Neighbours of war: interview with Ion Florescu

Ion Florescu interviewed by Maria Nadolu. Bucarest.

By Maria Nadolu, Bucarest.



Ion Florescu is born in Casablanca, from a Romanian father, refugee during the days when Romania was occupied by the Soviet Union, and an Italian mother with African connections. Growing up in between Rome, London, and Geneva, he graduated History at Cambridge, and then, went to Eastern Europe lured by some ancestral call, and challenging opportunities in a fast-transforming region. His investment fund group, Reconstruction Capital and Reconstruction Capital II, is well-known for its activities in Romania and South East Europe; having been involved in some of the most important economic sectors in the post-communist transition: financial services, logistics, pharmaceuticals, textiles, dairy production, and the paints and chemicals industries. He is someone to talk to in such strange times, as he is equipped with historian tools, the lucidity and practical sense of the entrepreneur, and an obvious cultural versatility.

We are seated in a coffee shop, and there is a heavy feeling in the air.  We know each other well, and we are both valuing a sense of exploration, and dialogue that enhances knowledge, but this time horizon is not clear: we feel the pressure of the war that happens next door, and it’s hard to understand what’s next.

This February, before it all exploded, President Zelensky, at the Munich Security Conference declared: “we have been warned that we are risking a war, and we asked to put sanctions against Russia. We were answered, we can only do that once the war starts. How efficient will they be when we will be bombed and invaded?” he asked in rage. His words are relevant for the whole world, not only for Ukraine now …what measures can be efficiently taken now, to prevent a global nuclear misfortune, and let again dictatorial forces set the agenda in terms of (in)security?


We are almost two weeks into the war started by Russians in Ukraine; the Russians kept on shelling civilian infrastructures, including some of the humanitarian corridors; they took control of the Zaporizhzhia nuclear power plant, the biggest in Europe; and they continue to target civilians, using munitions that are outlawed under UN conventions. By now there are more than 2000000 refugees. The United Nation, in a historical vote of 141 to 5 (Russia, Belarus, Syria, Eritrea, North Correa) demanded Russian boots to get off the territory of Ukraine.  The international community sends a strong message of isolation, both in terms of policy and business, whilst everyone recognises the threat when a state invades another. Thousands of Ukrainians cross the borders with Romania, and with them the sense of shock and grief escalates. Beyond that, Romania is NATOs border, and obviously a strategic point of (in)security.


The hope is that there can still be a peaceful solution to the conflict through diplomacy, yet again the gravity of the situation rises every day. On one side, President Zelensky, a former actor stepping out of a TV series titled “The Servant of the People” (where incredibly he plays history professor elected president of Ukraine) truly becomes the representative of the peoples in a fight against the Russian giant. Men are taking arms, sending their women and kids across the border, they deploy all possibilities, including a cyber war, and social media activations calling to Starlink services and international community to support. On the other side, Putin and his heavy despotic apparatus, well known in the region, that seems nowadays somewhat rusty yet fearful. As Lithuania’s Prime Minister’s Ingrida Simonyte notes in the Economist: “All this was bound to happen. Vladimir Putin’s war on Chechnya did not serve as a wake-up call for the West in 1999. Neither did the Kremlin’s cyber assault on Estonia in 2007, its war on Georgia in 2008, the illegal annexation of Crimea, nor the start of its military aggression against Ukraine in 2014 – all which Russia denies.(..) But Western leaders pressed the snooze button time and again”.



What is the historical significance of what happens these days?

Possibly and willingly, this is moving in the direction of confrontation between superpowers; it is not just a local event. One of the arguments for the invasion that Mr. Putin made on television was that NATO was expending, and he expressed the desire to have buffer states around; this gives it a completely different kind of historical importance, compared to the intervention of Russians in Armenia, or even in Georgia or Chechnya. The consequence of that is the disentangling of Russia from the world economy, as it happened incredibly quickly, and this has many direct and indirect effects on the entire world, in terms of the economic impact it will have.


If it would be to zoom in and look through your eyes. How did you see the region evolving in this post-communist period?  

I have been exposed to the whole transformation of the region. I think that what differentiates Russia from the rest of the region is two fundamental points : one is the fact that hidden in the Soviet Union there was also the imperialist idea ; the mistake that was made during the post-Cold War era was to assume Russia was going to be a normal state, at peace with its neighbours, whilst Russia’s view of itself was very different: a global power, a nuclear global power, therefore acting differently from all the other states (being created after the Cold War). The second point, which is linked to it, is the fact that it is incredibly natural resources rich; and therefore, trapped into its natural resources dependent economy which has created a class of people, and a state that depends on these resources for power, and perpetuates a system of massive inequality.  It is the case of the well-known “curse of national resources”, which happens in many places around the world, where an elite that gets its hands on resources and tends to have a huge amount of economic and repressive power effectively dominate the population of a country.

What we have seen is a complete disconnect between Russia, the historical states of Central and Eastern Europe, which tend to be smaller countries, in many cases with a strong attachment to independence, because of the experience of being caught between empires. Then, you got the post-soviet countries, which are effectively successor states of the Russian empire, as the Soviet Union and the Russian empire had an overlap; some of them have not been independent for several hundreds of years. These countries feel very strongly that Russia is a big powerful neighbour and therefore they need to join alliances to defend themselves. For these countries, historically, Russia has been the aggressor. Their bad luck is that they have been caught between different empires: the Austrian Hungarian Empire, the Ottoman Empire, the Russian Empire… But the Austro-Hungarian and Ottoman Empires collapsed after World War 1, and no longer represented a threat, whilst the Russian Empire morphed into the Soviet Union, and remained in place. Whilst America might have been an aggressor in other regions of the world, it has not been considered a danger here, so the general opinion is very different, and there is an understandable worry about Russian expansionism.


Talking about Russian expansionism. There is a transgenerational burden we carry on our shoulders – most of our great-grandparents, and grandparents lived with the fear “Russians are coming”. How to keep a fresh, and just view on present times?

History and historical time do not move at the same paste around the world; some of the declarations that Mr. Putin has made over the last few days are very much XIX century declarations: “certain countries don’t have the right to exist”, “we need buffer states”. The idea that some countries have greater rights because they are bigger and more powerful is something very strange. One is asking What is the motivation behind the invasion of Ukraine? It seems to me an amalgamation of different objections which are not necessarily aligned : the most ridiculous one is supposed “de-nazification”-  a strange statement if you look at who the people in power are ( President Zelensky is himself Jewish) ; the second one is the need for buffer states between Russia and NATO and thus the de-militarisation, but NATO already has borders with Russia and its ally Belorus, namely along Poland, and the Baltic States, so not Ukraine would not be enough to create “buffer states”, Poland and the Baltics would also need to be “taken out” ; the third one, that the Ukrainians are not separate people from Russia is an opinion, nothing more.  I think one should respect every country’s right to feel weather they have the right to exist or not.


What these XIXc declarations do to business?

Business can continue being a XXI business. I should mention that when I talk about Russia’s economy being trapped by commodity, it is also correct to say that it also has a very educated work force and population; very dynamic IT, sadly it could have developed much more… For me, I was very lucky to be very young when communism ended in Eastern Europe, to feel that I could contribute to the economic, but also civic reconstruction of these countries. It has been a real satisfaction to see the enormous progress over the last 30 years, in terms of measurable statistics: GDP, GDP/ capita, in some cases overtaking the countries of southern Europe; but also, in terms of civic societies, and values. Including Romania, which is the country that I know best.


Looking at the present situation, how does it affect the markets: regionally, and internationally?

Two types of effects: one is the effects of war, the other, the effects of sanctions. The effects of war are hugely dramatic for developing countries which spend most of their incomes on basic commodities. Just to give you a terrifying statistic: 25%-27% of world exports markets in wheat is represented by Russian and Ukrainian wheat, and we don’t know how much of that is going to be taken off the market. But all you need to do is look at the wheat prices now to realise that this is going to be a catastrophe for many countries in the Middle East, like Egypt or Iraq. If the war prevents these exports, even if some countries like Egypt might not be putting sanctions, there will not be the logistic possibility to transport it over the Black Sea, or agriculture will suffer badly from the war. This will have a very serious effect over food prices. It couldn’t have come at a worst moment because inflation was already picking up around the world, as we came out of an economic repression caused by covid.

Another exampley: aluminium. Russia is a major producer, now it will not be able to export a lot. That will have effects on the car industries, and a knock off effect on other industries where cars are needed. There were already shortages before this happened. This will feed into massive inflation.

We must remember that a lot of countries are highly indebted and therefore their capacity to withstand an economic shock is limited. The EU is going to have to keep interest rates very low. The currency will be significantly devaluated again, generating more inflation.

One of the implications of this war is that it will completely redesign the world economy. A few years ago, we have reached a highly, well-tuned worldwide mechanism of supply chains, which is one aspect of globalisation, and we have now entered a phase of de-globalisation. This is fundamentally fuelled by nationalism. An extreme barrier is a sanction put on another country, a barrier to trade. A less extreme barrier is Brexit, which is also driven by nationalism which is basically saying we don’t want to be part of an economic block where free trade is the norm; we want to be able to set our own standards. It’s difficult to see how we will repair the process of globalisation; how we will return to this globalisation which has been deflationary for the last 20 years ever since Den Xiaoping’s reforms in China in the 80s, and China entering in the world economy as a major producer. It’s going to be painful.


Globalisation was a glorious path in the making; and at times the road map was not very clear, nor equitable. It led to cases where very prosperous German companies would dump their garbage in Senegalese waters… Could this be an occasion to review some principles?

What we should aim for is globalisation without the dumping, with measures agreed globally to tackle the climate change. The globalisation is not the creator of climate change. In a deglobalized world we would have as many issues with the climate as in a globalised world. For example, if Russia does not supply gas to the EU, would we have to go back to burning coal? Every historical process has got negative side effects; there are ways in which countries working together could tackle that and that’s work in progress.


Some business opportunities that could arise from this crisis?

The trend towards clean energy production will accelerate in the EU. I don’t think it will be enough. One of the effects of this war is to put Europe in a very weak position compared to the US (from the economic point of view); the US has got much lower energy costs; now it has become an energy exporter. The failure which people have been talking about, in terms of EU stability and self-sufficiency as a continent in the last 20 years, is the massive dependency on Russia for gas, which some states, especially Germany, have allowed to happen. To reverse that with sustainable green energy investments is a massive, long-term enterprise. In the short time, the EU is in a vulnerable position.


Yuval Noah Harari, one of the most vocal voices in the international arena these days, launched the idea that from a historical perspective Russia lost already the war. What do you think about it?

Very difficult to understand what ordinary Russians think. Ultimately, we shouldn’t be too hopeful based on the thousands, or tens of thousands demonstrating in big cities like Moscow and Saint Petersburg. It’s a long battle and it is based on how information can be manipulated and controlled by those inpower. With no free media left in Russia, clearly, there is an attempt to impose a narrative at home, but I don’t think it’s going to succeed.

What is equally important, is that in Ukraine Russians lost the war even before started, because they lost the narrative. May be the war was based on wishful thinking from the Russian side, that the Ukrainian state won’t resist, that they did not have national values, they were run by clowns, people were waiting for their country to be liberated. The more time has passed, and the more this has turned out not to be the case. It has only strengthened something that was already there: a strong civic nationalism, and a sense of nation that is not based on ethnic identity, or language, but rather on values, and a sense of belonging. They have been the victims of imperial wars and have forged a different kind of identity. Therefore, they created a lot of sympathy; they basically presented what could become a better model of a nation.





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