When elephants fight

There is an old African saying that whether elephants fight or make love, the grass suffers. When applied to the international state system, fights or alliances between the “big” powers are usually to the detriment of smaller nations. However, in the present face-off between the Western and Russian elephants, there might be an opportunity for some smaller nations to improve their condition.

It started with Russia taking sides with separatists in Ukraine seeking to resume their unification that was sundered only a couple of decades ago. In the larger scheme of global affairs, this was not surprising since during the long period of unity as the USSR, there had been a heavy influx of ethnic Russians into the Ukraine.

In the Eastern part of that country abutting Russia, as in the Crimea, they were actually the majority – hence the referendum during the Ukraine turmoil, which successfully reincorporated it back into Russia.

Even though, the Cold War between the US and the USSR was supposed to have ended with the dissolution of the latter; tensions had remained as Russia under Putin sought to reassert itself – at least with the countries along its borders. The US had pushed its allies in the European Union to take a harder line against Russia as the situation in the Ukraine “deteriorated”.

After Ukranian separatists downed a South Korean passenger jet last month, evidently using Russian-supplied surface-to-air missiles, the EU decided to make amends and squeeze the Russians by cutting off Russian Banks’ access to their capital markets, trade in arms and technologies in deep-water and Arctic oil drilling. The US, in what was a clearly orchestrated move, “followed suit” by also denying the Russian banks access to its financial institutions. These sanctions were to last for “three months”.

From the onset of the imposition of these sanctions, there were questions about their blowback on the economies of the EU and the US, since their trade in the restricted areas with Russia was very significant.

However, what was unexpected was that Russia would in turn, impose its own sanctions – which it did last week by banning for 12 months, the importation of foodstuff such as beef, pork, fruits and vegetables, poultry, fish, cheese, milk and dairy products, not only from the US and the EU but also some of their closest allies such as Canada and Australia. It also prohibited use of its airspace to flights from these countries.

Apart from the shock of the Russian move, the actual cut-off in imports has already began to bite the EU’s economy, especially its agriculturally dependent southern members, which never fully recovered from the 2009 financial meltdown that plunged them into a recession. But there will be three further damaging repercussions from the Russian gambit.

Firstly, the surplus created in the food-producing EU countries will soon drive down prices for the banned items and the rest of the world will benefit, while they will suffer.

Secondly and more significantly, most of the smaller and not so small countries that will pick up the slack to supply Russia with the banned items, should be able to maintain these markets and deepen their productive capacities. Latin America will definitely benefit and if Guyanese poultry producers had used their decade-old tariff-protected status to become more efficient rather than making monopoly profits, they could have also enjoyed this new opportunity.

Lastly, Russia will also be using the opportunity to incentivise its local producers which could not compete with the entrenched and more efficient producers in the west when its markets were “liberalised”. All of these moves will have profound effects in the evolving world order.