MOSCOW BLOG: Ukraine home truths

By bne IntelliNews February 6, 2015

Ben Aris in Moscow -


There is talk that the US is seriously considering sending "defence weapons" to Ukraine, as the fighting escalates and President Francois Hollande and Chancellor Angela Merkel head to Moscow for a last-ditch attempt to resuscitate the Minsk ceasefire agreement. We are sliding towards a full-scale war in Ukraine that could spill out and engulf other countries in Europe. It's time to face some hard truths about the situation in Ukraine, and relations between Russia and the West.

The first is that arming Ukraine is not necessary. We take it as axiomatic that if the answer to the question "Is it conceivable that the current clash can be resolved by diplomatic means?" is "yes", then military options should remain nothing more than a threat, and no action should be taken.

The Kremlin was signalling before the Christmas holidays that it was open to talks, but this offer was not taken up. The West mistrusts the Kremlin, with plenty of justification, and has been taking an increasingly hard line. But as Eric Berglof, former chief economist at the European Bank for Reconstruction and Development, said at the recent bne IntelliNews debate: "We should be concentrating our efforts on finding a way to walk this conflict backwards." And that is not happening.

Secondly, isn’t "defence weapons" just a piece of rhetoric designed to make the supplier of these weapons feel good about themselves? While better radar and secure communications gear don’t kill people directly, armies are in the field to kill each other and any equipment that gives an advantage to one side will lead to more deaths. Furthermore, amongst the "defensive weapons" on the proposed shopping lists are US-made armour piercing Javelin rockets, a shoulder-mounted anti-tank missile system that will look pretty offensive to anyone on the receiving end.

Even if the US sends this materiel to Ukraine, it won't end the fighting; as the very term "defence" implies, it will prolong it and ultimately lead to yet more bloodshed. President Vladimir Putin is guaranteed to meet any improvement in the Ukrainian army's weaponry with increased supplies of better and heavier Russian arms and more regular Russian soldiers on the ground.

Another obvious truth is that the Ukrainian army is incapable of defeating the rebels in the face of (as is increasingly obvious) Russian supplies and regular Russian troops (estimates run between 1,000 and 9,000 fighting in East Ukraine). Ukraine has been an economic basket case for 20 years and its army is in a terrible state, whereas Russia has been actively rearming for at least three years and its army was in better shape to begin with. Moreover, Russia's army is at least 10 times the size of Ukraine’s, so no amount of "defensive" weapons will undo these advantages.

The government in Kyiv has said that it will increase defence spending to 5% of GDP to create "the best army in Europe", and has already spent at least $1bn on military equipment. This ambition is a fantasy: it is twice what any European country is spending and more than both the US and Russia spend.

And that is before considering the fact that the country is all but bankrupt, is struggling to meet social spending needs, must cut gas subsidies according to the deal with the International Monetary Fund (IMF), and desperately needs investment in almost every corner of the economy. Ukraine can't ramp up spending on its military, let alone devote 5% of GDP to defence spending.

Lack of unity

The Ukrainian government is already facing deep public discontent. On February 3 hundreds of protestors gathered outside the presidential palace in Kyiv waiving a symbolic call-up card and demanding the resignation of Ukrainian President Petro Poroshenko. These young Ukrainians don’t want to go to the east to fight the Russians. The Western reporting of the conflict is all in "them and us" terms: Ukraine vs Russia. But there is no unity amongst the Ukrainians themselves; the latest polls show more Ukrainians are unhappy with the performance of the new government than are pleased with it.

The young government is being put in an impossible position. It is draining away resources into a military conflict it can neither win nor afford, calling on its people to serve, although a significant proportion of them don’t want to fight. Moreover, the government is burning up political capital it needs, as it will have to impose painful austerity measures under the terms of the IMF programme on people who are already seeing their quality of life deteriorate.

If the West is serious about protecting Ukraine from Russian aggression and clearing the Donbass of separatist rebels, then the obvious solution is for the US or Nato to send in troops. However, that is off the table; no Western democracy will risk a European war (although the command at Nato might), as no Western country could sustain a long fight.

Yet sabre-rattling on both sides risks an accidental escalation to conflict. Russia has already stepped up air and sea incursions into or close to Nato territory. In 2014 Nato aircraft intercepted Russian planes more than 400 times, three times as many as in 2013. On January 28 UK Eurofighter Typhoons and French Dassault Mirage jets even intercepted Russian bombers over the English Channel.

For its part, Nato has already stationed more air and ground forces in the three small Baltic states to bolster their defences. On February 5 it agreed to increase forces substantially in Poland and Romania, and set up command units, staffed with national and Nato soldiers, in Poland, Romania, Bulgaria, Latvia, Lithuania and Estonia as part of a new strategy in response to the Ukraine crisis.

Heavy Western armament in Ukraine itself may require Western ‘advisers’ to show how it should be operated. It is not hard to see how those advisers could become embroiled in the conflict, pushing the West and Russia ever closer to war.

With no alternative to sanctions and frustrated by the current efforts to deter Putin or improve the situation on the ground in the Donbass, the West is slowly sliding towards increasing military pressure because there is little else it can do.

Putin holds several trump cards in this conflict. He knows the West won't attack and Ukraine can't win, so he can keep the Donbass unstable for as long as he likes. He knows there is dissent amongst the long-suffering Ukrainian population that will boil up if he only spins the conflict out. He doesn’t need to formally invade or occupy the territory, which could precipitate a real war with the West if he did.

Back to the negotiating table

So if the West won't fight, what can it do? Actually it can do much other than negotiate a deal. But the West can't be seen to do nothing, so sanctions have been imposed, which are as much about being seen to act by domestic voters as they are about punishing Russia. Sanctions have a utility as they act as bargaining chips, but as a diplomatic tool designed to bring an end to the conflict in its own right, sanctions are more than useless – they are in several ways actually counter-productive.

If the goal of sanctions is to force the Kremlin to back down over Ukraine and withdraw military support for the rebels, then numerous studies have shown that sanctions are an ineffective tool when it comes to forcing policy changes. If anything, they force leaders of the targeted country to dig in and generate support from the population for a harder line, as all the recent polls in Russia show is happening there.

If the goal of sanctions is to reverse the prosperity in Russia, undermine Putin's popularity and forment either a coloured revolution or a palace coup, then this is simply naïve. The impact of sanctions on domestic politics has been to destroy the nascent opposition by making it totally irrelevant, and to make the elite close ranks around Putin at a time when the slowing economy made him vulnerable for the first time in his 14 years at the helm.

If the goal of sanctions is to punish Russia economically and push it to the edge of a crisis, again forcing Putin to back down, then they are unlikely to work. So far, despite the double whammy of sanctions coming on top of the fortuitous (from the West's point of view) collapse of the oil price, the Kremlin has made no concessions whatsoever, but it has responded in kind with a painful ban on European agricultural goods.

Undermining Russia's economy is a very dangerous game to play. First, because Russia's economy is increasingly integrated with the rest of Europe and, as the second largest retail market in Europe, a Russian slowdown inflicts economic pain on the rest of Europe at a time when Europe's economies are so sick the European Central Bank has been forced to launch its own quantitative easing.

Second, because Russia is so big it has become an investment node in the region, and to bring Russia's economy down would be to bring down the economies of the entire Commonwealth of Independent States (CIS). The main channels are through trade, banking and massive remittances of guest workers – including millions of Ukrainians – sending their wages home. In per capita termspay in Russia ($24,114 in 2013) is just under three times higher than that in Kyiv ($8,790) and half of Tajikistan's GDP is made up of Russian-based remittances.

Third, thanks to Russia's large currency reserves, low external debt and triple surplus of trade, current account and federal budget, it can weather a lot of economic pain; the current thinking is reserves will be enough for at least two years and possibility longer. Moreover, the Kremlin is as unlikely to cave into financial sanctions as it is to economic sanctions, as both are seen as bullying, and Putin will take it down to the wire, risking a full economic crisis rather than give in. An economic collapse of Russia would be bad news for everyone on the Continent.

The only way to end the conflict and stop the inevitable escalation in bloodshed is to go back to the negotiating table. The West needs to concede that Russia today is not the same Russia in 1991 or even Russia in 2000, but has emerged as a major European power and has its own interests it is determined to protect. The concessions that Putin is asking for should not be hard to accept.

The Kremlin has asked for a "100% guarantee" that Ukraine does not join Nato, and Western leaders have already conceded that Nato membership is not and never was on the cards. Merkel’s government was visibly alarmed by Poroshenko’s plan to hold a referendum on Ukraine joining Nato, seeing it as a dead end that would only inflame tensions with Russia. France is also against allowing Ukraine into Nato

The Kremlin has said that any Ukraine-EU trade deal needs to be a three-way discussion that takes Russia's interests into account; Merkel has already conceded that a trade deal between the EU and the Eurasian Economic Union (EEU) is achievable.

So a diplomatic deal is still possible. The problem is that both sides are in a game of diplomatic chicken and so far no one is reaching for the steering wheel. The chances of a head-on collision are rising fast as the amount of road between the West and Russia runs out.



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