By Dragan Vitorovic
The Game Theory of Surprise
15 January 2015 – The Swiss National Bank (SNB) abandoned the currency peg to EUR, previously set at 1.2 Swiss francs per Euro back on 6 September 2011. The Swiss franc appreciated immediately 20%, mounting pressure on the mortgage loans in Croatia, Poland, and the Czech Republic, hitting investors who had uncovered exposure to loans in Swiss francs. Eventually, the market forces adjusted the exchange rate after the initial disturbance and incurred losses in the financial sector and real economy. The move of the SNB was unannounced, effective, and had an element of surprise. Some could say that the action of the SNB was expected, given the weak but observable signals coming from the markets – but the postmortem hindsight operates in a completely different reality.
24 February 2022 – The official military of the Russian Federation started the extended operation by entering Ukraine, attacking its neighbor from the land, air, and sea. The military analysts, general public, and policy-makers were partially caught by surprise. Despite the extensive speculation that Russia will attack Ukraine, few people expected that the military intervention could deploy so many Russian military resources. West responded swiftly, in no less surprising move – severely and effectively cutting Russia off from the significant number of the financial markets, isolating its presence from various diplomatic, sport and cultural events, exercising pressure on many levels of human activity and successfully coordinating the efforts of the military, state and private sectors of the West – against Russia.
Is there a parallel between the two seemingly unrelated events, or did the Russian intervention possibly transmit stronger signals a long time ago? Could the most decisive move opening the war games appear irrational and self-destructive at first sight, later to transform into the more significant part of historical junctures and psycho-geopolitical dimension?
Not so Uncharted Futures
In his recent interview for the Uncommon Knowledge, Professor Stephen Kotkin, a well-known American historian, stated that the Russian Empire had been revamped as a powerful country in the shape of the USSR. According to a renowned expert, the USSR was not satisfied with the exclusion of the from the international community, combined with its territorial losses. The USSR acquired enough power to revise a Versailles Treaty in stages as the global circumstances unfolded. Then, in 1991 the USSR lost the Cold and ideological war, pushing Russia back in a result, without an opportunity to revise this situation. However, once again, Russia managed to grasp power on the international stage. Those developments allowed President Putin to roll back the rules of engagement in the international order. If denied, speculated Professor Kotkin back in January, President Putin will attempt to rewrite the rules. As many experts also hypothesized, Professor Kotkin discarded the strong possibility of Russia invading Ukraine directly, thus proposing that Russia would adopt the hybrid war strategies, dividing the invaded country as a result.
Valdai Discussion Club and Putin’s speech this in 2021
In support of the Professor’s claims, Putin’s speech of The Valdai Discussion Club from last year is worth mentioning. The Valdai Discussion Club was established in 2004. It is named after Lake Valdai, located close to Veliky Novgorod, where the Club’s first meeting took place. This meeting is highly regarded, especially in Russia, gathering many renowned intellectuals, decision-makers, and professionals. The speech of the Russian President, adjusted and paraphrased, could be interpreted in the following manner (please note that the written encrypt follows the official translation from the event and could be open to various interpretations):
“New era of humanity, started three decades ago, now searches for a new equilibrium, and the new world system remains badly structured, mainly because the winners of the cold war did not comprehend the global situation properly. Systemic changes in all directions, where everything is changing, in a world filled with natural catastrophes, could not be resolved by the current capitalism model because the social structures are out of order. Those outdated structures are becoming controversial and produce inequality, without opportunities in societies and on the international level. This current system is full of deep social drifts and social discontents, while the recent pandemics have become a divisive factor. So, instead of uniting people, people relied on the outdated models that did not improve the situation during the pandemics. International sanctions remained for countries in dire need, not only for Russia but for many countries in need, which is the West’s fault.
Also, one more thing – new generations of technology and IT revolution could not be disentangled from the cultural and spiritual values. Safety and security systems have failed us; the global governance institutions did not live up to their challenge. So, Russia asks for the redefinition of the World system, in which the West built the walls for many participants on the international stage. The thinking of the current system led by the West resembles Bolsheviks’ thinking, which does not allow for any alternative or thought that is not fully compliant with the established ideology. “
Instead of conclusion
As the unfortunate events in Ukraine continue, it is hard to say the end-game of Great Powers in the Ukraine conflict. From the introductory part of this brief article, it could be speculated that the surpassing, sometimes seemingly irrational moves on behalf of financial or policy-making authorities often have a limited impact after the regulation, direct or indirect, sets in. While the monetary policy design remained the same in the case of the SNB’s intervention, this could hardly be said for the Russian action. Russia’s intervention will reshape the international order in the medium term, and even the world’s best scenario planners could hardly anticipate with certainty what this new order might be.
Disclaimer from the author: the purpose of the article is purely intellectual and research-oriented and cannot be used for apologetic or propaganda purposes.
Image Credit: AP