Dear Reader,

Things are getting interesting in Greece. While the mainstream narrative continues to focus on the face-off between the frugal Germans and the defiant Greeks, the real action is happening behind the curtain. Obama, Putin, and European leaders are all vying to parlay this delicate situation into a geopolitical advantage.

Martin Fluck has the fascinating details below.

Dan Steinhart
Managing Editor of The Casey Report

Greece as a Pawn in Putin’s Chess Game vs. the West

By Martin Fluck

Last week the world woke up to the fact that Greece’s new government holds a geopolitical trump card: it can hold the EU ransom by threatening to break the fragile consensus on Russia.

The renewal of sanctions against Russia requires the unanimous support of EU members… which means Obama’s alliance against Russia needs Greek cooperation. What’s more, Greece has veto power over whether NATO can retaliate for an attack on any of its members. Article V, which states, “[A]n armed attack against one or more of them in Europe or North America shall be considered an attack against them all,” may only be invoked with unanimous agreement among NATO members.

Greece and Russia have close cultural and religious ties, and Russia is Greece’s largest trading partner. Russia’s ambassador to Athens didn’t waste any time congratulating Greece’s new prime minister, Alexis Tsipras, on his victory.

So it’s no surprise that Putin is using Greece as leverage. Russia has hinted that it will open its market to Greek food exports if Greece leaves the eurozone, and also that it would consider giving Greece financial aid. One can imagine other carrots being dangled, like an offer to hook up Greece to the Turkish Stream pipeline.

Syriza, which has close connections with Russia, admires Putin’s defiance of Western institutions. The new Greek foreign minister, Nikos Kotzias, has a relationship with Aleksandr Dugin, a Russian nationalist philosopher with close ties to Putin. As neo-eurasianists, they aim to pry a weak and divided Europe away from US influence. Syriza has openly campaigned for Greece to leave NATO, though it has toned down its hostility on that issue recently—presumably to preserve it as a useful bargaining chip for the future.

Kotzias, who says he’ll work to prevent a rift between the EU and Russia, has already recognized the legitimacy of the Donetsk People’s Republic in eastern Ukraine and dismisses the Ukrainian government as a neo-Nazi junta. But he’s assured the world that he is not a “Russian puppet.” He simply wants to restore Greece’s dignity and stop the ongoing transformation of the EU “into an idiosyncratic empire, under the rule of Germany.”

European leaders were understandably alarmed when Tsipras suggested that Greece might veto further sanctions against Russia. Tsipras has been vocal in his opposition to sanctions, as have other members of the EU, including Austria, Italy, and Hungary. In the end, the EU decided against further economic sanctions but did extend existing sanctions against Russia, with the support of Greece.

The new Greek government appears to be cleverer than initially thought. It is playing both sides, leveraging its veto power to get what it wants in debt negotiations. Tsipras explicitly said that Greece has no intention of accepting Russian financial aid and that Greece’s only goal is to strike a deal with its EU partners.

Greece’s finance minister, Yanis Varoufakis, is a formidable negotiator. A world-class economist, financial blogger, and one-man media storm, he’s a leading expert on game theory. As James K. Galbraith, Varoufakis’ former colleague puts it, Varoufakis will be thinking a few steps ahead of his opponents. Varoufakis says the only thing that isn’t negotiable is keeping Syriza’s promise to render Greece’s debt sustainable, “even if the term haircut is replaced with euphemisms, like ‘debt swaps.’”

Greece’s relatively conciliatory approach appears to be paying off. President Obama is supporting Greece’s push for a debt restructuring, and France’s finance minister, Michael Sapin, concedes that Greece has a legitimate right to lighten its debt burden. Even the EU Commission president, Jean-Claude Juncker, appears to be prepared to scrap the troika.

At this point, it seems possible—and maybe even likely—that Germany won’t get its way in debt negotiations. Larger strategic matters are at stake. Russia’s influence in southeastern Europe is already growing, and it’s unlikely that NATO would accept a strategic defeat simply to preserve Germany’s small-town fiscal righteousness.

Either way, we could be nearing a historic turning point. The euro and the Ukraine crises are converging, and Putin is watching closely.