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Authors' Note: This article is based on a section of our paper, Beyond the Sanctions: Russia, the West, and Ukraine.
Almost forgotten in the discussions of the conflict between Russia and the West is what happens to Ukraine. The answer to that question, like so many other problems, depends on how much each side is willing to pay for their preferred outcome. It is important therefore to understand the costs of the potential outcomes for Ukraine and how those costs will be apportioned between Russia and the West.
The West sees itself as defending Ukraine against Russia, and since it wont wage military war against Russia it has two main ways to do that, both economic. The first is to shore up Ukraines huge economic vulnerabilities, mainly by helping Ukraine pay its bills and plug its deficits. The IMF has pledged $17 billion to that end, the EU a nearly equal sum. The second way the West is defending Ukraine is to levy economic sanctions against Russia to deter it from further aggression.
From Russias standpoint, things are more complicated, but in the end there, too, it comes down to economics. Russia sees Ukraine as a front in a war being waged by the West against Russia. Through its actions in Ukraine, Russia is telling the West to stop using the country as a staging ground for operations against Russia. Russia sees sanctions as a yet another weapon in the Wests war. Russia knows it is far inferior to its adversaries in terms of economic size and strength (the combined GDP of Russias NATO and EU adversaries is roughly 15 times that of Russias), so it has opted not to engage in tit-for-tat responses to Western sanctions. Instead, it resorts to asymmetric measures. It looks for weak spots. One obvious such weak spot is Ukraines economy. The Russia attitude is, if the Western coalition wants to use Ukraine against us, let them see how much it will cost.
It is clear to most observers that the West would not be able to defend Ukraine economically from a hostile Russia. Russia is in a position to do far more damage than the West can defend against or repair. Its always true that its easier to undermine a country economically than to build it up. Its easier to destabilize than stabilize. It is perhaps less evident that the West would have a very hard time stabilizing the Ukrainian economy even if Russia werent around to make mischief. The simple fact is that Russia today supports the Ukrainian economy to the tune of at least $5 billion, perhaps as much as $10 billion, each year.
When we talk about subsidies, we usually think of Russias ability to offer Ukraine cheap gas which it does when it wants to. But there are many more ways Russia supports Ukraine, only they are hidden. The main support comes in form of Russian orders to Ukrainian heavy manufacturing enterprises. This part of Ukrainian industry depends almost entirely on demand from Russia. They wouldnt be able to sell to anyone else. The southern and eastern provinces of Ukraine are dominated by Soviet-era dinosaur enterprises similar to Russias. They were all built in Soviet times as part of a single, integrated energy-abundant economy. They could be sustained only thanks to the rents from Soviet (overwhelmingly Russian) oil and gas. Russian subsidies have continued to maintain the structure in the post-Soviet era. Because most of these subsidies are informal, they do not appear in official statistics. (In fact, not even Putin talks about them, though it might be to his advantage to do so, because acknowledging the existence of hidden Russian subsidies to value-destroying Ukrainian enterprises would expose the fact that the same thing goes on, on a much greater scale, with their Russian counterparts. They, too, are not producing real value.)
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If the West were somehow able to wrest full control of Ukraine from Russia, could the United States, the other NATO nations, and the EU replace Russias role in eastern Ukraine? The IMF, of course, would never countenance supporting these dinosaurs the way the Russians have. So the support would have to come in the way of cash transfers to compensate for lost jobs. How much are we talking about? The only known parallel for the amount of transfer needed is the case of German reunification. The transfer amounted to 2 trillion euros, or $2.76 trillion, over 20 years. If Ukraine has per capita income equal to one-tenth of Germanys, then a minimum estimate is $276 billion to buy off the east. (In fact, since the population size of eastern Ukraine is larger than East Germanys, this is an underestimate.) It is unthinkable that the West would pay this amount.
http://www.brookings.edu/research/articles/2014/05/21-ukraine-prize-russia-west-ukraine-gaddy-ickes
dipsydoodle
(42,239 posts)Thanks for posting.
Things that no one have been paying attention to so far.
KoKo
(84,711 posts)bemildred
(90,061 posts)Only Ukrainians can successfully run Ukraine, and that option will go away if the present polarized situation persists.
Tommy_Carcetti
(43,226 posts)It correctly saw the interim government that took over following Yanukovych's departure as weak and vulnerable and it knew if there was ever a moment to claim Crimea, that was it. So they did. And not satisfied with just Crimea, Putin started up with the "Novorussiya" talk regarding Eastern Ukraine, and that set the ball rolling there. And here we are today.
Had Putin never invaded Crimea, the Ukrainians would be in a far better situation than they are today. Yes, the events on Maidan would still be in the rear-view mirror, but with only an inauguration of a newly elected president to look forward to, the country would be far more stable. Not surprisingly, having an armed insurrection in the eastern half of your country cripples the stability of the entire country. And ultimately it is the Russians who are to blame for that instability.
bemildred
(90,061 posts)Look, I don't disagree. Where we differ is you seem to expect moral behavior from governments. I expect them all to be weasels. It is an amazingly effective heuristic.