Special Post: France raising the possibility of Western troops in Ukraine is a turning point in this conflict. Part II: Major second-order implications and risks.

• In the previous post, we looked at the main strategic objectives sought by Macron in bringing up the possibility of deploying NATO ground troops in Ukraine.

• We shall continue to look at further implications, signaling effects, and some potential risks and unforeseen circumstances that emanate from his decision to broach this (hitherto taboo) subject in public.

• 1) Signaling effect to the global south.

• This is the main signal here: this is getting rather serious now - don’t think you can be all that passive and play all sides against each other for much longer. This is our backyard and we will not let Russia win.

• Put yourself in the position of a typical swing state/global south country: your country has benefited from playing the middleman in supplying Russia with critical components (like chips/industrial equipment) and/or helping to park Russian money.

• Perhaps you have also gained from a massive draft-dodging Russian brain drain? (for example: a significant proportion in the rise of Armenia’s GDP has to do with the influx of the highly productive Russian programmers)

• Well then, if any of these descriptors apply to your country, you are in for some bad news..

• And this is due to simple logic: if the West is considering deploying its own soldiers in Ukraine, how likely is it that they will continue to close their eyes to the sanctions/export control restrictions that the countries of the global south continuously exploit to make money from Russia?

• Naturally, there are degrees to this.

• For example: it is one thing to actively help in exporting critical parts (eg. Armenia, Kazakhstan) and park Russian cash (eg UAE) vs enjoy influx of highly-skilled labor (Turkey), continue to engage in legitimate business deals outside the scope of sanctions (eg. Egypt with grain deal, or Turkey with energy deals) or violate the spirit of sanctions (like India increasing the purchase volume of Russian crude albeit at heavy discount but in terms favorable to Russia (eg. Rubles - Rupee deal).

• But the crux of the matter remains unchanged: things cannot simply go on as before.

• No more business as usual.

• And this threat is not merely rhetorical either.

• In a major signal to the global south, the latest EU sanctions on Russia included secondary sanctions (including a few on India - a country that has hitherto been perceived as one of the countries making the most out of the Ukraine war).

• In addition, the EU added 27 more entities to its “list of those directly supporting Russia’s military and industrial complex in its war of aggression against Ukraine. They will be subject to tighter export restrictions concerning dual use goods and technologies, as well as goods and technology which might contribute to the technological enhancement of Russia’s defence and security sector.”

• And some of these entities were in Turkey, India, Serbia, Kazakhstan, Sri Lanka, Thailand and China.

• The US is also in alignment with secondary sanctions, and as of December 2023, banks that facilitate Russia’s sanctions evasion will be covered by secondary sanctions.

• Crucially, these would also apply ‘‘regardless of whether the FFI engages in such activity knowingly or not, and even where there is no U.S. nexus to the transaction. This action marks the U.S. government’s first use of “secondary sanctions” under the recent Russia sanctions program.”

• All of this is a wake up call to the countries of the global south: going forward, helping Russia (whether knowingly, or by omission/lax oversight) will be 1) significantly less lucrative, 2) could cause more harm than benefit to domestic economy/big players in financial services/export supply chain companies, 3) would inflict more obvious/publicized reputational damage.

• All of this then means that any country that liked to play both sides against each other, will now find it much harder to pull tricks with the west: increasing use of secondary sanctions will make it significantly harder to play ignorant, and if a country can no longer plead ignorance, it will either 1) have to comply or 2) end up in bad terms with the West (further reducing its leverage vis-à-vis US/EU).

• There is however, also a flip-side to all this: any country that wishes to comply but also wants to avoid souring its relations with Russia, will now have a great excuse going forward.

• If previously, a country of the global south would risk ending up looking overly eager/pro-west when applying Western sanctions diligently, then now, they have a good way out: look, we want to do business with you, but they have us dead to rights. We have to avoid these transactions to protect our own domestic industries.

• 2) Intra-alliance discord.

• We touched upon this in the previous post - when discussing how the German Air Force chief’s leaked communications revealed the presence of British troops in Ukraine.

• The intercepted communications/discussions (about provision of Germany’s own Taurus missiles) revealed details of how French and British troops were delivering storm shadow and SCALP-EG missiles to Ukraine.

• And former UK Minister of Defense Ben Wallace’s comments in response were rather scathing: “We know Germany is pretty penetrated by Russian intelligence so it just demonstrates they are neither secure nor reliable..”

• Ouch..

• In other words, there are already tensions within the alliance.

• Macron raising the possibility of the ground troops presence in Ukraine is only likely to exacerbate these pre-existing divisions.

• But that was not all however, and a week after the initial comments, Macron somehow thought it prudent to shame Germany with a pretty scathing rhetoric:

• “We are definitely approaching a moment in our Europe where there will be no place for cowards.”

• We know that he is not talking about the Baltics here…

• And everyone understands that the comments were aimed at Berlin.

• And this is a risky strategy.

• Such tactics are doubtful to work even in private.

• Moreover, there is now a major risk that not only would such rhetoric fail to move Europeans closer to a sobering reality (and persuade several heads of state of Macron’s suggestions for ground troops), but that the ensuing discord could even hamper more basic coordination.

• For example: the most pressing Europe-level decision that needs to happen is an agreement to raise a major fund to 1) provide a larger pool of funds for Ukraine and 2) finance Europe-wide military rearmament.

• Most European states are lagging behind the minimum NATO standards on military expenditure (which state that at least 2% of GDP should be allocated to this).

• Calculations by the Ifo Institute suggest EU's NATO countries have underinvested in equipment by €550bn (or 4% of the bloc’s GDP) since 1991.

• And that redressing this would realistically imply raising the spend significantly higher than NATO’s 2% standard.

• And Germany is already admitting this: German Defense Minister, Boris Pistorius, pointed at the necessity for spending to reach 3.5% of GDP to rebuild armed forces' capabilities.

• Ifo Institute's findings indicate that to achieve 3% of GDP spending on defense:

• Germany and Italy must cut spending on other sectors by 3%.

• Britain and France may need to reduce other expenditures by 2%.

• It is hard to see how any of these numbers could be reached without a major political backlash.

• A good solution therefore, would be to repeat the Eurobonds program that was designed to fund the EU states during COVID and post-COVID recovery .

• If the EU can see a need to raise a $826.5 billion recovery fund - with debt burden shared by all member states via Eurobonds, then surely a major invasion on its doorstep should also be viewed as an existential threat.

• But this will require a political alignment: and although Macron shifting the Overton window (and adding legitimacy to creation of a massive fund as a minimum viable option to actual troops on the ground) could help, the discord sowed by inflammatory comments may risk actual practical alignment on the most basic political decisions - let alone major projects.