January 10, 2015
What Might the Kremlin's Setback Bring in 2015?
Economics Have Stalled Putin, But He Often Answers Reversals with Military Threats
By Elizabeth Pond
In the Ukraine crisis, soft economic power last month trumped hard military power for the first time. The threatened meltdown of the Russian economy could push Russian President Vladimir Putin to dial down his undeclared war on Ukraine in return for some easing of Western financial sanctions. Still, that is not assured.
Ever since masked, armed men with no identifying insignia snatched Crimea from Ukraine last February the West has strived to avoid two juxtaposed hazards. In a nuclear age it must shun any repetition of the sleep-walk into world war in 1914, when competing and destabilizing acts cascaded into disaster. But it also must avoid a supine surrender of Europe's most cherished achievement over seven decades: the establishment on this war-prone continent of a taboo on any nation's seizure of another's territory.
It was indeed the revolutionary peace order in Europe that Putin violated when he severed Crimea from Ukraine and annexed it, despite Moscow's explicit commitment to non-violence in Europe in treaties going back to the 1975 Helsinki agreement. His landgrab shocked Europeans who had come to take post-modern reconciliation and peace for granted. Pundits concluded that their Kantian peace was no eternal verity after all, but only an interlude between eras of more normal violent international anarchy.
Washington and the European Union immediately avoided any sleep-walk toward war by ruling out the dispatch of their own troops to defend Ukraine, which is not a NATO member. But their corollary act, to show their non-acquiescence in armed and illegal aggression, was to impose financial sanctions on Russian politicians and oligarchs close to Putin. Political scientists could hardly have designed a better experiment of a clash between short-term hard power and long-term soft power.
In fact, even though the annexation of Crimea gave Putin's popularity a chauvinist surge at home, Russia's military juggernaut performed surprisingly poorly thereafter in advancing Putin's claim to seigneurial privilege in Ukraine and wherever else Russian minorities live in "the Russian world."
"I think we have done better than we realize," former Swedish foreign minister Carl Bildt told a Berlin audience last month. The West's diplomacy managed to limit Putin's options, without resort to war, he maintained.
In Bildt's analytical framework, Putin started 2014 with all of Ukraine as his client state, administered by the Russian president's protégé, Ukrainian president Viktor Yanukovych. Yet Putin squandered this deep hegemony by overreach. The tenacious, pro-democracy demonstrators in Kyiv's Independence Square, far from being cowed by the police-sniper killings of a hundred of their number in January and February, held their ground and even gathered new supporters. Yanukovych's own clientelist party deserted him in shock over the killings, and the disgraced president fled into Russian exile. The parliament named a reformist prime minister, Arseniy Yatsenyuk, who within ninety days supervised an election that chose another reformist—the oligarch Petro Poroshenko—to succeed Yanukovych as president.
The ragtag Ukrainian army, after a poor start, learned to fight on the job, resisting the Russian takeover. Western diplomatic engagement with Russia took the correct gamble that Putin wanted cheap victories via a "hybrid warfare" of irregulars led by Russian intelligence officers, rather than by a massed, conventional army invasion of Ukraine. That diplomatic engagement gradually shifted the environment. Putin agreed—perhaps because he thought he could manipulate Poroshenko as he had the willing Yanukovych—to stop demonizing the newly elected president as the leader of an alleged fascist coup and to negotiate with him at the same table.
In July the Ukrainian army and its allied militias began a serious counteroffensive that gradually reduced territory held by the Russian-backed separatists to two enclaves in eastern Ukraine. In late August, Putin signalled his red line: he would not tolerate a victory over his proxies by the upstart Ukrainian army. He then did send in paratroopers from the 331st Guards Airborne Regiment and other units in a direct invasion. These heavily armed professionals routed the Ukrainian forces in a few days.
President Poroshenko understood the kinetic message immediately. On September 5 he, Putin, representatives of the self-proclaimed People's Republics of Donetsk and Luhansk, and an official of the Organization for Security and Cooperation in Europe (OSCE) agreed on a truce, a buffer zone, and closure of the Russian-controlled bilateral border to further passage from Russia into Ukraine of heavy weapons and military personnel.
In the four months since, no buffer zone has actually been implemented, and the Russian-Ukrainian border has not been closed. Yet the uneasy ceasefire has at least deescalated the violence and confined the exchange of shelling to the pre-existing battle line.
In Bildt's view, Putin can hardly be happy with this shrinkage of his original claim on full Ukrainian allegiance. Putin’s ambition was first reduced to claims only on the eastern half of Ukraine (which the Kremlin labels and claim as Novorossiya, a resurrected 18th-century term for that region). The area that Putin now contests is further shrunken to only half of Ukraine's two easternmost provinces.
The State of Play
On December 16, Russia’s “Black Tuesday,” the value of the ruble plunged to a new low at at 50 percent of its value last January. Capital flight continued to mount toward a 2014 high of $130 billion, and forecasts projected a likely drop in Russia’s gross domestic product this year of close to 5 percent if oil continues to fetch only $60 per barrel. The following day Putin and Poroshenko joined German Chancellor Angela Merkel and French President Francois Hollande in a late-night call to revive the diplomatic effort. Those governments now are discussing a new summit meeting as early as this month, perhaps in Kazakhstan.
The best Western guess now seems to be that Putin would like to deescalate fighting in Ukraine, either as a tactical pause or as an effort to stave off the financial meltdown that looms under the impact of sanctions and the plummeting price of Russia's all-important hydrocarbon exports.
This new stage in the standoff between Russia and the West over Ukraine could be very dangerous, in part because of Putin's impulsiveness, in part because of the lack of mutually understood constraints in a post-superpower but still nuclear world.
Consider for a moment Putin’s string of setbacks in 2014:
- the implosion of Yanukovych and the sure-footedness of President Poroshenko;
- the stout performance of the Ukrainian army and militias, along with the failure of eastern Ukrainians to rally to the pro-Russian cause;
- the failure of German businessmen with lucrative Russian trade and investment deals to block Chancellor Merkel's financial sanctions on Moscow; and
- the counterproductive impacts of Moscow's new intimidation--in alienating a Germany that has long been Russia's best Western friend, in accelerating the EU drive to free Europe from its addiction to Russian energy, and in consolidating a long-tentative sense of Ukrainian identity into a new conviction that Ukrainians have a common European calling.
Putin’s response to each of these has been to make military threats. His assumption has been that he can raise the stakes with impunity because Moscow holds escalation dominance, thanks to geography and Russia's raw military might.
Certainly Putin's instinct today is still to up the ante by periodic nuclear saber-rattling and by aggressive Russian air and sea probes of NATO and non-NATO defenses in the Baltic, with transponders shut down. Yet amid Russia’s financial crisis, even Putin—who in the past has scorned Western sanctions as pinpricks—no longer denies that the sanctions, combined with the plunge in oil prices, are wreaking serious damage on Russia's economy. They also are squeezing the vast wealth that Putin and his inner circle have accumulated via their Russian kleptocracy. Far sooner than the authors of Western sanctions anticipated, the vector of soft, long-term economic power has crossed the vector of hard short-term military power in the middle term of real-time policy. As the Financial Times concluded last month, "only a Russian exit from Ukraine can begin to restore confidence."
The paper might have added, sotto voce, that while it's far too late for Putin to save face by taking the "off-ramp" that President Barack Obama and Chancellor Angela Merkel offered him last spring and summer), it's not too late for him to exit from eastern Ukraine to save the Russian economy.
Elizabeth Pond is a Berlin-based journalist and the author of books on Russia and Europe. A version of this essay is posted at IP-Journal, the website of the German Council on Foreign Relations.