By Stelios Papadopoulos
UKRAINE sought to draw a line under its confrontation with Moscow recently by ratifying a landmark trade deal with the EU and approving limited autonomy for eastern Ukrainian territories controlled by Russian backed separatists.
The rejection of the deal last February under Russian pressure by former Ukrainian president Viktor Yanukovych triggered the Maidan protests which led to his downfall. Signing the deal then is significant but its partial implementation signifies Russia’s influence. This is so because although the EU has extended lower tariffs on Ukrainian goods until the end of 2015, Ukraine will not relax its trade rules until the start of 2016. This follows Russian claims that lifting Ukrainian tariffs would allow cheap EU goods to flood its market.
In reality this is the last thing Russia is worried about. The problem from a Russian standpoint is that an association agreement is a prelude to EU membership and an EU membership-judging from past cases-is a prelude to NATO membership. If one also considers the fact that the autonomy offered to the separatists excludes separatist control over foreign policy, then the current ceasefire is simply temporary. It is not difficult to see why. The Russians as is already known desire the ability to veto any potential EU or NATO membership for Ukraine. It is therefore not surprising why they have been advocating for a Federation as the solution to this political crisis. If this option is not available (i.e the current state of affairs) there is a well known strategy to prevent NATO membership and it is the following. The first element of this strategy is military control of so called ‘’breakaway regions’’- such as Abkhazia and South Ossetia in Georgia and Transnistria in Moldova-and the second element is a credible threat of destabilization in the form of military attacks-with the 2008 Georgian war being one illustration of this. Consequently in case Ukraine begins negotiations for either EU or NATO membership, Russia is in a position to destabilize the country so as to halt this state of affairs.
But the argument just outlined hinges on one obvious assumption, namely, the prospect of Ukraine joining NATO. No one can naturally say anything at the moment, but the United States has followed since the early 2000’s a policy of containment of an area that former US National Security Advisor Zbigniew Brzezinski called ‘’Eurasia’’. What is ‘’Eurasia’’? None other than Russia and China. The policy is carried out by incorporating the former soviet states into the West via NATO, while surrounding China with US military warships and South Asian allies who depend on US Arms imports. Given the historic change from a unipolar world in the 1990’s where the US was the dominant power, to a multipolar world with different centres of power, such a policy is not surprising and in fact it is the reason why the ceasefire will very likely be temporary. But it would not be wise to bet on a resurgence of the conflict in the short-term and specifically before this winter. Here’s why:
The European Bank for Reconstruction and Development forecasted recently that Ukraine’s war-hit economy is set to contract by at least 9 % this year and a further 3% in 2015. This means that Ukraine will require additional external financing to top the $17 billion IMF bailout agreed this summer. But it also warned of significant downside risks if fighting continued in the east of the country and trade with Russia was further damaged. In addition, it cautioned that Ukraine would face ‘’formidable difficulties’’ if Russian gas supplies were not restored before the winter. Russia interrupted gas supplies in June after Ukraine’s failure to repay a $4.5 billion debt to Gazprom. One question is who will provide this external financing. The IMF said that it would provide an additional $2.7 billion in mid-December if it complies with the loan conditions. But analysts such as Timothy Ash of Standard Bank state that the latter is extremely unlikely. ‘’It is not a matter of if but when will Ukraine restructure its debt’’ said Mr Ash. What about the US? This again seems unlikely since the Obama administration has shown no sign that it will provide economic aid due to corruption concerns.
This leaves us with the EU which simply cannot afford to and will not step in. The EU is still in a deep recession and a deflationary spiral is on its way unless something is done about it. The sanctions have also contributed to the problem through reductions in trade flows with Russia and the psychological effect on investment in Eastern Europe and Germany which is difficult to measure but real nonetheless. In addition, because of Ukraine’s gas disputes, gas prices from Russian imports will rise in the winter making the impact more severe. Consequently, this writer expects a settlement between the EU and Russia before winter. Nevertheless, it is a settlement that will not hold for the long-term at least if one puts things in historical perspective. We are moving from a unipolar world dominated by one superpower, to a multipolar world with different centres of power. It is a historic change and Ukraine is at the centre of it.
Stelios Papadopoulos is a political risk analyst, Wikistrat researcher and MSc political economy
