2016 EMF Conference Introduction: Changes in the Balance of Power: Putin, BREXIT and Trump – Air Cdre RAF (Retd.) Andrew Lambert 5-7 December, 2016

by on January 08, 2017

EMF Conference Introduction: Changes in the Balance of Power: Putin, BREXIT and Trump
Air Commodore RAF (Retd.) Andrew Lambert – ERPIC Honorary Chairman
EMF Conference 5-7 December 2016
Larnaca, Cyprus

We seem to be at the strategic crossroads, where the unipolar world is disintegrating and the balance of power is changing. The old powers are losing their sway, while at the same time we are witnessing the rise of new powers, such as Turkey, India, Russia and China. This signals return to the world of great-power rivalry. The value of liberal democracy has been put into doubt, and the validity of the law-based international system is being challenged. In the meantime, the West is going through turbulent times. The rise of nationalism and populism has most recently led to Brexit and to Donald Trump’s election as president of the US. What are the possible consequences of such developments for Europe, the West, and the entire world?


Christodoulos Pelaghias: Welcome to our Skype conference on the recent developments in the Eastern Mediterranean. We would like to welcome our friends from Netanya University as well as our broader audience on EMF Live. Our first speaker of the morning is Air Commodore Andrew Lambert – Andrew, welcome – who will speak about the changes in the regional balance of power. Andrew, the floor is yours.

Andrew Lambert: Thank you very much. Ok, ladies and gentlemen, I suggest you that we are at a strategic crossroads that is almost like the end of World War II. Despite the successes that follow along immediately after the 1991 battle in Iraq and then subsequent activity in the Balkans, we found that the unipolar world that came out of that has actually over the last sixteen-eighteen years progressively disintegrated. We’ve had plenty of military solutions, for example in Afghanistan, Iraq, also in the Arab Spring, in Libya. But of course then we didn’t actually participate in the red line operation, if I can call it that in Syria. We’ve had some success with Iranian nuclear weapons, though the question is for how long, and we still have the North Korean problem. But for all these situations we do not seem to have any form of political solution. As Sir John Sawers, the ex-head of MI6 said, what we need now is a situation that puts global stability first.

We have looked for too long at the War on Terror and perhaps now we should be thinking again about the “Concert of Europe”. If this is the case, then we have to ask ourselves what value is there then in the current situation where we have in the West been putting up this idea of liberal democracy. Unfortunately, that has been pushed to one side by many of the nations of the world. There is doubt about the validity of international institutions such as the United Nations, and worse than that we now see increasing flouting of things like the ICC (the International Criminal Court) and the ICJ (the International Court of Justice). And nowhere was this more brought into focus than in July this year when in the South China Sea dispute China decided they would not accept anymore the jurisdiction of the tribunal for the UNCLOS.

Which brings us to a question: are we back into a straightforward realist paradigm – the strong do what they can and the weak suffer what they must?

So if we look at the South China Sea dispute, we can see a situation where indeed South China has decided that it owns all the islands as you can see inside the nine-dash line – the disputed islands – and yet the countries closest to those islands, it seems, have no rights because China has said they have historical rights there.

But there’s also another rather insidious factor and that’s this “post-truth” concept. According to the Oxford English Dictionary this is the international word of the year and we’ve seen it brought into sharp focus in places like the Scottish referendum where it didn’t matter what the logical arguments were – the Scots still wanted to be free, whatever that meant. We’ve seen it in Russia to a large extent, mostly because of propaganda, and we see it of course in the Brexit votes that took place very recently where lots of very good arguments were reduced, virtually every single sane organization in the world from the president of United States downwards recommended that Britain stays within the European Union, but at the end of the day the British voted to go. And now, of course, most recently we’ve seen it with Donald Trump and a populist movement that seems to have propelled him into power.

The post-truth era says this: that facts are secondary to emotion so you can have any argument you like, but if you wanted to be the other side of the argument then that is the one that wins. The assertion of belief trumps reality. Well, this is a problem, because it means you can rewrite history if you wish, not only in the present but in the past as well, and one is back to the idea that history is the servant of politics. It’s quite often manifested now as petty nationalism and it fills me with concern for things like elections in the future, for evidence in law courts, for international treaties and their application, even for such mundane things as going to the shops and buying something. It seems there’s no longer such a thing as a lie or an untruth, it’s just an expression of what you want or don’t want. And so we end up in a situation where we are highly susceptible in the future. Because the Netherlands election is coming up in March and God knows which way that will go. In France, of course, there is a good chance that Marine Le Pen will take power in a populist wave in the first round of elections in April and then finally in May.

And of course, there’s the German elections in September. Well, so this is the chaos in which we find ourselves.

So I’m going to talk today about the changes in the balance of power. And I really want to talk about Vladimir Putin, Theresa May and Brexit, and Donald Trump. And just in case you think that Brexit is irrelevant, in this context I should remind you that Britain still has the world’s fourth largest economy and still has considerable global responsibilities.

So we are returning to a world where great power rivalry, it seems, is going to be the order of the day. Perhaps for too long we worried about the War on Terror and now it seems we need to think, as I mentioned earlier, about a “Concert of Europe”. And this is from the Financial Times of the 19th of October just a month and a half ago: “The first foreign policy priority of the next American president will be to work out how to avoid direct conflict with China or Russia.” Because both countries in different ways now challenge US dominance and the wars between the great powers are once again a possibility. For better or for worse, we are returning to great power balance.

At the same time, we can see there has been a change in power. The old powers in Europe, and indeed in America, are losing their sway in the world. At the same time we are seeing the rise of new, well, old-new powers. Turkey, of course – closest to home from where we’re standing -Turkey, as you recall, was the cornerstone of NATO, and still hopefully is, but from 2002 when the Erdogan government came to power the first act they did was to refuse the United States access to their bases for the invasion of Iraq, and then just this year we’ve seen the Gülen coup. And I believe I’m right in saying, and certainly the BBC says this: 105,000 people have been imprisoned in various purges or thrown out of a job. And this is the largest imprisonment or purge, really, since Hitler, Stalin or perhaps even the French Revolution. They’re headed towards a one-party state and it looks like a return to the old Ottomanism. That’s Turkey.

India. The fastest-growing economy until the latest catastrophe with of course the withdrawal of all the high-denomination banknotes. According to CNN this morning that means that the main method now of carrying out trade is barter. So it’s put them straight back into, well, the Middle Ages.

China. Of course, we’ve mentioned them already with the rise of their assertiveness in the South China Sea.

And it’s Russia that I want to talk about first.

Let me start by having a look at the various defense expenditures. And if you look on the left side of this particular slide you can see – that shows the defense expenditure of the United States. And I’m not going to go through the figures in too much detail but you can see that during the Clinton era defense went down, and down, and down. When Bush came to power in 2000, defense started to rise, and it rose fairly continuously during the Bush administration, reached a peak, and then since Obama’s come to power it has declined. So you can see the swings and roundabouts of administration expenditure. On the right hand side is Russian expenditure and it’s no surprise really that during the period under Yeltsin Russian defense expenditure fell down to the (inaudible) that you can see, and then slowly rose during the period that first of all Mr. Putin was in, and then Mr. Medvedev, and then, of course, Mr. Putin again. But you can see the gradient is nevertheless upwards, ever upwards and recently the gradient is increasing at the rate it’s actually going.

Which brings me on to a talk about Russia. And I think it’s important to understand just where the Russians stand. Russia has been for a long time defensive both in mind and body, and with some justification. Russia itself is a product of conquest. And the main conquest that took place that really set the history of Russia in the first instance was the movement of the Vikings into Russia under Rurik which occurred in the period just before 1000 AD. Nobody knows exactly whether the Russians are called “Rus” because of their red hair, but nevertheless it is the Vikings that came and established themselves in Russia and took over and took command of the Slavic nation, the indigenous population, thereby creating a group of aristocrats, the Vikings, and serfs, the Slavs. And it’s quite interesting that Yulia Tymoshenko who was until recently Prime Minister of the Ukraine used to dress with her blonde hair as if she looked like a girl from somewhere in the Baltic. She had the plats and looked exactly like some sort of a Viking maiden. And so you can see that amongst the people who have the power in that area nevertheless they hark back to their time as part of a Viking greater power.

But what are the other conquests? You’ll have to bear with me. I will talk us basically through. From the southeast waves of attacks have come first of all from the Mongols who attacked in 1222, occupied Crimea and beat the Russians in 1223, and then exited back to the Great Khan to tell him about the things that they had seen. They came back in 1237, marched on all the cities of Russia vanquishing Moscow, Ryazan and finally came in 1241 to Kiev. There they divided. The northern group went out and beat the Poles at Legnica and then the southern group went and beat the Hungarians at Mohi. That was the effect of the Mongol armies which then established themselves with the Golden Horde in the middle of Russia.

But if that wasn’t bad enough, at the same time that the Golden Horde was establishing themselves in Russia, Russia came under attack from the West. The Teutonic Knights and indeed the Swedish conquerors tried to move in and attack along the line of the Neva and were defeated by a man called Alexander Nevsky and who is very much held in high esteem in Russia at present.

They were then attacked again from the southeast by the forces of Tamerlane who came up in 1382 and 1385, and after that very fortunately, Tamerlane had to go and attack Delhi, conquered Delhi and essentially exterminated all his opponents before defeating the Ottomans. But if that wasn’t bad enough, we have to think further forward into the modern era. In 1707, Charles XII of Sweden attacked from the west and would have marched on Moscow but for Peter the Great’s scorched earth policy. And literally everything to the west of Moscow was destroyed. There was no food, no shelter and the horses were starting to starve, and so Charles XII had to move south and was eventually beaten by Peter at Poltava.

We, of course, think about Napoleon who invaded 1812 and took Moscow. We then come further forward, of course, into more of the modern era and we think in particular about the Nazi invasion in 1941. If you are a Russian, you find yourself in the center of heartland that people stomp through with very great regularity.

Which means then that the Russian philosophy is to protect that heartland. And the way you do it, of course, is by establishing buffer states. And I’ve ringed three buffer states: one to the West in the top left-hand corner, the area near the Caspian in the middle, and, of course, the Far East which you can see also ringed.  

The Empire came to its greatest extent under Alexander III. And it’s quite interesting if you look at this picture by Repin which is I think in the Tretyakov Gallery in Moscow. Look at Alexander obviously standing in the middle of this group of people, a great bear of a man, but look at the various nationalities that surround him, and it shows the diversity of the Russian population. So if you then look at what happened in terms of expansion and collapse, you can see that Russia extended itself very much to the west, and to the south, and to the east. But if you look on the right hand side, you can see there the situation for Russia at the end of World War II. Of course, Russia at the time had the Warsaw Pact countries, so looking from the top we look at East Germany, then down through Czechoslovakia, Hungary, Bulgaria, etc. They, of course, also controlled most of what happened in Finland and Russia itself, or the Soviet Socialist Republics included the countries of Latvia, Ukraine, and Belarus.

Well, since the fall of the Berlin Wall, of course the Warsaw Pact has collapsed, so that’s the first line of defense gone, and then, since then of course Latvia, Lithuania and Estonia have declared independence. Belarus is partially independent, though still sings to a considerable extent to Moscow’s tune, and of course we’ve seen the things in Ukraine going on. Finland meanwhile is now pursuing a very much more European, Scandinavian posture.

So we find ourselves now in a situation where we have Russia concerned that all its buffer states have gone and it looks as though President Putin is trying to reignite the Cold War again and perhaps to try and re-establish the spheres of influence that he used to have. But it’s the difference. At the end of the Cold War we had tied the Russians up in spaghetti, and these were the treaties that were there and were very successful.

Let’s just go through the treaties. The first one was quite interesting: the conventional forces in Europe treaty. I won’t read out all the things on the slide but it limited NATO and the Warsaw Pact to each have the holdings that you can see up there. Well, of course that became irrelevant when the Warsaw Pact collapsed, but the difference was it allowed us to verify force levels in each of the Warsaw Pact and NATO countries. Unfortunately, that treaty has now been derogated from and Russia declared in 2007 that it was suspending all treaty obligations under the conventional forces in Europe treaty.

We then have to look at nuclear weapons. And as you can see there both Russia and the United States have roughly 7,000 nuclear weapons each. You may think that’s sort of a fairly irrelevant factor and indeed for any person under the age of 45 who does not remember the Cold War nuclear weapons are seen as arcane and irrelevant. And we end up in a situation when people just ignore nuclear weapons and think there’s no reason to worry about them. But I suggest you there is a problem. Under the new START limits that we have, the new strategic arms reduction treaty limits, these are the limits that are applied between the United States and Russia. So they’re limited to 700 deployed missiles and bombers, they’re limited to 1550 bombers and re-entry vehicles, but bizarrely each bomber counts as one reentry vehicle. But as we know, each bomber can have several bombs on board, which makes a bit of a nonsense of it. And they’re limited as well to the number of launchers of 800. This is all to be achieved by 2018 and will last till 2025.

The next factor that needs to be considered is the Intermediate Nuclear Forces Treaty, which required the total elimination of all nuclear and conventional missiles as well as their launchers with ranges of between 500 and 5500 kilometers. That’s nuclear and conventional. And this was done because the SS20 shown on the left up there was a rapidly deployable mobile system that could hit anywhere in Europe. In response to that you will recall, under President Reagan – “The Great Communicator” – the ground launch cruise missiles were deployed, some 464 were deployed in Europe. That showed that we could match the Soviets missile for missile and as a result of that people sat down and talked about how to get rid of them and the INF treaty was the result. And so both sorts of weapons have now been outlawed and are not supposed to be deployed.

So this is a situation that we find ourselves in and I want to talk now just a little bit about Vladimir Putin. Let’s not forget that he has inherited the situation I’ve discussed. That is Russia that feels itself vulnerable, a Russia that feels itself likely to be pressurized, one that its borders have retreated and retreated, and it sees itself being threatened from all sides. They also, you will recall, during the period of Yeltsin found themselves in a situation of utter degradation. People begging on the streets. In fact, interesting enough, when I was last in Russia, one of the girls there told me that their grandmother had just died and when they looked inside all her wardrobes and all her cupboards they found bread hoarded in great quantities with jam because she was afraid just such a situation would occur all over again. And so the Russians have decided, and Putin is the prime example of this: never again will this occur to Holy Mother Russia. And it seems really as though perhaps Vladimir Putin has learnt from Theodore Roosevelt: speak softly, but carry a very big stick.

So we come on to Russia’s concerns. Well, it must never go through the degradation of the 1990s again nor indeed the various problems that it had during the end of World War II. Russia wants to reassert itself as a great power, and that means having military power first. It needs to have its border security established. That includes places like Chechnya. It needs to have some buffer states established and have spheres of influence that it can control what happens in those buffer states. It needs to make sure that its diaspora which is far and wide is looked after. It wants also to make sure that it’s not so dependent on the price of oil and an oil-based economy. And to do all this it’s necessary then to control those that would do Russia down: the agitators, the people who are against the freedom that Russia seems to think that it needs. And, of course, this is done very much these days through control of the television. This is a recent change. Businesses are now taken over if they do not do what the party wishes, and one thinks also of people like Boris Nemtsov who died, you remember, in very suspicious circumstances on that bridge just over a year ago. And I foot at the bottom freedom, and freedom, frankly, freedom in the way that we in the West regard it, is very much a low priority.

Well, let’s see some of the justifications and some of the concerns that Russia does have. If you look at both the Ukraine and the Baltic States you would have thought, well, maybe Russia does have a point because of course there is a huge Russian diaspora in the Ukraine. But look a little bit more closely and I hope you can see that it’s only actually in the Crimea that the Russian population outnumbers the local Ukrainian population. In areas of the Donbas, the Russian population is about a third. So there’s some mileage in saying, yes, we have to look after our diaspora, but perhaps invasion is not entirely justified. And indeed, when we look at the Baltic republics, just have a look: Estonia – 24, let’s call it 25%, Latvia – 27%, and Lithuania – about 6%. So they don’t really have much of a justification to interfere too much there, except the status of the Russians inside the Baltic republics is somewhat ambiguous. For example, the Russians inside the Baltics can vote in Russian elections and do, and most of them voted for Putin. Interesting. A lot of them do not have voting rights inside the Baltic republics. In Lithuania they were entitled to have full voting rights but then that only amounts to some 6% of the population, and so there are a number of Russians who perceive themselves as disadvantaged.

I mentioned the reliance on hydrocarbons and I put this up here to show how it is that when Putin came to power just to the right of that red line on the left slide, of course, the price of oil, and you can see another red line where the price of oil started to rise. And it shows that the oil has been the main driver of Putin’s expansion and it’s been quite a successful expansion as we saw.

And if we look then at how Russian GDP has increased, and Russian defense spending has increased, you can see they are very much in harmony. Well, let’s talk about some of the possible problem areas. The first one I want to remind you of is the INF treaty which says that every missile system between 500 and 5,000 kilometers is outlawed. We look at this particular missile, the Iskander, which is just being deployed now to the Kaliningrad Oblast right in the middle there between Poland and Lithuania. And you have to wonder why it is that this particular missile has been there. Well, what happened in July 2014? The United States notified Russia that they thought a breach was likely to develop of the INF treaty, that the Russians had had possessed prohibited weapons. The Russians said that the treaty was now unsuitable for Russia and unfair because other countries in Asia already had such weapons. And it’s probably likely that what they were referring to as unsuitable was because of the deployment of the Strategic Defense Initiative radars and so forth into Poland and the Eastern European countries.

Well, so hand in hand with that nuclear missile deployment we should look at other Russian rearmament. And I have to tell you it’s proceeding apace. Sputnik magazine has put out a piece of paper saying “Russian military exceeds its rearmament plan by seventeen percent,” and that’s probably true. Just this month they carried out the first of a series of tests of anti-satellite weapons. Well, that means they’ll be able to take out missiles, take out satellites in geostationary orbit, or indeed take out satellites that are (inaudible) for GPS remains to be seen. But it’s certain that they see themselves as being very capable and desiring to be able to fight a battle in space.

On the ground we see various other capabilities improving. The armata tank, which is now just being deployed, is one of the most heavily armed tanks and most accurate tanks. It’s probably frankly a world-beater compared with all the current systems that are there. It will be extremely difficult to knock out. The vessel on the right is Severodvinsk which is a new nuclear-powered attack submarine which will be capable of carrying cruise missiles, land-attack missiles, anti-ship missiles and various anti-submarine missiles of all varying sorts. It is very quiet and very difficult to detect.

Just in case you thought that Russia was not keeping up with the Americans in terms of stealth, on the left is the new Russian stealth aircraft that is being introduced into service as we speak – it’s the Pak FA t-50, and although it may not be quite as stealthy as, say, something like the Raptor or the B2, nevertheless it will be difficult to detect. The picture I’ve got on the right is the su-33. You will recall that the Kuznetsov and the Pyotr Velikiy – Peter the Great – frigates went down through the English Channel just recently and I found it quite interesting that on the Kuznetsov as they progressed along through British territorial waters they had two su-33s on deck alert all the way along, presumably saying, “We’re ready to take on all (inaudible).” Not exactly the sort of thing you do in friendly territorial waters.

So we come on then to the Ukraine crisis. I said to you that 58% of the people in Crimea are natural Russians, and we know that Crimea was taken, and there’s some justification for that. Russia originally took Crimea under Prince Potemkin on the orders, of course, of Catherine the Great. So naturally it was part of Russia. But I ask you this question: is that really the way to take over or take back your original possessions – just to march in and kick the Ukrainians out? One wonders.

And if that isn’t bad enough, there is a nuclear dimension as well and it’s this. Just recently in Moscow and I believe Saint Petersburg as well, civil defense exercises have been carried out where civilians are being sent to their bunkers and told what to do in the case of a chemical or a nuclear attack, thereby creating the mind in the civilian mind that they are possibly under attack already, or likely to come under very soon. And Dmitry Kiselyov, as you can see here, said that any clash of the US and Russian forces in Syria could escalate dangerously, well that’s sure, but then the next line becomes telling: “Impudent behavior by America has a nuclear dimension.” Well, that sounds like an official view and is extremely worrying because if we are now moving towards the sort of confrontation that we had in the Cold War, without the treaty obligations and without the treaty effects of the Cold War it becomes very unbounded.

So we come on to this question: is there a risk of miscalculation or are we moving into a compromise?

At the recent meeting, as you recall, of the both houses of parliament in Russia, President Putin on Thursday the 1st December denounced myths about Russian aggression and expressed hope that the incoming US administration would then work with Moscow to fight terrorism. And I wonder if this is an olive branch or this is actually a warning. Well, time alone will tell.

Let me leave that and turn now to Brexit. I’ve put on here that Brexit is a journey to an unknown destination and you can see, bearing in mind what I said about the post-truth era, some of the messages that were around: “Let’s give our NHS the 350 million the EU takes every week.” That’s absolute baloney. The net cost to the British economy was some 7 billion a year and actually because of Brexit by the next couple of years we will find ourselves 31 billion every year in debt and the overall level of debt will increase in the United Kingdom.

There was a feeling of “let’s take back control.” This is where it comes back to this idea of freedom. “We don’t want any more the people in Europe telling us what to do.” And there’s a cartoon you can see on the right there, I think it’s Sir David Davis and Boris Johnson on their horses hunting Liam foxes, and I think there’s Angela Merkel and Mr. Juncker at the back.

So what do these people, the Brexiters, really want? Well, they seem to divide into three. The utopianists really didn’t want Britain to be polluted by foreigners. They wanted British jobs for Brits, the Europeans were getting British benefits and need to be stopped helping themselves to our economy. Britain needed to be great again and we didn’t want the ever closer Union. Those were the utopianists. The nationalists on the other hand were somewhere in the middle. They saw that Britain was paying out an awful lot of money (350 million per week it was said), EU law was a burden, we couldn’t have our own British sausage anymore, Brussels decides everything we wanted to do, there was a bureaucracy that farmers had to adhere to (they didn’t worry about their crops so much, they had to fill in forms), the euro was supposedly costing the pound its value, and we couldn’t form our own separate trade agreements. And then there’s the other group, the opportunists, who said that the European Union is probably going to fail. We see what happens with Grexit and how close to the border we came with the Greek economy just recently. There are many more opportunities with China and India, and indeed if you look at the European army, that is going to undermine NATO and we don’t want that to happen, we want NATO to remain strong. So there we are, that is what the various Brexiters have said.

And if you look at what the papers were saying on the day of the actual election, four-fifths of the British press, especially that controlled by Rupert Murdoch, wanted to leave, and look at the headlines: “Vote leave today,” “Britain will roar,” “Out of the EU,” “Your country, your vote,” “Independence Day,” “Day of reckoning,” “Betrayal of Britain.” Interestingly, the top left-hand corner, only the Daily Mirror said, “Don’t take a leap into the dark.” Probably not quite what you would expect.

So when we look at the lines in the sand, there is indeed an increase, as you can see, from the left part of the slide in migration. And most of it had come from the newer Eastern European countries, Bulgaria and Hungary. But of course, it has to be pointed out that if that was to reduce because there is still a demand for cheap labor, then obviously the non-European immigrants will have to increase.

I’ve stopped there, and I’m not going to dwell on it, the way in which Britain voted. Interesting enough, the only real blue vote came from London and Scotland, and so that was the grouping that voted to remain. The rest pretty much overwhelmingly one way or another voted against.

The Economist did a very interesting study and I might look at this in too much detail. Essentially, it runs like this: the more degrees you have the more likely you are to remain; the fewer degrees you have the more likely you are to vote to go. And age became another factor. The older you were the more likely you were to vote to go’, and the younger the more likely to remain. Effectively, those that had the greatest impact of austerity, or received the greatest impact of austerity were more likely to vote ‘go’.

What was the effect of the Brexit? Well, the first thing is there was a decision over whether or not Brexit could be implemented as it currently stands. And it was put before the law courts, the high court, and you can see the three judges that were there: there’s the Lord Chief Justice of the United Kingdom – the Master of the Rolls – and another very senior legal advocate. They said that actually there were inherent rights in the Treaty of Rome given to individuals that cannot be removed by royal prerogative. And it must go before Parliament, and Parliament must decide. Well, you can see what was branded there on the day this decision was made. The Daily Mail said that the judges were the enemies of the people. Well, if you’re saying that the judges are the enemies of the people, one wonders who is not enemy of the people. And it seems to me that is a disgraceful thing to say. Well, if we now look at what immediately happened following the vote, and you can see it’s obviously the pound against the dollar, and you can see on the day after the vote the pound fell by some 10% virtually the next day. There’s another drop off you can see, about three quarters of the way along, following the speech by Theresa May at the Conservative Party conference saying that probably there would be, or hinting there would be a hard Brexit. The net effect is that the pound has fallen by some 18% over the period and is in a parlous situation.

Well, what has been the economic effect? Well, the pound, as I said, is already 18% down and probably will swing wildly over the next few months – every time a minister says something that is ill-advised the pound will go up or down in reflection. The same time, of course, oil has gone up and you’ll know that it was assumed to be about 45 dollars a barrel by 2020 and already this assessment was punched through following the last week’s OPEC meeting declaration of 50 dollars a barrel.

In addition to that, many of the businesses in Britain have gone to the government and said we need assurances that we will be better placed to stay in Britain rather than move our factories across to somewhere in Europe. And those assurances have been given, and NISSAN has decided to stay, and of course the other businesses will be seeking similar assurances. It is not known quite what those entail. At the same time, many of the farmers will be losing their casual labor from places like Bulgaria and so forth. And if alternative sources are not found for the labor, then of course the crops themselves will not be picked. So we’ll be eating, ladies and gentlemen, no strawberries this year.

Well, let me turn now to defense and look at the effect on defense. This chap is General Sir Richard Barrons, he was the commander-in-chief of the Joint Forces Command and he produced a report which went to the secretary of state, which was then published in the papers completely illegally. And he said that “Although we have a reasonable capability in the War on Terror, should we have to match against a peer competitor, in other words Russia, or to balance it in any way, then the forces will wither to such an extent they could not repel an all-out attack.” Now, you’d expect that a British public would say this is outrageous, we are paying all this money for defense. But actually there was virtually nothing at all – no impact, no concern, and it just went away.

British defense spending, you can see from this graph, was already a long way down and at 2%  there’s going to be a considerable pressure on British defense spending to be able to meet up to the commitments that we’ve already made.

Well, the first impact on British defense is the effect of the falling pound. If the pound falls by 18% then of course the cost of all the things that one buys in the United States go up by 18%. We’re committed to buying twenty four of the F-35s on the left, hopefully going to be buying forty eight before too long. We’re committed to buying nine P-8 Poseidon maritime patrol aircraft – all of them have gone up by 18%. And though there may be some hedging, it’s difficult to see just how this can be afforded. In addition to that, Britain is due to have an Apache replacement. It’s buying itself a new strategic nuclear ballistic missile defense. Many of the Typhoons are bought on the continent. We are buying predators and we’re buying weapons. It is difficult to see how all this can be afforded.

And then we come on to this issue. As Britain pulls out of Europe, we essentially give a free rein to, well, the Germans in particular. And Ursula von der Leyen, the German defense minister, have said, it is about time that Europe now build up a European army. And for Britain this will be disastrous because if a European army is built up, that will give them an excuse perhaps not to increase their defense expenditure, and also it’ll make people realize, well, if there’s a European army, what is the value of NATO? So Britain in particular will find itself neither protected by NATO, nor with the seat at the top table to decide what happens with the European army.

Well, this leaves us in Britain a bit of a cleft stick because whatever Theresa May does in the near future we are going to have a problem. If there’s a soft Brexit, which of course many people want, certainly all those that voted in terms of remain, then of course EU immigration will continue and UKIP will have a cause to fight against. If we go for a hard Brexit, then, of course, and we may actually just be kicked out, we can’t visualize any conditions at all that will require economic austerity for probably 10 years. Whichever way it goes, I confidently predict that when the conditions are put before the British people, there will be a vote of no confidence at some time in 2019.

Now, it was thought until just recently that Theresa May would be well advised to call a snap general election sometime during the early part of next year. But the defeat of Zac Goldsmith at Richmond Park that occurred just last week where his 23,000 majority was turned into a defeat of two thousand and the seat passed to liberal democrats, largely because Zac Goldsmith is a Brexiter, and most of his constituents are not, rather signals such a reason she goes to the country, those that voted “remain” will probably turf her out. So we then end up in a situation that she is in a real cleft stick. Is she going to go to the country early or hope that she can negotiate her way out? And indeed we then come to the problem. Politically, if we do depart and there is no source of labor, where will the immigrants come from? Will they come from the Commonwealth?

So we come to a Brexit. And I have to tell you that right now it is virtually the sole British issue. There is virtually nothing in the British papers apart from Brexit. Brexit for, Brexit against. And this week in particular the Supreme Court from today is ruling whether Parliament is rightful authority to trigger Article 50. Can royal prerogative be used to take away the inherent right of UK citizens under Article 50? Does Article 50 also trigger withdrawal from the exclusive European Economic Area? And that is another question. What will happen over immigration? Will that be stopped or will we accept it? Once the negotiations are complete, who then will say that these negotiations and these conditions are acceptable? Will it be the government? Yes, that’s fine. Will it be Parliament, or will there have to be another plebiscite? And then, of course, we come finally to the status of Scotland and indeed Northern Ireland close the plebiscite. A post-Brexit, will there still be a United Kingdom at 2019 and beyond?

Well, enough of that. Let me turn now to the situation in America. And the first question I’ve got for you is this: who really is Mr. Donald Trump? I see the man on the left, the compromise man, or is he the hard man on the right? And I should mention to you that the first one of the first people to congratulate him on his victory was Vladimir Putin.

Foreign policy. Well, it’s difficult to work out what the foreign policy is. This is culled from what has been said and what is believed. It’s believed that Donald Trump sees the world as chaotic and threatening. He has said he will put America first, he’ll reduce the US role in the world, he’ll stop being the world’s policeman. He’s happy to use force, provided it’s in the United States’ interests. That means it’s not necessarily in the interests of everybody else, and where everybody else’s interest is concerned, he won’t necessarily commit US forces. He wants to diminish the commitment to the Alliance. He’s not committed to giving a nuclear guarantee to Europe or the Far East and he said, therefore, that he does not see any difficulty with Japan for example having a bomb or Saudi Arabia manufacturing a bomb. He wants to pull out of adverse trade agreements, that’s WTO NAFTA, Trans-Pacific Partnership, and even the Paris Agreement on climate change. Well, we’ll see.

On immigration, he’s already said that he wants to reduce immigration so he can control the Muslim immigration, and he said that Mexicans will not be allowed to cross, and of course he’s committed to building a wall and imposing tariffs.

As far as Russia is concerned, he says his foreign policy is based on mutual respect and he said he is entirely happy over Syria to align with Russia’s Syrian ally. Ok, so that obviously indicates a change, but maybe by the time he comes to power that situation will be resolved anyway. On Ukraine and Crimea, is he going to continue with economic sanctions? Well, that he hasn’t said anything about. What he has said however is he tends to renegotiate the Iranian bomb treaty. But then I suggest to you that if he does or if he repudiates the Iranian bond treaty, all that will happen is Iran will just build a bomb all the quicker. Is he likely to agree to the spheres of influence that Vladimir Putin wants, certainly in the eastern part of Europe, or indeed in the Middle East? Is he going to negotiate this by a series of deals?

Let me come on to China. He’s already said that he might impose something like a 35% tariff on Mexican stuff, on Mexican imports that come in. Would he propose the same sort of thing on Chinese imports? Because if that happens, then I suggest that Chinese economy will probably collapse, and as a result of that world trade would go into difficulties. Then we come on to the South China Sea issue. Well, as you know he spoke to the president of Taiwan recently and that of course will give him all sorts of grief with China in the near future. And we shouldn’t forget of course that his country is heavily in hock to China anyway.

On the F-35, the F-35 future is in some doubt. Not only would the United States find it extremely difficult if the F-35 were not to go ahead, but also all the European nations that have contracted to buy it. And then I’ve said at the bottom, as I just mentioned, that we have a situation where Iran would just make the bomb if that were the case.

What he has said though as far as Europe is concerned is that everybody must pay more in Europe. And the line I’ve put vertically down there is the 2% line you can see, just those nations that are paying enough. And United States, it should be said, pays about 70% of the total cost of NATO at present and although the percentage of GDP looks impressive for places like Greece, of course Greece doesn’t have much of a GDP, so its actual expenditure is not that high. But then you look at the top and you look at Germany at 1.38%, and you realize that some nations are not frankly pulling their weight. What would Mr. Trump do? And one suggestion is, perhaps he would say to places like Hungary, Belgium, Germany, Spain and the places from the top, “We will only guarantee Article 5 to you provided and when you actually achieve the 2% limit.” And then, of course, we have the whole issue of the European army and whether that’s an alternative to NATO.

So where do we sit? We sit really at a pendulum. You know, on the one hand wise counsel may prevail, Russia could avoid involvement in Ukraine and keep well clear of that, and gas and oil could flow freely, Brexit could go for the soft option, the UK maintains its defense status quo and finds some more money, Mr. Trump encourages NATO to come up to the 2% over a period of time and maintains his interest in the NATO leadership. Of course, at the other end Russia could find that it’s encouraged by what’s going on and decide to put more pressure on the Baltics. Turkey, already starting to make overtures to Russia, could become less and less of a NATO player. There could be a nuclear play, I don’t mean nuclear explosions, but I do mean nuclear threats and nuclear coercion, the UK could be into a hard Brexit, defense would be cut back still further and I’ve already said that Britain already has virtually no appetite for anything but Brexit, UK could largely withdraw and retreat back into its little island fortress. Is Trump going to apply a 2% hard criterion, become isolationist and go for brinksmanship? And what will happen to NATO? Will NATO just fragment? Will the European Union just fragment? Will there be a European army, and will it actually be funded at a 1% rather than the 2% percent?

But in all this we can’t forget that we have cause and effect. Every single effect that takes place will rebound across the world. And it’s not just like a pendulum, it’s more like these swinging balls – every movement of the red ball will impact on China, India, Turkey in the Middle East and then bounce back onto the red ball.

Ladies and gentlemen, that completes my presentation. Thank you very much.


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