The country’s sovereignty will be challenged through a combination of domestic turmoil, Western estrangement, and Russian assertiveness
Ukraine is facing a testing year in its development as an independent state.A confluence of factors are working against the country’s national interests and its sovereignty will be challenged through a combination of domestic turmoil, Western estrangement, and Russian assertiveness. Increasing alienation from the West will make Ukraine more vulnerable to Russia’s political pressures; such a scenario can radicalize society and raise the specter of national instability.
A key priority that Vladimir Putin set for his third presidential term was the creation of a Eurasian bloc to balance the European Union in the West and China in the East. This would enable Russia to strengthen its position as a “pole of power” in a “multipolar” world. Such a grand plan envisages the integration of former Soviet republics, with tighter economic links culminating in a political and security pact. By solidifying economic, security, and political bonds it becomes less likely that Russia's neighbors will be in a position to join alternative alliances such as NATO or the EU.
In May 2012, Putin signed an Executive Order On Measures to Implement the Russian Federation’s Foreign Policy. It instructed state organs to focus on the integration processes within the Commonwealth of Independent States (CIS) as a national priority. These are to include numerous sectors, including economic, security, and law enforcement. The Order envisages deeper Eurasian assimilation within the framework of the Customs Union and the Common Economic Space between Russia, Belarus, and Kazakhstan, and the creation of a broader Eurasian Economic Union by January 2013.
Putin has also declared that Moscow will strengthen the Collective Security Treaty Organization (CSTO) by enhancing foreign policy coordination within the bloc. Although Ukraine currently stands outside these Russo-centric structures, the Kremlin has stressed that all formats would be open to other states, primarily to members of the CIS and to associates such as Ukraine.
Ukraine’s political regression plays into Moscow’s hands and presents a direct challenge to its independence for three core reasons. First, it will distance the country from the economic and security benefits of integration with Western structures. Second, the lack of credible alternatives in Europe can pull the country into a “Eurasian” framework based on authoritarianism and statism. And third, most ominously, it can divide Ukrainian society and generate social instability that could threaten the country’s territorial integrity and statehood.
The EU underscores that Ukraine’s democratic reversals disable the signing of an Association Agreement and a comprehensive free trade accord. There is little indication that this position will change given Brussels criticism of the parliamentary elections and its demands for releasing Yulia Tymoshenko, Yuriy Lutsenko, and other political prisoners. In the longer term, Ukraine’s political estrangement would mean a permanent blockage from the EU project.
Although Ukraine may be drawn into the Eurasian economic structures as compensation for its exclusion from the EU, such moves will further disqualify the country from mainstream Europe. Membership of the post-Soviet Customs Union would undermine qualifications for free trade and other EU benefits. President Viktor Yanukovych and the Party of Regions elite may fear that their business ventures will suffer from harsh competition with Russian oligarchs. But the carrots of cheaper energy and substantial loans from Moscow may convince Kyiv that the Customs Union is more likely to maintain their power than the political liberalization demanded by the EU.
Economic conditions are working against Ukraine. For instance, Kyiv is running out of options to finance USD 4.3bn of outstanding foreign-currency debt in the first half of 2013. To regain access to IMF funds and avert a financial crisis, the government needs to agree to raising gas prices and adopting a more flexible exchange rate. In sum, the Ukrainian economy is rapidly declining and revenues are falling as the euro zone crisis lowers demand for steel and other Ukrainian exports. Without an IMF agreement, Ukraine’s limited options include turning to Russia for loans and thereby increasing its dependence on Moscow.
Energy also remains a favored weapon for the Kremlin in exerting political pressure on its neighbors. At present, Ukraine is cutting Russian gas imports because of the high prices that Moscow refuses to reduce without gaining political benefits. In exchange for cutting prices, Gazprom wants to buy into Ukraine’s gas pipeline or ensure Kyiv’s membership of the Customs Union. If economic conditions continue to deteriorate and the government becomes insolvent, Kyiv will find itself precariously exposed to Russia’s enticements.
In the security arena, Ukraine’s “non-bloc status” underscores that the current government no longer aspires to join NATO. The rationale for international neutrality was to stabilize relations with Russia and lessen Moscow’s pressure on Kyiv to distance itself from the West. Nonetheless, permanent neutrality may encourage the Kremlin to become even more assertive, and without the realistic prospect of NATO accession as a balancer Ukraine could be drawn into Russia’s organizational constellations.
In the worst-case scenario, the Ukrainian government’s inability to defend the country from gradual absorption into Eurasian organizations and its widening estrangement from Western structures could precipitate an internal implosion. Dissatisfaction with receding European prospects and a consignment to neutrality or a Russian-centered bloc, especially if accompanied by declining economic conditions, can alienate large sectors of Ukrainian society.
The reaction of the Ukrainian government to growing social unrest would determine whether the country descends toward conflict. A crackdown is less likely to cower society than in Russia or Belarus and it could ignite several destabilizing trends. It would further polarize and radicalize Ukrainian politics, draw clearer battle lines between supporters and opponents of a union with Russia, and become increasingly linked with regional differentiation.
Such a scenario could heighten the resentment of Western and Central Ukraine not only against the country’s democratic reversals but also in opposition to another close alliance with Moscow. Such developments could severely undermine the current government, precisely the scenario that Ukraine’s “non-bloc status” was supposed to prevent. If mishandled, an escalating national crisis could challenge the integrity of the state by raising calls for substantial regional autonomy, confederation, or even secession. If this culminates in more direct and intensive Russian involvement in Ukrainian politics the national crisis will become critical.
DEFENDING UKRAINIAN INDEPENDENCE
To uphold Ukraine’s independence and prevent a dangerous spiral of destabilization, the government needs to focus on three key national interests. First, above all, it must more effectively balance Kyiv’s international connections between East and West. It can temper the Kremlin’s designs by relaunching the EU association track through a commitment to releasing prisoners that Brussels considers to be political hostages. It can also revive relations with NATO by participating in Alliance operations and enhancing its military and political inter-operability.
Second, Ukraine needs to wean itself off its dependence on Russia’s energy supplies and develop a more effective energy strategy. Russia is refusing to cut gas prices for Kyiv while proceeding with the South Stream gas pipeline designed to bypass the country. However, Moscow’s policies are a blessing in disguise, as they can reduce Ukraine’s dependence on gas imports from Russia, diversify energy sources, boost gas extraction in the Black Sea, encourage the construction of an LNG terminal near Odessa, and promote energy conservation.
Third, Ukraine must avoid sinking into the category of a dictatorship in international perceptions and becoming indistinguishable from Russia, Belarus, or the Central Asian republics. To exhibit their governing credentials, maintain internal stability, and reinvigorate Kyiv’s Western connections, the authorities need to demonstrate a commitment to human rights and the democratic principles undergirding the OSCE, the organization Kyiv will be chairing in 2013. Ultimately, Ukraine’s key national interest, to uphold its independence, remains contingent on two factors: democratic development and the freedom to decide on its international alliances.
The United States is committed to working with its Allies and partners to keep pressure on Russia to live up to its commitments and to begin the process of peacefully restoring Ukraine's full sovereignty over Donbas
During the 29th Economic Forum in Krynica-Zdrój (Poland) The Ukrainian Week talked with Ewa Konczal, Central and Eastern Europe Manager in the European Venture Philanthropy Association about impact investment and government role in that process