21 October 2015

How to use the Ukrainian crisis as an opportunity for reforming Russia

By Adriel Kasonta

Due to the ongoing crisis in Ukraine, when relations between Russia and Europe continue to deteriorate, the main task today is to help Ukraine to survive as a sovereign nation, i.e. to prevent its potential implosion.

Following the House of Lords suggestions made in the EU and Russia: before and beyond the crisis in Ukraine report (introduction part 1, points 1 and 4), I strongly agree that ideally Russia has to be involved in this effort, because if Russia is out or blocking the EU-Ukraine co-operation, the task of ‘rescuing Ukraine’ becomes extremely expensive for EU and difficult for Ukraine, if possible at all.

It is also crucial that the current situation in Ukraine to be understood within both the particular historical context of Ukraine-Russia relations and a broader Russian pattern of self-perception in the international arena.

Furthermore, given that many people in Ukraine actually consider themselves to be Russian, and that the justifications for sanctions may have shifted, it appears necessary to revise our approach to what could be considered one of the greatest challenges of the 21st century. We might do worse than explore for a peaceful solution to this crisis, engaging EU member states and Russia in a meaningful and inclusive dialogue, leading to a lasting solution, ensuring a stable, prosperous and democratic future for all of Ukraine’s people.

Therefore, in order to fully grasp social and political dynamics in this part of the world, I and other Central & Eastern Europe professionals and academics shared our first hand expertise, in a report for the Bow Group.

In our assessment, we attempted to address the historical and cultural contexts of the contemporary tensions, and consider those tensions as economic and political problems capable of peaceful solution, aiming to equip modern day policymakers in comprehensive knowledge crucial in the process of preparing effective policies towards the region.

Co-authors of the report also presented their own policy proposals related to providing structural aid to Ukraine, which aims to engage Central and East European voices in deeper and more consistent debate about the Ukraine conflict, as we, more than anyone else, are deeply committed to supporting reform in Ukraine, and believe that this is also the best way to further reform in Russia.


Key quotes from the report:

Tracking the cost of Russian sanctions on Western economies: the UK, US, and EU

“Cost to Europe:  €120 bn worth of exports to Russia in danger, total volume of business of €326 bn, almost 2 Million jobs at risk, $147 bn of Russian debt held by EU banks

Cost to the UK: €8.6 Bn of total exports, 119,000 jobs at stake, £27bn of Russian capital invested in the UK

Cost to the US: total trade worth €137 Bn, $38 bn US exports to Russia, up to $30 bn US capital tied up in Russia.”

What effect sanctions have had so far

“In the geopolitical sense, sanctions led to a noticeable shift in the Russian economy orientation from the West to the BRICS countries and former Soviet Union republics. Shortly after the second round of sanctions, Russia signed a valuable natural gas agreement with China worth $400 billion, in order to lessen its economic dependence on the EU. As a result of this agreement, Russia will, from 2018, have an alternative market in China for its natural gas. Russia has also received a political support from the Chinese vice premier, Wang Yang, who expressly stated on 11 October that China “strongly opposes” sanctions against Russia.

This may create a potential threat to the West if Russia continues to develop its alliance with the BRICS, and China in particular. If BRICS countries continue to replace Western exports to Russia, which are banned – albeit at higher costs for Russian consumers – sanctions will be less effective.

“On 8 August 2014, as a response to the Western sanctions, Russia announced an immediate embargo on “certain meat, dairy, fruit, vegetable and processed food products from the EU, USA, Canada, Australia and Norway”.

The EU is the most affected amongst the listed countries and, in particular, Poland, Lithuania and Germany, as the EU products amount to 73% of imports that were banned by Russian Embargo. This is expected as the EU alone represents 86% of Russia’s total imports from the above-mentioned countries and 43% of entire Russian imports from the world.

“Thus, it is absolutely necessary to find a non-military solution on satisfactory terms acceptable for Ukraine, Russia and the West by the end of 2015, otherwise the Ukrainian economy will have very high potential to default. There must be reached a diplomatic compromise, which will allow Russia to remain an influential political player in Eastern Europe, while letting Ukraine choose its own internal political regime and foreign policy orientation. A diplomatic solution will require all sides to find middle ground and to focus on their fundamental economic needs, which will perhaps not mean the best possible outcomes or absolute victory. Finding such a compromise will not be easy. However, it is vital for the West and Russia to work together towards reconciliation and building a stable, prosperous Ukraine.”

Political Assistance: keeping the focus on Ukraine

“The practical difficulties of dividing Ukraine, or imposing a single identity, serve to underscore a key point–Ukraine owes its current identity to both Europe and Russia. Asking it to choose between them is therefore asking it to deny part of its heritage.

“Conflating cultural identity with citizenship is almost always a recipe for disaster. It inevitably alienates minorities and undermines the very national unity being sought. A better alternative is to make cultural pluralism serve the security interests of the nation.

“The better option is therefore replacing the current emphasis on building a distinctive Ukrainian cultural identity with an emphasis on building an inclusive Ukrainian civic identity.

“It must first be acknowledged that Ukraine’s economic survival depends not on Western bailouts, but on renewing Russian investments there. This point was reinforced recently by a World Bank report that projected deep cuts in Ukraine’s GDP in 2015 because of the deterioration in its trade relations with Russia.

“And as the Ukrainian economy continues to shrink, more and more families find themselves relying on remittances from migrant workers, the majority of whom still find work in Russia.

“Since stabilizing the Ukrainian economy is a task that Western financial institutions cannot afford on their own, securing Russia’s assistance offers a rare opportunity for practical cooperation. Since the collapse of Ukraine is something that both Russia and the West say they are eager to avoid, it makes eminent sense to forge a clear program for the economic recovery of Ukraine that Russia and the West can implement together.

“By demonstrating political maturity, overcoming the Ukrainian government’s ideological resistance to Russian investment in Ukraine would also go a long way toward restoring international investor confidence in the country. In the long term it might even lay the foundation for transforming the current Eastern Partnership program from its current confrontational “two against one” stance, into a trilateral EU-Russia-Ukraine partnership. This would be consistent with the long term strategic objective of reducing tariff barriers between with European Union and the Eurasian Union, which was proposed by Russian president Putin in 2010, and recently revived by German Chancellor Merkel.

“Another troubling trend is the persistent desire to write one’s political opponents out of Ukrainian history. As Ukrainian historian Egor Stadnyi points out, such efforts to legislate the “correct” interpretation of history have more in common with the Soviet era than with contemporary Europe.

“Given Russia’s nearly ubiquitous cultural presence in Ukraine, building a Ukrainian national identity at the expense of Russian would be like trying to build Canadian identity around anti-Americanism and a refusal to speak English. Even if it could somehow be done, the social, psychological, and economic scars left by the process would last for generations.

In the long-run, therefore, Ukraine will thrive only if its bicultural and bilingual identity is seen as a source of strength, rather than as a weakness to be eradicated. External actors who seek to promote a viable and sovereign Ukraine should therefore do everything in their power to promote a political settlement on principles of mutual cultural respect, since this is the best hope for preserving Ukrainian statehood.

Economic assistance: consensus needed for reform

“Russia, together with the EU, would have to come to an actual agreement in respect to the crisis in Ukraine. Russia would have to make assurances in respect to its non-intervention in the conflict as well as the political and international affairs of Ukraine. On the other hand, the West would have to assure the Russian government that the vital Russian interests in the region will be preserved. Economic aid should be one of the most important matters on the agenda. While the US, Europe, and the IMF continue to provide financial assistance to Ukraine, there is a need for a comprehensive package provided by both Russia and the West.

“(…) the tension in the Donetsk and Lugansk regions has been decreased. Many experts agree that Russia does not intend to escalate the conflict further in those regions or even to support an establishment of “Novorossiya” state in the occupied territory.

“According to a social survey, many Ukrainians believe that the best way to resolve the conflict is to negotiate a settlement with the separatists and Russia.

“The other step would be to establish more beneficial terms on Ukrainian energy debts, as Ukraine would be able to use these funds to address the current economic crisis. In return, Ukraine would be able to guarantee Russia’s continued access to the energy delivery infrastructure and Ukrainian export market. It is also important to Ukraine to restore stable trade relations with Russia, as reorientation of Ukrainian exports towards other markets will require more time and investments.

“Ukraine, the West and Russia must come to an actual dialogue establishing clear political and economic measures aimed at the actual settlement of the crisis… The key leverage with Russia is its desire for an effective economic relationship with the West and EU. The parties should transparently cooperate with each other in order to reach an agreement establishing pragmatic, efficient confidence-building measures, acceptable to everyone. Further conflict will continue to harm Ukraine.”

This article was originally published in an earlier form by the Bow Group, and can be found here.

Adriel Kasonta is an Editorial Board Member at the Central European Journal of International and Security Studies, and Co-Editor of Konserwatyzm.pl. He was a Chairman of the International Affairs Committee at the Bow Group think tank (2014-2015), and is the editor and leading author of the Bow Group’s report titled “The Sanctions on Russia.”