Fourteen months ago, Ukrainian president Viktor Yanukovych was run out of office by demonstrations sparked by his shelving of the “Association Agreement” with the EU. The accord had substantial support in western and central Ukraine, in particular, and Yanukovych’s decision to opt, instead, for a $13 billion loan from Moscow in exchange for joining the Russian-led Customs Union sealed his already-precarious fate. What the Maidan protestors and Western leaders praised as a people’s revolution, the Kremlin condemned as an “extra constitutional coup.” After Yanukovych’s fall came the (unconstitutional) March 16 Crimea referendum in which over 90 percent of the voters chose union with Russia. (Though the results were widely dismissed, over 80 percent of the respondents in a June Gallup poll opined that the outcome reflected popular sentiment in Crimea.) The Russian parliament then ratified a “Treaty on Accession,” the formalization of Russia’s annexation of the peninsula. That deepened the crisis: determined to emulate Crimea’s example, separatists soon took up arms in parts of Ukraine’s Donbass. Moscow proclaimed itself their patron.
The Donetsk People’s Republic and the Luhansk People’s Republic were soon under threat from the advancing Ukrainian army and a gaggle of private militias. They may well have been overrun had Russian troops not opened a new front in Novoazovsk, on the Black Sea coast, in August, drawing Ukrainian forces southward and pummeling them. Simultaneously, Moscow increased arms shipments to its clients, and regular Russian units bearing heavy weapons started playing a far more prominent part in the war. The Kremlin’s denials of direct involvement were comical, but its added military muscle proved transformative.
The Minsk II ceasefire was signed on March 12 of this year, but six days later Ukrainian troops, who had been surrounded on three sides, were forced from Debaltseve. Those two events created the current line of control in eastern Ukraine. The March accord hasn’t ended the fighting and the dying, and it main provisions haven’t been fully implemented. Still, unlike its predecessor, Minsk I, which became a dead letter within days of being signed on September 5, it has survived.
Minsk II hangs by a thread, though, and the risk of renewed war remains real: it doesn’t take more than a few ugly incidents to shred fragile ceasefires. One place where the shredding could start is Shyrokyne, a small settlement (its population is less than 1,500) in Novoazovsk district, off the E-58 highway and 12 miles east of the Black Sea port city of Mariupol. Shyrokyne has been shelled repeatedly by Russian and separatist forces, and its fall would imperil Mariupol. Were Putin to then throw caution to the wind and order his army to push west with the aim of creating a land connection to Crimea, today’s crisis will seem minor by comparison.
While none of this is foreordained, Minsk II’s death would take all the parties involved in this fracas—Ukraine, Russia, and NATO—to a very dangerous place. The United States is already training Ukraine’s army and has allocated $195 million for non-lethal equipment, and President Obama will face intense pressure to send lethal arms to beef up the Ukrainian army. There should be no illusions about the consequences: Vladimir Putin will pour in more weapons and troops. And NATO’s already-anxious eastern members, Poland and the Baltic trio, will demand that it allies dispatch reinforcements. Moscow will push back if that happens. In short, a classic conflict spiral will commence.
The war in Ukraine has already created the most dangerous confrontation between Washington and Moscow since the Cuban Missile Crisis. If Obama scales up arms supplies to Ukraine in response to Minsk II’s collapse, the United States and Russia will be engaged in a military test of wills—on the latter’s doorstep. In 1962, geography favored Washington; Moscow had to withdraw. In 2015, proximity will permit Russia to bring additional men and materiel to the battlefield far faster than the United States can bolster Ukrainians units, let alone create an effective Ukrainian army.
Besides, Russia simply has far more at stake in Ukraine than the United States and its NATO allies do, and that means that Putin will take risks that the West simply won’t. It would be morally reprehensible and strategically obtuse, therefore, to encourage Ukrainians to conclude that the West will match Russia move for move. Ukrainians can be forgiven for getting precisely that impression from Assistant Secretary of State Victoria Nuland’s May 18 press conference in Kyiv.
While the “arm Ukraine” chorus persists, it hasn’t yet explained what the United States should do if Putin escalates rather than desists. If he ups the ante, Washington will face two choices, neither of them good: backing off or doubling down. Taking a momentous step based on hope, and without an effective and feasible countermove at hand in case the opponent fails to do what you expect, amounts to reckless folly—the more so since, during this crisis, Putin hasn’t done what the West has assumed he would.
The bite of economic sanctions was supposed to bring him around. But a year has passed since the penalties were imposed and, rather than extending an olive branch, he has boosted Russia’s military role in Ukraine’s east and stepped up air and submarine patrols, not a few of them risky, in NATO’s domains. There isn’t a scintilla of evidence that he plans to ditch the Donbas republics, let alone seek a compromise on Crimea, to ease the economic pressure on Russia. Predictions that his political system verges on collapse amount to the wish fathering the thought.
Yes, the West has isolated Russia by, for example, shutting it out of the G-8 and boycotting the May celebration of the Soviet victory over Nazi Germany, and Putin probably misses being part of the big-power club’s (largely useless) conclaves. And yes, he was miffed by the May boycott. But Washington’s mantra that Russia stands isolated internationally amounts to wishful thinking. India and China have refused to follow the West’s lead on Russia, and so have a host of other Asian, African, and Latin American countries.
Putin certainly faces serious problems. The Russian economy contracted by 1.9 percent in the first quarter of 2015. The ruble’s descent—it nosedived at the end of last year—contributed to an inflation rate that reached 16. 9 percent in March. The Russian central bank spent billions of dollars shoring up the currency, but it could be called upon to spend even more. Russia’s mega companies had gone on a borrowing binge when oil prices were sky-high and Russia’s economy was growing at a fast clip, but the sanctions cut them off from Western capitals markets, and with bills coming due, they turned to the state. Rescuing them reduced the central bank’s reserves further—from about $500 billion at the beginning of 2014 to $356 billion last month. Moscow could have managed this economic pain more easily had the sanctions not coincided with a collapse in oil prices, which went from $105 a barrel in early 2014 to $48 at the beginning of this year. This was a big blow because together oil and gas provide two-thirds of Russia’s exports earnings and half of its budget revenues.
Despite these difficulties, Western economic pressure hasn’t pushed Putin to yield an inch. Indeed, the assumption that he would was flawed from the get-go, based as it was on the notion that in international politics (or interpersonal relations for that matter) money trumps motives born of fear, anger, status anxiety, pride—that leaders are like green-eyeshades accountants and make high-stakes national security choices based chiefly by crunching numbers. History tells us otherwise.
Moreover, whether it’s Russia’s stock market, its agricultural and manufacturing output, the ruble’s value, or oil prices, the trend lines now appear to favor Russia, even though plenty of problems lie ahead and the picture won’t change as long as the Kremlin presides over a corruption-riddled petro state.
Russia’s economic woes, while scarcely trivial, pale in comparison to Ukraine’s. Simply put, the Ukrainian economy risks collapse. GDP contracted by 15 percent in 2014 and 17.6 percent just in the first quarter of 2015. Ukraine’s central bank reports that total external debt has declined by $10 billion since last spring, but it still totals $128 billion (and includes a $3 billion bond held by Russia). When the crisis commenced last March, Ukraine’s total debt was 40 percent of GDP; it’s now over 100 percent. Kyiv owes foreign creditors $10 billion in interest payments alone this year, and none of them agreed to a write-down. Meanwhile, the Ukrainian treasury held a mere $7.5 billion at the start of this year when including Special Drawing Rights and gold stocks: enough to cover a few months of imports.
To help out, the United States has provided $1 billion in loan guarantees (and may offer an additional $2 billion), and the EU has promised €11 billion over five years. The IMF has offered much more: $17 billion, to be paid in installments through 2018. But the budget trimming it has demanded as a precondition for the quarterly disbursements will hurt Ukrainian citizens, especially the poor and the aged, because Kyiv must slash subsidies and fix the broken pension system (which means cutting benefits or extending the retirement age, perhaps both).
While economists insist that tough reforms like these are essential, the nascent Kiev government, which is already beginning to lose the public’s confidence, lacks the strength and unity required to administer the bitter medicine. The IMF also insists that Ukraine’s leaders must find $15 billion in debt relief, and $5 billion of it this year, before they receive the next tranche of that $17 billion. But no one is rushing to Ukraine’s aid. Not surprisingly, Ukraine’s parliament authorized the government to withhold payments to “unscrupulous” parties. Contrary to immediate reporting, the move falls short of a moratorium; but it does inch toward one, thus heightening fears of a default and sending the wrong message to would be lenders.
As for Ukraine’s much-discussed corruption, it enriches groups that are well connected to the state or part of it, and they won’t relinquish their power and wealth without a fight. Moreover, corruption in Ukraine has deep economic and political roots and did not start with Yanukovych, though he certainly raised it to new heights; it was baked into the system of political economy created during Leonid Kuchma’s presidency in the 1990s. (President Poroshenko, one of Ukraine’s oligarchs, was among those who thrived under this arrangement.) Creditors now demand that Kiev demonstrate tangible progress against corruption, but no country has extirpated this scourge quickly; and Ukraine will not be able to, not least because of a legal system even well-wishers involved in reforming it describe as dysfunctional and itself corrupt.
Putin well understands the magnitude of Ukraine’s economic problems, and his real aim may not be to grab more of its land but rather to wreck it economy and bring down its government by keeping the war, which according to Poroshenko costs as much as $8 million a day, simmering. If this in fact Putin’s strategy, he hasn’t done too badly, particularly because a main consequence of the war has been Kiev’s loss of a chunk of the Donbas, an industrial, energy, and mining center.
Given that sanctions have not worked and that renewed full-scale war is both probable and dangerous, the only sensible approach is shoring up Minsk II and working with Russia—and of course Kiev—on a formula that keeps Ukraine whole and addresses principal Russia’s security concerns. The terms that Ukraine and Russia are prepared to accept won’t be clear until the hard bargaining begins. At minimum, though, Ukraine will insist on regaining control of its breakaway eastern regions and guarantees of substantial Western economic aid. (It’s expensive, this democracy building.) Russia will push for a phased lifting of sanctions and some sort of neutrality pledge from Kiev.
But even more will be needed to create a durable peace. Heavy weapons and soldiers (regular and irregular) must be fully withdrawn from the war zones, with compliance monitored by third-party observers. A no-weapons-zone must be created on both sides of the Russia-Ukraine border and verification processes put in place. Without these additions steps, talk of elections in the Donbas, regional autonomy (or some other form of decentralization), and political reconciliation based on a new national compact will amount to verbiage.
Beltway orthodoxy avers that Washington must not appease Putin by negotiating with him and that he will cave if the economic screws are tightened, never mind that Putin remains unyielding and that the consensus among the 28 members of the EU on sanctions, already showing signs of strain, will not last indefinitely. Victoria Nuland and Secretary of State Kerry’s trips to Russia suggest that stubborn facts may have finally induced the White House to try a different tack.
A meaningful deal on Ukraine will prove a longshot at best. But staying the current course will prove ruinous (economically and strategically) for Ukraine, and could push Russia and the United States from crisis to collision.
Rajan Menon is Anne and Bernard Spitzer Professor of Political Science at the Colin Powell School of the City College of New York/City University of New York and a Senior Research Scholar at the Saltzman Institute of War and Peace at Columbia University. His most recent book (coauthored with Eugene B. Rumer) is Conflict in Ukraine: The Unwinding of the Post-Cold War Order (MIT Press, 2015); his next book, The Conceit of Humanitarian Intervention, will be published by Oxford University Press in 2016.
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