Ahead of US-EU-Russia talks on the future of Ukraine on Thursday, pro-Russian protesters – possibly assisted by Russian special forces – have escalated their disruptions in Eastern Ukraine beyond Crimea.
While media coverage is understandably alarmist, these disruptions are not necessarily worrying signs. Ahead of negotiations there is always a rush by the negotiating parties to establish facts on the ground to support their positions. This is why Israel inevitably pushes forward with building settlements just ahead of negotiations with Palestine; is why both sides in Sudan’s conflict ramp up hostilities each time peace talks are scheduled. It does not mean the talks are falling apart before they have started. It’s just good strategy.
The fact on the ground that Russian President Vladimir Putin hopes to establish prior to talks is the destabilization of more of Eastern Ukraine. This way he will have something to give up, in exchange for what he wants: a federal Ukraine. This is what Russia has been proposing as an acceptable compromise for Ukraine even before it invaded and annexed Crimea.
Is also very worrying, as a federal solution is a worst-case scenario for Ukraine. Some may feel that it is a small price to pay in exchange for peace. Russia, the EU, and the US can play their games of influence in a federal Ukraine, jockeying for the sympathies of individual provinces, rather than playing the higher-stakes games of sanctions and energy threats, which have the potential to disrupt the fragile recoveries now emerging in the EU and underway in the US.
The problem with the federal solution is that it undermines the agreement Ukraine has signed with the EU. EU trade agreements tend to transform the countries that sign them. This is because they involve a deep and comprehensive upgrading of the signing country’s laws and regulations.
Take the case of Poland, which recently joined the EU. The accession process required changes to 18,000 technical and product standards; it required implementation of EU norms across areas from free movement of capital to collection of statistics to taxation to transport policy to consumer and health protection.
The process is intrusive and detailed. In 1999, for instance, Poland was judged to be failing in areas including competition policy (where state assistance to private business was endemic); company law (where intellectual property rights were weak); and environmental policy (where upgrading of the strength of regulation was slow). By 2000, major progress had been made in each of these areas, but the EU had new criticisms, including over industrial policy, media regulation and education policy.
Such comprehensive overhauling of law and regulation would be impossible under the federal structure envisioned by Putin. Making such rapid changes to law and regulation is difficult even for highly centralized countries; if an agreement among Ukraine’s regions was necessary for each major step, it would doom the process from the start.
And without such a governance overhaul, Ukraine’s next two decades are likely to resemble its last two decades, of anaemic economic growth punctuated by frequent crises. By contrast, if Ukraine is allowed to follow Poland’s path, its future is much brighter. As hard as it is to imagine now, only two decades ago, the two countries were in very similar economic positions (see graph below).
At upcoming talks, Putin will present a federal Ukraine as an acceptable compromise. He does not get what he wants, which was Ukraine signing a customs agreement with Russia and thus remaining firmly in Russia’s sphere of influence. Europe does not get what it wants, which is Crimea to be returned to Ukraine.
But this is a very bad “compromise” from the point of view of Ukraine’s prospects for the future. There is no compromise outcome to these talks that I can see that will give all sides what they want. Expect all parties to continue to apply pressure by all means available.