Russia’s Ukraine Power Play Pays Off

The will-he-won’t-he suspense sowed by the speculation over whether Ukraine’s president Viktor Yanukovych would formally sign the Association Agreement with the European Union is over.

On November 21, Yanukovych ended the guessing game that had produced a cottage industry of op-eds and blog posts. He told Brussels to buzz off. Well, Ukraine’s parliament, the Verkhovna Rada, deep-sixed the accord, but Yanukovych’s Party of the Regions (PR) dominates the legislature, and he dominates the PR, so it was really his decision. And it has set off a firestorm. Soon after the news became public, demonstrations erupted in Kiev and other major Ukrainian cities. Sunday’s rally in the capital brought some one hundred thousand people to the streets. Protesters clashed with police, who used tear gas to disperse them. Kiev’s main square is festooned with tents. More demonstrations are in the works. The scene is reminiscent of Ukraine’s 2004 Orange Revolution, which began nine years ago.

What mobilized the masses is the realization that, barring some deus ex machina development, Yanukovych has pretty much put the kibosh on Ukraine’s chances for a journey, however long, uncertain, and slow, toward the EU. His choice is not surprising. The implementation of the Association Agreement (AA) and the accompanying Deep and Comprehensive Trade Agreement (DCFTA) would have required Ukraine’s leadership to undertake far-reaching economic and political reforms.

One problem with signing the accords has been, all along, that this is a group that rules and enriches itself thanks to rampant crony capitalism and corruption. It’s good work if you can get it—and once you do, why would you give it up voluntarily? Signing the AA would, for Yanukovych and Co., have been tantamount to self-liquidation. What ruling elite does that? This is why Ukraine’s PR-dominated government has been ambivalent at best about the AA, something that was clear to me as far back as July 2011, when I met with its several senior officials as part of a European-American delegation.

No less important in shaping Yanukovych’s apparent decision to kill the AA is the controversy over the jailed opposition leader, Yulia Tymoshenko, the only politician with the charisma and national standing to rally Ukrainians against their government, even in the Russophone south and east, Yanukovych’s base, and to challenge him in the 2015 presidential elections. Yanukovych both fears and loathes Tymoshenko, who has been languishing in jail since October 2011, serving a seven-year sentence after having been convicted of abusing her power when she was prime minister. Despite her own past failings, she has become a symbol of all that’s problematic about Yanukovych’s regime, not least because she was imprisoned following what were clearly kangaroo court proceedings. The EU’s demand that she be freed was arguably the biggest stumbling block in the AA endgame. To give Yanukovych a facing-saving formula, one that he could have used to come off as the compassionate leader, the EU had even worked out a compromise under which Tymoshenko would have been liberated and allowed to leave the country for medical treatment—related to back problems—in Germany. Yanukovych could have let his nemesis wander into what might have become open-ended exile.

But that wasn’t good enough for him. For all the benefits that the Association Agreement would have brought Ukraine, albeit not to him and his coterie, the risk of allowing Tymoshenko out in public, free to give interviews and make speeches denouncing his government, was unacceptable to Yanukovych. Apart from his outsized instinct for self-preservation, the animus he harbors toward Tymoshenko begat a determination to persist with her punishment, come what may—a pattern of behavior that Schopenhauer and Freud, among others, would have understood, but that puzzles the prophets of instrumental cost-benefit analysis and rational-choice theory.

Ukraine stands to gain from the AA in many ways; among them, easier access to a big export market, economic assistance, credit lines from the IMF, and reduced dependence on Russia. But for the id-driven Yanukovych, a fog of fear and hatred obscures the national interest.

Yet emotion doesn’t explain it all. Yanukovych’s decision was also shaped by Russia’s antipathy to the EU’s advance toward its borders. In Vladimir Putin’s eyes, the EU’s Eastern Partnership, a program designed to foster civil society, electoral democracy, good governance and market-based reforms in the former Soviet republics, is the economic counterpart to NATO’s eastward expansion. (The latter, it should be said, was a needless decision, one that has played a significant part in producing ill will toward the United States among Russians.) As Putin sees it, both NATO and the EU have mounted a strategic offensive aimed at chipping away at Russia’s predominant, but diminishing, influence in the former Soviet republics—in the case of the EU’s Eastern Partnership, in Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine. The region encompassing these six countries plus the five Central Asia “stans” is the only one in which Russia can now claim predominance. China is fast eroding Russia’s position in Central Asia, and energy-rich Azerbaijan has forged strong ties with Europe and the United States. This makes the remaining five states covered by the Partnership all the more important for maintaining Moscow’s position in its neighborhood. And of the five, Ukraine, in Russian eyes, is in a class by itself. Its population of forty-six million contains more Slavs than any other country save Russia itself, and its eastern and southern provinces are inhabited predominantly by ethnic Russians or Russified Ukrainians. Its port at Sevastopol, on the Crimean peninsula (which, incidentally, the Soviet leader Nikita Khrushchev transferred to Ukraine to commemorate the three-hundredth anniversary of the Ukrainian-Russian union), is home to Russia’s Black Sea Fleet. Kievan Rus, the Slavic state that was formed in the late ninth century and lasted until the Mongols overran it in the thirteenth century, is the cradle of Russian civilization.

In order to counter the EU and preserve its primacy in what it deems an area in which it has “privileged interests,” Russia has combined carrots and sticks, with an emphasis on the latter. Moldova has been subjected to economic pressure, including curtailments of its wine exports to Russia. (Putin quipped that if Moldova was bent on signing an AA, it should plan on selling its wine in France and Italy.) Russia has other ways to pressure Moldova, given that the country’s Slavic-majority breakaway Transnistria region is a statelet subsidized by Russia and garrisoned by Russian troops, and that Moldova relies on Russia for gas supplies, the price of which Moscow sets not in relation to the market but based on importing countries’ attitude toward Russia.

Moldova is soldiering on and is determined to sign an AA at the Eastern Partnership Summit, which will convene in Vilnius, Lithuania (which, though, an EU member, has also faced restrictions on its exports to Russia, perhaps for playing host), on November 28-29. But Armenia, which had similar plans, abandoned them after arm-twisting from Russia, an effort that featured Putin visit to Armenia’s arch-foe, Azerbaijan (his first in seven years), and the delivery to the latter of $1 billion in Russian arms as part of deals struck in 2011-12. Armenia’s president Serzh Sargsyan was summoned to Moscow in September and signed an agreement the following month that will make his country a member of the Russian-led Customs Union, which includes Kazakhstan and Belarus and constitutes, along with the Eurasian Union, Moscow’s countermove against the EU-NATO encroachment.

Ukraine has faced similar pressure from Putin. As the negotiations on the AA proceeded, Ukraine’s exports to Russia encountered delays at the border (due to technical problems, as they say), and there were not-so-subtle hints about how Kiev’s decision to sign the AA might affect the price of gas, for which Ukraine depends heavily upon Russia. Russia has wielded the energy weapon against Ukraine before by raising prices and reducing flows, so this was not an idle threat. A Ukraine that is deprived of Russian credits and gas and also faces big tariff increases on its exports to Russia would be squeezed. So the question Yanukovych had to ask himself was whether the prospective economic gains from the AA would cancel the immediate losses that would be inflicted by the Kremlin’s resort to economic warfare. Perhaps Putin was bluffing. Well, that’s a theory Yanukovych likely didn’t want to test. He has seen Russia use its economic muscle against Ukraine before, against the pro-Western (and inept and ill-fated) government brought to power by the 2004 Orange Revolution.

Besides, Yanukovych and Putin are cut from the same cloth. Both are political bruisers who pride themselves on being tough guys and don’t hesitate to put enemies in the vice and turn the handle, quickly and mercilessly: just ask Tymoshenko and the ex-oligarch Mikhail Khodorkovsky, who fell afoul of Putin. Yanukovych and Putin despise one another, but in the way that two street toughs do. Both know the arithmetic of power, although Yanukovych, whom not even fawning acolytes would call an intellectual, is far less likely than Putin to have read Machiavelli’s The Prince or Thucydides’ Melian dialogue.

Both also understand that Putin holds the stronger hand in this particular card game: Russia’s market is more important to Ukraine’s exports than the other way around; Ukraine owes Russia $1.3 billion for past energy purchases; and Russia remains, far and away, Ukraine’s main source for gas imports.

Last year a quarter of Ukraine’s exports, totaling $18 billion, went to Russia. They can’t easily be redirected, even though Ukraine’s trade with the EU, which now takes over one-quarter of its exports and provides more than one-third of its imports, has soared during the past decade. As for gas, it’s essential to Ukraine’s economy and, with winter approaching, its political stability. Russia supplies close to two-thirds of Ukraine’s needs, more than 2.3 trillion cubic feet (tcf), with domestic production providing the rest. True, shale gas deposits have been found in Ukraine, and Shell and Chevron have already signed up to develop two fields. Ukraine’s total shale gas stocks may approach 197 tcf, of which 42 tcf are recoverable, and that’s on top of 39 tcf in regular gas deposits. And yes, Ukraine reduced its gas imports from Russia in 2012 and, with the EU’s help, recently signed a deal to buy gas from Slovakia at a lower price than Russia charges. But shale is a long-term answer to an immediate problem, and while Slovakia may eventually be able to supply between a third and a half of Ukraine’s gas imports from Russia, it can’t supplant them altogether.

So Yanukovych was under a lot of pressure from Moscow. But Putin is too wily a strategist to rely on pain alone to extract concessions; he knows that financial inducements help. Arseniy Yatsenyuk, one of the leaders of Tymoshenko’s Fatherland (Batkivshchyna) Party, has alleged that the enticements included $20 billion for Yanukovych himself, plus a pledge to help ensure his victory in the 2015 presidential elections. Who knows? But it’s a good bet that Putin promised Yanukovych reliable gas supplies at reduced prices and aid for Ukraine’s economy, which is mired in all manner of problems. These include declining foreign exchange reserves; foreign debt that’s skyrocketed from just under to $13 billion in 2000 to almost $124 billion in 2013, with $15.3 billion in repayments due in the next two years alone; and a budget deficit that will approach 6 percent of GDP this year.

Yanukovych has yet to sign on to the customs union (which will oblige him to hike tariffs on non-member states and more tightly bind Ukraine to Russia), let alone the Eurasian Union. And Prime Minister Mykola Azarov announced the decision on the AA, which has been presented as a “suspension” rather than a termination, prompting speculation that Yanukovych could switch course at the eleventh hour. Well, that’s certainly possible: if Yanukovych has proved one thing about himself, it’s that predicting his position is a fool’s errand. But for now the scuttling of the AA has increased his isolation at home and abroad. His standing among Ukrainians in the central and western part of the country, where support for the EU and opposition to the Party of Regions and to Yanukovych himself is strongest, has been further diminished. The EU feels dissed and had. Secretary of State John Kerry canceled his scheduled trip to Kiev for the OSCE foreign ministers conclave. The opposition, buoyed by the protests, has called on the government to quit. If Yanukovych, fearing a second Orange Revolution, resorts to repression against protesters, the EU won’t be able to revive the AA talks, assuming that’s even possible. No one will be happier than Vladimir Putin.

In short, the Russian leader, having seethed while watching him defiantly cozying up to the EU, won’t be in a charitable mood. For every bit of assistance Yanukovych gets from Putin, he will have to yield a bit more of his country’s autonomy. Putin is now like the Athenian generals in Thucydides’ epic, and Yanukovych like their hapless interlocutors.

Rajan Menon is the Anne and Bernard Spitzer Professor of Political Science at the City College of New York/City University of New York, nonresident senior fellow at the Atlantic Council and the author, most recently, of The End of Alliances (Oxford University Press, 2007).

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