The beginning of Ukranian peace talks is an important step for all sides. Kremlin's stand should also be taken into account given how strongly Russia and Ukraine are connected.
Former Ukrainian President Leonid Kuchma (second left), OSCE Ambassador Heidi Tagliavini (centre) and Russian Ambassador to Ukraine Mikhail Zurabov joined the talks with the Donetsk and Luhansk separatist leaders. Photo: Reuters.
The first real attempt to shift the conflict in Ukraine into the realm of negotiation began on Monday with the opening of peace talks in the Ukrainian city of Donetsk.
Alongside representatives of the self-proclaimed People's Republics of Donetsk and Lugansk were Russia’s ambassador to Kiev, Mikhail Zurabov, OSCE representative Heidi Tagliavini, and former Ukrainian President Leonid Kuchma.
The main outcome of the negotiations was the agreement of a ceasefire in eastern Ukraine until June 27. Its observance will facilitate the transition to a political settlement of the crisis.
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 backs the status quo
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 a 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, Russia’s main task is to preserve its positive economic dynamics.
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 the integration of their economies 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.
The fragility of this balance is forcing Moscow to avoid sharp fluctuations in relations with neighbors Belarus, Kazakhstan, Ukraine, Azerbaijan, and Turkmenistan. Contacts with these countries carry enormous strategic significance for the Russian economy.
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 protracted conflicts.
That is why it has not attempted to readjust the status quo in its backyard and has not imposed change in places where “a bad peace is better than a good squabble” (these would include Transnistria, Nagorno-Karabakh, and Kyrgyzstan).
Why stability in Ukraine is vital for the Russian economy
Russia cannot progress without stability in Ukraine. The economic ties between the two countries are stronger than any others that exist 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.
Moreover, Ukraine transits goods not only between Russia and the EU, but between Russia and Asian countries, too. A large part of Russian defense orders are contracted to Ukrainian firms.
In 2013 Russia accounted for 24 percent of Ukrainian exports, with second-place Turkey making up just 6 percent. China and Egypt had 4.3 percent each, and Poland had 4 percent. Meanwhile, Ukraine’s slice of Russia’s trade turnover was around 4.5 percent.
Around 3 million labor migrants made their way from Ukraine to Russia in 2013, and the humanitarian ties between the two countries are robust with mixed families and a common culture and religion.
In the name of preserving these interests, Moscow annually subsidizes the Ukrainian economy to the tune of 10-12 billion dollars through gas discounts, loans, orders for goods and services, and preferential trade arrangements to the detriment of Russian manufacturers.
Reducing the impact of Ukraine on the Russian economy
After the “orange revolution,” 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 at Novorossiysk in southern Russia, and the reassignment of defense contracts to Russian companies.
The extended timeframe of these projects means that even 10 years later it cannot be said that Moscow was fully prepared to peacefully “let go” of Ukraine, if the latter had decided to “go.” Russia sought to limit the damage on Moscow itself, but 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 and the prospect of Ukraine joining NATO led Moscow to encourage the secession of Crimea and Sevastopol. Thus, Russia demonstrated firm resolve in protecting 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, and its tolerance of the violence against the Russian embassy in Kiev.
Russia does not want to further harm its interests. Therefore, Moscow is proposing 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, as well as the smooth transit of energy to the EU. Russia also needs to clarify the rules of trade within the Russia-Ukraine-EU triangle, and to shore up the inviolability of property belonging to Russian enterprises.
What next for Moscow?
A renewed confrontation is undesirable for Moscow, but the Kremlin is ready for such eventuality.
If adventurist and aggressive forces prevail in Kiev, Russia will be compelled to contain the threat of an instable Ukraine. In this case, Russia will not use direct or indirect force against Kiev, since that would be too expensive and uncertain. It is striking that last Tuesday Putin motioned that the Federation Council pull permission on the deployment of Russian troops in Ukraine in connection with the start of tripartite talks on the settlement of the situation in the south-east of the country.
An escalation of the civil confrontation in the east of Ukraine is also undesirable because of the security risks in terms of cross-border trade, refugees, threats to Russia's infrastructure, etc.
In this scenario, there would be 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. Russia would also demand that Ukraine pay the full price of gas.
Taken together, this would most likely cause an economic crisis in Ukraine and hit Russia, too, putting the brakes on annual GDP growth.
Therefore, an end to the conflict and the stabilization of Ukraine, as well as measures to ensure its economic growth, are in the interests of all parties, including the EU.
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. There is every reason to have doubts about Kiev’s actions over the long term. The internal antagonism in Ukraine between East and West could grow further, while the EU does not realize the scale of — and is not ready to provide — the annual grants required to stabilize the country were it to turn its back on Russia. Further afield, the U.S. has yet to act as a stabilizing force.
The unfortunately reality is that the crisis in Ukraine is likely to continue to worsen, at least until the fall of this year.
The opinion of the author may not necessarily reflect the position of Russia Direct or its staff.