Understanding the Implications of the Ukraine Crisis

by Nathan Barrick on 3/8/2014 · 4 comments

I’m disturbed by the short-sightedness of media analysis of the events in Ukraine, even as they begin to explore deeper – they are trapped by their own previous reporting and I hope they feel guilty enough about it to start getting it right…not likely. I am also annoyed at the U.S. government’s public analysis and commentary on the events, and the choice of economic sanctions that will do little to effect changes in Russia, more likely harm others, and risks undoing any progress in the “Reset” with Russia. But the United States’ approach isn’t all bad, and the seeds are there that may bring a temporary resolution of this crisis. The media will help spin the result into a victory for the American government … until it is challenged and diminished by partisan politics.

 

The real winner? Russia.

The real loser? Civil society in the former Soviet Union.

For the conspiracy theorists? Yes – this is all about energy, specifically gas.

Why is this issue relevant for Central Asia? Because if the real winner is Russia, the real loser is civil society, and the issue is energy then the implications for Central Asia become very stark indeed.

Peeling the Onion

To get to the origin of the Ukraine crisis, we need to go back to at least 1 January 2009 (for those that don’t like dispositive details — don’t worry your identity is safe with me – there’s another trail of evidence that goes back to 2004). On 31 December 2008, the contract between Russia and Ukraine on providing gas to Europe expired without the two sides having reached an agreement on gas transit and supply negotiations. On 1 January 2009, Russia cut off gas to Ukraine in a hardline negotiation move, but also a move completely legitimate according to Western business practices. The gas did not get turned back on until 20 January and the disruption had severe repercussions in Europe, especially the Balkans, in the middle of a very cold winter. The impasse was resolved through a deal brokered between Prime Minister Putin and Prime Minister Yulia Timoshenko. Throughout the negotiations, both before and after the gas crisis, Ukraine’s President Viktor Yuschenko opposed reaching a settlement.

Timoshenko and Putin deal

Ukraine’s presidential election in 2010 was contested primarily between incumbent Viktor Yuschenko, former Prime Minister Viktor Yanukovich, and Prime Minister Yulia Timoshenko. The only real nuances between the candidates were Yuschenko’s anti-Russia position and Timoshenko’s push for stronger parliamentary powers. Perceived weakness in President Yuschenko’s leadership had drastically reduced his Orange Revolution popularity and he was a non-factor in the election. Yanukovich defeated Timoshenko in a run-off election. In 2011, to prevent Timoshenko from organizing political opposition to Yanukovich in Ukraine’s parliament, the Rada, Timoshenko was charged with corruption related to the 2009 gas deal with Russia and imprisoned. Pro-West former President Yuschenko testified against his former Prime Minister at the trial.

The imprisonment of Yulia Timoshenko has been a cause célèbre in the West since late 2011. When the European Union (EU) and Ukraine were working out Ukraine’s request for an economic package, the EU demanded Timoshenko’s release from prison or there would be no help. Yanukovich, who had been ousted as Prime Minister in 2007 by Timoshenko’s parliamentary political prowess, likely believed releasing Timoshenko was an unacceptable political risk. When he turned to Russia for the needed economic assistance, the crowds took to the Maidan in Kiev in protest.

In terms of proximate causes for Ukraine’s current political crisis, the responsibility must rest primarily with the European Union and the attempt to extort the release of Yulia Timoshenko from prison by using an entire nation’s economic health as leverage. The EU claims Timoshenko’s imprisonment is unjust. Technically, what the EU objected to in Timoshenko’s case was her pre-trial imprisonment and the alleged brutality Timoshenko experienced in prison (back pain either from beatings or her age (53) and sleeping on a prison bed, depending on who you believe). In 2011, before the verdict was reached in Timoshenko’s trial, the EU warned the Ukrainian government that its future integration into Europe hinged on whether or not they proceeded with the trial. Russia’s President Dmitri Medvedev also criticized the Timoshenko trial in Ukraine alleging that it was politically motivated, in apparent agreement with the EU. Ukraine’s request for economic assistance provided the EU an opportunity to punish Ukrainian President Yanukovich for Timoshenko’s trial. The EU views Timoshenko favorably — she demonstrated a willingness to make deals with Russia to keep gas flowing to Europe in winter and paid a price for that stand in domestic politics.

Now that Yanukovich’s government has been overthrown, the EU proposes to provide economic assistance to Ukraine, but only under the condition that Ukraine meet International Monetary Fund (IMF) financial pre-requisites. Prior to the protests, the IMF was demanding that Ukraine freeze workers’ wages and raise its domestic gas prices, an unpalatable solution the Ukrainian government likely believed would cause even greater popular discontent and instability. Ukraine’s economic problems stem primarily from poor financial policies and increasing debt due to subsidizing gas for domestic consumption. Interestingly, the latest EU offer of assistance assures Ukraine of future European gas exports. If Ukraine turns towards Europe, presumably Russia will eventually cut off gas to Ukraine and export to Europe through southern and northern bypass pipelines already nearing completion. Europe pipelinesUkraine will be forced to pay for gas from Europe, probably at marked up prices to help the Europeans pay for Russian gas at a market rate. Ukraine will go from having preferential, below-market gas prices for domestic consumption guaranteed by Russia, and profiting from transit fees for Russian gas going to Europe, to paying at least market rates for imported gas from Europe. It’s difficult to see how getting closer to Europe is going to help Ukraine in the next several years – this reality will likely become a greater challenge than Crimea for the new Ukrainian government and likely an election issue in Ukraine’s presidential elections.

How did Crimea become a crisis?

Crimea was not a major issue, except for the unresolved status of Russia’s Black Sea Fleet based in the Crimea, before the new Ukrainian government was installed in Kiev a week ago. The rhetoric of the new Ukrainian government is decidedly anti-Russian and ultra-nationalist. This political character in Kiev generated immediate concerns for the ethnic Russian autonomous republic in Crimea. The local Crimean government perceives the rabidly anti-Russian national government in Kiev as a potential threat to existing freedoms and benefits. Just as the protesters in Ukraine took over government buildings to pressure Yanukovich’s government, Crimean protesters of the new national government did the same and also reached out to Russia.

The new anti-Russian government in Ukraine deliberately manipulated simplistic Western media attention by characterizing the self-defense units in Crimea as “Russian troops”, knowing that the Western media would be incapable of intellectually distinguishing armed ethnic Russian Ukrainian citizens from armed Russian Federation troops. The fact that there were approximately 6000 Russian Federation military personnel based in Crimea, living in Crimea, with free rights for movement in Crimea was at first ignored by the media. Even after this fact became known to the media, there appears to be a reluctance to report the truth and backtrack from the alarmist “Russian invasion” sensationalism. Additionally, if the Russian Federation has increased its troop presence on bases it already is authorized to occupy through an agreement with Ukraine – how does this constitute an “invasion”? The press is sensationalizing the crisis and unhelpfully creating pressure to act precipitously on Western governments.

Crimea is calling for a referendum to determine its status; they want to hold this referendum on 16 March. There has been no evidence to suggest this was instigated by Russian agents or President Vladimir Putin. The Russian government is in reaction mode to the Ukraine and Crimea crises, just like Western governments are, and is attempting to balance their response to the situation between the competing interests of protecting ethnic Russian minorities, sustaining economic and commercial ties to Ukraine, maintaining an image as a reliable energy supplier to Europe, and remaining a global peer competitor to the United States. One can look at President Putin’s assertion that economic sanctions on Russia will boomerang back on the West as either a threat (if you’re anti-Russian) or a statement of fact (if you are intelligent). Any economic sanctions imposed on Russia will likely result in increased gas prices to Europe or the confiscation of American and European assets in Russia (long viewed as a place of possible investment). The eye for an eye spiral of reciprocal retaliation until the world is blind, Ukraine impoverished, and the Cold War resumed is a not so distant future if the current path continues without the restraint of pragmatic realities.

Rather than the new Ukrainian government in Kiev offering Crimea assurances about keeping its autonomous status, Kiev has insisted the United States and Europe negotiate on its behalf with Russia to preserve Crimea as part of Ukraine. Ukraine cannot negotiate with Russia on its own because Russia has total control over Ukraine’s economy and will dominate any discussion. The expectation of most observers is that if the choice were left to the Crimean people they will choose Russia over Ukraine or independence. I have no insider perspective on what they would choose, but I can see an argument for independence with Russian security guarantees climbing up the preference list. Only if there appears to be obvious (in the next several weeks) economic benefits and improved conditions in Ukraine by dealing with Europe, would a delay in the referendum possibly decrease the probability of Crimea choosing Russia. Since rapid economic turnaround is unlikely and popular sentiment in Crimea is against Kiev, the only option Ukraine has is to convince the United States and Europe to resist Russia based on emotive appeals.

It is unclear how keeping a presumably restless and frustrated Crimea inside Ukraine can result in stability for Ukraine other than by inextricably linking Ukraine’s territorial sovereignty and economic future to the expressed promises of Europe and the United States. In other words, Ukraine is invoking the bête noire of a resurgent Russia to prey upon the paranoia of anti-Russian sentiments in the West to secure guarantees from the United States and Europe that do not make political nor economic sense for Western governments. We can hardly blame Ukraine’s government for this attempt, but we must be intellectually aware of it and not fall into the trap.

Even if the United States and Europe could force international consensus that Crimea belongs to Ukraine, it will remain an autonomous region and the Russian military presence will continue. Nothing will really change in the Crimea, except perhaps disenchantment with the West for hypocrisy on the supposed democratic values regarding self-determination. Kiev will have no greater influence within Crimea and is unlikely to adopt constructive policies with respect to Crimea, thus exacerbating the ethnic Russian minority issue in Ukrainian politics. There are very pragmatic considerations that tend towards a Crimea that is not part of Ukraine and any efforts to counter this will become increasingly aspirational and unsustainable. The argument Russia cannot politically afford to allow separatism in Crimea because it will encourage separatism in Russia would be trumped by the example of a region wanting to rejoin Russia.

The more important issue is Ukraine itself, not Crimea. Ukraine is likely to become economically reliant, even completely financially dependent on Europe. Can the Eurozone and United States sustain this economic burden indefinitely? I am fairly certain the truthful answer to that question is likely to be lost in ideological economic constructs and partisan political positions, if it is even asked at all.

Implications

Beyond the Ukraine-Russia-US-EU dynamic, the crisis will affect former Soviet Republics and Eastern Europe most decisively. For those countries already in the EU/NATO camp, the US/EU protection and adoption of Ukraine’s future will validate their choices to break from Russia and will likely solidify anti-Russian sentiments and behaviors. It is probable that those future developments will lead to increased friction between Russia and Europe. Increased friction between Russia and Europe is likely to lead to a problematic energy supplier-consumer relationship in the best case, and renewed security concerns in the worst case. Renewed security concerns will lead to increased defense spending, which will pull a few percentage points of GDP away from other non-military expenditures – what will suffer as a result? Does this sound like the real world to you or is it a slippery slope fallacy?

For those countries not so closely tied to Europe and the United States, there will be two separate responses – efforts to contrive crises to secure similar US/EU protections or closer alignment with Russia. The more urgently, or desperately, a country seeks US/EU protection the more likely a regional crisis will erupt requiring US/EU intervention to demonstrate resolve similar to protecting Ukraine. The countries believing a precipitated crisis would be too risky are more likely to more closely align with Russia over the long term, likely in proportion to their ties to the Russian economy (through energy exports or migrant labor remittances), size of the ethnic Russian minority, or scale of existing Russian Federation presence.

In Central Asia, where Kazakhstan is a member of Russia’s Customs Union, Turkmenistan is a major cohort in Russia’s gas-related policies, and Tajikistan and Kyrgyzstan have significant Russian military or defense industrial presence as well as an economic reliance on remittances from migrant workers in Russia, Russia is likely to gain in influence. The Russians and the Central Asians will perceive this development as a Russian victory. When added to the imminent withdrawal of international forces from Afghanistan, the perceived need for closer alignment with Russia will only be reinforced. This is not to say that U.S. access and influence will be diminished, but it will become subject to higher thresholds in costs, real or implicit. United States official statements claim to disavow the zero-sum mentality that Russia has historically operated under; if true, increased Russian influence in Central Asia should not be viewed as a loss or a concern that causes the US to adopt policies or programs that do not make political or economic sense for the United States.

If the United States and Europe apply economic sanctions on Russia, those effects will only be negatively felt in Central Asia depending on the level of severity of the sanctions. If the sanctions remain at the level thus far made public, the likely impact on Central Asia will be minimal. However, there will likely be hidden impacts as Europe and the United States become more cautious in generating further tensions with Russia that would naturally arise by increased Western engagement in countries within Russia’s stated sphere of influence or area of concern. Sustaining the current US/EU stance on Ukraine will become diplomatically and economically expensive and increasingly difficult, particularly as energy-related developments arise. There will be less appetite in Washington DC and European capitals for Central Asian concerns.

There is already discussion in Central Asian press about comparing the Chinese experience in Tiananmen Square in 1989 with protests in Ukraine, Russia, and Kyrgyzstan. The comparison is premised on assuming governments try to develop economic improvements, therefore the Chinese response to crush protest was more effective because it allowed the government to continue stability and gradually implement economic reforms. The Russian government and Central Asian governments are going to have to consider how to manage future protests in their societies by comparing the effectiveness of government responses between the Maidan in Kiev, Bolotnaya in Moscow, Ala-too Square in Bishkek, and Tiananmen Square in Beijing. Will the discussion of these events make the populations more likely to protest or will civil society slow the impetus for reform? Has the Western response to Ukraine begun to set up conditions that might result in tragic loss of life in Central Asia?

How does this end?

The seeds for concluding this crisis are in the G7 statement canceling the G8 Summit scheduled for Sochi: “We commit ourselves to support Ukraine in its efforts to restore unity, stability, and political and economic health to the country. To that end, we will support Ukraine’s work with the International Monetary Fund to negotiate a new program and to implement needed reforms. IMF support will be critical in unlocking additional assistance from the World Bank, other international financial institutions, the EU, and bilateral sources.” Too bad, this wasn’t thought of before the ultimatum to Ukraine’s government, but this is the “setting the clock back” attempt to address the root cause of the problem. Those last three words “…and bilateral sources”? That includes the Russian Federation. Within days and weeks, the fact that Russia is needed as a crucial element in Ukraine’s immediate economic health will give Russia opportunities to be the hero.

Of course, you will not see or read about that in Western media – in Western media it will be the U.S. and EU that saved Ukraine. But the truth is the West cannot afford to save Ukraine and Russian gas will be needed. Ukraine’s government will have to engage constructively with Russia. By the end of next year, Ukraine’s economic realities will likely force even the most anti-Russian elements in Ukraine to acknowledge the practical economic need for positive relations with Russia. Russia’s actions in the Ukraine and Crimea crises will resonate to Russia’s advantage throughout its “near abroad” for the next several years. This crisis ends with a strategic victory for Russia no matter what happens next. The strategic result for the U.S. and the EU depends on whether or not they decide to shoulder the economic burden of Ukraine and whether or not they desire a resumption of the Cold War with Russia.


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This post was written by...

– author of 5 posts on Registan.net.

Nathan Barrick has consulted on Central Asia and national security issues with multiple organizations, government and corporate, including testimony before Congress. He is a former US Army Foreign Area Officer for Russia-Eurasia and has a Master's Degree from the Center for Russian, East European, and Eurasian Studies at Stanford University. His views as published are his own and do not represent any other organizations. Follow him on Twitter @Nates_Notes

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{ 4 comments }

Daniel March 9, 2014 at 11:10 am

Nice to see a balanced analysis on this subject.

Auseklis March 10, 2014 at 3:36 am

Interesting piece, very good conclusions, but the article seems to overlook some aspects:

- First is that the EU was free to set whatever condition it wanted (including Timoshenko’s release from prison) in exchange for economic support (It’s a union of states, not the Red Cross, they’re not obliged to help Ukraine by default), whereas the article seems to imply that this whole mess is entirely EU’s fault because of the pressure to release Timoshenko.

- Secondly, it doesn’t mention Russia’s boycotts of Ukrainian products in recent months, or Russia’s boycott of Lithuanian products as a “punishment” against Vilnius for pushing for an agreement with Ukraine during the Summing in Nov. 2013. This would portray a very different, less “neutral” image of Russia. It would be nice to cover that aspect as well.

- Thirdly, it assumes that if the EU and the US were to be faithful to their principles of human rights and self-determination, they would have to accept Crimea’s decision. But this leaves out any reflection about the fact that Crimea’s only autoctonous population is not Russian and that the Russians there can scarcely have a claim on the future of the whole region, as they came to constitue the majority only recently and only after the deportation of the Tatars.

Nathan Barrick March 10, 2014 at 11:11 am

Auseklis,
Thanks for your comments. You’re right that the EU is under no obligation to assist Ukraine. Timoshenko’s release was a major sticking point, but you are also correct that there were others (I could have made that point stronger).
The economic picture is definitely more complex than just energy, but again, energy is a large chunk of the issue, particularly concerning to Europe. I think there’s plenty of articles stressing the “less neutral image of Russia”. I also left off religion, medieval history, WWII, Soviet relations, etc…
To your third point though, it is clearly a problematic question in self-determination, and other similar issues, about what point in history one chooses to reference in terms of legitimacy. Perhaps what matters more than historical precedence is the will and means of current and future actors to act on their claims. I think there’s definitely momentum towards a Crimea declaring for other than remaining part of Ukraine, but the referendum hasn’t been held yet, so… there’s still room for states to act to influence the event.
I appreciate the constructive criticism that builds on improving folks’ understanding of the situation.

Avtar Singh March 24, 2014 at 7:46 pm

Excellent piece of information. A very balanced and realistic approach. The only nation which will suffer is Ukraine itself.

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