The Paradox of Self-Determination

strongly opposed to Kurdish autonomy.

Iraq’s annexation of Kuwait in 1990 was rebuffed by the United States. President Bush assembled a coalition to oust Saddam Hussein’s troops from Kuwait to restore the state. It should be noted that there are colonial maps that suggest Kuwait was part of Iraq, and Hussein’s claim that Kuwait was horizontal drilling into Iraq’s oil fields was probably accurate. Still, Iraq was not allowed to keep Kuwait.

2 There was a provision for a Kurdish territory in the Treaty of Sevres after WWI. However, this treaty was never ratified. In the Treaty of Lausanne, the Kurds did not receive a state.

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The Baloch people occupy eastern Iran and southern Pakistan and, like the Kurds, represent a distinct group. Both Iran and Pakistan suppress Baloch separatism.

The separation of Kosovo from Serbia was mostly supported by Europe and the U.S. due to atrocities being committed by Serbia. However, support was not universal. Not only did Russia oppose creating a Muslim-dominated state, but Spain, worried about the precedent set for its own Basque separatists, opposed force by NATO and statehood for Kosovo.

French Canadians in Quebec have persistently flirted with separation. Although referendums were held in 1980 and 1995, Quebec voters rejected separation in both cases. Interestingly
enough, First Nation members of the Cree tribe in Quebec strongly opposed separation and threatened armed insurrection if the referendum had carried the day.

These examples are in no way exhaustive. Whether a self-determined group can attain statehood mostly depends on whether regional and superpowers will permit the new state to emerge. If the U.S. had not provided the military force to support Kosovo, Serbia would still control that region (although it would likely be dealing with a persistent insurgency). China’s
power would need to suffer a major decline to lose Tibet. The Kurds will get a homeland only if it serves Turkey’s aims to project power, meaning that a Kurdistan state would be beholden to Turkey’s support.

So, was Russia’s incursion into the Crimea legal? Since there is no supranational law or body to enforce its removal, the case is similar to Iraq’s incursion into Kuwait. Conditions on the ground will only change if the U.S. decides that it will go to war to push Russia out of the Crimea and give it back to Ukraine. Given the lack of key natural resources in the Crimea and the fact that Russia has nuclear weapons, it is highly unlikely the U.S. will use military force to remove Russian troops from the region.

Ramifications

The key point of this analysis is to show that there really isn’t any “law” of selfdetermination.
Essentially, it comes down to “might makes right.” However, what makes this issue tricky is that the U.S., which, for the most part, decides who gets a self-determined state and who does not, is rather inconsistent in applying rules to these issues. For Russia, Kosovo was an illegal removal of Serbian territory. Russia is using the Kosovo precedent to justify its actions in the Crimea. The Kurds, who probably have a stronger claim than the Kosovars in terms
of having a culture, language and evidence of suppression, haven’t gotten statehood because the U.S. had other geopolitical goals in the region that made Kurdish statehood impossible. However, we note that since the 1991 Persian Gulf War, the U.S. has generally supported Kurdish autonomy, in part, to undermine the Hussein regime.

For the American public, the selfdetermination issue is a delicate one. Given that the U.S. began as a democratic revolution, Americans are sympathetic to the goals and aspirations of people who long for freedom from tyranny. However, the reality is often more complicated. South Sudan is clearly not a model democracy. Ethnic cleansing in the Balkans was not just a Serbian atrocity. Sometimes there are broader geopolitical goals that make supporting breakaway groups difficult.

This issue becomes a problem for markets when uncertainty about U.S. policy increases market volatility. A good example was the Iraqi invasion of Kuwait in 1990. There was great uncertainty as to whether the U.S. would actually oust Iraq or acquiesce to Iraq’s fait accompli.3 Thus, oil prices became quite volatile as the world awaited the decision to oust Iraq or not. A less volatile but similar situation has developed with the Crimea; markets have
settled down but we could see renewed weakness if Putin decides to expand his reach. We don’t expect the U.S. to develop a consistent policy with regard to this issue; American presidents want the flexibility that this uncertainty gives them. Investors have to be aware that no two situations are the same and neither will be the reactions of U.S. administrations.

Bill O’Grady

March 17, 2014

3 It was in the run-up to the conflict that British PM Thatcher warned President Bush, “…George, this is no time to go wobbly.” This event has been disputed by some figures in the Bush administration.

This report was prepared by Bill O’Grady of Confluence Investment Management LLC and reflects the current opinion of the author. It is based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.

Confluence Investment Management LLC

Confluence Investment Management LLC is an independent, SEC Registered Investment Advisor located in St. Louis, Missouri. The firm provides professional portfolio management and advisory services to institutional and individual clients. Confluence’s investment philosophy is based upon independent, fundamental research that integrates the firm’s
evaluation of market cycles, macroeconomics and geopolitical analysis with a value-driven, fundamental company specific approach. The firm’s portfolio management philosophy begins by assessing risk, and follows through by positioning client portfolios to achieve stated income and growth objectives. The Confluence team is comprised of experienced investment professionals who are dedicated to an exceptional level of client service and communication.

 

Via: Confluence Investment Management