Brexit is the greatest strategic shock occurred in Europe after the “fall of the Berlin Wall” in 1989.

Furthermore the 1989 myth had been nurtured by the EU small cultural elites, who regarded it as the beginning of the European century, different from the American Century analyzed by the Italian economist, Geminello Alvi, before and after the globalization.

Millions of euros were also spent for funding various intellectuals – often unreasonably famous – to create the myth of 1989 and Europe’s “new start”.

It was a great error of perspective: the fall of the Berlin Wall, built by East Germans in August 1961, did not mean the end of confrontation between the Communist and the liberal-democratic blocs, but its shifting to a different and higher context.

In 2006 President Putin stated that “the fall of the USSR had been the greatest geopolitical disaster of the twentieth century” and certainly he has not changed his mind in the meantime.

The Russian Federation has always dreamt – and not just recently – of a large Eurasia, not a remake of the old Bolshevik empire.

The Baltic republics are now completely Atlantic and Europeanized. Georgia and many Central Asian republics of the former Soviet Union have a more complex economy and strategy which does not look to the Kremlin only.

Moreover, under these conditions, Georgia – which has long been dismembered with the rebellions in Abkhazia and South Ossetia – will never enter the European and NATO sphere of influence.

That is enough for Russia.

Russia wants to penetrate and dominate the whole Central Asia, after the end of the failed Afghan experience.

President Putin’s real post-Soviet project, which explains much of what is currently happening with Brexit, was outlined by him in an old article published by Izvestiya on October 4, 2011.

It is a new “Eurasian union” joining together – just as the EU did – the former Soviet republics, the old Eastern Europe of the Warsaw Pact and the major expanding economies in the Asian-Pacific system.

Against this background, any strengthening of the old European Union runs counter to the line imparted to the Russian Federation by Vladimir Putin who, however, cannot positively view the coordination between the European Security and Defense Policy and NATO, which is relocating itself along the new Russian borders southwards, in connection with the Ukrainian crisis.

Indeed, in some circles there are rumors – groundless for the time being – about Russian strong support for Brexit so as to prevent the occurrence – on the same days – of something irreparable, namely a NATO-EU operation in Ukraine.

The news cannot be verified, but it shows us how a strategic balance between Russia and the West is reshaping and emerging in the South and in the Middle East.

A balance in which the EU is retreating and Russia is filling the void left by the European Union.

The Customs Union between Russia, Belarus and Kazakhstan of 2012 was a first step of President Putin’s project, followed by the treaties with the EFTA countries (Norway, Switzerland, Iceland and Liechtenstein) and later by the treaty with New Zealand, the new Russian asset in the Pacific.

Another Russian goal, shared with Norway, is to control the immense Arctic resources.

In short, President Putin is playing a zero-sum game with the European Union. He currently thinks that if there is no longer a European Union, there will not even be a significant US presence in Europe, particularly on our borders.

This Russian project also envisages military and strategic relevance: if the buffer zone traditionally represented by the European Union vis-à-vis the Russian Federation is weakened, the EU Member States will certainly be more sensitive to the Russian commercial appeal and to a future series of regional military agreements in the Mediterranean and the Balkans.

In particular, however, the European leaders will be less attentive to the link between Europe and NATO, which is certainly weakened by Brexit that marks the walking out of a large nuclear and military power present in the UN Security Council.

Furthermore the UK Treasury forecasts that the British GDP will decrease by 3.6% and that the pound sterling will lose 12% of its value compared to the period in which the UK was a member of the European Union.

Hence a 2% squeeze on military spending, already announced by Prime Minister Cameron – exactly the same percentage of the budget increase required this year by the Atlantic Alliance.

Probably the new British nuclear submarines will no longer see the light.

If this happens, Great Britain will have to redesign all its maritime engagements and its participation in the Inherent Resolve operation, thus creating a void which will certainly be filled by the alliance between Russia, the Syrian Arab Army of Bashar el Assad and the forces run by the Shiite Iran.

Furthermore all NATO and EU actions designed to control Russia and its allies in the Balkans, as well as in Mali, Somalia and the Mediterranean, will be weakened.

Even the actions in Libya, where the British special forces have been long operating, will be made less relevant.

For the time being the model for the redefinition of relations between Great Britain and the EU is following the Swiss and Norwegian example, which is the system of the EFTA area.

Currently EFTA has 25 trade agreements in place, while the EU manages exactly twice as many agreements with third parties.

If Great Britain adhered to EFTA, it would pay 17% fewer contributions than paid so far to the European Union.

There is no Schengen-style freedom of movement in the EFTA treaties and the EU has also little power of influence and commercial leverage on the European Free Trade Association.

Nevertheless, unlike the European Union, EFTA has no geopolitical, strategic and military relevance.

It is a good surprise for Russia.

China does not care much about Brexit, which is considered irrelevant, in the long term, for China’s economic development prospects in Great Britain and in the EU.

Indeed, according to some Chinese financial analysts, a fall in the value of the pound sterling could favor bilateral trade.

Moreover, no Chinese leader has hinted at a new definition of bilateral relations with the United Kingdom.

Between 2010 and 2014, Chinese companies invested 46 billion euros in the European Union for 1,047 Foreign Direct Investment (FDI).

Furthermore Great Britain was the largest beneficiary of this Chinese FDI, with 12,2 billion euros again for the 2010-2014 period.

At strategic level, China does not want any distortions of the world order.

China has been openly in favor of Bremain while, unlike Russia, it still regards the EU as a potential factor of weakening and separation – in the NATO European area – between the US interest and the interests of the other European countries – Germany, in particular.

Moreover, Great Britain’s walking out of the European Union could foster an improvement of the bilateral economic  relations between Great Britain and China.

In the real estate sector, as well as on the financial and stock markets, it is unlikely for Brexit to change something in the relations between Great Britain and China.

Moreover this situation could favor the Chinese strategy for the internationalization of the renminbi, which would find – in the pound sterling – an effective channel, also widespread in the financial world.

Moreover, with a divided and weakened Europe, China would have much greater bargaining power not only with Great Britain, but also with the EU Member States.

However, as some British analysts maintain, an European Union “divided into two parts” is less competitive than usual on the market-world.

Hence, while the Russian-British trade is at minimum levels and trade with the EU is destabilized by the US sanctions and the Russian countersanctions, we can predict that China is the only real winner of Brexit.

For Israel, the temporary fall of European economies and of the British one, in particular, can become a problem – apart from the now widespread and naïve pro-European anti-Semitism – considering that trade with the EU is one of Israel’s major sources of liquidity.

The weakening of the pound sterling and the euro as against the shekel cannot but damage the Israeli export-oriented economy, even though Prime Minister Netanyahu has stated that there will be no direct impact of Brexit on Israel. Jointly with the Bank of Israel, his government has created a situation room to monitor the effects of Great Britain’s leaving the EU.

Basically, no one to blame but oneself: so far the European Union has exerted a regulatory power which has often be bordering on the ridiculous: from the regulations on basil to those on carrots, from those on heaters to those on pencils, everything has become “European” with such bureaucratic spending and slow pace as to make EU Member States lose most of their comparative advantages on the market-world, which opened up after the aforementioned “fall of the Berlin Wall” and the subsequent globalization-Americanization.

In fact, the euro was born as an overvalued currency so as to deal a crippling blow to the US dollar, but some actions backfire and recoil primarily upon those who carried them out.

As has been authoritatively maintained, with the changeover to the single European currency, in Italy the lira was devalued by six times.

The EU global strategy is virtually non-existent, if not banally rhetorical and declamatory.

Politics cannot be focused only on economic aspects and overregulation leads to lose global markets and increase the costs of production, which are magnified by a “Napoleonic” single currency.

And obviously so at strategic level: Germany is fed up with the sanctions on the Russian Federation. It has no interest in doing a favor to Poland by dismembering Ukraine and it does not intend to be heavily engaged in the Mediterranean.

Italy would have a vital need to stabilize the Mediterranean, especially in Libya, but it is faced with some EU allies that are more interested in sharing the Libyan oil and financial pie which, in the past, was an almost exclusive prerogative of ENI, an Italian oil and gas multinational company, and the Italian banking system.

Spain is focused on its traditional sphere of influence in Latin America and is scarcely interested in the continental and Mediterranean system, apart from the former Spanish Sahara region and Northern Africa’s Atlantic coast.

Hence where is the EU strategic rationale?

With hindsight, it was better to maintain Charles De Gaulle’s old idea that envisaged and conceded only a “Europe of nations” creating a Union stretching “from the Atlantic to Urals”, in view of a dissolution of the Bolshevik empire.

The cultural, spiritual and historical boundaries of our idea of Europe are those forgotten both as a result of the race to accept anyone after the fall of the USSR – which has led to the EU elephantine and bloated apparatus – and as a result of the pro-European obsession to find a strategic niche without “one’s own arms” that Machiavelli recommended to every Prince who wanted to stay in power.

Giancarlo Elia Valori
Giancarlo Elia Valori

Giancarlo Elia Valori * (twitter-logo@GEliaValori)

* Presidente della merchant bank “La centrale Finanziaria Generale S.p.A.”
– Presidente della “Cattedra sugli studi della pace, la sicurezza e lo sviluppo internazionale presso la Facoltà di relazioni internazionali della Peking University, nonché “professore straordinario” di economia e politica internazionale nello stesso Ateneo
– Honorable dell’Académie des Sciences dell’Institut de France