Ukrainian Shock, Western Therapy

February 27, 2014 Topic: Global Governance Region: Ukraine

Ukrainian Shock, Western Therapy

History and reform.

Events in Ukraine evoke memories of the Soviet collapse in 1991. Then a hidebound system slid into bankruptcy, lost popular respect, and plunged into the ash heap of history. Now two decades of stasis in Ukraine might suffer a similar fate, but only if the next government reverses course and embraces bold reform. Then as now, the right Western policy is to support reform and realistic aspirations, and not back specific leaders or excuse poor performance.

Lethargy gripped Ukraine for over a decade under its first two presidents, Leonid Kravchuk and Leonid Kuchma. The country's first popular uprising, the 2004 Orange revolution, brought hopes for change. Incompetent and self-aggrandizing leaders—including president Viktor Yushchenko and prime ministers Yulia Tymoshenko and Viktor Yanukovych—turned hopes into dismay. None pursued the reforms Ukraine needed to lift its economy out of poverty and pay for Russian gas. Unlike Georgia after its 2003 Rose revolution, Orange leaders did not clean out or diminish bloated Soviet-style bureaucracy. Ukraine remained vulnerable to constant Russian pressures.

Ukraine's second successful popular uprising offers cause for optimism. The country has experienced several democratic and largely peaceful changes in power, notwithstanding Yanukovych's recent brutality. Civil society has become more robust, a vibrant Ukrainian diaspora in the West extends encouragement, and Ukraine has come to be seen in Europe as European. To secure wider freedoms and better governance, vast numbers of courageous Ukrainians have twice gone into the streets to oppose semi-authoritarian rule.

The West has been properly supportive. On January 31, German chancellor Angela Merkel said the opposition's efforts were "justified" and there was "a great need for change in Ukraine." On February 19, President Obama cautioned that Yanukovych's government would be held "primarily responsible" for the treatment of peaceful protesters and he warned of consequences for those who "step over the line."

Europe marshaled its outrage at Yanukovych's predation more slowly than America, but as violence mounted it swing into action. Going beyond US action, the European Union enacted asset freezes and visa bans on Ukrainian evil-doers.

Chancellor Merkel exercised leadership of the kind the German president called for at the Munich security conference last month. The EU dispatched three influential foreign ministers, from France, Germany and Poland, to Kyiv to mediate a solution. Their message shook Yanukovych. As with the 2011 Libyan intervention, America led successfully from within a coalition of allies.

The West is helping Ukraine by engaging Russia's Kremlin while also cautioning it. On February 21 Obama telephoned president Vladimir Putin to seek cooperation on a peaceful transition in Ukraine. In a February 23 phone call with the Russian leader, Merkel obtained a pledge of support for Ukraine's "territorial integrity," implying that Russia would not attempt to split off Crimea or the eastern part of Ukraine. The same day national security adviser Susan Rice warned that Russian military intervention would be a "grave mistake."

Thus far, however, it is unclear whether Russia is doubling down on a bad bet. The uprising in Ukraine came after months of punitive Russian trade embargoes and other intimidation aimed at scaring Ukraine from moving closer to the European Union and at keeping Yanukovych in power. This failed strategy united many otherwise fractious Ukrainians, and led Russia to suffer its worst foreign policy defeat since independence in 1991. On February 24 prime minister Dmitry Medvedev falsely characterized the change in Ukraine as the result of an "armed mutiny." Such heated rhetoric suggests Moscow may be readying its people for more direct intervention in Ukraine.

The turn in Kyiv has dealt a blow to the Russian-dominated Eurasian customs union, and to Putin's plans for a broader union beyond. Some members which chafe at the custom union's protectionism, such as Kazakhstan, may become more restive.

Russia is unlikely to separate eastern Ukraine. Since 1991 it has shown no interest in attaching itself to Russia, which would swallow control of the region and its industry, marginalizing some local elites. Talented young people in eastern Ukraine see themselves as future Europeans, not future Russians. One sign of Russia's limited influence in the east of Ukraine is the humiliation that befell Yanukovych after he abandoned Kyiv for his home region, Donetsk. Border authorities there refused to allow his aircraft to depart for Russia. Yanukovych apparently then fled to safer ground in Crimea, where Russia has greater sway.

The Kremlin's ambitions for Crimea remain uncertain but are worrying. Ethnic Russians comprise three-fifths of the population, and some are forming militias. The speaker of Crimea's parliament has spoken of possible secession. A senior Russian parliamentarian is in Crimea claiming that his country will protect the interests of Russians there.

The Kremlin may view Crimea as an analogue to Abkhazia, a Russian-occupied separatist region of Georgia. Crimea, which hosts Russia's Black Sea fleet, is of higher strategic importance for Moscow. The 2008 invasion of Abkhazia and South Ossetia provoked the greatest crisis in Russia's relations with the West since 1991. In 2009, when Russian war propaganda was spinning up again, the West made clear to the Kremlin that further aggression in Georgia would lead to a stronger Western reaction. Russia backed off.

The West should clarify that Russia would face sanctions if it were to use force in Crimea. To underline its resolve, America should alter warship deployments in the Black Sea by rotating them to the western Black Sea. In response to the announcement on February 26 that Russian forces on Ukraine's eastern border are being put at the "highest degree of combat readiness" for an exercise, the West should voice immediate concern in the United Nations Security Council and share intelligence with Ukraine on the Russian maneuvers.

From an economic perspective, Ukraine has been living on borrowed time. The government is almost bankrupt. Ukraine has the most energy-inefficient economy in the world. Yanukovych obtained the promise of a $15 billion loan from Moscow, but without economic reforms Ukraine may not have been able to repay its borrowing.

As new and more inclusive leaders and governance structures take shape in Ukraine, economic reform ought to receive top priority. An urgent need is to end subsidies to domestic energy prices and to maintain an over-valued exchange rate.

In 1992 Russian president Boris Yeltsin undertook shock therapy reforms which ever since have aided the economy. The West hedged in criticizing their corrupt implementation, however, and many Russians blamed the West for their impoverishment. In pressing Ukraine's leaders to liberalize the economy in return for international aid, the West and the IMF ought to hold them accountable for transparent reforms, and urge that leaders build wide stakeholder support for changes that will pain some Ukrainians even as they boost overall productivity and exports. The West can also help Ukraine by returning, and persuading others (e.g., certain Persian Gulf states) to return, plunder that Yanukovych and his cohorts stashed abroad.

Some observers call for a Western and IMF counter to Putin's $15 billion "bailout," but political support for such levels of aid may be wanting. Ukrainian reforms will have to make the biggest contribution to restoring the government to sound financial footing. The West should not raise undue expectations.

Likewise, although Ukraine will accelerate its path westward, hopes must be tempered. Ukraine's per capita GDP, measured by purchasing power parity, is about half that of the EU's poorest members, Bulgaria and Romania. Many in the EU now have buyers' remorse for having taken in these two countries so soon. Only thorough-going economic reforms over a decade or more could get Ukraine fit to join the EU.

Reminiscent of George Kennan in opposing NATO expansion eastward, former national security adviser Zbigniew Brzezinski argues in the Financial Times that Ukraine "must have no participation in any anti-Moscow alliance." Ukrainians would view as betrayal any policy that denied them an opportunity to join NATO. Ukrainian Americans and their compatriots the influential Central and East European coalition would excoriate any US leaders who backed such a policy. So would Senator John McCain. Russians would infer that the West was signaling that Ukraine was fair game for intimidation.

Ukraine has a way to go to become a stable and prosperous democracy. As Europe moves to secure more of its eastern flank, the West should be ready for intensive engagement with and support for Ukraine, but also tough love on reform.

William Courtney was US ambassador to Kazakhstan and Georgia, and special assistant to the President for Russia, Ukraine, and Eurasia.

Image: Wikimedia Commons/Mstyslav Chernov. CC BY-SA 3.0.