Putin’s Expensive Victory

World
23 December 2013, 17:41

Another victory for Vladimir Putin, another defeat for the West. That is how the outcome of the battle for Ukraine, the country between Russia and the European Union, is being portrayed in Moscow and in many Western capitals.

On December 17th, after a meeting between Mr Putin and Viktor Yanukovych, Ukraine’s president, Russia agreed to lend Ukraine $15 billion and to slash the gas price from $400 to $268 per thousand cubic metres, as a reward for Mr Yanukovych’s ditching of an association agreement with the EU. Unsurprisingly, the mix of money and political cover for theft and violence proved more enticing to Mr Yanukovych than the EU offer of the rule of law, free trade, competition and reform.

Yet look closer, and Mr Putin’s victory and Europe’s loss seem less obvious. Probably Mr Yanukovych never intended to sign an agreement with the EU—certainly not without being paid for it. By keeping up the pretence, he was able to bargain with Mr Putin, who has now agreed to provide money without Mr Yanukovych having signed a deal to join his Eurasian customs union.

And neither Mr Yanukovych nor Mr Putin nor EU leaders factored in the response of Ukrainians, who have been pouring into the streets for the past four weeks. Angered by Mr Yanukovych trading the country’s future for his own benefit, they were bolstered when he used violence against students. What started as a modest-sized street action demanding a deal with the EU has turned into a national awakening and vocal rejection of a kleptocratic post-Soviet state. After Mr Yanukovych’s futile attempt to clear the streets on December 11th, the barricades grew higher, the spirit on Maidan became more resolute and the split within the Ukrainian elite became more visible. The crisis has turned Mr Yanukovych into a lame duck.

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America’s threat to impose personal sanctions against him, his family and his backers has restrained Mr Yanukovych from unleashing further violence. He is hoping that the Maidan protests will simply fizzle out over Christmas and the new year. Given the weakness of Ukraine’s opposition, this may well happen. Yet whereas the Kremlin’s deal with Mr Yanukovych stymies Ukraine’s negotiations with the EU, it is unlikely to halt its political crisis. Nor will it restore Ukraine’s bust and unreformed economy.

For the crisis in Ukraine is compounded by a looming economic collapse that will now become Russia’s problem. Ukraine is running out of reserves and desperately needs cash to get through the winter and avert default. Having thwarted Ukraine’s deal with the EU, Mr Putin has little choice but to pay up. But it is unclear what he will get in return, which may explain why the gas-price cut will be reviewed quarterly. Given the dire state of the economy and Mr Yanukovych’s precarious political position, any help could be money down the drain. Unlike an IMF loan, Russian money (drawn mostly from its national welfare fund) comes with no strings attached.

Mr Putin may have extracted a promise from Mr Yanukovych to clear the streets of protesters and join the Eurasian union before or just after the 2015 presidential election. But Mr Yanukovych’s ability to honour such a promise without sparking a civil conflict is uncertain to say the least. For a large part of the country, including Kiev and western Ukraine, joining the Eurasian union would be an existential threat. Yet for Mr Putin, who once called the collapse of the Soviet Union the biggest geopolitical catastrophe of the 20th century and who sees himself as a gatherer of Russian territories, no price is too high to keep Ukraine in Russia’s orbit.

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Mr Putin also knows that, if Ukraine changed from being a corrupt autocracy into a competitive democracy, that would be a threat to his own regime, rather as reforms in Czechoslovakia were to the Soviet Union in 1968. Fearing the spread of revolutionary contagion, Russia has reportedly barred young Ukrainians who look like Maidan protesters from entering the country, despite visa-free travel between the two. But whereas the Soviet Union used tanks and ideology, Mr Putin prefers to deal in money and nationalism.

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Mr Putin’s talk of Russia and Ukraine as one Slavic people has been accompanied by vitriolic anti-Ukrainian propaganda from state television. His appointment of Dmitry Kiselev, a rabid anti-Western and anti-Ukrainian propagandist, as head of a new government information service to replace the old one, RIA Novosti, is a sign of degradation in the regime. As the Soviet Union found, it will also help to push the republics away from Moscow.

 

 
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