What's New

My April 2014 China newsletter

Greetings!  May I wish you peace and progress in a troubled world. 

With the Ukraine face-off between Russia and the West, the world is now a very different place. I am not just talking about Russia's "near-abroad". I am referring to the possible emergence of a new Cold War.

 

Will this drive Russia closer to China, the latter's expanding eastern Siberia settlement notwithstanding? Will the United States have to re-balance its Asian Pivot, given changed global dynamics, strained financial and military resources and a war-weary electorate? Will this unfold a new era of Chinese diplomacy? How will the Grand Chessboard be playing out?

As for China, with a slowing economy, shadow banking risks, worsening ecological strains, and uncertain foreign relations, what is the outlook for 2014 and beyond? Would China and the United States be able to seize the opportunity of stabilizing the world's monetary and economic systems? Will blue skies ever return to China's cities? How realistic is the "China Dream"? 

Meanwhile, e-commerce and re-shoring are changing businesses and banking paradigms. High-speed rail and a "Golden Age of Gas" are reshaping geopolitics and geo-economics. 

On the above topics and more, I hope you may find some food for thought in the following analyses -

 

Russia

• What next over Ukriane? (An analytical commentary)
• A Second Cold War looms in the horizon (An analytical commentary) 
• Ukraine caught in Russia's tussle for power with the West (My Op-ed in the South China Morning Post)
• Grand Chessboard over Ukraine's Future (An analytical commentary)
• Khodorkovsky arrives in Germany (My radio interview on BBC World Service)

International relations

• The Future of Europe and the Ukrainian crisis - George Soros (Gist of his interview with Spiegel)
• A New Era of Chinese Diplomacy Unfolds? (Will China dominate or lead the world? An analytical commentary) 
• Global Dynamics of the China Dream and Possible Turkish-China Relationship in a New Silk Road to Renaissance (My 8,701-word research Paper accepted for presentation at an international conference at Cambridge University, UK)
• Japan should have the courage to face its past (My Op-ed in the South China Morning Post)
• China's Human Rights Report on the United States (My interview on on RT, Russia's premier English-language TV channel)
• How the United States and China could help stabilize the world's monetary and economic systems  (An analytical commentary)

Challenges of a Rising China

• Will China dominate the 21st Century? (An analytical commentary)
• In defense of the Communist Party of China (CPC) - by Eric X Li, venture capitalist and political scientist on TED (A subsequent more balanced debate )
  
• Is there growing tension within China's Communist Party? Would a Rising China start a war? (An analytical commentary)
• Third Plenum - Bold Reforms for the China Dream (A presentation to the Samurai Group, a Japanese business network in Hong Kong) 
• Why is it getting harder for Beijing to govern? (A review of Professor David M Lampton's book “Following the Leader: Ruling China, From Deng Xiaoping to Xi Jinping”, University of California Press, 2014)
  

Technology and Business

•  China's Economy - Outlook for 2014 (My feature article for The Global Analyst, a business journal based in India) 
• World Wide Web - Global Force for Good? (My appearance on a TV panel discussion on Inside Story with Aljazeera English Channel)
• High Speed Empire - China's global rail ambitions (A feature report in Foreign Policy)
• How technology will transform Asia's and potentially the world's finance and banking (A Working Paper by Senior Fellow Andrew Cainey of the Fung Global Institute)
• Next-Shoring: A CEO Guide (A Mckinsey Quarterly report )
• The Explosive Growth of China's New Consumers (A tour d'horizon of recent analytical research )

Energy and the Environment

• The Golden Age of Gas (A collection of the latest leading research on global energy dynamics, including the Shale Gas Revolution)
• The Arctic Region is poised to change the world (An analytical commentary)
• China targets 2024 for new thorium nuclear reactors to fight smog (An analytical commentary )
• Dark Days Ahead  (My Op-ed article in the South China Morning Post)
• Blue Skies for China’s Cities - A multi-dimensional strategy (My presentation at the International Green Economy Association Conference in Beijing, 18-19, January, 2014)
• Forging a Sustainable Future for the Mekong (A report by ChinaDialogue, an international environmental journal)
• Watch the beauty and majesty of Earth from above ("Home" , a visually-stunning and emotionally-touching film produced in 2009 by Goodplanet.org) 

Cheer up and chill out

If too much serious reading gets you down, here is a repertoire of inspirational music videos  which may provide you with an uplift in spirits 

RSS feed and weblinks

All of the above postings are regularly uploaded under CHINAwatch, Publications and What is New on my website http://www.andrewleunginternationalconsultants.com If you wish instant access as soon as they appear on these blogs, just click on “Subscribe to this blog’s feed” under RSS Feed on top of the right-hand column of each blog. Select the appropriate Google feed option. It is absolutely free of charge.   

My web site includes a collection of mainstream China media and research sites under China Links.You may find it convenient to save my web site link on your computer, laptop, tablet, Blackberry, iPhone or iPad as a reference resource.  

To enable you to read some of the entries at leisure and for ease of reference, my newsletters are now uploaded to my website. This one can be accessed here You are welcome to send this newsletter link to your colleagues and friends via Facebook, LinkedIn, Whatsapp, WeChat, Twitter or other social media devices.

Real-time consultation service

I am available for real-time consultations by telephone, Skype or video conferencing, ideal for corporate board meetings. Please email me personally at [email protected] and concurrently text message my Hong Kong mobile +852 98198987 to ensure speedy response. My Skype address is andrew.k.p.leung  I am also available on WeChat : Andrewkpleung

Speaking and lecturing opportunities

Throughout the year, subject to mutual agreement, I am open to invitations for speaking engagements or visiting lectures worldwide on China-related topics. The following suggestions may be of interest - 

• The China Dream and the Third Plenum
• The Ascent of the RMB, the Chinese currency
• How technology, rural land reform, and financial liberalizasion would revolutionize banking services in China
  

A business networking and speaking platform in Hong Kong

As an Advisor to the Denmark-based Executives’ Global Network (EGN) Hong Kong, may I extend to you the opportunity of fielding a suitable speaker for an EGN event in Hong Kong? This will be entirely at our cost with acknowledgement of your support or that of your organization, provided that we are not asked to cover any speaking fee, travel or accommodation expenses. 

For background on EGN, please visit the following links -

Executives’ Global Network Click here
EGN Hong Kong Click here

Get-together in Hong Kong

Whenever you or your colleagues happen to be visiting Hong Kong, I would love to meet to share thoughts and ideas. Please email me at [email protected] 

Courtesies

Please allow me to benefit from your guidance, advice, comments, suggestions, and criticisms. Please feel free to share any of my papers, articles, presentations, and TV interviews with your colleagues or friends. You are welcome to publish any of them with full attribution. What is more, if you think that I may add value to your endeavours in any way, please do not hesitate to let me know. On the other hand, if for any reason you do not wish to receive my emails, please tell me to delete your name from my databank permanently.
 
Best personal regards,

Andrew K.P. Leung, SBS, FRSA
International and Independent China Specialist
www.andrewleunginternationalconsultants.com

Positions

Chairman and CEO, Andrew Leung International Consultants Limited (Founded in London)
Brain Trust Member, The Evian Group (global think-tank), Lausanne, Switzerland
Senior Analyst, Wikistrat, an online global strategic consultancy
Gerson Lehrman Group (Global Experts) Council Member
International Expert, Reuters Insight Community of Experts, Thompson Reuters
China Futures Fellow, Berkshire Publishing Group, Massachusetts, USA
Distinguished Contributor, Asymmetric Threats Contingency Alliance (ATCA) (global think-tank)
Fellow of the Royal Society for the encouragement of Arts, Manufactures and Commerce (FRSA)
Elected Member, Royal Society for Asian Affairs
Visiting Professor, London Metropolitan University Business School
Visiting Professor, Sun Yat-sen University Business School, China (2005-10)
Senior Consultant, MEC International
Global Commercial Agent, Changsha City, China
Member, Board of Advisors of Denmark-based Executive Global Network (EGN), Hong Kong
Member, Board of Advisors of The Global Analyst, India
Member, Board of Multitude Foundation, a HK-registered charitable trust
(The following until 19 May 2010, on permanent relocation back to Hong Kong)
Governing Council Member, King’s College London, UK (2004-2010)
Advisory Board Member, China Policy Institute, Nottingham University, UK (2005 -2010)
Founding Chairman, China Group, Institute of Directors City Branch, London, UK (2006-2010)
Vice Chairman, 48 Group Club, UK (2008-2010)
Committee Member of RSA, London Region, UK (2006-2010)

Included in UK's Who's Who since 2002
Awarded the Silver Bauhinia Star (SBS) in the July 2005 Hong Kong Honours List 

In defense of the Communist Party of China (CPC) - by Eric X Li, venture capitalist and political scientist on TED

In his provocative TED talk A Tale of Two Political Systems in June 2013, Eric X Li articulates how the Communsit Party of China (CPC) can achieve Adaptability, Meritorcracy, and Legitimacy.

Li stresses, rightly, that he does not mean to discredit Democracy, but merely tries to show that multi-party democracy may not be the only trick that works in a diverse world. He is also right to point out that the CPC is in continual metamorphosis to keep up with the times. The system is unique to China's circumstances and is not meant to serve as a model for other countries.

Yasheng Huang, Professor of Political Economy and International Management at the MIT Sloan School of Management, however, took Eric X Li to task in a comprehensive critque on a TED Blog on 1 July 2013. Click here.

The Professor doesn't argue that democracy will necessarily lead "to a nirvana" but that "it can help prevent a living hell". He admits that he is not for democracy on "messianic" but on "pragmatic" grounds - i.e. that it works better on the whole. Throughout his arguments, he sets great store on the right to vote.

There is much in Professor Huang's robust argument to commend itself. However, China now doesn't pretend that the Communist system is the be-all-and-end-all to be emulated by the rest of the world. Indeed, the leadership has repeately refrained from this hubris.

Perhaps the debate would have been more precise if the focus was shifted to whether China for the past few decades would have fared better as a democracy. Such a hypothetical question, of course, cannot be supported by facts. However, evidence shows that gripping social and environmental costs notwithstanding, the CPC managed to channel huge national resources and productivity over a sustained period, building the solid human capital and physical infrastructure which have driven the country's dramatic rise so far.

There is ample evidence to show that the CPC has been renewing itself continuously, out of the sheer need to survive in the changing times. Moreover, it is doubtful whether, given the political, economic, social and historical bottlenecks that China inherited before the Reform Era, these herculean challenges could have been overcome better by Western democracy.  Click here

For perspective, in an earlier TED Talk in July 2011, Professor Huang tried to answer the question if democracy stifles economic growth by comparing the models of development between China and India. The comparison shows that at best, the answer is nuanced. Neverthless, he omitted to point out that China's miraculous growth in recent decades owes not so much to politics as to the nation becoming the hub of a global trading and manufacturing system.

Following Professor Huang's India-China comparison, it is instructive that in Indian Foreign Policy, an Indian blog commentary dated 15 March 2014 concluded that "nuances of human rights aside and without hindsight ..... democracy does seem to slow the rate of growth in the case of India and China". Click here

Nevertheless, this does not mean that China will not embark on her own quest for a more democratic future. In face of rising aspirations of a massive middle-class, the current leadership is only too aware of the existential threat that lies ahead. Even though the dramatic reforms of the Third Plenum do not appear as revolutionary as they ought to be in some Western eyes, this does mark another clear watershed in China's continuing quest for development, unfettered by any "meta-narrative" of Western model of democracy. Click here

In conclusion, the jury is still out on whether and how China would be able to transform herself politically as the nation emerges as a well-off middle-income society. But so far, it seems unlikely that the country is about to embrace the Western model of democracy anytime soon.

The Arctic Region is poised to change the world

The Arctic Region is looming as an epochal game changer. As the Arctic ice melts, a cornucopia of energy and other resources are open to possible scramble. Moreover, the Northern Passage of Canada as well as the sea passage north of Russia are likely to become more navigable, opening up much shorter sea routes for international trade that may circumvent the sea ports in the Asia-Pacific, as depicted by a Brookings Institution introductory YouTube video

It's opportune that the United States will be assuming chairmanship of the Arctic Council in 2015, taking the opportunity to enhance Arctic governance. A Brookings Energy Security Initiative Report "Offshore Oil and Gas Governance in the Arctic - A Leadership Role for the U.S." dated March 2014 outlines some recommendations.

Download Improving Enegy and Resource governance of the Arctic Circle

This game-changer was  heralded by Trausti Valsson in his book "How the World Will Change with Global Warming", University of Iceland Press, 2006. It was featured in my blog of 6 September, 2008 under How Green geopolitics and geo-economics will change China and the World.

As China has no legal right to any territorial claim in the Arctic Circle, the Middle Kingdom is likely to lose out in terms of claims on Arctic resources. What is even more important, the global gravitas of China's Pacific container ports is likely to wane. On the other hand, Arctic shipping routes will provide China with alternative sea routes bypassing Pacific Ocean "choke points" controlled by the United States. Click here

Hence China has been proactive in joining the Arctic Council as an approved Observer, alongside with other Asian countries i.e. India, Japan, Republic of Korea and Singapore. Click here

Be that as it may, the ecology of the Arctic is vital to the ecosystem of the whole planet, including ocean acidity, climate-changing currents, food chains and species survival, not to mention other global revulsions of Climate Change. There is thus irrefutable argument that the Arctic should remain a common heritage, which the Arctic "sovereign countries" should hold in trust for mankind.

It is therefore to be hoped that coming discussions to enhance Arctic governance will not morph into agreeing a plan to divide up the potentail sploils of Energy and Resource in the Arctic. More importantly, the opportunity should be taken of formulating a global agenda for the custody in trust of this relatively unspoilt treasure of Mother Earth

The Future of Europe and the Ukrainian crisis - George Soros

A recent interview with George Soros on The Future of Europe was conducted by Spiegel correspondent Gregor Peter Schmitz. Parts of it appear in their book, The Tragedy of the European Union: Disintegration or Revival?, just published by PublicAffairs.

At the interview, Soros discussed the Ukrianian crisis at length. He reckons that Putin's aggressiveness is really a sign of weakness, due to less than apparently solid popular support at home and vulnerability of the Russian economy. Nevertheless, he suggests that it would serve no useful purpose in pushing the impasse over the precipice. The question is how to resolve the situation hopefully safeguarding the West's advantage. 

While agreeing that financial sanctions could work if properly targetted at financial inflows into Russia, Soros thinks that the West should put greater store in shoring up the finances of Ukraine and integrating it more vigorously into the economies of the European Union. This can be achieved in concert with an adequate IMF financial package as well as much closer economic, trade and investment links with the EU.

Soros also thinks that the EU doesn't have to have a confrontational relationship with Russia. Now with massive mutual investment and trade flows having become a reality, both the EU and Russia stand to benefit from a more benigh yet balanced relationship.

Click here for the full text of the Spiegel interview.

Soro's idea to achieve a more stable Europe tallies with Zbigniew Brzezinski's "Strategic Vision" for the United States to re-shape the global order, involving a re-balance of a "Complex East" and creation of a "Larger West", hoping to bring Russia (along with Turkey) into a Europe more amenable to Western norms. Click here

However, reality seems to dim the hope for a U.S.-led European order. One of Putin's closest advisors, Professor Aleksandr Dugin, a geostrategic and ideological theorist, recently published his visualization of three possible scenarios over the Ukrainian crisis, all interwined with the global order. One of these assumed Russia buckling under Western pressure, the second, armed conflict spiralling into global Armageddon, and the third, which he dubs “the Russian Spring,” featuring Russia leading a peaceful revolution across Europe, freeing the continent from alleged America-led Atlanticism, liberalist hegemony and Western financial oligarchy supported by dollar supremacy.  Click here

Putin's latest aggression over Ukraine underlines the resurgence of Russian revanchism. In the circumstances, it seems that Brzezinski's America-led European vision is becoming even more difficult, if not totally unreal.

What next over Ukraine?

As both Russia and the West are putting more military chips on the table, it seems that not only the future of Ukraine, but security and stability of the entire Eastern Europe if not the whole world hang in the balance.

The reality, however, remains that both sides don’t want and can’t afford an all-out war. Obama’s hands are tied with a war-weary electorate, budget constraints, an economy barely starting to recover, and increasing pressure on America’s Asian commitments. So, apart from using non-military leverage including visa bans and asset freezes, the West is unlikely to open fire.

For Putin, Russia's economy and finances are not at the best of times, with gas prices plummeting and risks of falling European energy demand being lured away by possible America’s exports of excess shale gas. So both sides have openly stated that military options remain the last resort.

Putin’s control over Crimea is a fait accompli. Not only are the miniscule Ukrainian forces there all being rounded up, but the vast majority of the Crimean people are of Russian extraction The Crimea leader asserts that more than 80% of the people there would support joining the Russian Federation. Click here

Likewise, there is a pro-Russian culture in eastern Ukraine increasingly resistant to Kiev interference, although most would still prefer Ukrainian unity. Click here

For both sides, the stakes are high. Click here It is not just Ukraine. For Putin, it is a lynchpin of his dream to restore the past glories of the former USSR through forming a "Eurasian Union" to rival the European Union. For the West, it may spell the beginning of the end of NATO’s credibility. Yet, both sides are likely to stop short of actually pulling the trigger, sabre rattling notwithstanding.  

So what seems an attractive leverage for both sides is the public opinion card. For Putin, the largely-predictable outcome of Sunday’s referendum in Crimea is set to boost his bargaining chips. With rising protests on both sides in eastern Ukraine, the option remains open to Putin of suggesting a plebiscite to determine its future. The prospect dangles of eastern Ukraine becoming not exactly like Crimea but perhaps an extraordinarily autonomous region independent of Kiev's diktats, making it remain under Russian economic and political influence. Meanwhile, he is likely to continue to de-legitimize the interim Kiev government.

For the West, while rattling up NATO’s military postures to show muscle, Obama is likely to highlight Putin’s illegal strong-armed occupation of Crimea and his “engineered” Crimean referendum, undermining the legitimacy of Putin’s plot.

An excellent article of 6 March in the Washington Post suggests why Crimean independence or annexation may not be such a good idea for Russia. The arguments are largely centered on three fronts: (a) burden to Russia of having to support Crimea financially; (b) generating fear amongst small countries in the neighborhood likewise with sizable Russian populations; and (c) the chicken may come home to roost on Russian soil in sparely-inhabited eastern Siberian witnessing expanding migrant Chinese settlement from across the border. The risk is that one day, China may turn the table on Russia as sauce for the goose is sauce for the gander.

On the other hand, as regards (a), if a cash-strapped Kiev can afford to support Crimea financially, so should the Kremlin. As regards (b), certain neighbours' fears are valid but they are unlikely to sever inherent ethnic and economic links to Russia. The risk that they may tilt towards China instead does not seem inevitable, not least because of perceptions that Turkic Uyghurs are not getting a very good deal in China. As regards (c), a resurgent Russia will serve for now to dilute America's capability to contain China in the Asia Pacific. So China is unlikely to stir any trouble in Russia's eastern under-belly, natural expansion of Chinese settlements notwithstanding. 

It is unlikely that such a serious strategist as Putin would not have done his sums properly before plotting his moves in Crimea, including the advanced referendum.

An interesting twist is raised in an article of 10 March in The Diplomat, an online platform on international relations, by a researcher with the Tsinghua University School of Public Policy and Management. It advances a case for China’s involvement, perhaps in concert with some other BRICS members or the Shanghai Cooperation Organization (SCO), helping to broker a deal with Russia to stabilize the situation. This, according to the article, would mean replacing the interim Kiev government with a new one more representative of the aspirations of pro-Russian people, a highly autonomous Crimea, and an eastern Ukraine driven by BRICS-led investment and more independent of Kiev. While the article’s allusion to a future solution for Taiwan is at best comparing apples with oranges, its suggested deal with Russia does not seem altogether impracticable.

Indeed, John  J. Mearsheimer, Professor of Political Science at the University of Chicago, and author of "The Tragedy of Great Power Politics", suggests in the New York Times here that Putin's legitimate security concerns with an enlarging NATO be recognized and that a cooperative deal with Russia is preferable to pushing this vast country into an ant-West camp with China, "the only genuine potential rival to the United States." 

Professor Mearsheimer's suggestions chime with an early Op-ed of 6 March by Henry Kissinger in the Washinton Post here . Kissinger proposes a “Finland model” to solve the Ukrainian crisis, comparing the Scandinavian country’s fierce independence while maintaining cordiality with Russia. This consists of (a) letting the Ukrainian people to choose their collective future, including with Europe;  (b) not letting Ukraine into the North Atlantic Treaty Organization (NATO) as this would unnecessarily provoke Russia; (c) Ukraine’s freedom to create any government compatible with the expressed will of its people, hopefully opting for reconciliation between the various regions and avoiding institutional hostility towards Russia and (d) in exchange for Russia’s recognition of Ukraine’s sovereignty. Crimea’s autonomy is to be reinforced in elections to be held with international observers. The process would include removing any ambiguities about the status of the Black Sea Fleet at Sevastopol. 

Kissinger’s formula would no doubt help to de-escalate the rising tensions over Ukraine. Whether it could ensure that Crimea remains intact under Ukrainian sovereignty remains to be seen, as Putin seems to have stacked the cards in his favour.

Meanwhile, the world is waiting to see how Putin would move on Crimea’s Sunday referendum. However, it seems unlikely that he is going to back down or reveal his cards in any way before the referendum has taken its course.

Forging a sustainable future for the Mekong

The Mekong River ecosystem is the very livelihood of some 48 million people covering China's southwest Yunnan Province, all the way to Myanmar, Laos, Thailand, Cambodia, and Vietnam. Massive hydroectric power dam-building projects along the River course, mainly by China upstream, pose serious threats to eco-sustainability.

"Forging a New Course for the Mekong" is a report by ChinaDialogue, an international enviromental journal. It is a collection of expert articles showing that China needs to change its energy strategy in the Mekong region, promoting sustainable practices in the Mekong region, rather than simply shifting its carbon footprint downstream.

Download Forging a New Course for the Mekong, a Report by ChinaDialogue, March, 2014

Grand Chessboard over Ukraine's future

Ukraine has now become a proxy Grand Chessboard between Russia and the West.

Over the years, Vladimir Putin has been building Russia's empire of energy pipelines throughout continental Europe.  Download Russia's pipelines to Europe   Download EU Imports of Russian Gas In the north, the Druzhba pipelines extend through Belarus to Poland and Germany. In the south, they pass through Ukraine to Central Europe and the Balkans to Italy. This gives Russia immense leverage over a host of European countries.  Those heavily dependent on Russian energy include countries in Eastern Europe, the Baltic States, Finland and Turkey.

Ukraine remains a key transit country for Russia’s energy supply to Europe.  In aggregate, Russia provides about a quarter of the natural gas consumed in the European Union, of which some 80% is carried through pipelines across Ukraine.

Building on this powerful energy network, Putin harbours a vision of a "Eurasian Union" Click here conceived during his third term as Russian President. It hopes to capitalize on the success of the Eurasian Customs Union between Russia, Belarus, and Kazakhstan to embrace other former Soviet Union member nations, growing them into a "powerful, supra-national union" of sovereign Eurasian states. 

It is possible that the vision goes beyond Eurasia. It was reported that at a November 2011 round table in Moscow organised by the ruling United Russia party, Russian political scientist Dmitry Orlov opined that membership could be extended to countries with historical, political or cultural ties, such as Finland, Hungary, the Czech Republic, Bulgaria, Vietnam, Mongolia, Cuba and Venezuela.  Click here

Ukraine is a lynchpin for Putin's Eurasian blueprint. As part of Ukraine, Crimea, where Sevastopol is the base for Russia's Black Sea Fleet, is at the core of Russia's Eurasian power projection. So the loss of Ukraine to the fold of the West would undermine Putin's Eurasian dream.

For the West, Ukraine’s about-turn presents a hard-won opening for bringing the country, or at least its anti-Russian western part, into the fold of the European Union.

However, a bankrupt Ukraine would soon implode without a substantial financial lifeline.  According to an analysis in YaleGlobal, an online platform for international and Asian studies, Ukraine is likely to need $35 billion for economic survival. The International Monetary Fund (IMF) comes up with only $5 billion while the EU offers only $610 million in “macro-financial assistance.”

Former US National Security Advisor Zbigniew Brzezinsky, a doyen of US foreign policy, calls for Germany to lead the EU in mounting a financial rescue. He hopes Russia could also do its part. Click here

Brzezinsky is an advocate for the United States to maintain global leadership through a "Larger West" with the ultimate aim of integrating Russia into the Western fold. (Zbigniew Brzezinsky, Strategic Vision, America and the Crisis of Global Power, Basic Books, New York, 2012) Click here Embracing Ukraine first would be an incremental tactical move on the Grand Chessboard.

Russia has suspended the remaining $12 billion of its $15 billion December bailout for Ukraine. Would Russia be persuaded to re-open the spigot? It may, if a deal could be struck to maintain its influence in the whole of Ukraine, perhaps through a less anti-Russia leadership at Kiev. However, any bow to Russian influence is unlikely to be accepted by the people in Western Ukraine.  Nor is Russia likely to agree to pay and to smooth the way for Ukraine's ultimate entry into the fold of the European Union. The prize is not just Ukraine. It's Putin's Eurasian dream.

Meanwhile, Western Ukrainians see their hope of closer ties with the European Union re-kindled. They also want to hunt down ousted President Viktor Yanukovych for civilian massacre, corruption and betrayal. On the other hand, pro-Russia Eastern Ukraine and Crimea are getting more and more agitated with the power seizure by an anti-Russian Kiev leadership. The viability of Russia’s Black Sea port is staring Putin in the face.

Peoples on the two parts of Ukraine seem now to be poles apart, torn by opposite aspirations, not to mention different language and cultural links. However, although as pointed out by The Economist, Ukraine is a "Tale of Two Countries" here, there is considerate support even in the pro-Russia eastern part for national unity.

As a strategic counterweight against a resurgent Russia, the United States has been pushing for the creation of the Transatlantic Trade and Investment Partnership (TTIP) with the European Union, which is expected to become potentially the world's largest trading bloc. Additionally, America's "shale gas revolution" opens up the possibility of future supply of U.S. energy to Europe, undercutting the stranglehold of Russia's extensive European pipelines.

In response to the risks of falling European demand for Russian energy, Russia is developing a much closer, though still guarded, relationship with China, the world's largest energy consumer for many decades to come. Russia became President Xi's first overseas port of call, where the two sides agreed to triple Russian oil exports to China to 45-50 million tonnes, possibly by 2018, making China sooner or later the largest consumer of Russian oil. Click here 

But these are longer-term counterweights for both Russia and the United States. They are unavailable in arresting a fast-developing crisis.

On the pretext of protecting Russian citizens in Ukraine, Putin has put the Russian military on full alert and is deploying armed forces to Crimea. But is Russia likely to restore the status quo ante in Kiev by force? This extreme action does not seem likely. This is because the Yanukovych regime has crumbled. The people in Western Ukraine have clearly spoken by taking to the streets. It’s no use reclaiming a ticking time-bomb. Moreover, excessive military aggression will backfire on Russia’s weak economy, vulnerable to energy demands in Europe Click here

For the West, immediate options are limited. The European Union is not equipped militarily or financially against such a formidable adversary as Russia. Nor is war between America and Russia conceivable. Short of economic and other sanctions, America’s hands are tied with a war-weary electorate, severe budget constraints, and rising pressures on the U.S. Pivot to Asia, including not least an unpredictable North Korea and volatile situations in the East and South China Seas.

Reality therefore dictates that both sides are likely to explore the next best alternative at minimum costs. For Russia, in the rush of events, a bird in the hand may be worth  two in the bush. Putin may therefore feel inclined to grab the best of a bad bargain by engineering a Yugoslavian split of Ukraine one way or another, perhaps through Crimea's (if not Eastern Ukraine’s) call for independence. Then, with levers of a financial bailout and energy supplies, he may hope to gradually bring the western part of Ukraine back into the Russia sphere of influence.

Crimea independence will split the country, and may not be the best option for any side, including the peoples themselves. However, while Russian control of Crimea is to be condemned for violating Ukraine’s sovereignty and unity, this is almost a fait accompli. Ironically, if this serves to push Western Ukraine closer to the European Union, this messy outcome may not be too undesirable to the West from a cost-benefit perspective, sanctity of national unity notwithstanding. 

Sadly, as with Syria, the Ukrainian peoples in many ways may not be full masters of their own fate. They are liable to having to negotiate their future on a much larger Grand Chessboard involving the world's powerful stakeholders.