There’s been a great deal of media coverage on Ukraine in the past few days, although the crisis has been going on since November last year. Many journalists have been sensationalising the situation and even scaremongering that this could lead to war. Concerning though these events are, it is clear that nobody wants war and that there is plenty of scope for solving the issue in a diplomatic way.
Nonetheless there is a big danger for our economy; the uncertainty alone has a massive impact on the stock market and the price of oil and gas, both of which have a very direct impact on our standard of living. I thought it would be helpful to summarise what’s going on and what the UK Government is doing in response-it’s a complex situation but bear with me!
- Protests in Ukraine forced the president Viktor Yanukovych to sign a deal on February 21st for early elections and a considerable reduction in presidential powers. This followed the killing of almost 100 protestors.
- Shortly after the deal was signed, Yanukovych fled Ukraine, leaving a political vaccum. Most of the MPs from his party abandoned him and the Ukrainian Parliament appointed an interim Government while announcing elections for May.
- The Ukrainian province of Crimea, which was part of Russia until the 1950s, is strongly pro-Russian and importantly contains the main base of the Russian Black Sea Fleet. It is somewhat like the Russian equivalent of Gibraltar for the UK. Crimea was in something of a power vacuum after the revolution and for quite a few days the new Government was not able to assert its authority.
- Russia has sent troops into the Crimea to protect its interest there-primarily the military base but also its perception of Ukraine being within its sphere of influence. It has, however, denied sending troops. It has also called the revolution illegitimate and part of the Russian propaganda is that the West is ‘behind’ the revolution.
- Putin claims that the new Government is oppressing Russian minorities and is led by Nazis and other extreme right wing groups. These claims are patently untrue.
- This highlights very different approaches to the World; Russia does not agree that Governments can be toppled so it opposed regime change in Iraq and Libya for example. The US and much of West support all moves towards democracy; as the Yanukovych regime in Ukraine was corrupt and failed to implement the will of the Ukrainian people, the West sees his toppling as a legitimate action.
- What does Russia hope to gain by sending troops to the Crimea? One is sending a clear signal to the new Government that it will not be kicked out of its military base there, another is wider; it is showing that it is still the dominant power in the region. It has the capability to conduct large scale military operations and wants to deter Ukraine and others from joining NATO or the EU. Russia is not a ‘modern’ country with hyperactive media and concerned population; to them this relatively small military action will seem as a rational and reasonable step to take.
- Putin knows he can take Crimea with no large impact from the West; we will look at sanctions but Russia can retaliate with the same. He does not care about the perception of him this causes.
- Ultimately, Ukraine is dependent on Russia-for energy and for cash-whoever is in control. It has a backward economy and would have to suffer considerable hardship and upheaval along with considerable support from the West to escape this reliance on Russia. Putin calculates that Ukraine will not be able to do this and taking Crimea is a way of tipping the balance.
- On the bright side there is very little probability of Russia keeping Crimea; a significant anti-Russian minority there would make the region virtually ungovernable and create a hug security problem for their military base where none existed before; in all likelihood Russia will remain there until the elections in May and by then we can seek a diplomatic solution.
- Europe and the US are quite rightly keeping up the diplomatic pressure on Russia; not doing so would be a sign that Russia’s actions are acceptable and Putin would be more likely to repeat them and there are plenty of places, from Belarus to Central Asia, where he could spread Russian power.
- This situation is unlikely to be solved in the short term but it is in absolutely no one’s interest for it to escalate so I am confident that we have already reached the height of the crisis.