MH17 tragedy sets up end-game in Ukraine crisis

By bne IntelliNews July 18, 2014

Ben Aris in Moscow -


The downing of the Malaysian commercial airliner MH17, which killed just under 300 civilians, is a game changer in the conflict between the West and Russia over Ukraine's fate.

The Kremlin now faces the very real prospect of being branded a “state sponsor of terror,” which will probably mark the beginning of the end of the bloody insurrection that has been raging in the east of Ukraine for the last couple of months. An act of aggression (or more likely, stupidity) that is beyond the pale, the Kremlin will be forced to distance itself from the pro-Russian separatists in the face of global condemnation over such a large and dramatic loss of innocent lives. There were over 80 children on board the plane on their way from Amsterdam to Indonesia, according to press reports.

But the actual cause of the crash is still not known, despite strong, but circumstantial, evidence pointing to a missile strike. The official investigation has yet to begin and not all of the plane's black boxes have been recovered. However, if it is confirmed that rebel forces used a sophisticated Russian-supplied missile BUK-M1 surface-to-air missile launcher, as is widely believed, then July 17 will mark the day the insurrectionists lost their de facto civil war with the authorities in Kyiv. "Although I wish it were otherwise, I feel the overwhelming odds are that MH17 was shot down by a Buk-M1 surface-to-air missile fired by the rebels (but supplied by the Russians)," says Mark Galeotti, professor of Global Affairs at New York University.

Evidence overwhelmingly supports the speculation that the Kremlin has been backing the separatist fighters in East Ukraine, who have been dubbed by Kyiv as "terrorists." It is a term the Russians use often too, as it provides the legal basis for wide ranging powers to use against parts of the populace. For their part, the separatists fighting against the Ukrainian army would argue they were resisting a "junta" that grabbed control of the country after a "coup" against former president Viktor Yanukovych.

But not anymore. Shooting down a civilian plane packed with holidaymakers – even if it was a mistake (as seems probable) – is an act of terrorism that changes the nature of the game. "The Ukrainian government are claiming the attack on the Malaysian Airlines plane was an act of terrorism – if it was a missile strike, then this would be difficult to dispute given that this was a civilian airliner," said Tim Ash, head of research at Standard Bank in a note. "If that is proven, then Russia could be vulnerable to claims that it is now acting as a state sponsor of terrorism in Ukraine and would then be at risk of very serious and significant further Western sanctions going down the Financial Action Task Force (FATF) route."

Assuming the use of Russian-made missiles by rebels is confirmed (and even if it is not), President Vladimir Putin will come under intense pressure to distance himself from the rebel fighters and their cause. And a number of reactions from the rest of the world can be expected.

What will the Americans do?

US Senator John McCain, a vocal supporter of the Kyiv government, was quickly in front of TV cameras as the details of the crash emerged, warning that if suspicions are confirmed, "there will be hell to pay."

The White House's resolve to continue its programme of sanctions and scale them up to include so-called "sectoral sanctions" that will inflict real economic damage on Russia must have been strengthened. Moreover, US President Barack Obama will come under more pressure from the Republicans to act tough, who are trying to paint him as a weak president.

Second, the US could start sending serious military support to Ukraine. So far, the Americans have limited themselves to army rations and flak jackets, but new shipments of modern military weapons and ammunition are now possible.

A halfway house to this measure would be to rescind the embargo on exports of arms to Eastern European countries that was put in place following the collapse of the Soviet Union and sell Ukraine US weapons.

What will Europe do?

In the short term, Europe seems to be still looking for a way to end the violence. German Chancellor Angela Merkel called on July 18 for an immediate ceasefire in Ukraine to give officials a chance to investigate the causes of the crash. Moreover, when asked about France's deal to sell an advanced Mistral warship to Russia, Merkel replied that the sale was "within the law."

Europe will push hard for a return to the negotiating table and will insist on a high-level role for the Organization for Security and Cooperation in Europe (OSCE) in supervising the situation in Ukraine going forward. With his options suddenly limited, Putin may be more willing to accept these conditions.

The crash will also almost certainly rally Europe to the US' cause in Ukraine. The European reticence to impose anything more than symbolic sanctions on Russia reflects concern among many of its member states about hurting trade and energy ties with Moscow. The sanctions imposed by Washington at the start of this week were essentially unilateral and had little support in Europe, argues Ash. "[The plane crash is a] total game changer, and now surely the Europeans will be forced to rally back around the US position on Ukraine," says Ash.

European business lobbies have been working overtime to try to calm their governments down, forcing them to step back from imposing painful economic sanctions. However, it's one thing to make profit from a prickly neighbour who jails the odd protestor or uppity punk rocker, quite another to make money from a regime that sponsors terrorists. "Pro-Russian interests in the EU will now be on the back foot, and surely this will scupper chances of the [relatively pro-Russian] Italian foreign minister becoming the new EU foreign affairs chief to succeed Catherine Ashton," says Ash, suggesting that European institutions will become more hostile to Russia, or at least a lot more wary, than they are now.

What will the Kremlin do?

Putin has been running circles around his peers in the international community for much of this conflict. He has successfully driven a wedge between Europe and the US, and has also successfully driven wedges between various EU members that have ensured the actual sanctions imposed on him have been fairly meaningless. But now he faces a string of extremely difficult choices. "The Kremlin will, for all its immediate and instinctive bluster and spin, have to definitively and overtly withdraw from arming and protecting the rebels," says Galeotti.

To abandon support for the rebels will be to condemn them to defeat. To scale up and invade Ukraine could lead to open war. The most likely scenario is the Kremlin will stick to its policy of “plausibly deniability:” it can claim that the rebels stole the missile launchers from Ukrainian army depots and that Russia has no control over their actions (something it has already said many times). The follow-through is to lay the blame at the feet of Ukrainian President Petro Poroshenko for pursuing the military option in settling the dispute with the residents of the eastern Ukraine. However the practical upshot of this last, most likely, scenario is that Russia will withdraw and the Ukrainian government in Kyiv will regain control over the east.

What will Kyiv do?

Poroshenko is now under pressure to see his military campaign in the east through to the end and to decisively crush the rebels. Any chance of a negotiated solution, or ceasefire, is now off the table, as it would make the president look weak.

The death of so many civilians will probably also polarize the Ukrainian population even further, but more dangerously it will make them nervous of Russia. This could translate into active support for Ukraine joining Nato. While support for Ukraine's membership of the EU has been relatively high, until recently the population were largely against Nato membership. But a poll held by the Gorsheninin June showed that just under half Ukrainians (47.3%) would vote in a referendum to join Nato if they were asked, up from 35.3% a year earlier.

The Kremlin has repeatedly made it clear that Ukraine's membership of Nato is a line in the sand which cannot be crossed. And the new administration in Kyiv is fully aware of this; it has also said publicly that Nato membership is not on the agenda. The irony of Russia's interference in Ukrainian affairs could be that it ends up with the very result it was trying to avoid.

What will the rebels do?

And what about the separatists in eastern Ukraine? They are probably in the most difficult position of all. Without Kremlin support, they have no chance of winning, and following the crash of MH17 they may not even be able to flee into Russia to find refuge. Politically they also have little future in the upcoming parliamentary elections, as too many civilians have been killed for them to form any sort of effective party.

Reports from Ukraine in the last 24 hours say that rebels are digging in in the city of Donetsk preparing themselves for what they assume will be an onslaught by the Ukrainian army to oust them. Machine-gun nests have been set up on the roof is on street corners and rebels talking to reporters have vowed to fight until the end. "Without Moscow’s support, the insurgency cannot last for that long. That is not to say that when it goes down, it will go down easy. If anything, the opposite is true, as they may no longer have the option of finding sanctuary in Russia," says Galeotti. "Fighters with their backs to the wall are always dangerous."

Related Articles

Drum rolls in the great disappearing act of Russia's banks

Jason Corcoran in Moscow - Russian banks are disappearing at the fastest rate ever as the country's deepening recession makes it easier for the central bank to expose money laundering, dodgy lending ... more

Kremlin: No evidence in Olympic doping allegations against Russia

bne IntelliNews - The Kremlin supported by national sports authorities has brushed aside "groundless" allegations of a mass doping scam involving Russian athletes after the World Anti-Doping Agency ... more

PROFILE: Day of reckoning comes for eccentric owner of Russian bank Uralsib

Jason Corcoran in Moscow - Revelations and mysticism may have been the stock-in-trade of Nikolai Tsvetkov’s management style, but ultimately they didn’t help him to hold on to his ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.