The Risks – Part 3: Russian Retaliation

The Risks – Part 3: Russian Retaliation

  • Michael Cholod
  • Jul 2nd, 2024

Many bankers and politicians warn about the risks of making Russia pay for their illegal war in Ukraine. Russia has caused billions if not trillions of dollars of damage to Ukraine and displaced millions of its people. These victims must be compensated, and if Russia doesn’t pay, you will.

Fools rush in

Businesses around the world and especially within Europe, have been investing billions in Russia since the fall of the Soviet Union. When the Iron Curtain fell in 1989 previous vassal states like Poland, Ukraine and Russia were suddenly open for business. The thirst for Western culture was fed by Coca-Cola, Pepsi and Starbucks. McDonald’s became the de rigueur place to be seen having lunch in your new Levi’s jeans, Zara shirt while clutching a Louis Vuitton bag. You could even furnish your flat with the latest Scandinavian designs from IKEA.

Business is all about making money and the opportunity to access a brand-new market of hundreds of millions of people right on Europe’s doorstep was too good to ignore. The collapse of the Soviet Union should have been followed by Western governments investing in capacity building, government reform and transparency. Unfortunately, a recession in the early 1990s distracted our leaders so they focused on solving domestic financial crises.

Hindsight is 20/20

Western governments’ distraction left the ‘Westernisation’ of Russia up to corporations. Russians should have been learning about the benefits of good education, universal healthcare and upgraded infrastructure but they instead learned how to make a buck at any cost. Western companies showed Russians how to be rich and look the part, but that’s just window dressing without the transparent enforcement of the rule of law. Exploiting the environment for cheap oil & natural gas to power all those new mega malls and warehouse stores dotting Moscow and St. Petersburg merely increased the profit of western companies who turned a blind eye to corruption and kleptocracy in the search of new customers.

Some of the former Soviet Republics like Poland, the Baltic states and Czechoslovakia were successful in creating a solid legal and institutional framework for western businesses to thrive while ensuring they paid taxes to support the development of the civil societies. Others however, like Ukraine, Russia and the states in the Caucuses were not so lucky and they and their people are now paying the price.

Seize the day

These businesses that were making money hand over fist in Russia where the rule of law is at the whim of one man, have been using some of those profits to lobby their domestic politicians for over 30 years to maintain geo-political ties with Russia - regardless of their increasingly aggressive actions around the world. Russia was allowed to develop a kleptocratic engine that was tolerated by Western politicians who had bigger things to worry about at home. Assurances whispered in their ears at global gala fundraisers or on the golf course kept them ignorant to what kind of mafia-state Putin and his colleagues were building.

Now those same Western business leaders are warning about the dangers of Putin and his gang seizing their property in retaliation for Russian assets being seized in the West. All those burger joints, bottling plants, warehouses and shopping malls that had been generating cash to fuel western balance sheets and Putin’s war machine, could be seized causing immense losses to the multinationals who’d been coining it for so long with impunity.

This of course makes absolutely no sense to anyone with a basic understanding of history. Seizing a private company’s assets by the government is called ‘nationalisation’ and it’s not new. Just ask the oil companies that lost their offshore drilling platforms to Hugo Chavez in Venezuela, or the mining companies across Africa that have lost huge investments to rebel generals after countless coups. This was all but ignored by western governments, however,  the mere mention of seizing Putin’s assets has corporate CEOs yelling in the ears of any politician or journalist who’ll listen.

Opportunity lost

Making money is the foundation of western capitalist democracies but it’s done within the framework of local and international laws protecting corporations and individuals alike from suffering loss or damage at the hands of an aggressor. Western governments should be lamenting their lost opportunity to help countries like Russia and Ukraine build robust, transparent democracies after the collapse of the Soviet Union. Western businesses should’ve made the rule of law a pre-condition for investing in Russia, alas, they did not.

The fact that Western businesses are now paying the price by having their investments in Russia nationalised should not be a surprise. The fact that Western politicians are even considering the risk of nationalising investments in a mob-state responsible for thousands of deaths is an insult to humanity.  

Slava Ukraini!  Heroiam Slava