Andrey Sushentsov
The EU has not yet realized the amount of yearly grants that Ukraine’s stabilization will require if the latter turns its back on the Russian support – and the Union is not ready to provide them. There is every reason to have doubts about Kiev’s actions over the long term. The internal antagonism in Ukraine between the East and the West of the country is growing further. The US has yet to act as a stabilizing force. Russia is taking measures to ensure its risks and to avoid damage to its assets. An impetus to strike a deal may only occur when the EU feels the damage to its energy security. 
ПРЕМИУМ
1 july 2015 | 22:03

The outline of the Russian strategy towards Ukraine

Contrary to the popular belief that Moscow is destabilizing Ukraine, Russia is currently acting as the chief guarantor of its integrity. Moreover, efforts to localize the instability in Ukraine and limit its impact on neighbors are policy objectives common to both the EU and Russia. That is why the European Commission is playing an unexpectedly constructive role in the gas debt talks between Ukraine and Russia.

If it wished to, Russia could quickly, efficiently, and — most importantly — anonymously utilize the crisis to destabilize Ukraine and implant loyal forces in Kiev. So why isn’t it doing so?

Russia as a natural status quo power

Events of the recent past have shown that pursuing an aggressive, offensive foreign policy can be both costly and ineffective. The consequences of the U.S.-led operations in Afghanistan, Iraq, and Libya bear witness. Indeed, globalization and nuclear parity seem to be holding the world’s major players hostage to peaceful conflict resolution. New territories and populations consume resources without providing growth. The power of the modern state increases with the size of its economy, not its territory. The most important condition of social stability is a steady rise in GDP per capita.

Russia embarked on the path of sustainable economic growth only in 1999, whereas the U.S. took its first steps back in the 1880s. The lost time cannot be recovered, but it is vital to try to make up for it. Hence, the key objective or the Russian political class is to preserve the positive dynamics of economic development.

The Russian economy remains extremely fragile. The first industrialization in the 1930s was not market-based, and the introduction of capitalist modes of production in the 1990s went hand in hand with excess privatization. It still remains to overcome the consequences of the lack of market planning during the Soviet era, when expediency and practicability took a back seat to the need to form nationwide cooperatives in the development of industrial regions.

The dispersion of interrelated industries across the whole of the former USSR presents a uniquely complex challenge: post-Soviet countries must preserve their economic integration in the face of political disunity.

Although this path is the direct inverse of EU integration, it is similar in logic: the need to develop gives rise to collaboration. Only together can Russia and Ukraine create such superlative hi-tech machines as Ruslan-type aircraft (the largest in the world), KA and MI-type helicopters, and intercontinental ballistic missiles. In the eyes of Moscow it is exactly the baby that must not be thrown out with the bathwater.

The fragility of this balance is forcing Moscow to avoid sharp fluctuations in relations with the neighboring Belarus, Kazakhstan, Ukraine, Azerbaijan, and Turkmenistan. For contacts with these countries are of strategic significance to the Russian economy. A number of states – like Belarus, Kazakhstan, Armenia, Azerbaijan and Turkmenistan - share common interests with Russia  from the point of view of maintaining stable relations for the sake of stability and economic development. Each of them with its own peculiarities has long chosen the path of profiting from the Soviet legacy, and they have remained on that path since then up till now.

At the same time the stagnant or crisis economies of Ukraine, Georgia, Abkhazia, Kyrgyzstan, Uzbekistan and Tajikistan are under serious threat of destabilization. Accurate planning and a more realistic approach are required in Georgia and Ukraine that took the road of the most risky strategy of drastic reforms and fundamental changes. For in the absence of these two requirements neither Tbilisi, nor Kiev is able to boast economic success. Still it was Russia that was the first of the Soviet states to go all the way through the political radicalism having initiated the collapse of the USSR and the shock therapy for its economy, and having survived through the storm against the Supreme Soviet building in 1993 and the first Chechen war.

Moscow has digested the fact that drastic transformations and simplistic solutions are a high-risk strategy. Armed with this experience, Russia since the end of the 1990s has trodden a path of slow, but steady growth, and avoided being drawn into costly conflicts. That is why Moscow has not attempted to readjust the status quo in its backyard. It was always the last to join its revision, and only if its vital interests (like Georgia and Ukraine) were at stake. And that is why Russia is not the one to impose change in places where “a bad peace is better than a good squabble” (these would include Transnistria, Nagorno-Karabakh and Kyrgyzstan). And it has always chose not to respond in the cases when some of its minor interests were ignored (like in Yugoslavia, Iraq, Libya and Syria).

Russian interests in Ukraine

The need for its sustainable economic development makes the stability and integrity of Ukraine a necessity for Russia. Economic ties between the two countries are stronger than between any other states in the post-Soviet space. Prior to the referendum in Crimea, Moscow’s key interests on the peninsula were the Black Sea Fleet and Ukraine's neutrality. Fifty percent of Russian gas exports to the EU pass through pipelines that run through Ukraine. Which is why transit of energy resources through the Ukrainian territory is another vital interest of Moscow – at least until the South Stream starts functioning.

Moreover, Ukraine transits goods not only between Russia and the EU, but between Russia and Asian countries as well, including impressive amounts of contraband electronics. A large part of Russian defense orders are contracted to Ukrainian firms. Russian investments in Ukrainian enterprises makes up a double-figure share in the Ukrainian economy. At the same time Ukraine’s share in the Russian trade is approximately 4.5%. Every year 6-7 million of labour migrants come from Ukraine to work in Russia. The humanitarian ties between the two states are especially close with their mixed families, common culture and religion. For the sake of preserving these interests Moscow’s yearly donations to the Ukrainian economy amounted to 10-12 billion USD by means of gas cost reductions, loans, contracting orders and implementing the preferential trade regime, which came at Russian producers’ expense.

It would not be an overstatement to say that Russia has always been the main guarantor of Ukraine’s stability – and it remains that way, and this has been the vital interest of Moscow.

However, Ukraine has not been trying to lay the ground for stabilization. Radicalism of the new Ukrainian elite and its dizziness of success it has reached prove that it is ready for irresponsible experiments. The policy has already resulted in degrading state apparatus and financial discipline.

Absence of loyalty and the wait-and-see tactics have become the principle feature of Ukrainian officials on all levels. No less radical and irresponsible is the privately owned media in Ukraine. All these circumstances give opportunities for the likes of nationalist party Svoboda leader Oleg Tyagnibok, or oligarch and Dnepropetrovsk region head Igor Kolomoiskiy, or presidential candidate nationalist Oleg Lyashko. Economic default is a serious threat for the country at the moment, which is still not as catastrophic as the ongoing war in the Eastern Ukraine.

All this exacerbates instability and goes against Russian interests – but to a less extent, as compared to the situation 10 years ago.

With the stake on its growth, 15 years ago Russia initiated Russia initiated a new policy towards Ukraine that was based not on the concept of “brotherhood at all costs,” but on reducing Ukraine’s influence on Russia's vital interests. Key aspects of this policy were the Nord Stream and the proposed South Stream gas pipeline projects, the start of construction of a new Black Sea Fleet base in Novorossiysk in southern Russia, and the reassignment of defense contracts to Russian companies. Implementation of these projects takes time, however Moscow was preparing to peacefully “let go” of Ukraine within the period of 10 years, if the latter had decided to “go”. Russia sought to limit the irreparable damage on itself, but it did not — and could not — veto Kiev’s chosen foreign policy.

The forced upheaval as a result of the February revolution in Kiev in 2014 harmed Russia’s vital interests. The threat to Russia’s Black Sea Fleet  remaining in Crimea and the prospect of Ukraine joining NATO led Moscow to encourage the secession of Crimea and Sevastopol. Thus, Russia demonstrated firm resolve to act in order to protect its vital interests, and warned of the consequences should they be infringed any further.

At the same time, Russia continues to endorse the status quo in a broader sense. This explains Moscow's recognition of the new regime in Kiev, its refusal to bow to resistance leaders’ demands in eastern Ukraine to intervene in the conflict, its granting the gas cost reduction amounting to one fourth of the price and its tolerance of the violence against the Russian embassy in Kiev. Russia does not want the damage to its interests to grow. Which is why, Moscow is proposing effective mechanisms to preserve the integrity of Ukraine inside the new borders through federalization.

A condition for Russia’s policy of putting stability first is a mutual understanding with Kiev over the price of gas, the smooth transit of energy to the EU, the rules of trade regime in the Russia-Ukraine-EU triangle and ensuring inviolability of Russian companies assets.

A shift from cooperation to a renewed confrontation is undesirable for Moscow, but the Kremlin is ready for such eventuality.

Should adventurist and aggressive forces prevail in Kiev, Russia will be compelled to contain the threat of an instable Ukraine. Nonetheless, Russia will not use direct or indirect force against Kiev to settle the differences, since that would be too costly and could lead to unexpected results. In the eyes of Moscow there are profitable alternatives to subjugating and pacifying Ukraine. For instance, the money could be worth spent on focusing the several million tourist flow on Sochi by investing 50 billion USD to create a first-class resort there. Or it could be directed to the military-industrial complex, where a 600 billion USD investment up to 2020 would lead to a breakthrough in its development, at the same time encouraging other sectors of national economy.

Moscow realizes that it is impossible to take military control over the biggest European state with a 44 million people population. The majority of the Ukrainian population would oppose invaders, whereas in the last 20 years Russia has come up with the rule of sending troops only to the regions where the local people would welcome them. Escalation of the civil confrontation in the east of Ukraine is also undesirable because of the security risks in terms of cross-border trade, refugee and cross-border militant flows, intended and incidental military damage to Russian assets, threats to train and air communications.

The worst-case scenario of Russian policy would look differently. There would be a new impetus for Russia to develop alternative ways of supplying energy to the EU, Russian investments in the Ukrainian economy would be blocked, and the preferential trade and visa regimes would be reviewed and limits placed on labor migration. More importantly, Russia would stop subsidizing gas costs for Ukraine. Taken together, this would most likely cause an economic crisis in Ukraine and hit Russia, too, putting the brakes on annual GDP growth.

Russia will strive to avoid this scenario but will not deviate from it should Kiev not leave a choice. Resources formerly directed to support its neighbor will go directly to the Russian national industrial development. With growing gap in development levels Russia will be attracting Russian speaking migrants from Ukraine. The course of limiting Ukraine’s influence of Russia’s vital interest will be accelerated.

Instability causes changes everywhere, and Ukraine is not an exception. In the past it was Russia, not the EU, that provided strategic conditions for the growth of Ukrainian economy. As soon as Ukraine exits the free trade zone with Russia and the bilateral relations worsen, Moscow will no longer be the only guarantor of the Ukrainian stability. It is a good thing that Kiev itself heads to it.

Putting an end to the conflict and the stabilization of Ukraine, as well as taking measures to ensure its economic growth, would demand joint effort from the part of Russia and the EU, whose common interest is to localize the damage of the Ukrainian crisis.

Brussels, in particular, is aware that the next phase of the Ukrainian drama could be an energy crisis in Europe. It is therefore striving to avert such an outcome.

However, it is still too early to talk about whether we are observing the inception of a long-term solution to the crisis. The EU has not yet realized the amount of yearly grants that Ukraine’s stabilization will require if the latter turns its back on the Russian support – and the Union is not ready to provide them. There is every reason to have doubts about Kiev’s actions over the long term. The internal antagonism in Ukraine between the East and the West of the country is growing further. The US has yet to act as a stabilizing force. Russia is taking measures to ensure its risks and to avoid damage to its assets. An impetus to strike a deal may only occur when the EU feels the damage to its energy security. The unfortunate reality is that the crisis in Ukraine is likely to continue to worsen, at least until the fall of this year.

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