Putin’s Ukrainian Gamble

Russia moves to reconstitute a neo-Soviet sphere.

By 12.27.13


Vladimir Putin is betting big in Ukraine. For weeks now, Russia’s wily president has worked feverishly behind the scenes to derail the former Soviet satellite’s tenuous pro-Western trajectory.

Until late last month, Kyiv had been on track to sign an “association agreement” with the European Union, thereby aligning its trade policies with those of countries in Europe. But Russian bullying (in the form of political strong-arm tactics and outright economic blackmail), caused the country’s pro-Kremlin president, Viktor Yanukovych, to abandon those plans in favor of economic partnership with Moscow. The decision generated a groundswell of popular opposition, with hundreds of thousands of protesters rallying in Kyiv’s Maidan Square.

Since then, Russia has upped the ante. On December 17, it offered Mr. Yanukovych some $15 billion in debt relief for Ukraine’s ailing economy, as well as a significant lowering of prices for Russian natural gas supplies. Predictably, the aid came with strings attached; the deal appears contingent upon Mr. Yanukovych remaining in power and overseeing the country’s Eurasian — rather than European — trajectory. Predictably, Ukraine’s president, embattled and discredited, has been only too happy to sign on the dotted line.

Much has been made about the consequences of this Faustian bargain for Ukraine, but the bailout is just as significant for what it says about Russia itself. The Kremlin’s plan to pay for its Ukraine deal by raiding the country’s $88 billion National Wealth Fund (dedicated to preserving the Russian pension system) reflects a willingness on the part of Mr. Putin and company to barter with their country’s domestic prosperity in exchange for strategic advantage abroad.

It also speaks volumes about how much Ukraine truly means to Moscow. Mr. Putin — who famously intoned back in 2005 that the collapse of the USSR represented the “greatest geopolitical catastrophe” of the 20th century — has made the reconstitution of a neo-Soviet sphere of influence his top priority. By virtue of its geopolitical position, Ukraine represents the crown jewel in this effort, which is why Moscow has gone to such great lengths to deny it its sovereignty and frustrate its Atlantic aspirations.

“I don’t think the Russian government has a long-term vision what to do with Ukraine,” Moscow-based foreign policy expert Fyodor Lukyanov recently observed to the Financial Times. Rather, the Kremlin is pursuing a zero-sum approach that expands its influence at the expense of the West — and everyone else. It is doing so, moreover, at potentially great economic cost to itself.

That’s because, despite its current appearance of strength, Russia’s economic future isn’t rosy. Earlier this month, the International Monetary Fund downgraded its forecast for Russia yet again. The Fund’s new projections now estimate that Russia’s economy will grow by just 2 percent in 2014 — nearly half of the 3.8 percent it originally projected for the Russian Federation, and the fourth time this year that it has revised its estimates downward. The culprits, experts believe, are evaporating foreign direct investment and slackening demand for Russian exports. The global economy, in other words, is increasingly passing Russia by.

And worse is still to come. According to a new study by the National Bureau of Asian Research, the years ahead will see an increasingly precarious economic future for Russia, as revenue from oil exports dries up and the Kremlin is forced to spend more and more to sustain the country’s aging population and dwindling workforce. Against this backdrop, Moscow’s investment in Ukraine could turn out to be an exceedingly expensive geopolitical boondoggle.

Since the start of protests in late November, both Washington and European capitals have voiced their support for Ukraine’s opposition forces, and pledged their solidarity with the country’s nascent democratic stirrings. Yet Moscow is clearly banking on the West to blink, and fail to follow up with concrete political and economic support.

That’s precisely what Ukraine’s revolutionaries, now out in force in the streets of Kyiv, fear as well. They understand, just as Moscow does, that — without sustained Western involvement and investment — Ukraine’s Atlantic aspirations won’t be realized, and the country will continue to languish in Russia’s shadow.

Mr. Putin, at least, is betting on it.

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About the Author
Ilan Berman is vice president of the American Foreign Policy Council in Washington, D.C.