Russia’s Options for Intervention in Ukraine

It doesn't need to send in tanks to keep Kiev in line.

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Darko Vojinovic / AP

Pro-Russian demonstrators march with a huge Russian flag during a protest in front of a local government building in Simferopol, Crimea, Ukraine, Feb. 27, 2014.

Yesterday, the Kremlin ordered its military to undertake major exercises as unrest in Ukraine’s Crimean peninsula left one person dead and a Russian flag flying over the regional parliament. While the prospect of Moscow sending its tanks into Kiev remains distant, there are three primary options at Russia’s disposal if it wants to exert its influence in Ukraine.

Firstly, it could intervene militarily in Crimea — a region with a majority ethnic-Russian population — on the pretext of protecting its citizens, just as it did with those in Abkhazia and South Ossetia when it went to war with Georgia in August 2008. This would be made easier if the regional parliament in Crimea requests Russian protection.

(MOREOur Dangerous Mistake in Ukraine)

For this to happen, Russia does not even need to send troops to Ukraine. They are already there. Russia’s Black Sea Fleet, complete with its 25,000 personnel, is based at Sevastopol, in Crimea.

Secondly, it could supply Kremlin-loyal factions in eastern Ukraine with arms and logistical support and, in doing so, encourage separatism there, just as it does in Trans-Dniestr, a breakaway republic located between Moldova and Ukraine. The heavily industrialized eastern part of Ukraine not only contains a significant ethnic Russian population but is also dependent on Russia for energy and trade. It would not take much for the Kremlin to frame the region’s future as better off with it than Kiev.

Failing this, Russia could encourage regions in the east to back demands for a new, federal political structure in which the regions benefit from greater autonomy from Kiev. This would give Russia a degree of control over post-Yanukovych Ukraine.

Thirdly, and more likely, Russia could exert economic influence on Ukraine.

(MOREWhat You Should Know About Ukraine)

Ukraine’s economy is in a dire state. Gripped by grotesque corruption and inefficiency, there has been no growth for two years. In 2012, Ukraine’s debt stood at over three-quarters of its $176 billion Gross Domestic Product. The country is running out of foreign currency reserves, and it has not been able to borrow on international markets for many years. A slump in demand for its exports of steel and capital goods, such as agricultural and industrial machinery, has exacerbated years of poor economic policy-making. As it currently stands, Ukraine’s economy is smaller than it was in 1992.

Russia is acutely aware of this. It is for the above reasons, as well as others, that Ukraine was forced to sign the $15 billion deal offered by the Kremlin last December. The deal effectively gave Ukraine an economic lifeline. Without it, Ukraine’s Prime Minister Mykola Azarov stated at the time, the country’s future would have been one of “bankruptcy and social collapse.”

While Ukraine has already received the first installment of $3 billion Russia’s Prime Minister Dmitry Medvedev stated on Monday that further payments would not be forthcoming because of question marks over the legitimacy of Ukraine’s interim government. For the moment, therefore, Russia has effectively revoked the deal.

(MOREWhat the West Doesn’t Understand About Ukraine’s Politics)

Russia could compound this by calling in all or part of the estimated $30 billion Ukraine owes to the government or state-owned banks. It could declare null and void the deal signed last December and, in doing so, increase the price Ukraine pays for Russian gas. The price would likely increase from $268.5 per 1,000 cubic metres to about $400. Or, like in its disputes with other neighboring countries, such as Georgia, Lithuania, and Moldova, over recent years, Russia could use trade measures as leverage. More than 60 percent of Ukraine’s exports go to the countries of the former Soviet Union, and Russia is the most important.

Should Russia increase economic pressure on Kiev, the prospects for Ukraine are not encouraging. It is clear that it cannot pay its debts to Russia and that it would struggle to deal with an increase in gas prices or Russian trade measures.

Nobody stands to gain from an escalation of tensions in Ukraine, but that does not mean Russia will not push Ukraine to the precipice in an attempt to keep it within its sphere of influence. Should this occur, however, Europe and the West need to be prepared to match Russia each step of the way.

Dr. Andrew Foxall is Director of the Russia Studies Centre at The Henry Jackson Society.

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famulla555555

The promise to reduce net migration to the “tens of thousands” was a foolish one for the Conservative Party to make, and so, yesterday, it was proved. David Cameron was warned before the 2010 election that the pledge made no sense, arithmetically, politically or economically. Arithmetically, it made no sense because tens of thousands can be added up to make millions. That problem at least was solved easily, because the Tory leader accepted the implication and stated his intention to bring net migration to below 100,000 a year.

Politically, the promise made no sense because Mr Cameron was setting a target, despite his insistence in other areas of public policy that “top-down targets” distorted priorities and produced perverse incentives. In this case, he was setting a target that simply could not be delivered. The 100,000-a-year figure is the difference between two large numbers, of immigrants and emigrants – both of them estimates because we do not count people in and out of the country, and neither of them controlled by the Government. He was, therefore, failing the two cardinal rules of politics, the first of which is never to promise what you cannot deliver, and the second of which is always to manage expectations.

Worse, to the extent that the target figure can be predicted, even if it cannot be controlled, it was always likely to go up by the time of the election. The economy is the main influence on both emigration and immigration. Emigration increased in 2008 and the first half of 2009 as unemployment rose and people sought to improve themselves in other countries. Since then, and as the economy has slowly and fitfully recovered, the number of people leaving has fallen back.

Interestingly, immigration did not slow down until late 2011. It continued to fall until the middle of last year, since when economic growth has been strong and the number of arrivals started to rise again. Hence yesterday’s figures, for the year to September, which show net annual migration, having fallen to 154,000 the year before, now running at 212,000.

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The Congressional Budget Office projects the federal deficit will decline to $514 billion this year, the smallest in six years, from a record $1.4 trillion when Obama took office in January 2009.

The 2015 budget will show further improvement, with the deficit-to-gross domestic product ratioprojected to fall “below 2 percent” during the next 10-year period, White House spokesman Jay Carney said Feb. 25. That compares with 9.9 percent when Obama took office. CBO estimates that the deficit would be about 4 percent of GDP in 2024, based on current law.

‘Deficit Reduction’

“You’re going to see the president’s budget once again, as it has in previous years, continue to propose deficit reduction over the medium and long run as it makes investments in jobs and priorities as well,” Jason Furman, the White House chief economist, said Feb. 4.

Furman said the deficit will “decline as a share of the economy to about 2017 or 2018 and then, absolutely, we need to do more over the medium and long term,” when spending exceeds revenue by about $1 trillion in 2022, Furman said. Even so, “The most immediate imperative we face is expanding opportunity, and that’s what the president is taking action on.”

Put another way, the Obama administration has cut the budget deficit in half, and says it’s time to shift to policies expanding economic opportunity for all Americans, with a focus on the middle class.

After years of stalemate, Congress, lawmakers and the White House in December reached a two-year budget compromise. Obama said that “should leave us freer to focus on creating new jobs, not creating new crises.”

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The London gold fix, the benchmark used by miners, jewellers and central banks to value the metal, may have been manipulated for a decade by the banks setting it, researchers say.


Unusual trading patterns around 3pm in London, when the so-called afternoon fix is set on a private conference call between five of the biggest gold dealers, are a sign of collusive behaviour and should be investigated, NY University's Stern School of Business professor Rosa Abrantes-Metz and Albert Metz, a managing director at Moody's Investors Service, wrote in a draft research paper.

"The structure of the benchmark is certainly conducive to collusion and manipulation , and the empirical data are consistent with price artificiality," they say in the report, which hasn't yet been submitted for publication . "It is likely that co-operation between participants may be occurring."

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he new chairman of the Senate Finance Committee, Democrat Ron Wyden of Oregon, has expressed a preference for extending lapsed tax breaks.

Congressional Republicans, seeking to increase control in the House or possibly win a majority in the Senate, have concluded the budget is a secondary issue.

House Majority Leader Eric Cantor of Virginia said his party’s election-year focus is on Obamacare, abuse of presidential powers, the middle class squeeze and job creation.

Maya MacGuineas, president of the Committee for a Responsible Budget, which advocates for smaller deficits, said midterm elections and “the ongoing savagely partisan environment” make progress on the budget unlikely.

“Politics will trump policy,” MacGuineas said in an e-mail. “This is not a good year to expect hard choices.”

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Ukraine doesn’t seem like the kind of place that world powers would want to tussle over. It’s as poor as Paraguay and as corrupt as Iran. During the 20th century it was home to a deadly famine under Stalin (the Holomodor, 1933), a historic massacre of Jews (Babi Yar, 1941), and one of the world’s worst nuclear disasters (Chernobyl, 1986). Now, with former President Viktor Yanukovych in hiding, it’s struggling to form a government, its credit rating is down to CCC, a recession looms, and foreign reserves are running low. Arseniy Yatsenyuk, head of the opposition party affiliated with former Prime Minister Yulia Tymoshenko, said on Feb. 24 in Parliament, “Ukraine has never faced such a terrible financial catastrophe in all its years of independence.”

But Ukraine is also a breadbasket, a natural gas chokepoint, and a nation of 45 million people in a pivotal spot north of the Black Sea. Ukraine matters—to Russia, Europe, the U.S., and even China. President Obama denied on Feb. 19 that it’s a piece on “some Cold War chessboard.” But the best hope for Ukraine is that it will get special treatment precisely because it is a valued pawn in a new version of the Great Game, the 19th century struggle for influence between Russia and Britain.