In recent months, Ukraine has undergone dazzling tragedies and ordeals, revealing deep domestic conflicts, changes in the international strategic landscape and big power relations in the post-financial crisis era. On March 18, Russian President Vladimir Putin signed a treaty with the Republic of Crimea and Sevastopol, officially accepting their entry into the Russian Federation. The agreement signed on April 17 by Russia, the United States, Ukraine and the EU to stabilize Ukraine failed to bring stability and peace to the region. So far, the United States and the European Union have imposed two rounds of sanctions on Russia, but these actions have failed to curb Russia’s strategic ambitions.
This essay will analyze the Ukrainian crisis from the perspectives of social transformation, geopolitics, international order and regional order in the post-imperial period.
System Transformation: Political Anomie-induced Social Disorder
It is undeniable that Ukraine is a vivid example of social transformation that proceeded for over two decades since the demise of the Soviet Union. Politically, Ukraine needs to build its national political system and shift from being a “constituent republic” to an independent sovereign nation; economically, it needs to shift from being a highly centralized planned economy to a market economy, all while disengaging itself from the CMEA and Soviet Union economic system. Meanwhile, it needs to embrace economic globalization, make use of its advantages in resources, technology and human resources and find its place in the international division of labor. In terms of foreign policy, it needs to take into account the global landscape and geopolitics and strike a balance between Russia and the EU’s expansion.
Two decades of independence has not yet brought Ukraine a governing model that suits its domestic conditions – a fundamental cause for the current Ukrainian crisis.
Admittedly, Ukraine has made progress in nation-building. In spite of this, it has been troubled by some long-standing social and political “infections” and was exposed to intermittent “fevers.” Politically, Ukraine has not yet found a governing mode that conforms to global developments and national realities. Alongside frequent changes in government, most Ukrainian parties are too underdeveloped to represent the interests of different classes. Political parties are instead controlled by interest groups, and such political anomie inevitably contributes to social disorder. For a long time, Ukrainian politics and culture was not characterized by inclusiveness, dialogue or peaceful coexistence. Instead, it was characterized by hostility, conflicts and political settlement.
Two decades of independence has not yet brought Ukraine a governing model that suits its domestic conditions – a fundamental cause for the current Ukrainian crisis. Democracy is a good thing, but not panacea. On the road to democratization and transformation, countries need to take into account their histories, traditions, interests and the influence of multiple internal and external factors.
Geopolitical Game Among Big Powers: A Repeat of the Two-Decade Crisis?
What really draws the most attention in the Ukrainian crisis is the geopolitical game between big powers. This particular game will not only determine the geo-strategy of Ukraine, but also influence the European security system and global strategic pattern. This year marks the 100th anniversary of the First World War. It is worrisome that two decades after the Cold War ended, the world once again resembles the Post-First World War context in which “winners” enjoyed feasts without addressing the structural problems in European security. A crisis is looming.
Russia, the United States and Europe have taken different strategic stands and have conflicting interests regarding Ukraine.
For Russia, Kiev is the origin of Russian civilization and Ukraine is viewed as the western frontier and strategic pivot of Russia’s rejuvenation. Since his reelection, President Putin has promoted the integration of Europe and Asia and attempted to build a Eurasian alliance on previous Soviet Union land, thus connecting Europe to the Asia Pacific. To achieve this Eurasian alliance, Ukraine is an indispensable link. Russia is weakening relative to the United States and having more political conflicts with the EU, and a more pro-West Ukraine will cause Russia to suffer unbearable losses. As a result, Russia is trying everything it can do to dominate Ukraine’s political process and foreign policy. In November 2013, Russia bought 15 billion Eurobonds from Ukraine and promised to greatly reduce the export price of natural gas in exchange for an end to talks over an “Association Agreement” between Ukraine and the EU.
The United States and Europe cherish the strategic value of Ukraine. Zbigniew Brzezinski once wrote that “Ukraine, a new and important space on the Eurasian chessboard, … Without Ukraine, Russia ceases to be a Eurasian empire.…In any case, it clearly remains a player, even though it has lost some of its ‘pieces,’ as well as some key spaces on the Eurasian chessboard.”1 As the Russian economy continues to deteriorate, the United States and Europe take it for granted that Russia is too weak, underdeveloped and poor to intervene abroad. They are thus emboldened to interfere in Ukraine’s domestic affairs. During the Ukrainian crisis, the United States and Europe supported the opposition against Viktor Yanukovych in Kiev’s Independence Square. Senior officials including John McCain, Victoria Nuland and Catherine Ashton all publicly supported the opposition, further complicating Ukraine’s politics.
Foreign Ministers of Germany, Russia, and Poland meet with the media after talks on the crisis in Ukraine, in St. Petersburg, Russia.
Behind such geopolitical competitions, the Ukrainian crisis manifests the “security dilemma” that now faces Europe. Encouraged by the optimistic view that “the past has gone,” the West abandoned the provisions in the Helsinki Final Act that borders must not be changed, and they disobeyed their promise to dissolve the Warsaw Pact and NATO. In addition, the West encouraged NATO to expand eastwards and squeezed itself into Russia’s strategic space, reminiscent of the pressure that the Versailles System posed on Germany that later acted as a trigger for the Nazi rise to power. It is sad that in a hundred years, the world has not yet worked out the dilemma that realist international relations theorist Edward Carl depicted when he argued that international systems are in a state of anarchy in which power plays a role in international relations and nations have fundamental conflicts of interest.
After Crimea’s accession into Russia, the West imposed multiple rounds of sanctions on Russia. Relations between Russia and the West are moving backwards and have prompted concerns that a new Cold War could be coming. A “Cold War” is not technically in sight, for “Cold War” refers to the situation in which two militaries with different ideologies face off against each other militarily and economically.
In a globalized world in which countries are more interconnected and the West is economically much stronger, Russia and the West are not likely to launch a new “Cold War” per se, not to mention an actual active war. However, it is certain that Russia’s relations with the West will deteriorate over a certain period. The United States will reevaluate Russia’s role in the world and adjust its deployment in Europe. The tension between Russia and NATO will no doubt last for several years.
International Order and Agenda: Not Changed by Ukrainian Crisis
Russia’s hard stances and takeover of Crimea do not necessarily mean an overturn of the existing international order, nor do they necessarily signal a potential replication of the “Crimea model” in international affairs. Although the United States and Europe are not likely to launch large-scale military actions against Russia in order to fight for Crimea, it is certain that they will not take this situation lightly. On the contrary, they will make full use of their dominance over international politics and economics to punish Russia.
By contrast, Russia now suffers from an even more impaired international image. Moreover, Russia may risk wasting its efforts in integrating into the international order and being marginalized from the existing international system. In particular, Russia’s economy might suffer great losses if the sanctions are escalated.
As a matter of fact, Russia is already excluded from the G8. Although the G7 of the post-financial crisis is nothing in comparison to its peak, it is undeniable that the G7 remains a critical platform for the West to discuss international hot spots and reach consensus. It still exerts a huge influence on global economics and politics. Russia once spared no efforts to join this so-called “Rich Club,” even if it was excluded from economic discussions. Today though, Russia is not likely to discuss international affairs with these declining powers, nor will it join the OECD.
Russia’s hard stances and takeover of Crimea do not necessarily mean an overturn of the existing international order.
In terms of the sanctions and countermeasures between the West and Russia, “interdependence” and “relative damage” shall both be taken into account. Despite its contempt regarding Western sanctions and its threat to seek revenge, Russia is bound to lose in this conflict due to its economic defects and disadvantages in the international economic order. The Russian government has had to cancel all but two bond auctions since the crisis began. This contributes to capital flight, puts pressure on the ruble and creates inflation. At the same time, it limits investment in the country and pulls down incomes.2
Russia can no longer isolate itself from the global market like the Soviet Union once did. Western dominance over the global economy, Russia’s imbalanced economic structure and its reliance on Western capital and markets pose four vulnerabilities that could be exploited by Western sanctions:
Debt Risk
Despite Moscow’s measures to rein in government debt in recent years, rising corporate debt pushed Russia’s foreign debt from 538.8 billion dollars in early 2012 to 732 billion dollars in early 2014, far exceeding its foreign exchange reserves of 500 billion dollars. It is clearly remembered that in 2008, when the global financial crisis first broke out, Vladimir Putin and Dmitry Medvedev claimed that Russia was a “refugee” for owning huge foreign exchange reserves. They never expected that these reserves had failed to shelter Russia from the financial crisis.
In 2009, Russia’s GDP fell by 7.9 percent, the largest decline among countries in the G8 and the G20. High foreign debt is the major risk that Russia faces. As its outlook is downgraded to negative by major international rating agencies, Russia is becoming skeptical regarding its solvency, leading to a suspension of foreign debt and increasingly high loan costs. Meanwhile, negative market expectations and concerns over the political outlook have exacerbated capital outflow from Russia. In 2012, capital outflow amounted to 54.6 billion dollars; in 2013, the volume climbed to 62.7 billion. In the first quarter of 2014, capital outflow climbed to 51 billion dollars, according to Russia’s Finance Minister. But the European Central Bank now estimates that Russia’s capital outflow increased to 220 billion dollars since the Ukrainian crisis began. There is no doubt that huge capital outflow will drain the Russian economy.
Financial Risk
Russia’s financial security system is weak compared with the financial dominance of the West. On March 1, the Russian Federation Council approved President Putin’s application to use Russian forces in Crimea. On March 3, Russia’s stock market and exchange market both registered huge losses – the Moscow index fell 10.8 percent within one trading day, a loss of 60 billion dollars in market value. By March 24, the Moscow Interbank Stock Exchange Index had fallen by 13.7 percent from the beginning of the year, the Russian Trading System Index had fallen 21.6 percent and the ruble’s rate against dollar and Euro fell 10.7 percent and 9.7 percent respectively.
As the United States and Europe released their sanction lists against Russia, big Russian stocks (like the Russian Development Bank, Gazprom, Rosneft, Novatek, Russian Telecom Group and Sberbank) dropped sharply. Novatek fell 8.6 percent in market capitalization and lost 27.3 billion dollars and Rosneft fell 7.6 percent in market capitalization. Since early this year, “Russian 10-year bond yields are up 179 basis points since January 2nd, yielding 9.7 percent. Rate premiums like that are making it hard for Russian companies to obtain affordable credit.
Russia’s government recently canceled a bond auction due to a lack of investor demand. Corporate bond issuance is down 70 percent from a year ago, with some companies struggling to refinance, according to the Treasury. On April 25, Standard & Poor’s downgraded Russia’s sovereign credit rating to BBB-, the lowest of the investment grade rankings.”3
Investment Risk
Russia relies heavily on Western investment for economic development. By the end of 2013, Russia attracted a total of 384.1 billion dollars, among which FDI accounted for 126 billion, security investment totaled 5.69 billion, and other investments came up to 252.3 billion. However, roughly 70 percent of these investments were from the United States and Europe.
As a matter of fact, Russia’s overseas investment mainly flows towards Western countries. By the end of last year, Russia’s foreign investment totaled 176.4 billion dollars, among which 126 billion of foreign direct investment flowed to the British Virgin Islands, the United States, Britain, Cyprus, Switzerland and the Netherlands. Once the United States and Europe impose financial sanctions on Russia, Russia will not only face difficulties in attracting foreign investment, but will also face huge risks when it attempts to invest abroad.
Energy Risk
Russia is highly dependent on energy exports, which make up 10 percent of GDP and 50 percent of its budget revenue. The EU, Russia’s largest trading partner, accounts for 49.4 percent of Russia’s foreign trade in 2013, with the bilateral trade volume reaching 417.5 billion dollars and 70 percent of Russia’s oil and gas exports. Despite the energy interdependence between Russia and Europe, the United States shale gas revolution changed the global energy landscape and offered the European Union more alternatives. As oil keeps flowing from the Middle East and North Africa, Europe may reduce 20 to 40 percent of its natural gas imports from Russia. Supposing that the United States releases its strategic oil reserves and persuades the Gulf States to increase oil production, the EU might reduce 20 percent of its oil imports from Russia. This, in turn, would cost Russia 30 billion dollars in lost oil revenue. Recently, President Obama announced that the United States would facilitate the export of shale gas and other energy sources to Europe and possibly lift its ban on oil export, a move that would greatly impact Russia’s energy exports.
It is fair to say that even though Russia took over Crimea, it lost much more in exchange.
Given that the existing international order is dominated by the West, major power strategic competition is more of an “all-round competition” of national power rather than a forcebased “individual event.” It is fair to say that even though Russia took over Crimea, it lost much more in exchange. The United States and European sanctions will result in huge economic losses and marginalize Russia’s international standing and reduce its influence over international affairs.
Post Imperial Period: When Will the Imperial Hangover Heal?
Academically, imperialism is an important perspective that must be observed when analyzing the post-Soviet world. Unfortunately, twenty years after the break-up of the Soviet Union, analysts and decision-makers now tend to ignore the imperial causes of political unrest in the eastern region of the Soviet Union. Likewise, few people realize that the majority of conflicts that occurred in the former Soviet Union were caused by the immediate thawing of the collapsed empire.”4 In fact, if we can reflect further on the perspective of Soviet Union imperialism, we are bound to have a clearer and deeper understanding of Russia’s status quo and future.
Imperial states refer to countries that try every possible means to strengthen their own power and influence. Such states focus not on strength itself, but on the relative strength compared with surrounding countries. This has been true since ancient times – that weak neighboring countries are often the drivers of imperialism. Imperial states are characterized by the extension of laws, orders, economic models and culture from ruling states to occupied regions.
From this perspective, Tsarist Russia and the Soviet Union are both imperial states. The Ukrainian crisis is just a recurrence of the former Soviet Union’s imperial hangover. The imperial residue still haunts the fifteen former constituent republics when they engage in nation building and try to establish new regional orders. Efforts by new independent states in building national consciousness, safeguarding sovereignty and participating in globalization are intertwined with the imperial past, ethnic conflicts, frozen conflicts and reintegration.
Three issues need to be discussed in viewing the post-Soviet space from the perspective of imperial states: first, former suzerain Russia’s strategy and development; second, whether former subsidiaries like Ukraine can win independence and establish equal ties with the external world; and third, whether a stable and peaceful regional order can be established in the post-Soviet Space.
Between 1989 and 1991, when the Soviet Union was about to fall, Russia cast off those subsidiaries. Over seven decades, Russia had regarded itself as a cow milking other republics for existence and development, but at the cost of burdening itself. As a result, Russia tacitly approved and even encouraged the independence of other republics. However, when Putin took office, Russia recovered its strength and rekindled its big power ambitions and attempted to play a dominant role in the post- Soviet space.
In President Putin’s speech on Crimea, delivered on March 18, he expressed discontent towards the West on imposing discrimination, suppression and “double standards” on Russia since the dissolution of the Soviet Union. From a Russian perspective, NATO’s eastward movement and the EU’s “Eastern Partnership” severely violated Russia’s traditional sphere of influence.
Due to “frozen conflicts” like the Nagorno-Karabakh and Transnistrian issues and unsettled borders with Russia, some former Soviet Union republics have totally different views. They regarded the crisis in Abkhazia, South Ossetia after the 2008 Georgian War and the crisis in Crimea and East Ukraine as the outcomes of Russian “revanchism” and “irredentism.”
As a result, they feared that history would repeat itself. Even Finland believes that as Russia grows stronger, it tends to use military force like it once did to safeguard its own interest. Moreover, Finland even cast doubt on its long-time neutrality and proposed that it join NATO.
After the disintegration of the Soviet Union, the Commonwealth of Independent States (CIS) acted as the platform upon which the former Soviet Union republics could divorce and maintain traditional ties.
In 2012, Putin proposed four steps to build the Eurasian Union: first, establish a Eurasian Economic Community to promote economic integration; second, establish a Russia- Belarus-Kazakhstan Customs Union within Eurasian Union membership; third, establish a custom union-based economic space; and finally, develop an economic space for the Eurasian Economic Union, then promote political integration and establish the Eurasian Union covering economics, politics and the military. However, Russia’s proposition of recovering dominance contrasts starkly with other countries’ efforts to safeguard their sovereignty.
Russia will promote Eurasia’s integration after the Ukrainian crisis, but this process will be affected by the following factors. First, subject to sanctions imposed by the West, Russia’s economic development will decline in terms of both economic inflow and outflow. Second, the establishment of a “customs union” will bring Russia, Kazakhstan and Belarus even more conflicting interests. Third, in designing a system, the “customs union” makes free flow of goods possible among member countries. However, exchange rate gaps between different currencies may lead to trade or currency wars. Fourth, the internal drive of integration lies in the pursuit of common interests and values, while the speed of integration relies on the development model of core countries and their abilities to offer public goods.
Russia’s economic development model lags behind and it lacks the competence to provide needed capital, markets, technology and managerial experience to other countries. In this sense, Eurasia’s integration does not have a good outlook.
Conclusion
As a major event in the evolution of the international system since the Cold War, the Ukrainian crisis will exert far-reaching influences on Europe’s security structure, Eurasia’s development and the global strategic landscape. Nowadays, the Ukrainian crisis is in constant evolution and cannot yet be judged.
The Ukrainian crisis will exert far-reaching influences on Europe’s security structure, Eurasia’s development and the global strategic landscape.
The development in Ukraine mark another structural crisis in social transformation. Ukrainian government and political elites face various issues – recovering domestic order, getting rid of their economic crisis and creating a suitable political system through open, transparent and balanced presidential elections and constitutional reform. Moreover, the government needs to define the Ukraine’s development strategy. As for major powers that have different geopolitical interests in Ukraine, the key question affecting European security is whether they can properly use their political wisdom and diplomacy to find a middle ground on Ukraine’s sovereignty and international status, and whether they can avoid the conventional “zero-sum game” and “security dilemma.”
Feng Yujun
1 Zbigniew Brzezinski, The Grand Chessboard: American Primacy And Its Geostrategic Imperatives,Basic Books, 1997, p.24.
2 Greg Satell, “Here's How Obama's Russia Sanctions Will Destroy Vladimir Putin,” http://www.forbes.com/sites/gregsatell/2014/04/28/heres-how-obamas-sanctions-will-destroy-vladimir-putin/.
3 Kenneth Rapoza, “Washington Deepens Russia Sanctions, Energy Sector Now In Crosshairs,” http://www.forbes.com/sites/kenrapoza/2014/04/28/washington-deepens-russia-sanctions-energysector-now-in-crosshairs/.
4 Ariel Cohe, Russian lmperialism, Greenwood: Praeger Publishers, 1998, p.165.