Skip to comments.The Economics of Limiting Russian Expansion (How To Get It Right On Ukraine)
Posted on 03/19/2014 10:30:40 PM PDT by goldstategop
In a series of moves that appear to have been planned carefully, Mr. Putin has taken Crimea, won huge popular support in Russia and in much of Crimea and left the West holding financial responsibility for the rest of Ukraine.
There is no doubt that Russia may seek to annex more parts of Ukraine. Russian military intervention is possible, but the Crimean strategy has proven much easier. Time and momentum are on Russias side, so Mr. Putin can be patient. If Ukraines eastern and southern regions continue to flounder while Russia grows richer, it is only a matter of time before large separatist movements will develop in these areas.
Russia will make a success of Crimea as an example for others: pensions, government wages and other incomes can roughly double to meet Russian averages. The experience of debate and referendums in Quebec, Scotland, Catalonia and other regions all point to plausible democratic routes to exit that Russia can encourage.
A stable Ukraine, with an economy that catches up to its neighbors, is the best defense against disintegration. There is a chance to keep Ukraine united with its current borders (less Crimea), but it would require a striking change in Ukrainian economic strategy something very hard to pull off with so many levers of power in the hands of the established political elite, who remain well entrenched.
Russia controls many of the levers for Ukraines success. It is Ukraines largest trading partner. Ukraine is heavily in debt to Russia and relies on Russia for most of its energy imports. Russia has been selling Ukraine natural gas at well below world prices. Russia also has substantial ability to promote riots, political intrigues and general instability. In short, unless Ukraine can normalize relations with Russia, it has little hope for growth.
(Excerpt) Read more at economix.blogs.nytimes.com ...
This is the reality of Ukrainian survival - there is no way it can survive for long without Russia and Russia holds all the cards. Russia can afford to be patient and outwait Ukraine's present anti-Russian regime, for which it will seek to make life impossible. The bottom line is no solution to revive and stabilize Ukraine can work without Russian cooperation. If we don't get Russia on board, nothing will work.
That sounds very much like a tactic that is undergirded by a strategy of capitulation...
Its a strategy rooted in reality. The West cannot take on the burden of stabilizing Ukraine alone. It needs to give Russia a stake in the country’s prosperity. Like it or not, geography matters here and Ukraine must get along with Russia. If it doesn’t, it faces a bleak future.
If Russia holds all the cards, as you say, what’s stopping Russia from not just taking a stake, but the entire pie?
Zbig the Psychopath wrote the Great Chessboard, but WH is closer to Checkers level.
You are clearly advocated “Realpolitik” here, and we can’t have any of that.
The title you appended was “How to get it right on Ukraine”.
I don’t see this article as offering solutions, so much as explaining why the problem isn’t solvable and saying that we can’t do much.
Ukraine needs prosperity to lure voters away from a Russian orientation, except no one is going to offer enough to help, and world bank loans would do more harm than good.
How can the west do much about Ukraine’s energy dependence, when Russia sells it there far below market rates.
Corruption must be solved, except it’s endemic and can’t be because the moneyed interests (Oligarch) are too strong. The article doesn’t get around to admitting that the previous government was just as corrupt as the Yanokovich one, which is why Tymoshenko lost the election.
I hope these events slap us and our allies awake to the idiocy of our energy policies. It’s an urgent national security issue that will cost us terribly the longer we wait to fix it.
Geography is a hard fact to overcome. Our work would be easier if Ukraine had smaller and more tolerant neighbors to its east. We forget that we’re dealing with a nuclear superpower. This is not some Third World country we can walk over. Russia is a major adversary. We should deal with it without illusions but cease have any fond hopes it will be like us, wish us well or think that we have a great say in what it does in what it considers to be its own backyard.
Believe it or not, there are precedents where countries made a break with Russia - Georgia, Baltic states - who have done it at a great cost and now can rightfully claim to be independent. Granted, they’re one tenth the size of Ukraine and Ukrainian integration with Russia is a bit deeper. I’m a bit hazy on the numbers but something like 25% of exports are going to Russia. It’s a big sacrifice for independence but it’s definitely doable, so I wouldn’t use the words “no way it can survive”.
If Russia chooses to break economic relations, she will not be endearing herself in the eyes of an average Ukrainian and the government will be too glad to blame economic hardships on Russia. Similar way that Hussein and Iranians fostered hatred against Americans in their countries when US imposed sanctions. Putin can roll the dice and see whether Ukrainians turn against the Kiev government or against Russia.
Breaking trade with Ukraine will carry economic costs to Russia as well, especially in the military industrial sector. For example, Ukraine is the main supplier of helicopter engines for Russian military. Russia would need to invest billions and start building their own. Or buy elsewhere, which may or may not be more expensive, and which may or may not fit their specs - either way, it couldn’t quit cold turkey.
Another card Ukraine has is the gas pipe. Despite North Stream, South Stream etc. Russia still carries MOST of its gas through Ukraine. Any gas price increases or disruptions will be countered by transit rate increases.
To sum up, Russia can definitely make a huge mess in Ukraine. But 1)there will be costs to Russia as well, and 2) IF she wins, she will win a huge mess. But to get that far, it will all depend on how much of a sacrifice Ukrainians are willing to make for their independence.
What if Ukraine were to choose to openly defy Russia, in whatever way it pleases? Why should mere "geography" be determinative?