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A Utilitarian Consideration for the Ukraine Crisis

March 12, 2014

by J. Andrew Zalucky

Crimea from Space

Do we really need to lose our minds over this? Let’s think hypothetically, just for a moment.

Taking Stock of the Situation

The last few days have seen a period of calm in the current crisis in Ukraine, centered around the possible succession and/or annexation of Crimea. The peninsula is due to hold a referendum on Sunday where residents will choose to revert back to the 1992 constitution as part of Ukraine, or to completely integrate itself as part of the Russian Federation. There’s a lot of bluster and rhetoric spinning through the news media lately, so much that it would seem the Crimea is indeed the largest flashpoint in world events since the end of the Cold War. Russian and American politicians feel they need to look tough on this issue, lest they come across as ready to fold on such an important issue.

After all, Russia, the US and the UK are all signatories of the 1994 Budapest Agreement to preserve Ukrainian sovereignty – making it difficult for anyone to back out at this point. For their part, Ukrainians in the interim government have tried to look tough as well, with the Prime Minister claiming they will not give “one centimeter” of Ukrainian territory. To be fair, it will take a ton of convincing to make Ukrainians confident in their central government, so its only in the best interest of the authorities not to give up its territory without some kind of fight. And like I said in my previous article, splitting the country could prove to be a grave mistake (the arrival of Serbian Chetnicks on the scene makes things even more horrifying).

But what if I was wrong? What if giving up the Crimea really is the best option of all?

Giving up the Perfect for the Good

There was a very good piece by Alexander J. Motyl this week in Foreign Affairs called “Is Losing Crimea a Loss?” Crazy as this may sound to some people, the author lays out a very convincing case for Ukraine even giving up Crimea and some of other easternmost regions. Rather than focusing his argument on some bland notion of the international community, he describes how it could work out well for Ukraine…really well actually:

Ukraine would emerge more compact, more homogeneous, and more unified in purpose: Along with its eastern territories would go much of the electorate that routinely votes for the Communist Party and for former President Viktor Yanukovych’s Party of Regions. As a result, anti­-Ukrainian and anti-Western sentiments would decline. The new Ukraine’s government could confidently proceed with a radical political and economic reform program (a more solidary population would be more likely to accept the belt-tightening that reform entails) and pursue rapid integration into European and international structures. Unburdened of some of its most unprofitable rust-belt industrial sectors, Ukraine’s economy would be more open to foreign direct investment and could be poised for takeoff. Without Crimea and its southeastern provinces, Ukraine would be smaller, but it would survive and, in all likelihood, be much stronger.

Everything’s coming up roses! (By the way, is “solidary” a word? Maybe the author just made it up, but I kind of like it!) To those of you scratching your head at such a sunny outlook for Ukraine, check out some of these statistics about eastern Ukraine:

Crimea, Donetsk, Kherson, Luhansk, Mykolaiv, and Zaporizhzhya represented an enormous drain on Kyiv’s resources: 22.82 billion hryvnia (around $2.5 billion, or 90 billion rubles). And that is only for the first six months of the year. Multiplied by two, the deficit amounts to 45.64 billion hryvnia (about $5 billion, or 180 billion rubles).

Yikes!

If you thought that was bad, it gets even crazier when examining parts of eastern Ukraine’s industrial base, as much of it is made up of dying industries, which rely on government subsidies to stay afloat:

Luhansk and Donetsk provinces are home to Ukraine’s loss-making coal industry. Kyiv spends between 12 and 14 billion hryvnia (around $1 billion–$1.5 billion, or 47 billion–55 billion rubles) annually to support these mines.

Readers should not take this article to mean that eastern Ukraine is not important to the country’s economy. As an article in Businessweek shows:

The Donbass region houses much of the country’s heavy industry, including metallurgical plants, coal mines, chemical processing operations, and salt mines that produce heavily for the domestic market, as well as agriculture. According to the Ukrainian government’s investment portal, the Donetsk region contains 12 percent of all the country’s natural resources.

Since Ukraine’s independence in 1991, 10 percent to 15 percent of the country’s gross domestic product has come from industrial production in the east, according to Alexander Kendyuhov, head of the economics department of Donetsk National Technical University.

But the article goes on to describe how corruption and poor economic policies have led these industries into disrepair and near-obsolescence. Good governance with a comprehensive attack on cronyism and oligarchical favoritism could help to bring about a much needed upgrade. Under several administrations however, this has not happened. Whether these needed changes would happen under the Kremlin’s leadership remains to be seen.

Granted, it would be nice if this discussion wasn’t even necessary. But if there cannot be peace with unity, there may be a strong case for peace by separation, or perhaps some middle-option like increased decentralization and federalism among the country’s different regions. Personally I think the latter makes the most sense, but only if the situation was contained within a vacuum, without Russia sitting right next door. As for what Russia has to gain out of southeastern Ukraine, there are two areas where the acquisition doesn’t look so great: public opinion and economics. For now, maybe the authorities in Kyiv should make it easy for ethnic Ukrainians and Tatars to resettle should they feel the need to, and should appeal to other powers in the Black Sea to allow safe harbor for Ukraine’s navy until a new port can be opened.

What it Could Mean for Russia

For all the talk of how happy people in the east would be to come under Moscow’s control, the recent poll numbers cited in Motyl’s article paint a different picture:

Crimea was least opposed, with 59 percent against. In Donetsk, the number was 66.8 percent. In Luhansk, it was 75.9 percent. In Kherson and Mykolaiv, more than 95 percent of respondents were opposed. And a full 83.3 percent of those in Zaporizhzhya said no.

Does Putin really want to claim territory with a population that opposes him in such large numbers? He already has enough headaches in the northern Caucuses, why create even more trouble for yourself? And what if the takeover only leads to an exodus of people leaving for the west, which has already occurred in small instances in the Crimea. Even without that, he may even have a new jihad on his hands.

As for the impact a large annexation would have on Russia’s finances:

In 2014, Russia expects its budget revenues to be around 13.6 trillion rubles (around $375 billion); its expenditures are supposed to total 14 trillion rubles ($380 billion). That amounts to a deficit of 400 billion rubles ($11 billion). Even without extra development funds or the costs of an occupation, annexing Ukraine’s southeast will raise Russia’s deficit by 45 percent.

Fantastic.

Part of me feels like if I was the interim Prime Minister in Kyiv, I would look at these numbers and say to my Russian counterparts:

“You really want to do this? Um…ok. Be my guest!”

Of course I hope it doesn’t come to that. At this point, I don’t think Russia will annex eastern Ukraine beyond the Crimean peninsula. Crimea was a show of force, a way to show the US and EU that Russia will not simply yield when its interests are challenged. The US, EU and Ukraine need to make it look like they tried to do something, only to be pressured by Russian stubbornness. There’s a bit of truth in both of these, even if I am of a western disposition. But I think we should all be open to the fact that, perhaps even the outcomes which looks like the worst, might actually be the best.

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2 Comments leave one →
  1. March 18, 2014 8:06 am

    According to Patrick Buchanan (linked below), who I agree with on this issue, the Crimean numbers Russia is looking at are of ethnic Russians and of potential NATO missiles and US airbases on their front doorstep. It is stupid and dangerous for America to risk war with Russia over something they consider existential and which we have no real interest beyond pride and maintaining appearances as “world power.”

    http://www.wnd.com/2014/03/is-putin-the-irrational-one/

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  1. 2014: A Year of Conflict and Convulsions | FTSA

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