понеделник, 16 декември 2013 г.

Ukraine: The hard choices to make


French President Hollande announced that he is not going to the Olympic Games in Sochi. So did Laurent Fabius. It is just a matter of time before other Western and CEE leaders follow suit. It is too early to tell whether that will end up in a total boycott of the Sochi Games -meant to be the pinnacle of President Putin's rule. We are not immune to repeating Cold war boycotts over political differences, although for the time being these seem an extreme option. Yet the resolve is there and the message to the Russian president is clear - you are crossing a red line - Ukraine is not Georgia. Vladimir Putin is facing the greatest crisis during his tenure, which in many aspects came as no surprise due to the incompatibility of his model of governance with the mainstream value set in the EU and US politics. Russia, while trying to copy paste China's resurgence to global prominence – missed the main point - Moscow is dependent on Europe for almost 80% of its energy exports and is therefore limited in its foreign policy options and the use of internal demand as economic growth driver.

The cards and bets are on the table. The unfolding events in Kiev have virtually exhausted President Yanukovich's chances to remain in power until the elections in 2015. His only option is to align with Russia's interests and to borrow from the school book of Lukasenka, fully aware that Ukraine is not Belarus. The Ukrainian President's maneuvering range has disappeared - there is not breathing space between the hard line President Putin has adopted and what the EU is prepared to offer.

History has taken its natural course. Tomorrow President Yanukovich and PM Azarov are planning to sign the road map that will eventually result in Ukraine joining the Russia led Custom's Union. The news will be carefully PR repacked with assertions that otherwise Ukraine would have defaulted and that the move does not preclude an association agreement with the EU. Yanukovich's main concern is that he is losing the support of the oligarchs and Ukrainian business in general. The virtues of the vast and rewarding Russian market and generous capital flows are lost in the trivia of the daily newswire abundant in arbitrary administrative and political barriers and frustrating track record of industrial cooperation with Russia in recent decades. Suffice to observe is the story of the joint ventures in the aerospace industry (the cargo and passenger versions of the new AN plane), the traditional Ukrainian exports of large size pipes to Russia (Gazprom has shifted orders to Russian producers and the Russian government recently virtually banned imports) and finally the "brotherly" bear hug denying Kiev critical budget revenues from gas transit bypassing Ukraine with hugely expensive South Stream pipeline. There is clearly no love lost in Russia-Ukrainian business relations these days.

To the same degree that Moscow does not believe in tears (after the title of the famous movie), Kiev has ceased to trust political vows coming from Moscow. The Ukrainian business is increasingly shifting its focus to the EU market despite greater competition and lower margins as it is far more predictable. The modernization of Ukraine's economy, its technological overhaul and restructuring in line with best global governance practices, its access to global capital and financial markets are mostly contingent upon integration with EU, US and increasingly trade on Asian markets. Not on Russia, that is growing increasingly introvert and imperial.

Brussels cancelled or postpones (depending on the diplomatic phraseology) talks on the association agreement with Ukraine, thus denying its leadership the right to pretend to be balancing different interests and playing on two fronts in order to strike the best deal for the country.

Mr. Putin’s resounding silence in the last days has only one explanation - he has struck a deal and feels comfortable, holding tramp cards and being reassured that he has President Yanukovich under control. Most analysts that have been following his rise to power and evolution at the top of Russia’s politics know that keeping silence and going mute for him for a long period is atypical and not his first choice. A more likely explanation is that he has decided that playing in the open is not in his interests and has therefore shifted his focus on actions below the opponents' radars. His appointment of the Soviet type
propagandist Dimitry Kiselev at the helm of Russian foreign propaganda machine should leave no room for illusion - the Kremlin is ready to fight back and win on the battle ground the ultimate trophy - the whole or parts of Ukraine. The integrity of Ukraine is not a must. The Russian President is ready to mobilize and dig deep into his foreign policy asset base in order to preempt EU and US moves and leave them with the fait accompli of Ukraine's joining the Customs union.

Putin's former adviser - Andrei Ilarionov -one of the first liberals to be forced out of the Kremlin power house - believes that Moscow will revert to the Abkhaz-South Ossetian war plan as a model to resolve the Ukrainian crisis. As it stands at the moment an escalation of tension and a hot phase seem inevitable. Even if the sides opt for a softer or negotiated settlement - along the Slovenian scenario for example - the middle ground for a compromise has virtually gone, whilst the likelihood of future violence, even some military action, posturing or at least some sabre rattling should not be ruled out.

I am not sure whether the European public fully grasps the fallout from this strategic standoff. The fight for Ukraine is critically important for Russia. What happens in Kiev is likely to be repeated in Moscow. Putin was shocked by the Orange Revolution in 2004 and it took him almost six years to build up the orange anti-virus potential in his power vertical. And the people are again on the streets.

The consequences of the Ukrainian crisis will be far reaching for the EU as well - a loss in Ukraine might trigger an irreversible degenerative process in the Union exhibiting critical limits in the EC’s ability to design and implement common foreign policies, expand influence to the immediate neighborhood and protect vital interests of its member states against openly hostile adversarial action. It is one thing to tackle the national footprint of the Eurozone crisis or deal with inconsistencies in the course of evolution of the EU integration model and a totally different ball game to admit that Brussels is incapacited or unwilling to stand up for core values.

The countries in Central and Eastern Europe have noted with growing uneasiness this soft spot in the EU underbelly which Moscow is successfully exploiting via privileged partnerships with EU countries and EU global energy corporations while keeping the pressure on other EU members. The story of the Nabucco West pipeline has been a revelation for the CEE countries and Brussels lost the trust of their governments that it is ready, able and willing to lead in difficult times, define common grounds and guide shared action when faced with divergent interests within the EU and divisive competing influence from Russia. Shortly after the decision of the Shah Deniz consortium to scrap the Nabucco West pipeline, dashing the hopes of Central and Eastern Europeans consumers for access to rarest and credible source for critically needed alternative gas supplies - Moscow emissaries were seen in CEE capitals passing the word – you will get a better deal if you talk to us instead of relying on the EC as Brussels can’t offer neither more nor cheaper gas.

The stakes involved in Ukraine are far greater than simply energy prices and association agreements. The battleground will not be confined to Kiev or Ukraine, but inevitably will expand to include other CEE countries as Moscow is famous for linkages and when feeling insecure or losing is likely to resort to aggressive action – notably if not given a face saving exit option. In the context of the neo-ottoman "axis shift" of Erdogan's Turkey and the odd match in government tactics when containing public unrests in Moscow, Istanbul, Sofua and Kiev prospects look grim for Southeast European countries caught in the cross fire.

For the time being there is no short term solution to the Ukrainian crisis unless Putin tones down his opposition to Kiev's EU ambitions. Times have changed in the EU and Vladimir Putin has not been able to find replacements for personal friends like Berlusconi. Merkel is no Schroeder, Hollande is no Sarkozy to fly in earnest and negotiate another Georgian cease fire, to say nothing about David Cameron - although in all fairness Putin pulled some strings using British Petroleum’s over dependence on its Russian business. Even President Obama, who is known for lack of focus on Central and Eastern Europe, has no option but to get involved in Ukraine - the bi-partisan heavyweight US senators’ recent presence in Kiev left no room for doubt.

The lost ground in winning public support and the degree of desperation at the top of the Ukrainian ruling elite was evidenced in the blatant lies by Prime Minister Azarov in his address to the pro-government rally - that allowing same sex marriage followed automatically from the Association agreement with the EU.

Ukraine steadily and irreversibly is sliding towards a major civil conflict – some might go further - that could lead to splitting the country and a major conflict between Russia and the West. For Putin it is a matter of survival – he can't afford to be seen as a loser - not in 2014 Russia - as this might trigger a regime roll back and change in Russia. Once the Russian elite smells trouble and the King is weak and vulnerable, the events could unfold in no time. There will be little mercy as his grip on power is based on the perception of the omnipotence of the strong man at the top.

The future of Central and Eastern Europe is also at stake in the Ukrainian crisis as should EU lose there is little to stop Russia from regaining lost Soviet territories in the region.

The events in Ukraine will echo in ex-Soviet allies countries like Bulgaria moreover that Moscow is unlikely to confine the conflict to Ukraine alone. Kremlin will call to arms all troops and disposable resources, including media and special influence groups - traditional Russophiles, old and new euro skeptics, nationalists, leftists and environmentalists – of the type scaring people with anti-fracking horror stories while ignoring developments of shale resources in Russia. Next on line is revisiting old Soviet tactics - funding abroad special purpose political projects  – such as new parties and NGOs projects – building the civic society base – that has proved helpful in staging pro-government and “counter” protests.

Very few realize the size of the financial and business pool, which Kremlin could call upon in the moment of truth. Against this scale the reported “Islander” missile deployment in the Kaliningrad region should qualify for an innocent PR excersize and posturing.

The Bulgarian PM Oresharski and the coalition behind him seem desperate to win some breathing space and sympathy in the US by short cutting the procedure on the new reactor in the Kozldouy NPP. It has also toned down its enthusiasm for Russian energy projects, after the set of harsh criticism received from the EU energy commissioner and DG ENER. There are not many Bulgarians or international observers that would have trouble identifying the political genetic code of the present government in Sofia. The bad news is that those criticizing the current BSP leader within his party are even further to the left and to the east. The lack of proper dialogue and communication between EU leaning Bulgarian politicians marks a critical fault-line in the national political landscape, which undermines Bulgaria's response to Euro skeptic and Europhobic advances.


The Government of Bulgaria does not stand much of chance to ignore the events and lay down while the tempest rages above its head. It has few good moves on the chess board and most of them would require a dramatic change of mind, a will to ‘bury the hatchet’ with the opposition and to talk consensus. Regrettably this is not likely to happen any time soon with the blind resolve to fight the opponent to the mutual attrition. Recent growl over EC critique over Bulgaria’s ‘sovereign’ decision to engage with Russia on South Stream is an indication of a deeper resentment for Brussels attempt to  take control of energy dialogue with Russia and pre-empt future Grand slams. Traditionally close to Russia political circles in the EU (Bulgaria is no exception), will use the elections for EU parliament next May to try and change course in Brussels and Strasbourg towards a more acquiescent line with Moscow. 

We are standing on the edge of tectonic shifts in Europe’s newest history. From the baseline level of Ukraine a parallel in importance could be drawn to the expansion of NATO and the EU. However when accounting for the wider context and the stakes for Russia and EU we should consider the Ukrainian crisis as the most significant event since the fall of the Berlin Wall. 

There are hard and imminent choices to be made. Most of them are of historic proportions. The chances for Bulgaria to end up once again on the wrong side of history are far from slim.

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