Features Australia

How we bet the house on Ukraine

... and lost

25 June 2022

9:00 AM

25 June 2022

9:00 AM

Most Australians understand the meaning of the expression ‘bet the house.’ Someone bets everything they have on an expected result. If he or she wins the bet, they win big. If they lose the bet, they lose everything that they have.

This high-risk gambling strategy is usually frowned upon, for obvious reasons. It is a desperate and extreme way to manage risk, with potentially catastrophic results. Which leads to my two questions in this article: why did Australia decide to ‘bet the house’ by joining the Biden administration’s disastrous adventure against Russia in Ukraine? And what are the catastrophic consequences that Australia is likely to face, as a result?

No matter how Western leaders and their media vassals may seek to spin it, the US-led response to what Vladimir Putin called a ‘special military operation’ in eastern Ukraine, has been an unmitigated disaster. In military terms, while the well-trained Ukrainian forces have fought bravely, the final result has never been in doubt. Russia is now close to achieving the goals set out by Putin just prior to the military operation. This month, the Russian Defence Minister Sergei K. Shoigu announced that the Russians had successfully created their desired ‘land bridge’ between the Donbass, Crimea, and Russia. Russian military forces are now inexorably grinding their way west through the Donbas region, towards the open plains of central Ukraine, northwest towards the major city of Kharkov and in the southwest, towards Odessa. The infamous Snake Island is now fortified with Russian missile and air defence systems, including their famous SM400, giving them full control of the sea, land and air in the north-west part of the Black Sea and in south Ukraine.

Putin may now approve an extension of the initial goals of the operation and order the military to advance all the way to the Dnieper River, if not further. Western and Ukrainian propaganda can no longer conceal the awful truth about the ongoing destruction of the Ukrainian army. Western military assistance appears to have escalated the conflict, with military equipment being destroyed in transit or in place by superior Russian firepower. Entire Ukrainian brigades are dying, giving up or retreating, often in disorderly fashion.  No one can tell how many Ukrainian soldiers have died or been injured – an American general estimated the true figure may be up to 200,000. It is telling that young men do not appear anymore in video and images that emerge from the main fronts. The tragic scenes emerging from the Donbas are rather of older men, exhausted and haggard after weeks surviving relentless Russian bombardment.

Western observers have in general not grasped the reality of the situation. Accustomed to seeing American saturation bombing from the air on weak opponents, we in the West have forgotten what real war looks like between well-equipped and well-trained armies. The Ukrainians are not goat-herders from Afghanistan. They were a very effective and motivated fighting force. That the Russians have been able to decisively outmatch them with inferior numbers and constraining rules of engagement, proves how effective the Russian military is.

So much for the military situation. The worse disaster for the West has been the spectacular failure of the much-vaunted economic sanctions against Russia. A more misguided and frankly imbecilic set of sanctions would be difficult to imagine, than the one designed by the Biden administration and then facilitated by an enthusiastic Brussels, as well as key American allies. We now have a situation where despite being subject to the most punitive Western sanctions in history, Russia has emerged in rude economic health, with inflation dropping and their currency, the ruble, stronger than it was before the military operation started. Not just that, but the EU nations are experiencing an unprecedented economic freefall, much of it caused by the sanctions they championed and that were designed to punish Russia.

While it is legitimate for Australia to express concern that any nation might resolve differences through military action, quite why our Parliament decided in a bipartisan manner to join in this disaster remains a mystery. Ukraine is a nation some 13,000 kilometres away. Australia and Ukraine have negligible economic, military, political or cultural ties. The tussle between Russia and Ukraine over the status of Russian-aligned regions in Eastern Ukraine, has nothing to do with Australia. Australia is not a member of NATO, or the EU. Despite the FakeNews sheen, Ukraine has long been known as a deeply corrupt and troubled place. In short, there does not appear to be any national interest justifying Australian involvement in the conflict.

In fact, significant Australian national interests existed in February 2022 – and still exist – that should have on balance ruled out any Australian involvement in the Ukraine conflict. The first was the risk of inflaming our relationship even further with the People’s Republic of China. After all, on 4 February, the Russian Federation and China publicly announced that they had entered into a formal alliance. By publicly siding against Russia, we recklessly took a position against China. There was a clear risk that Australia would immediately put a target on its back, should the Russians succeed. Australia has now done so, with potentially grave consequences. More about that later.

It has always been a head-scratcher why Australian politicians have become accustomed to fanning the flames with China, Australia’s number one trading partner, a nation that buys more than $165 billion of our exports each year. Like it or not, China is the great power in our region. Australia’s relationship with China – and Chinese people – is highly developed and has provided both nations with many positive outcomes. However, China has shown it is willing to retaliate against Australia if required. So why put the relationship at risk, for Ukraine? Was Beijing even consulted, prior to the Australian government getting into bed with the United States in Washington DC’s Ukrainian adventure? I suspect not.

Second, the geo-political winds leaned against any Australian involvement in Ukraine. For example, China and Russia intend to use the Brics grouping of nations as the core vehicle to advance their new alliance. The five core Brics (Brazil, Russia, India, China, and South Africa) members are the largest ‘developing’ countries in the world, representing 41 per cent of the global population, 25 per cent of the global gross domestic product, and 17 per cent of global trade. They are direct trading competitors of Australia because they export the same commodities as Australia. Many nations are very keen to join Brics, including Indonesia, one of Australia’s most important export markets and a G20 nation that is the largest in South-East Asia, with a powerful economy. It seems to have escaped Canberra that if Russia succeeded in Ukraine, Australia was risking the Brics grouping being used against it.

Third, when signing up to the Biden sanctions, none of the Australian leaders appear to have asked, what if they don’t work? Canberra seems to have completely misunderstood the strength of the Russian economy. It turns out that the Russian economy is not ‘a gas station masquerading as a country’, the infamous insult penned by the late US Senator John McCain in 2014. In fact, the Russian economy and financial services sector in 2022 is massive, sophisticated, highly diversified and integrated into the global economy. This is why it is proving highly resilient against sanctions that would break most Western nations. There seems to be a view among Western leaders and elites that Russia is best understood as a nation of corrupt vodka-swilling peasants, mismanaging the broken and fragile economy that existed just after the fall of the Soviet Union. McCain was wrong in 2014. Such a sentiment is not just incorrect, but dangerous.

As a result, Australia went all in with the Biden administration’s sanctions regime and to make things worse, Canberra created its own sanctions against Russia and individual Russians. The sanctions having failed, there will be harsh consequences. As the EU leaders are and will continue to find out, Russia also has the power to use its leverage in energy and commodities, to inflict severe payback on nation-states that it considers to be adversaries. Australia’s fate could be even worse, as explained below.

Apart from these considerations, another very sensitive but critical issue does not appear to have been considered by Canberra – the competence of the Biden administration, which has lurched from disaster to disaster since taking office. Never in US history have we seen such a shambolic, dysfunctional mess as we are presently witnessing.

America appears to be declining and weakening as each day passes. On the global stage and apart from this ongoing debacle with Russia, the Biden administration has bungled every major issue facing the United States, whether it is Iranian or North Korean nuclear weapons, the US relationship with China, the Saudis, Opec and Latin American nations, or the debacle of the Afghanistan withdrawal. While Australia has an historic alliance with the United States, there was ample evidence back in February to conclude that this particular administration is incompetent and that, in respect of a conflict in Europe some thousands of kilometres away, it would be prudent for Australia to sit this American-led project out.

Just one of the considerations above should have been a potential red light to Australian politicians, when Uncle Sam came knocking and demanded our support, vis-à-vis their plans towards Russia in Ukraine. In combination, they should have been a red-hot warning that Australia was putting the national interests at risk by supporting the American-led drive to destroy Russia, cynically using Ukraine as a proxy.

Putting aside the merits of Australia’s slavish adherence to the demands of the US, the unfolding debacle has revealed that Western leaders, including Australia, seem to be infected by a particular hubris that affects their judgement. Realpolitik and pragmatic realism seem to have been thrown out the window, replaced by policy drafted on the fly with knee-jerk, emotional soundbites.

This has arguably led to a wilful blindness in the West, in particular about the capability of adversaries such as Russia. For example, military experts have for years observed the Russians re-building and modernising their armed forces. In the case of missile systems, we knew that the Russians (and Chinese) had forged ahead of the West, because they had told us. For example, in March 2018, Putin announced that the Russians had developed hypersonic weapons that the West had no answer to. On 18 March 2022, the West got a taste of how effective these weapons are, when a Khinzal hypersonic missile destroyed a de facto Nato base in Deliatyn, western Ukraine. It was a clear warning by the Russian leadership to the West – we have them, you don’t, and you can’t stop them. If required, we will use them.

Western leaders these days seem incapable of considering that the West may lose, or indeed that the West is even capable of failure. With such a grandiose view of Western power and influence, ‘betting the house’ makes sense. Accordingly, Australia bet the house on Ukraine. And is losing, badly.

What now? We already know that Australia now has a target on its back. On 7 March, the Russian government issued a list of nations that it views as ‘unfriendly’, and Australia was on that list. When they announced their historic alliance in February, China and Russia both mentioned their deep unhappiness with the Aukus alliance, which to date has produced nothing of value to Australia. It doesn’t take long to connect the dots. As a result of Australia’s conduct in the Ukrainian disaster, one thing is certain – there are going to be consequences.

Many do not seem to have grasped how severe they may be. In 2021, Australia’s export trade was worth about $515 billion. Energy and resource commodities make up 68 per cent of the total, or $350 billion, with Australia’s overall annual energy and resources export earnings forecast to lift to a record $425 billion in 2021–22. Right now, our exports to China are worth an eye-watering $165 billion per annum. They are forecast to rise above $200 billion by 2024.

Back to the Brics nations. Here is where it gets interesting about potential payback for Australia. The Brics nations export the same commodities as Australia does. These commodities include coal, gas, oil, aluminium, uranium, lithium, nickel, gold, steel, iron ore and other precious metals. They also include wheat, soybeans, barley, sugar and livestock.

Going forward? China could replace our commodity exports with Brics exports. Russia can supply China with most of the commodities that China currently imports from us. This level of co-operation is specifically mandated in their alliance agreement, by the way, which is widely available on the internet to read in full. A new arrangement like this would be positive for China and Russia, but a potential $165 billion per annum catastrophe for Australia. The potential consequences are not confined to Brics nations, but also to Australia’s trade with nations that want to join Brics. Take Indonesia. Anthony Albanese led a high-level Australian delegation to Indonesia recently. Perhaps the most interesting part of the visit was his trip to the port of Makassar, the capital of the Indonesian province of South Sulawesi. Albanese described the visit as symbolic, to demonstrate that ‘Australia understands that Indonesia is much, much more than Jakarta and Bali’, an unfortunate comment that would not have gone unnoticed by Joko Widodo.

Albanese then doubled down on his comments by proclaiming that he ‘wanted to make sure that we send a message as well that we understand that this vast country is one that’s diverse’, before touting the relationship between Sulawesi and indigenous Australians, presumably referring to the trade in sea cucumbers between fishermen from Sulawesi and the Yolnu people of the Arnhem coast, which started in about 1700. Albanese left out the inconvenient fact that this relationship ended in 1901, when the Sulawesi traders were banned from entering Australia by the federal government.

Albanese also omitted another reason why he was in Makassar. It is the major Indonesian port for Australian wheat exports, worth $11.6 billion per annum. 17-20 per cent of our annual wheat crop, worth about $740 million, goes to Indonesia. Australian oil exports come to about $2.5 billion. In fact, Australia’s annual commodity exports to Indonesia amount to over $9 billion.

Yet another thing Albanese didn’t mention, which is likely causing panic in Canberra. In March 2022, the Indonesian state-owned energy giant Pertamina confirmed that they were interested in replacing Australian oil and wheat, as they were being offered the same commodities at discounted rates. By whom? The Russian Federation, that’s who. In fact, Russia and the Brics nations can replace almost all of Australia’s exports to Indonesia. Now ask yourself – if you are an Indonesian leader wanting Indonesia to join Brics and must choose between Australian or Brics imports, what is your decision? You already know the answer. All these risks were known by Australia’s leaders well before 24 February 2022, yet they appear to have been swept aside as Canberra went all in with Uncle Joe.

It didn’t need to be this way. By remaining out of the Ukrainian disaster, Australia would likely have evaded the payback that is coming. But right now, Australians have to prepare for the inevitable backlash for participating in the Ukrainian disaster. It is not going to be pretty. As our export trade proves, there are 515 billion reasons why Australia should never have become involved. To those who say Australia will not face consequences for what our leaders have done, I have a simple question: ‘Want to make a bet?’

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