Putin Could Make War To Wash Away Sanctions

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Analyst believes the Russian president could solve the problem of sanctions and major world issues by a revolutionary out of the box idea.

Putin should lead a U.N backed coalition to fight the Islamist threat in the Middle East. At the same time he would take the lead in moving the world forward as it holds its breath immersed in the images coming out of Iraq and Syria. The Russian president would be supported by the whole Muslim world and Russia’s neighbors. It would also rid Russia of its own Islamist threat in the north Caucasus.

A joint co-operation with the United States at this time in history could be similar to the one during the second world war, which defeated Nazi Germany. The result will be to save the United Nations as an institute and to reinvigorate the capital flow around the globe.The world has been holding its breath since the sixties for America to lead the way. The East is now blowing out.

South China Morning Post reports:

The world needs a robust solution to two concurrent geopolitical problems which have imposed a latent tax on global trade and growth. The ballooning threat of Islamic State in the Middle East and the escalating Russian-Ukrainian conflict need swift action and resolution. Both these developments have posed a foreign policy quandary for the West and require unusual dexterity and out-of-the-box thinking by the Nato countries to resolve.

At this stage in the game of Russian roulette, Vladimir Putin should focus on his legacy and how history will judge his impact as the leader of Russia. During the past 12 months, Russia’s economic crisis has steadily deteriorated.

But, just a little while ago, things did look rosy under Putin’s leadership. The Russian economy saw marked economic improvements across the board. Russia embraced free market reforms, engaged in open trade and focused on delivering growth for its people. During this era, real per capita incomes for Russians doubled. The economy averaged gross domestic product growth rates of 4.5 per cent and unemployment in the country came down from 14 per cent in 1998 to 5.2 per cent in 2013. With the help of the central bank, inflation was swiftly curtailed from 80 per cent in 1998 to a more manageable 6.5 per cent by December 2013.

All this hard work by Putin and his economic team went awry in 2014, due to Russia’s decision to annex Crimea, together with their recent proxy war in Eastern Ukraine. Much to his chagrin, the economic sanctions imposed by the West have now crippled the Russian economy, contrary to Russian belief.

Is there a viable exit strategy for Russia?

One way out is through working with the United Nations to help lead ground troops into Iraq/Syria to battle Islamic State. This solution will require Russia to commit ground troops. Rather than engaging in a ground war with Ukraine – its closest trading partner – Russia should refocus its efforts on leading the UN, Iranian, Syrian and US-trained Iraqi forces to put an end to the global terrorist threat of Islamic State.

Syria and Iran will agree to such a coalition on account of their long-term relationship with Russia and their immediate need to remove Islamic State from their own backyards. Once the Islamic State threat is eradicated, the UN-led coalition should ensure Russia’s orderly withdrawal from the Middle East.

The strong global coalition led by Russia’s military, adequately bolstered by state-of-the-art US technology, would give this mission the highest probability of success (absent outright US involvement). It’s worth remembering that the last time US and Russia worked together, during the second world war, to fight a common enemy, it resulted in a victory for the Allies. Because this is a global battle, the rest of the world should step forward to help finance it. In return for Russia’s commitment to fight this war, Europe and the US should agree to lift economic sanctions on Russia.

One of the conditions for doing so should be the tangible enforcement of the permanent ceasefire in Ukraine, which has been agreed to but not abided by both countries under the Minsk II agreement. This negotiated ceasefire should be strictly enforced by UN peacekeeping forces, which must be stationed in Eastern Ukraine for at least five years.

The war with Islamic State that Russia would be asked to lead is similar to the ongoing internal battle with the separatist Chechen movement of the 1990s.

Outsourcing this battle to a UN/Russia-led coalition solves US President Barack Obama’s difficulty of having to commit American ground troops and getting involved in another expensive war. Even the Senate and House Republicans are reluctant to commit boots on the ground. However, there seems to be more appetite among US voters for sending advisers to aid the fight against Islamic State.

The lifting of economic sanctions would give Russian banks and corporations the flexibility to access the debt capital markets and secure dollar funding. It would also open up imports of hi-tech capital equipment back into Russia, which would be welcomed. Eliminating sanctions would also help in several ways: to reduce Russia’s risk premium in financial markets; stabilise the rouble; stem capital outflows from the country, possibly even reverse the flow; and enable the central bank to lower interest rates, thereby stimulating economic growth.

These actions will eventually help the battered Russian consumer by lowering inflation. The successful implementation of this unconventional solution could elevate the perception of Putin as a global leader and restore Russia’s now-pariah status within the G8.

If Putin took the time to contemplate, he would quickly recognise that Russia has made more economic progress under him than any other Soviet leader in the past. He would want the history books to acknowledge this.

This path would help set aside the perception that he is driven by ego and demonstrate that he is focused instead on what is right for Russia.

This solution would be an elegant way for him to rewrite the history books and secure a firm place as a global leader who made a material difference during a critical juncture for the world.

Guru Ramakrishnan is the chief executive officer of Meru Capital Group.

Edmondo Burr
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