How Putin’s Ukrainian Dream Turned Into a Nightmare

Kiev and the West are winning. Now is not the time to let Moscow off the hook.

atever the larger goal of Russian President Vladimir Putin’s armed intervention in Syria, it has succeeded in distracting the world’s attention from his ongoing aggression in eastern Ukraine. In his half-hour speech at the United Nations earlier this month timed to reach a prime-time Russian audience, he spent only a minute on the Ukrainian conflict, focusing instead on Russia’s constructive role in the Middle East.

Putin’s rhetorical redirection is not surprising. The Kremlin’s war in Ukraine is turning into a quagmire.The Kremlin’s war in Ukraine is turning into a quagmire. Militarily, it is a stalemate — which, given the vast imbalance between Russian and Ukrainian capabilities, amounts to a Ukrainian victory. Ideologically, the war is a bust, as the Kremlin’s hopes of converting southeastern Ukraine into “New Russia” have been effectively, and perhaps permanently, shattered. Economically, the war and occupation of both Crimea and the Donbas have imposed ruinous costs on Russia, whose economy has already been battered by declining global commodity prices and Western sanctions. Socially, both regions are on the verge of a humanitarian catastrophe for which Russia would be blamed. In sum, Putin’s plans of weakening Ukraine have backfired. Ukraine is slowly getting stronger, while Russia is getting weaker.

Time is, therefore, on the side of Ukraine and the West. They should avoid offering Putin any relief as long as Russian and proxy troops continue to occupy Ukrainian territory: on the contrary, they can and should press for additional concessions. Given Ukraine’s strengthened military and the threat of further sanctions, Putin will be unable to escalate the confrontation. Ironically, Putin’s self-defeating aggression in eastern Ukraine is now limiting his scope of action more effectively than anything the West could have devised.

Much of Putin’s authority at home rests on his ability to deliver steadily improving living standards as the upside of his authoritarian rule. But Russians of all income classes are tightening their belts. The sanctions have already cost the Russian economy 9 percent of GDP, according to the IMF. Since Russia’s invasion of Crimea last February, the ruble has lost 50 percent of its value. In dollar-denominated terms, Russia’s GDP has fallen from $2.1 billion in 2013 to an anticipated $1.2 billion by the end of 2015. In dollar terms, the country’s economy has dropped from ninth in the world to thirteenth. Many Russian professionals are leaving the country, frustrated by its authoritarianism, corruption, and lack of interest in modernization.

Meanwhile, social and economic problems in the Russia-occupied Donbas enclave are mounting. Many of the territory’s economic links with Ukraine have been disrupted. Its GDP has contracted by over 80 percent. Much of its infrastructure and its banking and administrative systems are in ruins. Large swathes of the territory suffer from shortages of gas, water, and electricity shortages. Though it’s hard to know precise figures, unemployment is huge. A large proportion of the region’s skilled workers and professionals are internally displaced or in exile, mostly in Ukraine. Unsurprisingly, inflation is high and poverty is growing.

In eastern Ukraine, Putin now has responsibility for a large population of about three million under de facto Russian occupation who are increasingly looking to Moscow to meet basic social needs. He must also cope with a rising criminal class in the self-styled Donetsk and Luhansk Peoples’ Republics. A parasitical conglomeration of local political bosses, powerful oligarchs, and criminal elements with roots in Soviet times have traditionally misruled this part of the Donbas. These elements are still around. At the same time, the collapsing economy has made contraband and smuggling, from Russia and Ukraine, one of the most lucrative and stable sources of income, thereby giving rise to new criminal entrepreneurs centered in the power structures of the republics. This development threatens to spread crime and instability into neighboring Russian regions. Statistics from Russia’s Ministry of Justice show a spike in the crime rate in parts of the country bordering on the occupied Donbas.

Adding to this litany of problems is the risk of further economic costs resulting from Russia’s aggression. In September, protesters belonging to Crimea’s beleaguered Tatar minority imposed a blockade on all trucks carrying goods to and from the occupied peninsula. On September 22, Ukraine announced it would launch aggressive international litigation, seeking $50 billion in compensation for the Russian takeover of property and assets in Crimea, and the damage inflicted by Russian weapons and fighters. As successful litigation by investors in the bankrupt oil company Yukos has shown, international courts have the ability to impose economic costs on Russia.

While Western pressure to facilitate a durable peaceful solution should remain a top priority for the European Union and the United States, forcing Ukraine into deep concessions to secure peace at any cost is a mistake. While Putin has dug himself and Russia into a hole, Ukraine is making steady, if unspectacular, progress toward reforming its economy, society, and political system, while retaining its democratic institutions, a free press, and a vigorous civil society. The banking sector is being fixed, energy subsidies have been reduced, and GDP growth is expected to be positive in 2016 — an enormous achievement after a contraction of over 20 percent in 2014-2015. Higher education and the police are being reformed. Government decentralization is being sharply debated and may soon be introduced. Corruption and the courts remain huge problems, but here, too, some inroads are likely to be made once a new National Anti-Corruption Bureau and Prosecutor get to work in late 2015. If the Prosecutor is genuinely independent, progress may be substantial.

The most serious counter-argument against maintaining the sanctions regime and continuing to insist on Russian concessions is that Putin would respond to a tough Western stance by escalating the war in Ukraine, creating additional global mayhem.

But all evidence points in the opposite direction. A ground offensive would be hard-pressed to succeed in the face of an increasingly strong Ukrainian fighting force. Today, 40,000 well-supplied forces, led by officers proven in combat, defend Ukraine’s front line with the Donbas enclave. Ukraine has also arrayed 350 tanks and hundreds of pieces of heavy artillery in the region. It has developed its own drone industry for better intelligence and surveillance. In short, the country is ready to withstand an offensive from the East, and any territorial gains would result in thousands of casualties among the Russians and their proxies. There are also reports of declining morale among the proxy forces as it becomes increasingly clear that they are stuck in a long-term frozen conflict. The time for Putin to have invaded Ukraine was in the spring of 2014, when Ukraine’s government and armed forces were in disarray. Now, short of a major invasion, Russia is stuck.

An all-out Russian invasion, entailing bombardment of Ukrainian cities and forces,would, however, trigger major new Western sanctions as well as embroil Russia in a second war. Hybrid war is one thing; the open use of the Russian air power and massive deployment of Russian forces is another. Russia could expect not only international condemnation, but also economic isolation, including its likely removal from the international SWIFT banking system.

This last measure, which would devastate the Russian economy, has been the subject of Western policy discussions and is thus perfectly possible. And Putin could expect a backlash at home. While Russian public opinion supports the separatist cause in the Donbas, it opposes by a stable majority direct Russian military intervention in Ukraine. Unsurprisingly, Putin’s propaganda machine has assiduously hidden the fact of a Russian military presence in Ukraine, and of substantial Russian troop losses, from citizens. Putin’s legitimacy among and support by the Russian policy elite would also suffer. Hard-line nationalists already regard his abandonment of the New Russia project as a betrayal of Russian interests.

In sum, Putin’s adventure in eastern Ukraine is now dragging him down. The temporary upside for his popularity is outweighed by the economic burdens of the occupation and the costs of further expansion. Unsurprisingly perhaps, Putin may be losing interest in the Ukraine project. A person party to the September 2 phone conversation between French President Francois Hollande, German Chancellor Angela Merkel, Ukrainian President Petro Poroshenko, and Putin said that the Russian president appeared unengaged and was not in command of the nuanced details of the discussion. Instead, he was more interested in complaining that Ukraine was not buying Russian gas at a cheaper price than it gets from European and other international sources.

For the West, Putin’s quagmire in eastern Ukraine and his dangerous recent intervention in Syria are excellent news. Russia’s foreign policy rests on an eroding economic and political foundation, and the West need only sustain Russia’s Donbas mess for the Kremlin to become more pliant and amenable to compromise. It is as if Putin has himself contained Russia. The West need do little more than maintain the status quo.

The West should pursue two aims. First, it should keep Ukraine sovereign and stable and promote its reform process — which is exactly what the West has been and is doing anyway. Second, the West should maintain strong sanctions on Russia until all its forces and heavy weapons are withdrawn from occupied Ukrainian territory.

Just as importantly, the United States and Europe should clearly and unequivocally label Russia the occupying power in the Donbas and press Russia to provide adequate socioeconomic assistance to the three million Ukrainian citizens under its control. At the same time, the leaders in Kiev must make clear to its citizens in the Donbas that they will be ready to help them, but if and only if the Russian occupation ends. Until that time, Ukraine and the West must do all they can to press Russia to compensate Donbas residents for the damage it has inflicted upon them.

Western policy also should refrain from pressuring Ukraine to absorb the economic burden for rebuilding the Donbas, even if Russia withdraws all its forces, weapons, and bases. The costs must be shared between Russia, which caused most of the destruction, Ukraine, the victim of Russia’s aggression, and the international community. Russia’s cost sharing can be pitched as a face-saving humanitarian gesture by the Kremlin to rebuild the Donbas and save its population from disaster.

For the first time since Putin invaded Crimea, the West and Ukraine have the upper hand. They should play it and force Putin to agree to a genuine peace in Ukraine. He could do it. He started the war in 2014. He forced the separatists to accept a ceasefire on September 1, 2015. If confronted with a tough Western stance, he just might draw the right conclusion and actually end the war with Ukraine.

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