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Monday, February 24, 2014

Ukraine: To the victor the spoils? What will Russia and the EU do next?

Ukraine’s future is in the balance. It could move closer towards the EU, Russia or both at the same time. It could remain a unified state, split in two or conceivably be invaded by Russia. Here are some of the scenarios which we've ranked according to their probability.

Closer ties with the EU - Ukraine was due to sign an association agreement with the EU, the cancellation of which caused the crisis in the first place. With a new government and Ukraine on the brink of financial default Ukraine will be looking for EU help and finance. Full EU membership, and certainly NATO membership, will remain off the table but the original trade agreement looks likely to be signed.
Partial reconciliation with Russia - It is highly unlikely that the new government will wish to move closer to Russia, and will not wish to join Russia’s Eurasian Customs Union (itself incompatible with the EU deal). That said Ukraine cannot ignore Russia - it is dependent on it for its energy, it has substantial debts with Moscow and it is its largest trading. There is also the question of the large Russian minority and Russian speaking minority that would strongly oppose Ukraine distancing itself from its Eastern neighbour. Much depends on the pragmatism of the new Ukrainian government, the Russians (President Putin in particular) and the EU - ultimately it is in the interests of all sides to ensure stable political and economic relations. 

Remain a unified state - 
Although the ethnic/linguistic divides are stark (see below) the split is not as straightforward as it looks. There are ethnic Russians (in the Crimea), ethnic Ukrainians who speak Russian as well as other minorities. The revolution was undoubtedly triggered by Yanukovich's decision to opt for closer ties with Russia and not the EU but widespread discontent fuelled by corruption and bad governance were crucial in bringing things to a head. As long as the new government is inclusive, remains on good terms with Russia and avoids antagonising the Russian minority too much the state should hold together.

Divided - but how?
Disintegration - If the new Ukrainian Government - backed with financial support from the EU - decides to ignore the concerns of Russian speakers in the East it risks provoking an insurrection in these regions. The ex-President is still at large and could be a focus for areas wary of coming under the control of the protest movement that they did not support. The most dangerous flash point is in the Crimea, which only joined Ukraine in a transfer organised by the Ukrainian Soviet supremo Khrushchev. Crimean Secession seems unlikely for now but it’s worth remembering the Russian Black Sea fleet is based here.

Invasion by Russia - 
There is a danger that if Russia feels frozen out of the Ukraine all together it could act as it did in Georgia in 2008 and seek to intervene in support of a proxy interest. In this case, if the new government were to threaten Russian interests or ethnic Russians in the Crimea, it could prove a pretext for Russian intervention. Russia could back secessionists or act in its own interest and annex the Crimea. Russia would pay a heavy price (Ukrainian military action and western retaliation on its fragile economy) so for as long as its interests are secure this remains an extreme scenario.

The stakes are high for the European Union. Ukraine has many links to EU states – parts of its territory have been part of Austria, Hungary, Czechoslovakia, Poland, Romania and further back Lithuania – but the EU should be careful. Russia has an equal claim to close relations with Ukraine and any mutually exclusive deal with the EU will raise tensions. The new government and the EU should of course establish good relations, but Russia needs to be a part of the process and so too does the large Russian speaking population in Ukraine – the EU risks confrontation if they are not included in the process.


Anonymous said...

As far as I am concerned the EU has completely over-stepped the mark here by deliberately courting a nation that does not fit the profile of an EU nation.

The move smacks of pure empire building and nothing else.

I thought that the whole purpose of the EU was supposed to prevent war in Europe.

Not in our name EU.


Jesper said...

I'm fairly sure that the people in Ukraine who risked their lives did not risk their lives to obtain a trade agreement with the EU.

Pushing for a trade agreement now would appear to be insensitive and unwise.

Rik said...

Looks to me that Putin is going for let it do its thing for some time.
With Greek-square corruption and incompetence added by less dough than Greece and a lot of nationalist crap on top of that, it is an almost guaranteed recipe for disaster.

Country is simply unable to govern itself because of corruption and incompetence (and lack of structures). Now we have tensions between the 2 main groups in the pressure cooker (hard to see a politically stable situation develop medium term, with that woman involved) and the money has finished on top of that.

He simply doesnot have to do something now it will happen by itself (Yulia and the poodle/boxer will take care of that), in a few years time tops.
Help a bit by cutting the gaz (or raising prices) and make exporting more difficult. Much better time to play your cards when things run out of control again (only in the opposite direction). Might even end up with the whole country iso only the SE.

IMF involvement will mean all sorts of price rises with nothing in return.

And let be frank, the West simply looks very dodgy at best re its own role in this. Incredibly unprofessional. Great to have this in the news as often as possible (when your name is Putin at least).
It won't be popular with the electorate in the US and especially the EU (well in the paying countries). Let them run from rescue package 3.4 to 4.2 worked 'well' in Greece.
25-35 Bn will never be enough the country is a blackhole. Will be very popular especially in countries like Holland where it simply means further cuts on the local stuff (as they are borderline Olli-material). Hard to see where the Club Med gets the cash from btw.
Preferably combined with discussions on EU membership. I just asked Europes biggest expert on EU membership, Mr Salmond, who informed me it is just a walk in the park.
Anyway EU support has eroding written all over it.

This is long term stuff, no real need to make a sudden move. Unless the US does something stupid like NATO plus missiles.
Probably that could be countered by an airdefence system for Iran anyway. And a bit of tension in the ME always works well for the oilprice.

Rik said...

Fully agree, but I think nevertheless they will.

All these East European countries need to find a way to live next to Russia in a sustainable way. Nearly all try to achieve that by 'Go West' (where the skies are blue) and digging themselves as deep as possible in overthere.
Next to the process of nationbuilding which usually means being anti-Russian. Probably even worse in the Ukraine as it is not really a country historically seen.
So from the current Ukraine side there is probably the idea that it should be as much West as possible and as quickly as possible.
Imho a huge structural problem for the EU. At the end of the day you need to coexist in a sustainable way with Russia. Your biggers neighbour and main energy supplier. But there simply is no coherent strategy for that. At the end of the day when Putin now gives an advanced air defence system to Iran and moves energy supplies East Europe is f-ed big time. Simply has no real alternatives. And with overreliance on gaz (which is very difficult to transport unlike oil and coal) and with effectively shorter term only 2 realistic sources ME and Russia, which can easily be relatively cut off by Russia very vunerable.

From the EU side. It is also an overall rather negative picture.
They probably think they can get this organised, while history proves otherwise. They have not really been able to kick corruption out in any of the Eastern countries. Most decreases in corruption can probably be better explained by the state getting itself better organised.
And even in the South it has a horrible trackrecord in that respect. So not going to happen.
They got their priorities wrong, they need a stable Ukraine more than a Western Ukraine. In fact a Western Ukraine is very likley to develop into a huge (Greek financially and Uber-Balkan re immigration) liability.
Anyway they seem to have bought the place (at least have done a downpayment) and look to be going for term payments. In other words with every step they will dig themselves deeper in this thing (that has disaster written all over it).

Just checked the Dutch stuff but it is already clear how that will develop. Wilders is already making the link Ukraine-money and local cuts. Problem is he is great at keeping it in the news. In just by doing that it will do its work (eroding EU support). The population simply donot like it especially when that link becomes clear. Now people are probably partly focussed on those nice courageous freedom fighters against that 'nasty word' Putin. But not too far from now reality will hit in: 'Money can only be spent once'. Simply has as said earlier disaster written all over it. In a nutshell just keeping it in the news will very likely do the job for people like Wilders.

Organisations like the EU simply are awful in exit strategies. Hard to see anyway how that would work here. You have a structural dysfunctional country, but after you got in it always will be the choice between two evils. Exit and it turns in an even bigger mess. Stay and it will cost and be a PR disaster at home. Simply has Greek-style disaster (as disaster-species) written all over it.

Will be fun to watch and EU reform positive.

Rik said...

On the UK.
Everybody knows that Hague likes to play the international statesman, but Cameron and Co would be better advised to keep a low profile on this.
Will very likely end in tears (as in PR disaster), better not have your name on it.
Huge payment to a 3rd world hole and/or mass immigration in what ever form and caused by something EUish or not will simply be associated by many as negative in a general sense and EU-related on top of that.

Especially as that is likely to happen in the next 1-2 years. It has a Greek sort of timing written all over it. Read could well be in general election time.

Same as with the NSA thingy the excrements have hit the electric air replacing device, the thing is to get as little as possible on your clothes.
Obama's ears can be a good shield re the NSA and Merkel can also cover a lot of surface (re Ukraine).

This NSA thingy btw will 'go business' now. Markets for US main products will hedge against being a NSA target with info ending up with its competitors. Not really nice if you like your worldwide sales.
And non-US will start to push for measures with their local Merkels to do something about it. This has big money being anti-NSA written all over it. Obama is managing it in the worst possible way. Simply shoul made an estimate how much more excrements will hit the fan and what will be necessary to bring things from there on a sustainable footing again and subsequently do that asap. That is the way to get it out of the news. Now every new thing will bring it back.
Doubt if the Guardian side fully understands that they have now 2 very powerful new allies (and both with the capacity to finance things). Apple,MS,Google&Co in the US and nearly every business abroad that competes with US companies.

christhai said...

Open Europe wrote:
"Closer ties with the EU - Ukraine was due to sign an association agreement with the EU, the cancellation of which caused the crisis in the first place."

History. The EU, mostly Germany, spent literally hundreds of millions of euro to, as it turned out, bribe the Ukrainian Parliament to join the EU.

The Ukrainian MPs took the bribes but voted NOT to join the EU.

The EU then spent December, January and most of February destablising the Ukraine by paying protesters.

What should the EU do?

Get out of the Ukraine and stop interfering.

EU policy has created the risk of civil war. Even nuclear war with Russia.

The EU wants the cheap labour, the Oil Fields and Wheat oceans of the Ukraine as Hitler did not so long ago.

EU get out and leave them alone - remember what you did in the N.Ossetia and Georgia!

Roger Cole said...

Interesting and rational blog so far.
General Powell was reputed to have said when the US/UK and other EU states invaded and occupied Iraq that once a country was invaded it was "owned" bey the invader. The overthrow of a democratically elected government by mass demonstrations that became violent in response to state violence or initiated by the rebels or sections of, has created a major crisis that could now be "owned by the EU/US/NATO axis that encouraged it.
Are the Irish, British, French, German etc people's now living in EU now be expected to have a massive increase in their taxes for the Ukraine they now "own"? Will the corporate media that supported the rebels now tell the people's of the EU they should pay more taxes?
A massive tax increase is the most benign solution as there could be other options now advocated such as war with Russia. Personally I think the political/media elite that have dragged us into this crisis needs to be replaced and we should leave the rebels sort out their own problems. The last thing we need is massive tax increases let alone another war

Anonymous said...

Russia has the right approach retain the monies it was going to pay out, the eussr with its power grabbing attitude apparently wants to fund the pro eussr group and extend the problems. This is what happens when you have a political nobody running the so called foreign policy of a disparate group of nations with nothing in common.

Ray said...

Putin would like to go back to, or create a de facto copy of the old USSR, and we have the ex(?) communists in the west trying to create an EUSSR. The USA is in the background stirring the dudu and it will be us that catches the flak when it all goes tits up. Once again all the politicians of the West are going where none of their electorate want them to, and we will pay the bill. Lets put a stop to this where we can, in the UK we can, get UKIP into governement and watch the rest of Europe follow us.

Anonymous said...

According to today's press, the Ukraine needs c.EUR10Bn to EUR15Bn in immediate financial aid to keep the economy from collapsing.

Given that the Ukraine is totally corrupt (and the money is likely to disappear down a rather large hole) and has a history of not paying back debt, I would love to know who is going to stump up the cash.

My bet is an EU backed bailout.

For me, this is completely illegal. As a UK taxpayer I do not want any of my taxes to go to the Ukraine (no disrespect to them or the Ukrainian people) either as part of existing EU funds or as part of an EU bail out via a cash call to EU sovereign nations. It is obvious that the Ukraine is in the Greek boat and will need more and more bailouts going forwards.

Funding the expansion of an illegitimate EU empire is not a priority for me or many other European taxpayers.

Given the current economic environment and the UK's debt profile, any UK government that commits taxpayers' cash is heading for a 'vote of no confidence' from the people.

How are you going to get out of this EU?! You had a major hand in creating this mess.



Unknown said...

This is the plot of the latest Clancy novel "Command Authority". Truth is as strange as fiction.

Jim Kemeny said...

I agree with all the above comments, anonymous or not.

I also deeply resent the EU spending our money on such a disgraceful venture!

Rik said...

The above comments look to give a good indication how popular a EU financed bail out of the Ukraine is with the electorate.
Similar btw for interfering in a foreign contry's affairs, since the big successstories in Iraq, Afghanistan, Libya, Egypt, Syria and often being drawn into a swamp.

Seems like Mr Hague cs have joined Mrs Reding in campaigning for Ukip. And all so well timed before the European Parliament elections.

Robert HARNEIS said...

The reason the EU leaders look like a bunch of Ealing comedy crooks in this lamentable affair is that they are in the pockets of the US/NATO which is more or less the same thing since the US pays for 75% of NATO and has all the guns and bombs. They are constantly being jostled by the US to do things differently, more quickly and invariably more crudely. They cannot say no because as governments they are tied by largely secret agreements via NATO and as individuals they have been bribed one way or another to cooperate. Refuse to do as we say expect real trouble at home of one sort or another. Do as we say and you get a Blair/Major style retirement. At the moment there are negotiations to bring NATO and the EU even closer together. This will be an utter disaster for the EU AND Europe generally and in the end it will do the Americans little good. We can only pray that the financial collapse that is coming brings all this corrupt nonsense to an end.

Rik said...

Some issues not seen discussed in the media.

1. The monkeys have taken over the zoo.
1.1 First of all it is good to realise that the EU and the US have largely different interests re Eastern Europe and Russia.
The US simply seems to think that the Cold War isnot finished yet and basically all their actions towards Russia point in that direction. And the UK is simply following them in that btw.
They have done the same thing with Vietnam with devastating consequences. Kept seeing Vietnam as the enemy and with 'the enemy of my enemy is my ally' doctrine kept on supporting the Khmer Rouge while these were already killing their own people on a massive scale. Apparently they havenot learnt anything from that.
Same here if you want to reset relations and give up your role as international policeman you need to cooperate with Russia and China, whether you like them or not.
Pissing over Russian and/or Chines shoes with every opportunity that occurs hardly will do that trick.

1.2 Europe on the other hand has to find a modus to coexist with Russia and in that process assure energy supply. You might not like Putin but realistically he is there to stay and if replaced, it will be by someone very similar.
It is simply by far Europe's biggest, important (oil supply and geopolitical influence wise), potentially dangerous (when the relation is messed up) neighbour. So for people who donot like their Cold Wars 2.0 edition and like some heating winters better find some modus to coexist.
The EU seems a much better in telling other people what to do than to deal with equal partners.

1.3 As far as Eastern Europe goes.
The EU and NATO incorporated many states after the fall of the Sovjet empire. Good stratigic reasons at that time for that. It created a buffer which was simply useful in case the Russian developments would turn the other way again.
After that they messed the whole thing up and kept messing it up until basically now. EUs East wants now a buffer of its own and the EU simply let itself being forced into that.
First they have ended up with economic blackholes like Rumenia and Bulgaria. Second started to incorporate further all kind of even more 3rd worldish countries and let themselves being talked into starting access talks (partly unofficial) with countries like Georgia (of which one could doubt if they are European to start with.
Third this disaster. The label economic disaster and financial balckhole gets bigger and bigger the further East you go. And so come the dangers attached to that, the Ukraine is simply half Russian for starters.

It is clearly not in the interest of Western Europe to do this. They are simply letting themselves be drawn into it by US, media, Eastern Europe and events (and reacting like a complete moron on those).

2. Re Eastern Europe. The only sustainable solution is not going 100% West and keep demonising Russia, like they do now as basic strategy. Economically the West gives a lot more opportunities, so going West as far as the economy goes makes a lot of sense.
However on another level they have to find a way to coexist sustainably with their neighbour Russia. Now they are simply going largely confrontational. With no real reasons but nationbuilding and not have dealt with their past.
Like Europe has had to deal with Germany a way which works long term and structurally. However by going anti-Russian on every possible occasion doesnot.
What the big mistake is that EUs West makes is that it let it own basketcases get away with that.

Rik said...


3. Saying that Russia and Russian speaking Ukrainians should be involved simply doesnot do the trick.
At best it will be neutral at worst it will be another empty promise to be broken, with all sorts of repercussions.

The EU in order to stabilise this monkey cage simply will have to enforce some basic conditions (if the other Ukraine side doesnot meet those by itself, which is very likely).
-Russian(speakers)/East-South should be assured proper representation. Proper like proper not like empty promises.
-Russia should get really involved and be given a say (no rhetoric ending up with 'and we, the EU think that Russia should pay half, this is our bankaccount', stuff like we have seen in Cyprus.
-Get rid of that woman. She is one of the 2 undigestable figures in Ukrainian politics (one down, one more to go). And will be an even bigger liability when there is no leader at the other side.
-If not properly working much more autonomy for the regions is the only possible solution, preferably before they start to kill each other on a more industrial scale.
-Demand accountability of EU funds.
-Grow a pair of testis in that process. If necessary let them eat cake. Hard to see they take the cake route at the end of the day.

If not properly working much more autonomy for the regions is the only possible solution, preferably before they start to kill each other on a more industrial scale.

4. Will however more likely end by just paying up. But clearly not enough to do the job properly on top of that.
And anyway with 10s% ending up in oligarchical hands and some on Yulia's Swiss bankaccount.
The EU has a moronic 50% plus 1 idea of democracy that they see as the real thing at least for other countries. Simply doesnot work in a situation like here where you have 2 parties that donot like/hate each other (same thing in Syria btw and the reason we now face a perpetual civil war there).
Parties have to coexist in a sustainable way. If one side doesnot accept the other side is ruling (a mutual feeling in the Ukraine), you simply end up with a completely unsustainable situation (like now).

Simply donot see them doing that as said. The EU reacts, not acts not even to mention proacts.
So congratulations, you just bought yourself one of the biggest 3rd world manure collectionpoints, with a real Drama-queen as supervising attendant, to add to your consideble sized collection. Enjoy it. Use a proper toiletspray for the smell.

5. At the homefront. This has PR disaster as said earlier written all over it.
Basically all over Western Europe. People are fed up with Western interventions because:
-the end up costing alot of money;
-often end in disaster;
-there are alot of problems at home to take care of.
Not even to mention another new member in the pipeline, while they are still overjoyed with their Bulgarians and Rumanians.
Wait till the Wilders and Farages of this world start to point this out to see the full effect hereof.
So for politicians it is wise longer and medium term not to be associated with this. The UK has a nice low profile, Germany and the EU itself, is taking most of the Flak (and rightly so btw).
So Osborne stating that there is money available or Hague doing an international effort to find funds is hardly a great idea. Well not if you like your voters anyway.

Anonymous said...

The EUSSR has overturned yet another democratically elected government and replaced it with EUSSR technocrats.

With a little luck, the people of Ukraine will kick out anyone and everyone from the EUSSR, the US and Russia, and take their country back.

Anonymous said...

Well it looks like the Russians are sending in military to the russian speaking parts of the Ukraine, the elected president of ukraine is in Russia so are the eussr going to move in to protect their puppet government now?