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Supply Chain Risk

Morrison’s risk assessment is not limited to Canberra

Anthony Blinken, US Secretary of State, will appreciate how extremes of divisive politics, community disillusion and voter distraction can paralyse any prospect of coherent policies being implemented.

The Biden Administration is flailing if not failing in Washington’s quagmire even as it attempts to bolster international co-operation among its allies.

The Melbourne meeting of “the Quad” members is part of the combined effort to counter China’s and Russia’s ambitions to reset the global balance of power. The Quad discussion will now include the urgency of a response to Russia’s hostile moves against Ukraine – an addition to the favourite Australian topic of China’s long-term threat to regional security.

Australia is not so directly affected by events in Ukraine, but its interests would quickly become hostage to crisis. The appeal of Australia re-opening to the world comes with a darker double meaning. And threatening confrontations are no longer politely coated in diplomatic rhetoric that avoids targeting governments by name in favour of vaguely worded statements about support for the international rules-based order and democratic values.

The joint statement issued by Xi Jinping and Vladimir Putin after their meeting in Beijing is a potent demonstration of a new relationship of mutual convenience being relentlessly strengthened against the US and its allies.

Predictably, the statement included condemning AUKUS, the trilateral security partnership between Australia, the UK and the US.

But in Ukraine, Putin is also demonstrating his brutal skill at leveraging Russia’s relatively modest economic clout to exert political and military power in order to destabilise other governments and extend a malign Russian influence.

There is still uncertainty about whether its hostility will extend to a full-scale invasion of Ukraine – or more limited military incursions to control particular areas of the country backed by other forms of cyber and guerilla warfare.

Most analysis has suggested that outright invasion is less likely, while Ukraine’s president has been dismissing fears expressed by the US that invasion is imminent, insisting it just won’t happen.

It also seems unlikely Xi would be prepared to have Putin disrupt Beijing’s showcasing of the Olympics this month. Yet there’s no discreet exit possible from Putin’s decision to shift more than 100,000 troops to Ukraine’s eastern border region. The joint military exercises being held with Belarus, Russia’s client state and another Ukraine neighbour, reflect the threat to Kyiv from a range of directions.

What is clear is that Putin’s aggressive manoeuvres have put him back at the hot centre of global tensions while exposing confusion among members of the North Atlantic Treaty Organisation about whether to try to mollify or confront him. The more blatant of Russian demands – including preventing any more countries joining NATO – have been unanimously rejected.

But Putin now has Xi’s endorsement in also opposing any expansion of NATO. The joint statement naturally promoted the superiority of their new relationship over “the political and military alliances of the Cold War era”.

That still leaves room for panicked diplomatic efforts from various European leaders also interested in advancing their own national and political interests and ensuring war doesn’t return.

French President Emmanuel Macron is meeting Putin in Moscow this week while the new German chancellor Olaf Scholz is heading to Washington for his first meeting with Joe Biden. In the UK Boris Johnson is keen to rise above another self-inflicted crisis crippling his prime ministership to concentrate on avoiding a humanitarian catastrophe in Ukraine.

But the political strategy is still focused on stressing the high cost to Russia of economic sanctions that would be imposed if Putin does indeed invade. Rushing 3000 more US troops to Europe and boosting the level of US military equipment provided to Ukraine are chiefly for deterrent effect.

Ukraine’s military is definitely much better prepared to fight against Russian aggression than it was in 2014 when Putin annexed the Crimea. Yet such support does not indicate any willingness by the US or by its West European allies to assist in countering an invasion with their own military forces.

Nor does it resolve Russia’s own ability to impose economic costs on Europe by withholding gas and forcing up energy prices. Russia supplies about 40 per cent of Europe’s gas needs. Brussels is frantically working on contingency measures, including negotiating extra supplies from major LNG producers. This won’t stop big price rises – and plenty of other risks – should Putin really want to test the West. Welcome to 2022.

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