Europe

A Tale of Two Ukraines


As the conflict in Ukraine wages on, the United States, European Union, and China are all reacting distinctively to the crisis as they alter their relationships and interactions with Russia. These behaviors are changing the international roles of these actors with longstanding implications in the global arena.

Since independence from the Soviet Union in 1991, Ukraine has occupied a tense space balancing the affairs of Russia and the European Union (EU). The current unrest in Eastern Ukraine began in November of 2013, when former President Yanukovych rejected a popular deal for increased economic integration with the European Union and instead accepting a deal with Russia, resulting in mass protests that quickly turned violent with hundreds dying at the hands of state police. The escalating dissent ultimately forced the president’s resignation in February. Russia responded by annexing Crimea in March of 2014 and fomenting a violent separatist movement in Eastern Ukraine: to date, more than 6,000 lives have been lost to the conflict. Between the escalating violence in Eastern Ukraine and President Putin exhibiting his control during a recent visit to Crimea, Ukraine’s President Poroshenko—the pro-European candidate elected May 25, 2014—has numerous security and economic priorities to balance. The different forms of support offered by the European Union, United States, and China to Ukraine has shifted relationships between heads of state and altered economic affairs in the region.

The Western powers have used economic sanctions in an attempt to induce a change in Russia’s Ukraine policy. In March of 2014, the European Union and the United States imposed sanctions targeting entities threatening Ukraine’s sovereignty and independence. For the EU, these comprised of excluding Russian state banks from taking out long-term loans in the EU, limiting exports that have military applications, and a stoppage in oil industry technology exports. In addition, numerous senior Russian officials have has their Western assets frozen and are subject to travel bans. The United States imposed sanctions against Russia which similarly froze assets of several Russian and Ukrainian officials who supported Crimea’s separation, and certain entities in the Russian arms industry. The United States further sent $75 million in “non-lethal equipment” to Ukraine in support of the efforts to foster stability.

The EU also deepened its involvement with the Minsk Protocol negotiations during September of 2014 and the now-failed Ukraine peace deal from this past February. This joint statement—a collaboration by Vladimir Putin, Petro Poroshenko, Angela Merkel, and Francois Hollande—specified intentions and broad objectives to foster sustained peace in Ukraine. The leaders committed their respective countries to seek a diplomatic solution to the crisis based on this Protocol. However, with sections of this peace deal having already been disregarded EU foreign ministers have prolonged sanctions on Russia until the end of January 2016 to motivate Russia to honor the deal. EU officials have posited that Russia’s weakening economy has been catalyzed by their sanctions and, in due course, will force a diplomatic solution to the conflict.

Although western involvement has been praised by the deputy head of the Ukrainian presidential administration, Valeriy Chaly, the actual impact of the sanctions are opaque. The World Bank projects that Russia’s GDP will decline by 2.9 percent in 2015, and the European Bank for Reconstruction and Development estimates that Russia’s economy will shrink by approximately 5 percent this year. Despite these economic consequences, critics speculate that sanctions have had minimal effect in compelling Moscow to re-examine its policies towards Ukraine, with some economists asserting that an economic slowdown would have taken place in Russia regardless of sanctions. Another possible result is that the upsurge of Western sanctions simply exonerates the Kremlin from taking responsibility for the unavoidable economic downturn while Putin’s popularity appears to flourish at home.

One obvious outcome of this situation, however, is the strengthening Sino-Russian relationship. Dmitri Trenin—Director of the Carnegie Moscow Center think tank—argues that Chinese President Xi Jinping and Russian President Vladimir Putin are united by a shared goal for non-Western countries to gain influence in a multipolar world. Strengthened military collaboration also appears to be in the near future of this relationship as shown by the recent joint naval exercises between China and Russia in the Mediterranean in May and in the Pacific in August. China’s economic strategy during the Ukraine crisis is staying pragmatically non-aligned by not overtly condemning Russian hostility in Ukraine while concurrently balance its trade linkages with both Russia and Ukraine which seem—at least in the short term—to be benefitting economic growth for all three countries involved. In November of 2014, Moscow and Beijing signed a preliminary agreement regarding gas supply deal of critical importance to Russia, since oil and gas accounts for half of its revenue and Europe was its biggest export market. The arrangement between Gazprom—the Kremlin-run monopoly—and the China National Petroleum Corporation is monumental since this $400 billion contract is the largest natural gas agreement for Russia since the collapse of the Soviet Union. The officials involved in these discussions have asymmetric power since sanctions are severely curtailing Russia’s natural gas market.

In Ukraine, Chinese capital has been facilitating growth in industries such as information technology, real estate construction, and agriculture. Since the Russia’s annexation of Crimea, Ukraine has increased its agricultural trade with China by 56 percent. China promised to lend Ukraine $15 billion over 15 years for residential construction to aid Ukraine’s crumpling real estate market. Scientists and engineering technologists from the two countries collaborated at a first-ever China-Ukraine forum on science and technology in 2015. Ukraine’s developing relationship with China could help to reduce its long-term economic dependence on Russia—to date Russia remains Ukraine’s largest trade partner.

Economic sanctions and non-lethal aid seems to have little impact on Russia’s motivation to adhere to a diplomatic solution with Ukraine, meanwhile, China seems to be poised to profit handsomely by both opposing sides in the conflict. Not enough time has passed to gauge the benefits of the different deals, but it is clear the Chinese government is attempting to transform violent conflict to economic growth while the EU and the US have focused on diplomatic channels and economic sanctions to force a peace treaty to take root. As this conflict continues to cause the relationship between Russia, the US, and the EU to deteriorate, China may be left as the bridge between these world powers.

 


Marlena Luhr is a member of Young Professionals in Foreign policy and specializes in the practical applications of policy regarding the U.S.-Chinese relationship and its broader global interactions.

Image Courtesy of the U.S. Department of State / Flickr.

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