I’ve been relatively sanguine about the Crimean conflict to date. It was a was a well executed Putin putsch and he held all of the cards so it really didn’t threaten stability greatly.
But no longer. From the FT overnight:
Ukraine’s leaders warned that their country was at risk of being torn apart as armed pro-Russian separatists occupied government buildings in three eastern Ukrainian cities, displaying a new level of force and ambition.
The protesters seized buildings in Kharkiv, Donetsk and Lugansk on Sunday. By Monday evening, they had been dislodged from the site in Kharkiv, with at least 10 people reportedly injured during clashes with pro-Ukrainian protesters.
Oleksandr Turchynov, Ukraine’s acting president, blamed Moscow for the unrest, calling it “a second wave of a special operation by the Russian Federation against Ukraine … with the aim of destabilising the situation in the country, overthrowing Ukraine’s government, sabotaging the [May 25 snap presidential] election and tearing our country apart”.
Russia, in turn, said the Ukrainian government was to blame, but Moscow politicians avoided suggesting that Russia intervene militarily or drawing parallels to the situation in Crimea.
The unrest in eastern Ukraine comes weeks after Russia annexed the Crimean peninsula. Moscow has maintained tens of thousands of troops near the Ukrainian border, jangling nerves and prompting Nato commanders to warn about the possibility of an invasion.
US secretary of state John Kerry spoke on the phone on Monday with his Russian counterpart Sergei Lavrov. According to the State department, Mr Kerry “made clear that any further Russian effort to destabilize Ukraine will incur further costs for Russia”. The unrest in eastern Ukraine over the last 24 hours “did not appear to be spontaneous” and was of “great concern”.
Russia’s foreign ministry said the events were being “closely watched”, and argued they were proof of the need for a federation in Ukraine along lines proposed by Moscow but angrily rejected by Kiev.
“As the Russian side has noted time and again, without real constitutional reform in Ukraine, which would through federalisation ensure the interests of all regions of the country, maintain its neutral status and strengthen the special status of the Russian language, long-term stabilisation of the Ukrainian state can hardly be expected,” the ministry said.
As Ukrainian authorities moved to open negotiations with the separatists, they cut off water and electricity to the group that had seized the regional state security building in Lugansk. The strategy appeared to be one of wearing down the separatists over time rather than risking bloodshed that might invite reprisals from Moscow.
This now has the outline of a developing great power proxy war in Ukraine. Whether Russia is actually behind the insurgency or not, its support of the Crimea appears to have triggered a wave of Russian-speaking ethnic nationalism. What is the great bear to do if neigbouring regions coming looking for Crimean-style annexation?
Would it serve Russian interests to see Ukraine Balkanise (that is, split apart)? While civil wars are very nasty, in the calculus of great powers it could still be seen as useful. It stops the movement West of the EU and NATO and underlines to other neighbouring states that Russia’s sphere of influence is real and martial. The economic fallout would be offset by higher energy prices. A conflict could be quite useful in raw strategic terms so long as was kept at a manageable level and did not actually cut off gas supplies to its customers in Europe.
Russia still holds all of the cards. Roughly 25% of Europe’s gas imports flow through Ukraine and any cessation of those flows is going to cause very serious economic congestion with a shock to global gas prices and perhaps oil as well.
If it came to it, Europe’s interests would also be better served by Balkanising Ukraine and handing Russia the eastern half, so long as that guaranteed gas supplies. So much for the enlightened post-modern state and moral super power!
But the great risk now is that the Ukraine will not allow itself to be sliced and diced and, if open conflict were to begin, Europe will be forced to back an independent Ukraine in a proxy conflict in which it channels funding and arms. Europe can’t very well just let Putin march west unchallenged, either.
For Australia, the specter of Urkainian conflict offers the prospect of higher gas, wheat and iron ore prices (Ukraine supplies roughly 40 million tonnes per annum) but any benefit will be dented by the blow to global growth.
This is now a front-of-mind global economic risk.
