The Cold War ended 30 years ago. But since the 2007-08 financial crisis, it has not only returned but mutated into a hybrid lukewarm war. And with the United States and its European allies now struggling to manage the threat of a Russian attack on Ukraine, the specter of a hot war is looming. The 1938 appeasement of Nazi Germany has become an attractive historical analogy, since that was the moment when the post-World War I cold war mutated decisively, supposedly making a hot conflict inevitable.
Munich will forever be associated with that moment, because that is where Britain, France, and Italy ceded to Germany substantial territory in Czechoslovakia without consulting either the Czechs or the Soviet Union. This episode has been revisited repeatedly, most recently in Christian Schwochow’s brilliant new film Munich: The Edge of War, based on the novelist Robert Harris’s interesting attempt to rehabilitate British Prime Minister Neville Chamberlain’s reputation.
Now that the Biden administration has offered to hold another summit with Russian President Vladimir Putin, following weeks of abortive negotiations, are we witnessing a replay of Chamberlain’s efforts in Munich?
The analogy has justified mistakes
A facile dictum emerged from Munich: Never appease dictators. After 1945, this often led to disastrous consequences. In 1956, for example, British Prime Minister Anthony Eden (who had resigned as foreign secretary in 1938, just a few months before Munich) was wrong to treat Egyptian President Gamal Nasser as a new Hitler. Decades later, US Presidents George H.W. Bush and George W. Bush were wrong to apply the same label to Saddam Hussein. The analogy justified a catastrophic mistake that has profoundly altered the shape of world politics.
There is little doubt that Putin is a disturber of the peace who has already accomplished many of his goals. He has destabilized Ukraine and thereby prevented it from serving as a model for opponents of his authoritarian rule. He has split Europe from the US, shone a harsh and unflattering spotlight on America’s incapacity to respond to Russian initiatives, and highlighted internal divisions within Europe.
In the past, the obvious response to Putin’s threats against Ukraine would be massive economic and financial sanctions imposed by the US and its NATO allies, targeting not only Putin and his cronies but also the entire Russian economy. For example, Russian banks could be barred from SWIFT, the international payments-clearing system.
Danger of a financial crash
But Russia has systematically built up its reserves and reduced its financial vulnerabilities, which means that losing access to SWIFT might not be all that painful in the short term (though it would almost certainly cause great hardship in the long run). Worse, weaponizing SWIFT could have both far-reaching and immediate implications for the US and its European allies. One obvious risk is if creditors suddenly cannot be repaid, cascading insolvencies could trigger a financial crash and an international credit freeze.
This scenario has echoes not of 1938 but of 2008, when fears about relatively small subprime mortgage losses led to much greater uncertainty about how major financial institutions would be affected. The result was a massive selloff and generalized panic. Today, the uncertainty is being augmented by new factors, such as the rise of digital currencies and payment systems and the weaponization of energy trading. Would shutting off imports of Russian energy to Europe really be an effective retaliatory measure? Some European countries – notably Germany – would consider such a sanction a greater threat to themselves than to the Russians.
The current menu of financial and economic sanctions thus reprises the Cold War logic of mutual assured destruction (MAD). The ability to deploy systemically threatening financial and currency instruments is the modern equivalent of nuclear warheads. (Chamberlain was driven by a similar logic: only a generation removed from the horror of WWI, he was committed to preventing a further escalation.)
Keeping room for interpretation
What does the Russian side of the MAD equation look like today? Kremlin strategists certainly know that Russia has a great deal to lose from an open conflict in Ukraine. A Russian invasion would encounter substantial Ukrainian resistance, leading to heavy casualties and a further demoralization of the Russian population. Maintaining control would be difficult. The occupying soldiers would be repressing a civilian population that can speak to them in their own language. It is worth recalling that the first Soviet soldiers in Prague in 1968 needed to be withdrawn because they began to sympathize with the Czechs.
With limited options all around, both sides feel trapped. The real lesson of Munich is that there are ways to deal with the political psychology of entrapment. Hitler won the contest in Munich, because he gained unrivaled domination over Eastern and Central Europe. But he soon became frustrated, because the opportunities offered by threatening a conflict had disappeared. As Henry Kissinger convincingly demonstrates in Diplomacy, Hitler’s irrationality led him to throw away his advantage by going to war in 1939.
A hot war is not inevitable in a Munich-like negotiation process. While it is true that the aggressor once again seems to be winning, much remains open to interpretation. If Putin’s goal is to expose the West’s weaknesses, he can claim an immediate victory. But viewed another way, peace and even democracy also are winning, because the new logic of MAD shows just how little there is to be gained from an escalating conflict.
Copyright: Project Syndicate.