Ukrainian President Petro Poroshenko greets Ukrainian POWs returning from Russia

GIS Dossier: Ukraine

  • Europe badly underestimated the costs of luring Ukraine from Russia’s orbit
  • Russia’s aim is to prove Ukraine is unviable and split the European Union
  • Freezing the armed conflict in Donbas serves both sides
  • Ukraine’s most important fight is against corruption, and it appears to be losing

GIS Dossiers aim to give our subscribers a quick overview of key topics, regions or conflicts based on a selection of our experts’ reports since 2011. This survey is devoted to one of Europe’s biggest geopolitical challenges – the conflict with Russia over Ukraine.

After the breakup of the Soviet Union, for Russia “no loss was greater than that of Ukraine,” GIS expert Professor Stefan Hedlund noted in a January 2012 report. The amputation of the USSR’s largest non-Russian republic, with Europe’s sixth-largest population of 51 million, was the most damaging diminution of what was once the world’s second superpower.

Under independent Ukraine’s first two presidents, Leonid Kravchuk (1991-1994) and Leonid Kuchma (1994-2005), Moscow tried with varying degrees of success to bring the country back into its political orbit. Ukrainian leaders tried to steer a middle course, retaining an orientation toward the “Eurasian cultural and economic space” dominated by Russia, while seeking closer ties and investment from the advanced economies of Western Europe.

The Orange Revolution of November 2004 frustrated Russian President Vladimir Putin’s efforts to recapture Ukraine by political means. After an allegedly rigged presidential runoff triggered mass protests, Moscow’s preferred choice, Prime Minister Viktor Yanukovych, was forced into a rerun won by the opposition candidate, Viktor Yushchenko (2005-2010).

Moscow tried economic pressure to win control over Ukraine’s energy infrastructure and strategic gas pipelines

This defeat prompted Moscow to switch to economic pressure, attempting to win control over Ukraine’s energy infrastructure and especially its vital gas transport system, including the main pipelines carrying Russian natural gas to Western Europe. These tactics culminated in a two-week shutoff in 2009 that left European customers freezing in the middle of a very cold winter, forcing Ukraine to sign a 10-year gas agreement that started with discounts, then escalated tariffs to European market levels, as GIS expert Dr. Frank Umbach pointed out in a February 2014 report. The effect was to put a choke hold on Ukraine’s economy.

Yanukovych’s moment

The gas squeeze came during the death throes of Mr. Yushchenko’s presidency, which had already been wrecked by the squabbling Orange Revolution parties and their oligarch sponsors. The return to power of President Viktor Yanukovych (2010-2014), capped by a victory of his Party of Regions in the manipulated October 2012 elections, did not stop Kiev’s balancing act between Russia and the West. But it unleashed a wave of popular anger that eventually swelled into the Euromaidan revolution of 2013-2014.

Mr. Yanukovych’s moment of truth came in November 2013, when he had to decide whether to sign an association agreement with the EU, or bow to Russian strong-arm tactics and join the Eurasian Economic Union. He opted for the latter. As Professor Hedlund predicted in a September 2013 report, that set Ukraine on the wrong side of the fence “separating liberal democracies and rule-based market economies in the West from authoritarian, oligarch-controlled regimes in the East.”

Poison pill

Ukraine’s last-minute decision to snub Europe’s offer sparked the protests that ultimately toppled President Yanukovych. But it also revealed the flaws of the EU’s Eastern Partnership (EP) strategy toward the former republics of the Soviet Union – the “near abroad” which Russia wished to retain as a “zone of privileged interest,” Professor Hedlund argued in December 2013.

The EP must now be viewed as a general failure [because it] never offered more than a halfway house. Governments … had to consider that forging closer ties with Europe would invite retaliation from Russia, and that the EU would not be ready to compensate for severe disruptions in trade and in the flow of energy.

Underlying this was an even more dispiriting realization in European capitals: “After many years of severe economic mismanagement, Ukraine has turned itself into a poisoned pill that nobody really wants to swallow.” Only the EU had resources vast enough to rescue the country, but Brussels considered the idea of offering full membership, with access to subsidies, as “outlandish. Even the less costly option of an association and free trade agreement was viewed by many as too much.”

Europe’s ‘fatal error’

For Europe, the geopolitical problem of Ukraine is twofold. First, Western leaders drastically underestimated the political and economic capital they would need to invest to put the country on a sound footing. Second, they failed to realize that Ukraine was a matter of life or death to Russia.

The logical corollary is that any attempt to lure Ukraine out of the Russian orbit, without permission from Moscow and a massive commitment, was bound to fail, Professor Hedlund noted on March 3, 2014 – three days after Russian troops seized Crimea.

A cool-headed analysis should have informed EU leaders long ago that any move to lure Ukraine to ‘join’ the West would provoke more powerful moves to retain the country within Russia’s sphere of interest. There has been no readiness to meet such moves... Every time the Kremlin has responded in force, it appears to have come as a surprise to Brussels.

Russian President Vladimir Putin during a visit to Crimea
President Vladimir Putin knows that the overwhelming majority of Russians and most Crimean residents would never accept a return of the peninsula to Ukraine (source: dpa)

In April 2014, GIS founder Prince Michael of Liechtenstein quoted portions of a prescient essay by Archduke Otto von Habsburg (1912-2011), published eight years earlier, that might have helped European leaders avoid the subsequent tragedy. It is a strong argument for why the EU needed to get serious about incorporating Ukraine:

During the period from Stalin to Putin, Russian imperialism has always nurtured the objective of conquering Ukraine once again, folding it into Russia and using it as a platform for further major operations vis-a-vis Poland and/or other parts of Europe. This turns Ukraine into a key location within Europe and makes it necessary for it to be integrated into the European Union.

One must also understand that culturally, historically and spiritually Ukraine forms part of Europe … Ukraine has thus acquired a right to Europe that is of political significance as well as one of security. Ignoring this fact could result in a fatal error of historical proportions.

What would an effective eastern policy have looked like? Professor Hedlund sketched the basic outlines in a March 31, 2014 report:

When Brussels decided to take on Moscow in a tug-of-war over Ukraine, it should have come to the table with an arsenal of powerful tools, designed both to secure the Ukrainian economy against Russian retaliation, and to make it clear that economic warfare between Russia and the West would be fought with determination. It might have worked. But the choices Brussels finally decided to make were simply reckless.

Russian interests

Russia’s claim to Ukraine goes beyond geopolitics. As Professor Hedlund noted in a December 2013 report, it is all about history and emotions.

It is grounded in a powerful belief that Moscow is the natural and rightful heir to … ancient Rome and Constantinople. As frequently expressed by Mr. Putin, it entails viewing Russians and Ukrainians as one people, with a common language and culture, and a denial that Ukraine has a right to independent statehood. If Ukraine were to opt for closer association with Europe, it would end all this. Russia would be reduced to a non-European outlier, wedged between Europe and Asia.

Mr. Putin’s aggressive stance was also an act of self-defense against the morality-based politics that have dominated Europe since the Helsinki Final Act (1975) and the Charter of Paris for a New Europe (November 1990), Professor Hedlund noted in July 2015.

A vision of common European values continues to grip the minds of Western leaders

While the vision of common European values encompassing the whole continent evaporated after Russia’s seizure of Crimea in March 2014, it continues to grip the minds of Western leaders. Russia’s response “has been to place ever-greater emphasis on its own culture as being distinct from that of the West, and on its own values as being different.”

It would be better to listen to the advice of veteran U.S. diplomat George Kennan, who argued that “foreign policy must be based on interest.”

Ever since the collapse of the Soviet Union, Moscow has been seeking a dialogue with the West which is based on common interest Russia is clear in its mind on where its interests lie, and it plays a deliberate game to secure [them]. The West, in contrast, has become so preoccupied with upholding its increasingly hollow values that it has lost sight of its interests. It is this very contradiction which has produced disaster in Ukraine.

After fumbling his initial response to the Euromaidan revolution, Mr. Putin has consistently pursued these Russian interests, Professor Hedlund noted in a December 2014 video commentary.

His ambition was never to occupy Ukraine militarily [but] to demonstrate … that Ukraine is not a workable state, that it needs to have a deal with Russia if it is going to survive. The other game he has been playing is “divide and conquer” within the European Union … making sure that the EU also ends up in political crisis … and is not a credible actor.

The gulf widens

There was a moment during the EU-brokered Kiev agreement of Feb. 21, 2014, when it just might have been possible to orchestrate an orderly transition, Dr. Uwe Nerlich observed in a December 2014 report. This would have required the West to “engage Russia in a process of continental re-ordering” while “helping Ukraine follow a route of Europeanization without membership.”

By early 2015, as Professor Hedlund noted, the geopolitical situation had altered drastically. As Ukraine dug in for a long war in Donbas, Western sanctions had done nothing to reverse Crimea’s annexation or deter further Russian aggression in eastern Ukraine. Instead, Russia had been turned from a potential partner into an open adversary in conflicts such as Syria. As hardliners took over, “what remained of Russian liberals and liberalism [was] ground into dust,” and Vladimir Putin discovered that Western sanctions were even “helpful in cementing his regime.”

Moscow also paid a price. The conflict with Ukraine effectively scuttled its Eurasian Economic Union, which could have been viable until the seizure of Crimea, Professor Hedlund wrote in a January 2015 report. Even worse, this example and Western sanctions spooked other key players like Azerbaijan, Kazakhstan and the Central Asian countries, which appear to be drifting in China’s direction.

Ukrainian war veterans embrace in Kiev
The war in the east helped Ukraine forge strong national bonds, as shown by this veterans’ reunion commemorating the February 2015 battle of Debaltsevo (source: dpa)

Forged in battle

In an otherwise downbeat July 2017 assessment, Professor Hedlund wrote that Ukraine’s war in the east had helped crystallize a sense of nationhood:

Despite war and consistently crooked politics, Ukraine is surprisingly well on track toward becoming a nation-state. The loss of Crimea and the separatist-held parts of Donbas has even been helpful, as it removed large numbers of the Russian-speaking population. But the real driver was Russian aggression and Ukraine’s resistance. Both have fanned national sentiments and fostered emotional bonds with the independent Ukrainian state.

Another GIS expert, Dr. Pawel Kowal, noted that war was a catalyst for reform in Ukraine’s army – potentially making it a modernizing force as in Kemal Ataturk’s Turkey. For NATO, supporting the Ukrainian army has a double utility. Tactically, it would give the Western alliance an outside ally “if Russia decides on wider military action in the east.” And in terms of enlarging and consolidating the zone of democracy in Eastern Europe, a reformed army could be the “recruiting ground for a new political elite, more dedicated to the ideals of the Maidan Republic.”

As the war in Donbas wore down to a low-intensity, frozen conflict, it appeared to be by mutual consent, Professor Hedlund noted.

Both sides believe that simply freezing the conflict is preferable to resolving it. Ukrainian politicians win by fueling national mobilization against Russia; some even have serious business interests that thrive on war and instability. Meanwhile, the cost to Russia of supporting the self-proclaimed “people’s republics” is bearable, probably less than $1 billion per year, much less than the cost of sustaining Chechnya.

War on corruption

Corruption is the second war Ukraine is fighting, in the words of U.S. Ambassador Geoffrey Platt. In 2014, Transparency International ranked Ukraine 142nd out of 174 countries surveyed, worse than Nigeria and Russia. And the conviction is that “little has changed – that oligarchs, bureaucrats and politicians are still lining their pockets as if nothing had happened,” wrote Professor Hedlund in a November 2015 report.

Corruption cannot be rooted out by new laws or more police, but only by replacing the players

“Once mismanagement and corruption become a habit, it cannot be rooted out by new laws or more police. Such behavior can only be changed by replacing the players, not only on the political scene but also in the administrative and law enforcement apparatus at every level,” Prince Michael of Liechtenstein wrote in a September 2015 statement.

At that time, he placed the greatest hope on a band for foreign reformers, including Economy Minister Aivaras Abromavicius, a Lithuanian; Finance Minister Natalie Yaresko, an American investment banker; and former Georgian President Mikheil Saakashvili, who took over as Odessa’s provincial governor.

Reform retreat

But seven months later, the reformers were out, along with Prime Minister Arseniy Yatsenyuk and the rest of his government. Mr. Abromavicius got the ball rolling with a shock resignation on February 3, 2016, saying he had been overwhelmed by corruption. In April, President Petro Poroshenko, who had pledged to “wipe the country clean of corruption,” was implicated in the Panama Papers scandal, while 61 percent of Dutch voters rejected ratifying Ukraine’s association agreement with the EU. A new government led by Poroshenko loyalist Volodymyr Groysman was unveiled on April 14, 2016.

Prime Minister Yatsenyuk’s fall was “a symbolically important setback for Western ambitions to micromanage Ukrainian government affairs,” Professor Hedlund wrote. But by far the most worrying conclusion is that Ukraine’s troubles were “mostly homegrown.”

Russian aggression has certainly caused much damage, and Western indecision has added its fair share, but the main reason why the country remains so vulnerable can be found in the deeply ingrained pattern of oligarchs feathering their own nests. President Poroshenko himself is a powerful symptom of this disease … A recent voter survey shows that if Ukraine were to hold elections today, no party would crack 10 percent, while 27 percent of respondents would not bother to vote at all.

Naftogaz CEO Andriy Kobolyev is one of the new breed of Ukrainian technocrats
CEO Andriy Kobolyev restructured Ukraine’s gas monopoly Naftogaz, only to be targeted by oligarchs who made fortunes by diverting cheap residential gas to industrial ventures (source: dpa)

Developments at key state-controlled companies, such as Naftogaz – the country’s largest taxpayer and manager of its strategic gas pipelines – also bode ill for reform. In a November 2017 report, Professor Hedlund shows what happens when young technocrats take on vested interests. Naftogaz’s 39-year-old CEO, Andriy Kobolyev, had some initial success with restructuring. But now the old guard is pushing back. Outside board members have been forced out, judges negatively vetted by the anti-corruption panel have been appointed to the Supreme Court, and even the governor of the central bank, Valeria Gontareva, was hounded out of her job by death threats.

Crimea: cause and solution

Moscow has always viewed Crimea as Russian territory and a vital “forward bastion” on the Black Sea, with a military significance analogous to Kaliningrad on the Baltic. The peninsula’s seizure and annexation in March 2014 was the first open violation of European borders since 1989, and initiated what has become known as the “new Cold War” with the West.

In May 2015, Professor Hedlund argued that any resolution of this confrontation must start with Crimea. “No matter how hard it will be to find a solution there, finding one in Donbas will be even harder,” he noted. This would require Western politicians to climb down from their moral posturing that Russian cannot be allowed to win – a promise that can only be paid for in Ukrainian lives and by Western taxpayers.

The only way to defuse the Crimea situation is with a tailor-made solution

The practical options in Crimea were sketched out by GIS expert Dr. Svyatoslav Kaspe in August 2017. First, most of Crimea’s residents, and the overwhelming majority of Russian society, will not accept giving the peninsula back. This “Crimean consensus” goes even for opposition leader Alexey Navalny. On the other hand, Ukraine cannot simply give up 5 percent of its population, and Western leaders cannot afford to lose face completely.

This renders the Crimean problem insoluble, and Crimea a toxic asset for Russia. The only way to defuse the situation is with a tailor-made solution. Varieties of mandated protectorates, or mixed sovereignties, have often been successful in the past. Flexibility is called for, which could allow “a series of palliative, hybrid measures” to be deployed.

Who’s winning?

As of early 2018, the front line in east Ukraine remains frozen, with Russia once again building up its forces across the border. By clinging to the Minsk II process and the Normandy format, Europe had “doomed from the outset” any hope of successful mediation, Professor Hedlund noted in a December 2017 report.

The U.S. decision to provide Ukraine’s army with lethal defensive weapons, such as Javelin anti-tank missiles, was intended to deter Russia from further military advances. But their effectiveness against the reactive armor of Russia’s more modern tanks has not been tested, making the decision “more of an emotional-political move than a military-strategic one.”

The Kremlin has also been frustrated in its hopes of fomenting a far-right rebellion in Ukraine. The economy is in better shape: inflation is under control, economic growth has returned, and pressure from the EU and the International Monetary Fund has even forced the government to take serious steps against corruption. The latter include a cleanup of the banking system that saw the nationalization of oligarch Igor Kolomoisky’s notorious Privatbank.

Without pressure from below, Ukraine could still slowly but surely revert to the Russian sphere of influence

However, these successes are not enough for Ukraine. Crunch time is approaching with the presidential elections in 2019. Politics at the government and parliamentary level remain corrupt. Without continuing pressure from below, Ukraine could still slowly but surely revert to the Russian sphere of influence – because “the Kremlin is the only player with the motivation, resources and patience to rescue a collapsing Ukrainian economy.” Yet even this prospect may not prompt “Ukraine’s financial and political elites to place the national interest before their own enrichment.”

Perhaps only a broad international settlement could break this inexorable logic, as Dr. Uwe Nerlich observed in January 2016:

Ukraine lacks the strength to resolve its domestic problems and cannot look to Europe for rescue. The only international context that would make the country politically and economically viable would be a cooperative framework involving Russia and Europe, with at least the tacit support of the U.S.

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