social catastrophe that they have yet to acknowledge. This time, it is middle-aged workers who are poised to suffer.

This might seem surprising, given that middle-aged workers seem to be the winners in today’s system. Workers in their late forties and early fifties enjoy stable employment, control the political system, and are less vulnerable to economic downturns than their colleagues who are closer to pension age.

Moreover, high entry barriers, seniority-related benefits, and tough restrictions on firing employees have enabled Europe’s middle-aged workers to retain even moribund jobs – a situation that has contributed substantially to youth marginalization. According to the OECD, from 2008 to 2012, unemployment among Europeans aged 45-54 increased from 5.2% to 7.7%, while youth unemployment jumped from 15% to 21.4%. At the end of 2013, approximately four million people aged 50-64 were unemployed, compared to nearly six million aged 18-24.

Such statistics explain why policymakers have so far failed to recognize that there is a problem at all. But middle-aged workers’ enviable conditions will soon begin to erode, as mounting competition from emerging economies and relentless technological progress weaken their grip on the system.

The traditional industries that employ older workers are disappearing rapidly from Europe, and the companies that are replacing them – such as high-tech start-ups – are dominated by workers under 40. The McKinsey Global Institute has identified 12 potentially disruptive innovations – including 3-D printing, advanced robotics, and autonomous vehicles – that will revolutionize the business landscape, creating new opportunities for young minds, while driving older workers from the job market.

In such a dynamic environment, workers can prosper only through continuous skills upgrading, willingness to move, and entrepreneurial resourcefulness. This gives young workers a major advantage. After all, it is far more difficult for middle-aged people to acquire new competencies, uproot themselves for a job (owing to more binding family constraints), or assume the risks associated with starting a business.

Although these trends are prevalent worldwide, Europe will likely be hit particularly hard. Its population is aging faster than, say, America’s, undermining the labor force’s ability to respond to the need for skills upgrading. And Europeans, who are accustomed to a particularly generous worker-protection system, will find it more difficult to adjust their expectations to the flexible, knowledge-based model recommended by the European Commission.

The pro-youth movements that are flourishing across Europe – in both business and politics – will complicate the situation further, as they push for generational renewal in many industries. In Italy, for example, young leaders have emerged in the major political parties, promising to overturn a socioeconomic system that is heavily skewed in favor of older workers and misallocates resources within the economy.

Furthermore, the euro will contribute to the marginalization of middle-aged workers by preventing national governments from using competitive devaluation to preserve declining industries. Likewise, European countries’ massive public debt is limiting policymakers’ ability to protect vulnerable sectors.

But the pain will not be shared evenly across the eurozone. To rebalance their budgets and regain competitiveness, peripheral countries will eliminate thousands of public-sector jobs – the very jobs that middle-aged workers dominate.

Of course, generational renewal, technological progress, and international competition are intrinsic to modern economies. But the accelerating pace of economic transformation means that governments have far less time to implement relevant structural reforms. Making matters worse, eurozone countries lack access to several fiscal or monetary-policy tools that could help to smooth the transition.

As millions of people are pushed into a middle-age traptoo old to work, but too young to retire – the risk of social instability and political polarization will increase. Trade unions, reinvigorated by the despair of marginalized middle-aged workers, will question the system’s fairness. Young people, eager to overcome years of hardship, will defend an economic model that rewards fresh minds and flexible lifestyles. Eventually, these tensions will erode social cohesiveness.

European policymakers should intervene before such an outcome materializes. In order to ensure life-long learning programs for all workers, without putting excessive strain on public budgets, they should promote public-private partnerships. They should also allow wages to decline after a certain age rather than increase with seniority – to reflect the fast depreciation of professional skills in modern economies and boost older employees’ appeal. Finally, they should rewrite Europe’s social contract, so that it promotes intergenerational solidarity and creates an inclusive system capable of merging young people’s creativity with older people’s wisdom.

Europeans now live longer than anyone else on the planet. The challenge now is to figure out how to prolong their professional lives.

Edoardo Campanella is currently a Fulbright Scholar at Harvard University's Kennedy School of Government. He has worked as an economic adviser to the Italian Senate and was formerly an economist at the World Trade Organization.