Putin’s Maneuvers Risk Permanent Loss of Ukraine to the West

Ash: “…unless Putin is willing to sanction a more risky intervention in Ukraine, he risks the permanent loss of Ukraine to Russia - time is not necessarily on his side.”

MOSCOW/LONDON, Aug 17, 2015 (UBO) – Writing in the Moscow Times, Vladimir Frolov ventures the opinion that:

“The Kremlin is watching the implementation of the Minsk-2 agreement nervously. The agreement is failing to deliver on Russia's policy goals in Ukraine. Once viewed as a diplomatic coup to win through means other than war, it has now turned into a diplomatic trap that could at best provide cover for Russia's withdrawal from the Donbass.”

In response and further comment, Nomura Int’l top analyst Timothy Ash at 01:21 today offered the following comments:

Interesting piece in the Moscow Times, worth reading.

It suggests that the February 12 Minsk II peace deal is no longer really working for Moscow and other options may need to be considered.

This kind of dovetails with what seems to be the situation on the ground in eastern Ukraine, which for a few weeks now has been marked by an upsurge in shelling, and casualties reported on both sides. On a daily basis the Ukrainian military now reports 100+ live firing incidents, and worryingly over the past week the use again of Grad rocket launchers which are devilishly inaccurate with civilians usually suffering the most.

On August 12 Putin convened a session of Russia's national Security Council, specifically to discuss the deterioration of the situation in Eastern Ukraine. Ukrainian and Western military sources, meanwhile, report a large military buildup again by Russian forces either side of the border with Donbas (9,000 in Donbas, and as many as 50,000 close to the border in Russia) - also coming in parallel with another Aid convoy from Russia to Donbas. These latter convoys (35 have now been run) have also tended to dovetail with heightened military activity.

Last week Germany's foreign minister, Steinmeier, visited Moscow and issued a joint statement with his Russian counterpart, Lavrov, calling for both sides to abide by the terms of the Minsk II agreement. Upon his return to Germany, Steinmeier, was quoted in the German press as warning that the situation in the East of Ukraine was explosive.

So is a large scale military assault in the offing again

Well putting the above together it is clear that Russia is unhappy with the status quo on the ground in Ukraine. As the Moscow Times article pointed out, constitutional reform in Ukraine, and therein the devolution of greater power to the regions, including special status for rebel controlled areas of Donetsk and Luhansk, is proving slow moving. Legislation covering constitutional reform and decentralisation are working their way through the Verkhovna Rada, as agreed at Minsk II, but these are difficult and controversial issues at the best of times, and there remain big differences between how Kyiv and Moscow interprets how these should be shaped. Moscow is eager to see a Federal structure rolled out in Ukraine, perhaps similar to the Swiss model, whereas Kyiv is willing to devolve greater power of spending to the regions, but is opposed to a scenario where the regions individually have veto power over the geopolitical orientation of the country itself. Arguably Moscow is more interested in regions having this veto power over national government decisions, than the actual devolution of power to local government. That said, some would argue that Moscow supports any scenario which weakens the central government in Kyiv, which is why it pushed so hard for constitutional reform and decentralisation of power in the Minsk peace process.

There was a hope back at the Minsk II peace talks in February that the issues of constitutional reform and decentralisation would be resolved in time for local government elections to be held in October. Once elections were held, Ukraine was then to have secured control back over its borders, essential to stop arms flows across the border. Kyiv argues that whether constitutional reforms have been approved or not, it is difficult to hold elections in the East, given the presence still of large numbers of armed military formations. As ever in resolving similar conflicts elsewhere, the sequencing of the various stages of the peace process is important. But in this case, there has been no sequencing, and no real entity to oversee the process (the OSCE has failed to secure a real mandate and foothold across the region), which has made implementation of Minsk II nigh on impossible. There was withdrawal of heavy weaponry earlier in the Spring in accordance with Minsk II, but large armed formations remain in situ, and artillery has since been moved back up to the front line.

From Moscow's perspective

It has failed to get what it wants in terms of constitutional reform in Ukraine. Power, particularly over national issues (NATO membership, and geopolitical orientation) is still centered in Kyiv, a situation which seems unlikely to change any time soon. Indeed, most Ukrainian politicians realise that evolution to the Russian idea of a Federal state would see centrifugal forces emerge and the collapse of the state itself. No Ukrainian politician can sell this idea domestically - it is simply political suicide, and hence the stalemate with Russia over the issue.

Isolated from Ukraine in effect, the DPR and LPR remain dependent on economic assistance from Russia, and hence are imparting further strain on an already weakening Russian economy, alongside Crimea which is also struggling economically;

The Ukrainian military is benefitting from training from a range of NATO member states, and is gradually re-equipping and building its defensive capability. The longer Moscow waits, the greater defensive capability Ukraine will attain, eventually eroding the military advantage and leverage which Russia currently enjoys.

If it had hoped that the pro-Western government in Kyiv would prove short lived, as economic collapse strained domestic political and social stability, and that this would quickly usher in a new government more aligned with Moscow, these hopes have been disappointed. The Poroshenko-Yatsenyuk administration might not be popular, if opinion polls are to be believed, but one year after its formation, the ruling coalition remains intact. There haven't been mass popular demonstrations against radical and painful economic reforms - as many predicted. Interestingly, and importantly perhaps, opinions polls show no popular shift East, but still West. For example, one recent poll showed two thirds support for NATO membership - from the teens just before the Maidan protests, and support for a military alliance with Moscow down to single digits, from around one third before Maidan. The country still seems to have shifted decisively West.

Even on the macro front in Ukraine there is some signs of stability, even improvement. Thus the UAH exchange rate has stabilised, current account and fiscal deficits have evaporated fast, and NBU reserves stabilized, grown on the back of IMF disbursements and a moderation in capital flight. There is even hope of a deal with private sector creditors, voluntarily restructuring private sector debts which would avoid a default and potentially open the way to future private sector financing of Ukraine.

Reviewing the above, at Minsk II, Moscow arguably pulled back from pursuing military options, to allow other means to be deployed to bring Ukraine back under its control. According to this view, Moscow adopted a wait and see approach. However, the score card above suggests that these non-military options are having only limited impact - time might not actually be on Moscow's side, and the longer it leaves Ukraine, the more chance Ukraine has of securing its transformation into a fully functioning and developed Western market democracy, and away from Russia's own Sovereign Democratic model.

This might all suggest that the risks are now that Moscow falls back towards the military option - which could be what we are seeing on the ground at present. But would that suggest a large or rather full scale Russian military assault on Ukraine as some are suggesting

I tend to think not.....................

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