Russia Opens a Eurasian Pandora's Box

"Russian aggression against a weak Ukraine, including the annexation of Crimea, is putting in play forces that may reshape Ukraine, Russia and all of Eurasia."

Just over a century ago, Sir Halford Mackinder, the father of geopolitics, posited that the power that controls Eurasia controls the world. Not all agree, but what began as a popular uprising in Kyiv will have far-reaching consequences for Eurasia. Russian aggression against a weak Ukraine, including the annexation of Crimea, is putting in play forces that may reshape Ukraine, Russia and all of Eurasia.

First, Ukraine is facing a near-death experience but may emerge reborn.

On the brink of economic collapse, it is launching long-delayed, IMF-mandated reforms. One will cut subsidies that have made Ukraine’s economy among the world’s most energy-intensive. Another reform is to cease propping up an overvalued currency that penalizes exports.

President Petro Poroshenko, elected free and fair last month and to be inaugurated on June 7, has broad support and a reconciliation agenda. He has wisely called for moving up parliamentary elections from 2017 to later this year. Only together can he and a representative legislature muster the political legitimacy to undertake bold reforms, such as slashing top-heavy bureaucracy and stifling regulations. These things have made Ukraine one of the most corrupt and most impoverished countries in Europe. Likewise, security forces must be purged and rebuilt. Their uneven performance against separatist forces embarrasses Ukraine and jeopardizes its security. Finally, Ukraine should decentralize governance while not crippling it (as Russia seeks). This ought to include the election of regional governors and guarantees of Russian-language rights where desired.

Outraged by Russia’s seizure of Crimea and bullying in the east, Ukrainians may be ready for bolder reforms and closer ties with the West. If not, Ukraine will remain poor and vulnerable to predation, and internal disputes will flare. A March poll by Gallup and Baltic Surveys offers a warning. Most respondents in the west of Ukraine backed eventual membership in the European Union, but in the east, support was as low as one-fifth.

Poroshenko has pledged to soon complete Ukraine’s adherence to a European Union association agreement, enabling wider cooperation. This is a defeat for Russia, which wants Ukraine to join its protectionist Eurasian Economic Union, to be created on January 1 as a successor to the Eurasian Customs Union. Europe offers Ukraine a political shield and a far wealthier export market than these Eurasian arrangements. Many of Ukraine’s exports, such as iron, steel and mining products, compete against Russia’s.

As it moves westward, Ukraine will need to cultivate a productive modus vivendi with Russia. Ukraine depends on Russia for natural gas, but it also trades heavily with the EU. Many Ukrainians have familial and cultural bonds in Russia or hold favorable views of Russians and Russia. Poroshenko, who owns business in Russia, voices interest in improving cooperation. This will require accommodation and discipline, such as paying off legitimate energy debts to Russia. Western support for Ukraine—symbolized by President Barack Obama’s declaration on June 4, "we will never accept Russia's occupation of Crimea or its violations of Ukraine's sovereignty"—will strengthen Kyiv’s hand in dealing with Moscow.

Second, by using force against Ukraine, Russia has gained new territory in Crimea, but is undermining other interests and opening the door to longer-term problems.

Toward the end of 2013, as Russians battled inflation and an economic slowdown, Putin’s public approval sank. The Sochi Olympics helped restore his luster. After President Viktor Yanukovych fled Ukraine in February, despite Russia’s offer of billions of dollars in loans, Putin resorted to revanchist policies. Using Russian state television to portray a false picture of unrest and discrimination against ethnic Russians in Ukraine, Putin mobilized his security forces and sympathizers to seize Crimea and stir separatism in eastern Ukraine. Restoring hegemony in much of Ukraine—some of it called “New Russia” by Catherine the Great—was the asserted casus belli. As with the 2008 invasion of Georgia, the seizure of Crimea lifted Putin’s popularity among many in Russia who want to secure Russia’s place on the world stage.

This may boomerang. Victory over Georgia in 2008 weakened Russia’s influence in the South Caucasus, but the Crimea annexation could be more costly. Russia has assumed large burdens for pension and social benefits in Crimea, where tourism is now blighted after the takeover. Further, Western sanctions on Russia are scaring investors. Last month, European Central Bank President Mario Draghi said capital flight from Russia since the onset of the Ukraine crisis may have reached $220 billion, far more than the Kremlin admits. For now, political opposition inside Russia is quiet, but a sluggish economy and heightened international isolation could lead to protests.