We should all remember the fall of the Berlin Wall and the lifting of the Iron Curtain, as it is barely a quarter of a century since those events that completely transformed the geopolitical landscape. The Eastern Bloc countries broke away from Soviet influence without Russia being able to do anything to prevent it, because its communist economy collapsed like a house of cards. The power vacuum was enormous, surreal in what had until then been the world’s second superpower. And the countries that had been under its political and economic influence were welcomed with open arms by the Western free market, despite their obvious economic backwardness. The new world order finally had victors and vanquished, and the victors were «the good guys» and the vanquished was «diabolical communism».
Countries such as Hungary, Slovakia, Romania, Poland and the Czech Republic – with states and borders different from those of today – as well as the former Soviet republics themselves, etc., embraced Western democracy one by one in the face of the chaos and collapse of the Kremlin. Yet today, just 25 years later, it would seem that the situation is partially reversing. Now it is a significant part of the EU, that is to say the West, which is facing economic difficulties. And Russia is the economy that has recovered strongly since its default in 2000, boasting a growing middle class and an oil industry that is essential to its economy and that of its neighbouring (or not-so-neighbouring) countries.
The economic—and therefore political—influence that Putin currently wields over certain countries is greater than that exerted by the Western bloc. Clear examples of this can be seen in the reactions of the Czech Republic, Hungary and Slovakia, which have vehemently opposed the sanctions imposed and to be imposed by the EU on Russia. It is no coincidence that major Russian multinationals have been weaving a web of corporate and investment influence in the countries that were once within their sphere of influence for some years now. For example, the financing of a nuclear power plant in Hungary or the Southern Gas Corridor in Bulgaria are operations that bolster Russia’s influence over those governments. Furthermore, Russia’s financial arm, Sberbank, through its ever-growing branch The European Union also funds major projects in Eastern European countries, such as a Slovakian electricity company. All of these are, of course, deals worth billions of euros.
However, not all countries welcome Russian investment. In countries sharing a direct border, such as Lithuania, Estonia, Latvia and Poland, this economic influence is not so welcome, and they are calling on the EU to impose tougher sanctions on Russia in the wake of the conflict in Ukraine. However, in countries such as the Czech Republic, Slovakia and Hungary, NATO stands no chance of gaining a foothold, as these countries prioritise their economic interests over the vague, inconsistent and impotent promises of the EU and the US. In other words, the Western offer, which is distant or in serious economic straits, appeals to them less than the Russian one.
All these actions undertaken by the Kremlin to gain economic and political influence, however, are nothing more than the West’s standard strategy since the modern era. In fact, Putin is doing nothing more than imitating the Western model to steer the world in a direction that suits his country. Just as China learnt a decade or so ago, the best way to dominate the world is by dominating its market, and making its economy as indispensable – and therefore as influential – as possible. This is not some Machiavellian scheme that we in the West have not invented and used for almost a century. It is simply a case of the opponent using the same weapons. And therefore, The Russians and the Chinese are and will remain natural allies, and will become even more powerful in the future. They now play by the same free-market rules that they have mastered to perfection, whilst also being able to sidestep the «hassles» of democracy in order to take unpopular decisions in the interests of national supremacy.
The reality is that Russia’s influence over the economies of EU member states acts as a Trojan horse, ensuring that any drastic stance or measure Europe might consider taking is qualified or watered down by members sympathetic to the Kremlin. The US is already seeing that some EU member states do not exactly toe the line set by the CIA and NATO, and the battle to influence the European landscape is fierce. In fact, the conflict with Russia is the most recent example of the struggle between Russia and the EU/US to influence the government in Kiev, only this time that struggle for political and economic influence has got out of hand and ended in gunfire (as well as other ulterior motives (whatever influence Putin may have).
In short, the former Iron Curtain is now more diffuse and complex, but a clear distinction has once again emerged between the Western camp (EU/USA) and the pro-Russian camp, the latter being more nascent and less overtly committed and loyal… for the time being. Many countries welcome Putin as if it were the Marshall Plan, because The economic winds are blowing in favour of the all-powerful Sino-Russian alliance, and against the Western bloc’s crippling debt. To finish up, I’ll leave you with some Russian corporate data which investors would do well to bear in mind. It is no surprise that the Russian stock market has risen by more than 30% up 100% since it hit rock bottom during the Crimea crisis in mid-March. And even after that rise, it’s still trading at a price-to-earnings ratio of just 5.6. That’s nothing.
Welcome to the new East-West Cold War, in which economic power is the weapon of choice.