Monday, March 3, 2014

Tragedy in Ukraine

We've gone from what we thought was a very promising entente between Ukrainian protesters and the government of President Yanukovych covering limitations on Presidential powers and a commitment to early elections, to a very unstable situation which threatens the existence of the nation.

Russian President Putin, the world knows, is a formidable player on the world stage, but his very strengths may be the undoing of his desires for Russia, e.g. recognition on the world stage as a power center equal to the United States, Europe and China.  Whatever goodwill might have been cobbled together by the Sochi Winter Olympics has now made them seem as meaningful as the long-forgotten Goodwill Games.

President Putin does not hide his contempt well.  Clearly, he has no regard for President Obama, who has been even more disconnected from foreign policy than usual, with his laser focus on mid-term elections and on the next Presidential campaign for the Democratic nominee.  Into this vacuum, President Putin pounced with his roughshod entry into Crimea.

The Ukrainian political system has itself to blame for allowing resolutions to be passed in defiance of the brokered agreement, and for leading President Yanukovych to seek safety with the national treasury. Now the release of self-styled opposition leader and former oligarch Yulia Tymoshenko has done nothing but muddy the waters as to who is in charge of Ukraine's central government.  All of this could have, and should have, never been allowed to happen.

As many observers have noted, the tactics of fomenting the problem through paid agents, and then answering the call to protect the human rights of Russians in Ukraine with masked gunmen, armed forces, and Russian nationalists in Ukraine, are straight out of the KGB playbook.  Of course, President Obama responds late with another "red line" variation.  The Europeans may be more politically sophisticated to realize there are few options, but they too are inept and navel-gazing to the threat right on their doorsteps.

So, President Putin has played the hand quickly, forcefully and with no compunction.  The problem is going to be: what's next?

If President Putin weren't so one dimensional and short-sighted in his thinking, he would realize that playing this old hand may relegate many of his dreams to the scrap pile of history.  The best thing for a real Russian economy (not the kleptocracy of an oligarch-run economy) would be a vibrant Ukraine producing grain and other products and services for export to Russia and to Europe.  Logistics and infrastructure projects, in which Russian companies could compete with European suppliers, have long been recognized as providing real economic returns to investors with longer time horizons, like sovereign wealth funds.

The Russian population in Ukraine, if they got the message from President Putin, to end their "sleeper cell" model and instead to become committed citizens of Ukraine, they too would prosper.

If the Crimea were permanently occupied, China and Japan would have to become concerned with Russian naval power now in total control of its base in Sevastopol, as opposed to operating under an agreement with Ukraine as owner of the territory.  Relationships with these two powers would not be warm and friendly.

With the U.S. and Europe, prospects for meaningful economic and political relationships would be damaged, perhaps irreparably.

With the Obama administration's foreign policy apparatus being led by nincompoops, and with a President preoccupied with domestic concerns, U.S. policy could go in the deep freeze until the new President is elected.  This too would be a very dangerous situation, especially if the American shift were to become more isolationist and confrontational.

What message can be read into President Putin's actions by his own restive citizens?  If Russian becomes preoccupied with instability and control over a divided Ukraine and, for example, if chaos were to spill towards Europe via Moldova, then it might be a good moment for separatists inside Russian republics to play stronger, more violent hands.

Even if President Putin once again played his energy hand with Europe, consolidated inside Crimea and Eastern Ukraine and ethnic and religious rebels inside Russia, what would have been won by all this? Russia surely aspires to be more than an OPEC.  The Russian economy would be devastated, more well trained Russians would leave and even the oligarchs might get restive with their leader, whose successor isn't apparent and who probably couldn't survive with the same playbook. Oligarchs are subservient now, but the chess player Putin recognizes that relationships change over time.

The interests of the international community are undoubtedly best served by a vibrant economy in Ukraine, which certainly has the human capital and desire to take its place a major agricultural producer. Whether Ukraine "tips" to Russia or Europe is irrelevant: that is playing a game that has left town for good. Let's hope that the situation can be brokered back to political solutions.

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