Ukraine: Invasion Is Russia's Fallback Option

Putin's goals—and his calculations.

Mr. Putin badly misjudged the climate of Ukrainian politics and the survivability of his ally, Viktor Yanukovych. But since Mr Yanukovych's flight from Ukraine in late February, Mr. Putin has pursued a relentlessly clear-eyed policy meant to achieve one of two objectives. His preferred outcome is to have a compliant government in Kyiv, oriented eastward in foreign policy and, like Russia, authoritarian domestically. But his fallback is to take enough of Ukraine to leave it a rump state still subject to Russian pressure if it looks westward.

Kremlin Instruments of Influence

Mr. Putin has a variety of tools short of military aggression to achieve these objectives and has used most of them. He can exert economic pressure by blocking the import of Ukrainian goods, as he did in the fall to persuade Mr. Yanukovych to turn away from a trade association agreement with the EU. He can raise the price of natural gas, or limit gas supplies to Ukraine, although this is a less effective tactic in the spring than the winter. He can exert political pressure as the self-proclaimed protector of ethnic Russians and Russian speakers in Ukraine. He can send provocateurs into Ukraine to create turbulence in the East and South, and point to the disorder as proof that ethnic Russians are in danger. He can conduct military exercises on the border with Ukraine to suggest that intervention is imminent. He can crank up the Russian media to launch the most extensive disinformation campaign seen since the failed Soviet media efforts against President Ronald Reagan's Strategic Defense Initiative (Star Wars). This media effort has failed miserably in Ukraine and the West, but has succeeded in creating a patriotic, if not xenophobic, frenzy in Russia.

Kremlin Weaknesses

President Putin and his Russia, however, suffer from several significant weaknesses that explain why the use of military force is his last resort. His economy grew like gangbusters until the Great Recession in 2008 thanks to higher prices for hydrocarbons; but it grew at less than 2 percent in 2013.

Russian Central Banker Elvira Nabiullina recently predicted that growth in 2014 would

fall below 1 percent. Asset flight in the wake of the Ukraine crisis is one reason for Ms.

Nabiullina's downward revision of Russia's economic forecast. Russia's Ministry of Economy projects capital flight at $70B in the first quarter of this year and could reach $150B for all of 2014.

Moreover, while Putin is bestriding Russia as a nationalist hero thanks to his compliant media, most of his inner circle are more opportunists than nationalists. Even his allies do not want to lose their assets abroad as a result of Western sanctions imposed due to the crisis with Ukraine. It is no surprise that Boris Rotenberg and Gennadiy Timchenko, two close associates of President Putin, are also citizens of Finland.

In short, while a media-induced nationalism has boosted Mr. Putin's popularity in the wake of his seizure of Crimea, he understands that this will not last. If the economy faces more hits, his standing among the Russian public will drop significantly. He knows too that the Russian

elite, including his closest supporters, are eager to avoid additional sanctions that might follow if the crisis continues or worsens. (One comparative strength of Ukraine is that its oligarchs, including in the East, have rallied around the government in Kyiv.)

This explains Mr. Putin's turn towards negotiations. While Ukraine's supporters in the West complain about the weakness of the American and EU response to Kremlin aggression, Mr. Putin was unpleasantly surprised by the two rounds of sanctions. President Obama's sanctions on Putin's inner circle—the Rotenbergs, Timchenko and Sergei Ivanov—made an impression. So did the listing of Bank Rossiya, which demonstrated that key institutions were

also subject to sanctions. The fact that Mr. Obama announced his authority to sanction entire sectors of the Russian economy reinforced this point. Even without European support, U.S. sanctions against the Russian financial sector would deal a body blow to the nation's economy.

Moscow Seeks to Ease Tensions

For the first time since "Russian-looking" troops fanned out across the Crimean Peninsula, Mr. Putin called Mr. Obama on March 28, and the result of the awkward conversation were U.S.-Russian negotiations. Mr. Putin was trying to ease tensions by assuring nervous Westerners that he had no further territorial designs on Ukraine. He was even willing to reduce slightly the number of Russian troops exercising on the border with Ukraine.

Yet Mr. Putin conceded nothing essential. In his public pronouncements, he spoke of parts of Ukraine as historically part of Russia ("New Russia"), insisted on his right to "protect" ethnic Russians and Russian speakers in abroad, complained about the ongoing "threats to Russian speakers" in Ukraine, and continued to send provocateurs to swell rallies in Ukraine's East calling for independence from Kyiv.

In addition, the Kremlin's terms for negotiations keep his two objectives firmly in view. Ukraine must not pursue a westward-leading foreign policy. It cannot be a member of NATO or even the EU. Ukraine must have federal governing structure that permits regions substantial domestic authority.

Yet Talks Will Not Achieve President Putin's Objectives