In Other News – Limiting Russia’s Influence & More – 1/27/2023

January 27, 2023

Sanctions, tanks, and other measures to limit Russia’s influence. The Kremlin-aligned Wagner Group mercenary outfit has been nothing but a menace for the past decade, but its shameless recruitment of thousands of prisoners to fight against Ukraine has put a spotlight on the scale and methods of the group. It’s just business as usual, however, for Russian businessman Yevgeny Prigozhin, who finally decided to come clean on his association as the Wagner boss back in September. Notably, Prigozhin had previously sued a UK journalist for making the association.

The Wagner Group has had a long, detrimental impact on Eastern Ukraine. Most recently, the mercenary force has been at the forefront of efforts to capture Soledar and Bakhmut, and it’s seemingly met with more success than official Russian-state fighters. On Wednesday, Kyiv officials confirmed that Ukrainian forces had retreated from Soledar and pulled back to their previous defensive positions in what’s being viewed as a moderate but also symbolic victory for Putin. It’s also true, however, that a significant number of Wagner fighters were killed in the process.

On Thursday, Washington expanded its financial war against Russia, formally labelling the Wagner Group a “transnational criminal organization” and unleashing a new slew of sanctions against the mercenary force. US Treasury Secretary Janet Yellen remarked that “Today’s expanded sanctions on Wagner, as well as new sanctions on their associates and other companies enabling the Russian military complex, will further impede Putin’s ability to arm and equip his war machine.”

It makes sense to hit Wagner at its financial heart, because when Prigozhin shows up, there’s a good chance that there’s a business incentive behind it. In the Donbas, it’s likely that Prigozhin wants to reap the economic rewards of the region’s salt and gypsum mines, in addition to raising his clout within the Russian political establishment. Sanctions will be one way for the United States to attack him at the jugular, but many of the places and people he relies on for support aren’t going to comply with them.

Indeed, these financial weapons need to be complemented by tactical ones, and this week the United States and Germany both finally decided to provide Ukraine with heavy tanks – Abrams and Leopards respectively. In response, Putin unleashed a fierce barrage of Russian missiles and stated that the weapons transfers will count as “direct involvement” in the war and that red lines were now a thing of the past. There are also UK intelligence reports suggesting that a Belarusian front could open soon, and that Russian troops will continue to flow, however ill-trained and disenfranchised they may be.

Ukraine remains strong in its resolve to intensify its defenses, and with the eventual help of these tanks it could move the battle lines back towards Russia. But right now, it’s winter and the Russians want to wear-down Ukrainians by keeping them in the dark, biting cold without steady sources of heat and power. The corruption crackdown this week further underscores both the dynamism and the strategic reflection of the Ukrainian leadership that understands it needs to keep troop morale high and lay the groundwork for a post-war Ukraine that sets it on the path to European Union membership.

If Ukraine can stay the course, strategically Russia will continue to flounder. The longer-term effects of sanctions and Russian energy embargo will also increase pressure on the Kremlin. Further, we’re already seeing signs that Washington is working on developing political alliances and fostering good will with some of Putin’s more traditional but malleable international allies.

Europe’s Global Gateway seeks to challenge China’s Belt and Road Initiative- and the time is finally ripe. While China isn’t losing power as quickly as the Western media would like to portray, there are a couple of notable developments indicating that Beijing will face not only domestic pressures but international competition. For the past decade, China has been funding global infrastructure development projects via its Belt and Road Initiative (BRI), but the cracks in the system are rapidly expanding. The BRI adopted a high-risk but potentially high-reward strategy: focus on less-developed countries and regions and offer them large loans and services.

BRI financial contracts have been managed by state-owned Chinese banks, and you could often see Chinese workers conducting most of the physical work. This arrangement came with its own set of political, environmental and security concerns at the local level. Tensions have been particularly high in places like Pakistan where certain nationalist groups have previously physically attacked Chinese workers, and where citizens continue to protest the Chinese interference in their livelihoods- raising concerns both about Pakistani government response to the protestors and the viability of the projects.

It’s unclear how much China was ever expecting to be repaid for their loans or efforts, but the past two years of global economic turmoil have certainly not been conducive for repayments. The original thought was that if the projects weren’t paid for, they’d become Chinese property. And based on the type of projects that China supported, you could see that they were angling for eventual ownership- even without adequately considering how they’d handle pushback from the local communities. This is particularly true in regions where China was trying to secure extractive commodities.

But the extent of the money now owed to China from BRI defaulters is so large that it’s thrown the nation into a rather dire financial situation. This is further amplified by inability of domestic Chinese businesses like Evergrande to repay their loans to the state banks. Earlier this week, US Treasury Secretary Janet Yellen was in Zambia where she called China a “barrier” to debt reform. She clearly touched a nerve, and the Chinese Embassy in Zambia immediately snapped back, stating that Washington should get its own house in order.

Washington is making a concerted effort to be more strategic about Africa and mitigate the nefarious influence of China and Russia in the region, but the EU also recognizes that now is a favorable moment to assert itself. The EU Global Gateway initiative, which last year promised to mobilize EUR 300 billion by 2027 for infrastructure projects outside of the EU, appears to have been injected with new momentum. To start, the Global Gateway is likely to focus on a dam and hydroelectric plant in Cameroon, and a submarine optical fiber cable to connect the Mediterranean and Northern Africa.

The EU will hope to differentiate itself from the BRI through transparency and a “values-based” offer, reflecting European environmental and social standards where China had none. However, critics complain that the scale of the EU offerings pales in comparison to that of China, and that it’s just foreign aid in new packaging. Still, it’s notable that, in addition to its efforts in Africa, the EU is also expected to challenge Beijing closer to home. According to media reports, these could include an energy transition partnership with Indonesia, collaboration on digital connectivity with the Philippines, and alternate energy projects in Central Asia.

The EU is expected to finalize its Global Gateway project list in early February, and it could not come at a more necessary and opportune time.