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Putin will never have another chance like this to overthrow the European strategic order

Markets seem not to believe that Europe is close to the largest military conflict since 1945, even though the US president tells us that such a breakdown of the international system is more likely than not, and could happen as soon as the ground freezes hard enough for an armoured invasion of Ukraine.

The strangely calm mood belies intelligence gathered by Britain’s eavesdropping – and confirmed by US officials – that Vladimir Putin plans to install a puppet government in Kiev. The putative leaders come from the inner circle of the pre-Maidan Yanukovich regime.

The benchmark TTF gas price in Europe has halved since the panic spike just before Christmas. It is back to €79.50 (£66.47) per MWh for the February contract, roughly where it was four months ago.

Stock markets have slipped – due to fears of central bank tightening, and peak tech earnings – but they remain stretched by any historic measure.

Either investors are not paying attention to Ukraine, or they think that Mr Putin is engaged in a theatrical bluff to extract concessions, noisily deploying over 125,000 men at last count near the Ukrainian border, along with attack helicopters and the dispatch of Baltic amphibious assault ships to the Black Sea.

They may calculate that the Kremlin will settle for what Joe Biden terms a “minor incursion”, below the threshold of response from a divided Europe that is strongly disinclined to respond.

Such insouciance is to disregard the military force posture in the field and the Kremlin’s unusual, but fleeting, moment of strategic advantage. It is now or never for Mr Putin. The stars are unusually well-aligned for the overthrow of the post-Cold War settlement.

Mr Putin has been playing a cat and mouse game with Europe over gas stocks since July, first withholding top-up flows on the grounds that Gazprom needed to refill storage at home, then trickling out just enough supply to nourish wishful thinking.

This method of boiling-the-crab-alive has worked up to a point: stocks are today at 43pc capacity, roughly 12 percentage points below where they should be at this stage of January.

But the gas shortage falls short of a total coercive lockhold. Mild weather and deliveries of liquefied natural gas have to some degree rescued Europe from its own misjudgments.

The Kremlin enjoys the same partial advantage on the politico-military front. European Nato disarmed through the austerity years and is now near rock bottom, while Russia has been rearming for a decade.

The White House is perceived to be a pushover after waiving its objections to the Nord Stream 2 pipeline last July in a shabby deal with Germany, which undercut Ukraine’s vital interest in what may be viewed by historians as a latter day Munich.

China’s sabre-rattling over Taiwan leaves Mr Biden facing the risk of two continental crises at the same time.

Mr Putin does not have to worry about serious economic retaliation.

Germany has effectively vetoed use of the financial “nuclear option”, which would be to expel Russia from the Swift system of international payments.

Berlin’s argument is that such sanctions have asymmetric blowback. The US has little direct exposure and would suffer modest loss. German and European companies with large interests in Russia would take the brunt.

This leaves little on the table beyond surgical sanctions on Russian banks and other manageable frictions. “I don’t see anything on the economic front that would seriously frighten Putin,” said Ian Bond, a former ambassador and British security planner now at the Centre for European Reform.

If Mr Putin is to attack, he must act soon. He has a narrow window for a combined-arms invasion with tanks and towed-artillery before the infamous rasputitsa turns the ground into a bog.

The military imperative is to lunge deep into Ukraine and deliver a knock-out blow before the mid-March thaw. That is not easy: it took six weeks for Russian forces to clear the Chechen capital of Grozny in urban fighting. Kiev, Kharkiv, Dnipro, Zaporizhzia, and Odessa are all larger.

A team of ex-military officers and planners writing for the Atlantic Council say that Mr Putin has over the last week “set the conditions to execute a high intensity, multi-domain attack”.

This includes the deployment of air defence systems, electronic-warfare platforms, Iskander-K medium-range ballistic missiles, and combat sustainment units.

It has used forthcoming manoeuvres with Belarus as cover to bring forward Su-35 advanced fighters and S-400 surface to air missiles. Still missing is the clinching evidence that Russia has begun to call up reservists.

The Center for Strategic and International Studies in Washington has laid out the likely options for the Kremlin in an essay by CIA veteran Philip Wasielewski and CSIS security chief Seth Jones.

Mr Putin could peel off the Black Sea coast and link up to the Crimea, perhaps pushing beyond Odessa to deprive Ukraine of its entire coast. However, the British warning on Saturday suggests that he aims for total decapitation of the Ukrainian state.

He could seize the whole of Orthodox Eastern Ukraine as far as the Dnieper River. But this would leave a large enough rump to survive as a viable state and permanent headache.

The conquest would have to include Kiev, the great prize for Mr Putin, who harks back to Kievan Rus as the ancient cradle of the Russian nation in his mythologised ethno-nationalist version of history. His 7,000 word manifesto published last year dismisses the Ukrainian state as the invention of Soviet cartographers.

The CSIS says Mr Putin could go further and annex all of the country, except the mostly Catholic lands to the West (old Galicia). This former Habsburg pocket is the most un-Russian in character and would be hard to hold down over time.

Mr Putin could try to take everything and announce a tripartite Slavic union of Russia with Ukraine and Belarus, reuniting ‘all the Russias’ of the Tsars: Great, Little, and White. This would require ruthless russification, by the methods of Catherine the Great or Stalin.

Energy dependence has turned core Europe into an accomplice by default. Russia is currently supplying roughly 120 billion cubic metres of gas through all pipelines or as liquefied natural gas (ICIS data). This accounts for half of German needs in industry, power, and home-heating, and even higher ratios in a string of EU countries.

If this was cut off entirely – tricky for Russia without damaging its own gas fields – the gap could in extremis be plugged from global sources. “It would take 160 LNG cargoes a month, out of the global total of 400,” said Thierry Bros, former head of energy security at France’s economy ministry.

“It would be like the Berlin airlift. It is doable but I think it would prove much harder than it looks on paper,” he said. US liquefaction export plants are already running at 95pc capacity. Much of the global LNG supply to Asia is on fixed contracts.

You cannot reroute cargoes on a huge scale except by political force majeure. Prices would go through the roof and there would be industrial rationing in Europe and Asia, a violent shock for supply chains.

Europe has no stomach for such an experiment. Top figures in the German Social Democratic Party are not even willing to take Nord Stream 2 off the table if Mr Putin annihilates Ukraine. Defence minister Chrisinte Lambrecht said there is “no connection” between the two issues.

Chancellor Olaf Scholz has belatedly agreed to demands from Washington and his Green coalition partners that there should be some linkage but the commitment is too vague and half-hearted to have much deterrent value. He still insists that the pipeline is a purely “commercial” matter.

Germany has not only refused to sell vital weapons to Ukraine – although it is the world’s fifth biggest arms exporter – but is actively preventing its Nato allies from doing so.

Mr Putin can ignore Europe. What he does have to worry about is what happens inside Ukraine itself. He cannot know for sure how much of the population will acquiesce in a Slavic Anschluss.

He must contend with Ukraine’s battle-hardened army, equipped with US and British Javelin anti-tank missiles, and backed by 900,000 reservists on call and in location. It might resist tenaciously and greatly raise the political cost for Mr Putin in Russia.

The Kremlin has overwhelming air superiority but the US is upping the ante by providing Ukraine with Stinger missiles capable of shooting down aircraft.

These come too late to change the immediate battlefield balance but they signal a US intent to supply a Mujahideen-style insurgency after any invasion.

Washington is dusting down the Reagan Doctrine of the 1980s. The US judged – correctly – that it could bleed the Soviet Union dry by arming resistance movements wherever the Soviets were overextended. For every dollar spent, it cost Moscow ten dollars.

Will the Ukrainian people go along with an attrition policy in which they pay the highest price? These are the unknowns that may yet cause Mr Putin to hesitate.

Investors are struggling to price this extraordinary showdown. Markets always have trouble adjusting to geopolitical convulsions. There is a reflexive assumption that talks will avert the unthinkable and that the status quo will reassert itself.

The London and Paris bourses remained becalmed over the weeks leading up to the First World War in 1914, slow to grasp why Sarajevo was different and unique, a “gift from Mars”, as it was described by the German high command in documents that later came to light.

There again, perhaps the collective intuition of the markets is that earnings will scarcely miss a beat even if there is an invasion.

It is a fair bet that Europe will roll over as it did over Crimea. A despairing Washington might accept a fait accompli and cut its losses. Such a squalid outcome is all too plausible.

Source: Telegraph.co.uk

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