Sleepwalking into a Major War?


Washington’s written reply to Moscow about the latter’s concerns regarding the standoff over Ukraine, which was eagerly awaited even though everybody in the whole world knew that it would disappoint, could well be the last missed chance of averting what might turn out to be a major war on the edge of Europe. That this confrontation has erupted over Ukraine is only of secondary importance, since it was building for more than 10 years and despite Russia’s warnings the US and EU were bent upon expanding Nato right up to the Kremlin’s throat. And since the US-led alliance was clearly counting on Russia’s diminished military and financial firepower to just gulp its eastward march, President Putin has also, quite expectedly, pinched them where Europe’s concerns about its gas supply from Russia, via Ukraine, will also drive some sort of wedge between Germany and America.
And so this complicated game goes on. Financial markets, however, are now beginning to price in a complete collapse of talks, which all sides have pledged to continue despite the setbacks, in anticipation of some fireworks in the not-too-distant future. Oil shot past $90/barrel for the first time in seven years on Wednesday, which means that an already tight market will now have very little downside room even in case of a small breather. And that, in turn, means that the pressure on commodity prices is likely to persist a while longer.
If the buildup of troops and breakdown of talks is doing this to the oil market, it’s not very difficult to work out what will happen if some spark is actually lit on the ground. The entire world will feel the impact, especially poor countries like Pakistan that are very responsive to international price shocks.