The War Putin Had to Have
President Putin’s war is against the obscenely wealthy Russian oligarchs. Putin’s war is not with Ukraine. The balance of power is shifting. The 21st century can no longer be called the Asian century. The 21st century is the age of resources. President Putin’s war against the oligarchs can be termed as the first environmental and resource economics war, and it will not be the last. As callous as this may sound, the deaths of Russian and Ukrainians is the price we are paying for this new and evolving dynamic.
Of course, for thousands of years, wars have already been fought for resources, power, glory and territory. In general, for war to occur with rational actors, at least one of the sides involved has to expect that the gains from the conflict will outweigh the costs incurred. Second, there has to be a failure in bargaining so that, for some reason, there is an inability to reach a mutually advantageous and enforceable agreement. Both of these factors are currently at play between the oligarchs and President Putin.
For the first time in human history, we are slowly becoming more cognisant that we live in a world with a finite amount of resources. For the first time, we must tackle climate change, environmental degradation and pollution. For the first time, we must consider human rights, a living wage and child labour. For the first time, we are rethinking capitalism and wondering how to actually live sustainably.
In a recent article by Umair Haque 'Why a New Era of War is Dawning — And What Putin Really Wants', Umair implies Putin's war game is about control over Eastern Europe and "…about amassing control over resources." The article goes on to state, "Because Putin understands something chilling. Our world is running short of resources now. Whoever controls the resources controls the world." While parts of this are true, there is one undeniable fact, Russia has an abundance of natural resources.
Why go to war for resources, when Russia "…possesses rich reserves of iron ore, manganese, chromium, nickel, platinum, titanium, copper, tin, lead, tungsten, diamonds, phosphates, and gold, and the forests of Siberia contain an estimated one-fifth of the world's timber, mainly conifers." Putin's problem is that the oligarchs own these resources, not the Russian state. And with their immense wealth has come power.
The term ‘oligarch’ is of Greek origin and can be loosely translated as "the rule of few". The current sanctions aimed at the oligarchs attempt to influence Putin to withdraw from Ukraine. Recent articles from The Washington Post and The Guardian suggest that the oligarchs do not have the political power to stop Putin. But what if we are looking at this in the wrong way? Shouldn't we be asking, "Does Putin have the power to stop the oligarchs?" I will argue no, Putin no longer has the power to stop the degradation of Russia from the rape and pillage of resource extraction that benefits a minuscule number of people.
While it may not be glaringly obvious, the world is attempting to transition to a sustainable and circular future. As our values are changing, so too is the level of scrutiny by governments, investors, financial institutions, NGOs, and ordinary citizens on the products they buy and consume. Even supply chains, a topic most consumers are clueless about, is becoming an item of interest. So, where does Russia sit in this new paradigm?
The world's largest high-grade nickel and palladium producer is a Russian company, Norilsk Nickel. Their two largest shareholders are the oligarch Vladamir Potanin (shareholding 35.95%), who is also the president of Norilsk Nickel and Oleg Deripaska (shareholding 26.25%). Their net worth is $22.5B and $2.5B, respectively. In 2020, at a Norilsk Nickel plant, 20,000 tons of diesel seeped into the soil and water on the Taymyr peninsula in the Russian Arctic, and the Ambarnaya River ran red.
It has been reported that Norilsk Nickel believes the region's melting permafrost caused a reservoir to collapse. Permafrost thawing across Siberia, linked directly to climate change, has caused widespread issues such as buckled roads, collapsed homes and disruptions to traditional herding and agriculture.
According to Greenpeace Russia, the Norilsk spill is one of hundreds of oil accidents that occur across Russia every year. At the time of the spill, President Putin publicly gave an "unusually stern dressing-down" aired on Russian television, where he asked Sergei Lipin, the chief of the Norilsk Nickel fuel subsidiary NTEK, "Why did government agencies only find out about this two days after the fact? Are we going to learn about emergency situations from social media?"
Russia's NDCs (Nationally Determined Contributions), as part of their commitment to the Paris Agreement, states "Reduction of greenhouse gas emissions by 2030 by up to 70% compared to the 1990 level, taking into account the maximum possible absorptive capacity of forests and other ecosystems and subject to sustainable and balanced socio-economic development of the Russian Federation." Yet, these forests are subject to massive deforestation.
China is the world's largest importer of logs and lumber in the world, becoming a global wood product remanufacturing and redistribution centre. Russia supplies 48.3% of these lumber imports to China.
By Russia feeding China's colossal appetite for wood, China has brought jobs and cash to regions of Russia. Yet China has sharply restricted domestic logging to preserve its forests and Russian timber facilities only to be staffed by Chinese labour.
Ms Avdoshkevich, the Kansk City Council member, said that the Chinese timber barons based in China ship as much wood as they can, as quickly as possible, to China, without investment in manufacturing in Russia and regard to environmental damage.
It is estimated that around 20% of the Russian wood exported to China is felled illegally, helping Russia become a global leader in forest depletion. However, assigning the massive deforestation to corrupt officials and the Chinese oversimplifies the mechanics behind ownership of Russia's natural capital.
The UK registered non-profit, Earthsight, recently published an exposé on the Russian companies linked to deforestation. They found that Russian oligarchs are behind the country's largest logging companies and wood products exporters. These oligarch-linked firms control Russian forests with a combined area as large as France, forests home to precious wildlife including Siberian tigers, lynx and brown bear. Despite nearly all of their logging being 'certified' as legal and sustainable by leading global green labels.
Russia's war with Ukraine does not make sense. Nor does the belief that President Putin wants to turn back the clock to resurrect Russia to its former Soviet glory. Unfortunately, much of the world has failed to comprehend how serious the dwindling supplies of primary raw materials are becoming. A small minority of people, some in very large companies, are aware of this dilemma and exploit the prevailing system's weakness until this too begins to close. Huge profits are still to be made from under-priced primary raw materials, and sadly, we are still too slow in developing a secondary raw materials industry.
While the world vilifies President Putin for his barbaric assault on Ukraine and its civilian population, I do not believe he has lost his mind. He has only lost his ability to rein in the oligarchs and their wholesale destruction of Russia's assets. There is no other country in the world where the scale of extraction and correlated financial benefits comes close.
It is well-known President Putin is complicit in this Faustian bargain over Russia's natural wealth. And for quite a long time, the uneasy balance between the oligarchs and President Putin was well defined and maintained. This balance has slowly been eroding and has forced Putin to take the unusual step to wage war with Ukraine to bring about economic sanctions to Russia as a country and Russian individuals.
An increasing number of investigative academics, journalists, NGOs and a growing band of citizen detectives are beginning to record the relentless extraction of one country's natural capital for the benefit of another.
In 2020, two academics published an article, "Singapore's Scentless Growth is Built on the Brutal Extraction of Cambodian Sand and Imported Labour", where they state ", The critical importance of sand for the realisation of Singapore's nation-building project becomes clear through these incongruous sand stockpiles dotted around the island…all this underlines the fact that it is a matter of national security and beyond debate."
A US journalist recently wrote on Ikea's Race for the Last of Europe's Old-Growth Forest. Will a secondary raw materials industry bring peace to these covert wars for resources to feed humankind's insatiable appetite for consumer goods, and middle-class lifestyles fed by profit-hungry companies? A secondary raw materials industry democratises resources with SMEs becoming conduits for resource recovery and reprocessing facilities. The world will always be reliant on a certain amount of extractive industries but it must sit side-by-side with a healthy, well-managed, functioning secondary raw materials system that has the potential to significantly reduce the power and reliance on a few major mining companies.
But first, we must start to build the system for a resource recovery industry to exist. And, treat end-of-use-cycle products with respect. We must also begin substituting the word 'waste' with 'resources' and encourage all consumers to responsibly dispose of items they no longer want. Unless we design products for the economical return of these resources back into inventory for manufacturers; unless we innovate new materials to fit closed-loop systems, President Putin's war with Ukraine is just the beginning of our war for and over resources.
Ms Adrienna Zsakay is the CEO of Circular Economy Asia Inc. The views and assumptions expressed in this article are her own.
References:
The Russian Economy: http://countrystudies.us/russia/55.htm
Vladamir Potanin: https://www.bloomberg.com/billionaires/profiles/vladimir-potanin/
Oleg Deripaska: https://www.forbes.com/profile/oleg-deripaska/?sh=6990211b804c
Norilsk Nickel: https://www.nornickel.com/investors/shareholders/listing /
‘The Reasons for War — An Updated Survey’ by Matthew O. Jackson and Massimo Morelli, published 2009.
