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.
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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.
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.
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.