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Anders Aslund: Ukraine Should Not Subsidize Occupied Territories

Oct 22, 2014 | Newpathway, News, Featured

The situation around the war in the Donbas and the Ukraine-Russia conflict in general is murky as many things are being decided behind closed doors. As an example, according to the Ukrainian paper Mirror Weekly, the U.S. State Secretary John Kerry said last week that there is an agreement, which complements the agreement signed in Minsk in September, reached by presidents Poroshenko and Putin which sets “certain terms for certain things”.

The New Pathway is continuing to uncover the sense of the current developments in Ukraine for our readers. We have recently interviewed Anders Aslund, a Senior Fellow at the Peterson Institute for International Economics, and a known leader of opinion about Ukraine, Russia and Eastern Europe. From this interview, we make a conclusion that the status quo with a reliable ceasefire is the best option for Ukraine at the moment, however, only if Ukraine does not incur any costs associated with the occupied territories. Although President Poroshenko has made it clear that Ukraine will not finance occupied areas, there are indications that this may not be the case. Mr. Aslund believes that Ukraine's subsidizing the DNR and LNR would be the ideal scenario for Russia.

NP: What is the most likely scenario this fall: is Russia going to attack Ukraine to take a land road to Crimea or is this slow conflict going to continue?
AA: There is every intention from Putin to keep all options open and maintain uncertainty. I think he has decided but he keeps all options open. I've talked to a senior Kyiv official recently and he said that he didn't see why Putin would like to take the land road to Crimea – he doesn't care about his own people, why would he care about the people in Crimea? The military can be supplied by air and ship, it's really for the sake of the population that land transport is important. Crimea is going to be an economically dead zone in any case, just like Abhasia, South Ossetia and Transnistria.
So, to go all the way through Mariupol to Crimea – it's an open steppe, you don't want to do it in the winter. Few things are as vulnerable as tens of thousands of troops in a thin line crossing the steppe. So, it's not a good idea to go to Crimea, there are many other things that are more important.

“…Putin…doesn't care about his own people, why would he care about the people in Crimea?”

My view is that Putin's interest is to make sure that Ukraine fails. And how does it best fail? Through uncertainty. We can see particularly from the second Minsk memorandum of September 19, that Russia seems to want to put all the costs on Ukraine and Ukraine does not get any state revenues or any value added from the occupied part of Donbas. I think this is Putin's purpose now.
Putin would have an interest in storing up the port of Mariupol but I think he is balanced by three factors: Western sanctions against Russia, Ukrainian military resistance and Russian domestic public opinion (such an invasion would cost a lot of Russian lives and would not be very popular).
NP: The Western sanctions are having an effect on the Russian economy, but when will Putin give in? The talks in Milan on Friday showed that he is not really giving in.
AA: You can compare this situation to the war in Yugoslavia: Slobodan Milosevic started the war in Slovenia in 1990. The sanctions against Serbia were massive, it was bombed in 1999 and still Milosevic lasted until the year 2000. The political and economic effects are completely different. Economic effect on Russia is already big and will get much greater but it does not mean that Putin will give in politically.
NP: In terms of the three options for Ukraine which have been discussed by many observers, which one is being currently implemented: 1) fight and win the occupied territories militarily, 2) abandon those territories, 3) incorporate and institutionalize those areas, together with their current “rebel leaders”.
AA: The first option is out for military reasons. The West has failed to provide military support for Ukraine, it's incomprehensible to me why the West has failed to deliver arms to Ukraine on a big scale and it's clearly determined by President Obama for reasons that do not make sense to anybody. The second alternative was what I thought was happening because I don't think any elections will happen in these areas because there is no control over any kind of democratic forms.
It's in Ukraine's interest, if it doesn't get anything from these territories, to exclude any cost stemming from those territories. And then it needs elementary security, a steady line between Ukraine and the rebel-held territotires.

“it's incomprehensible … why the West has failed to deliver arms to Ukraine on a big scale…”

NP: But Poroshenko, Putin and Western leaders are discussing the option of Ukraine incorporating those territories, holding elections there. At the same time, the rebel leaders are saying that they do not want to be in Ukraine. This doesn't sound right. How is this possible to achieve?
AA: This is impossible. This would be in Russian interest and would allow it to get resources out of Ukraine.
NP: So, you foresee the current status quo to continue, with the “republics” DNR and LNR existing, no Ukrainian control over the Ukraine/Russia border and slow conflict going on?
AA: I think this is the best option that is on the table right now – that the ceasefire line remains stable and Ukraine does not have any costs from territories that it does not control. Ukraine can't win the fighting and has not interest to intensify the war.
NP: What do you think will happen to Russia, do you foresee any regime change there anytime soon?
AA: Again, a parallel with Slobodan Milosevic who was first elected in 1979 and stayed in power until 2000. Putin has a much stronger position and much more resources than Milosevic had. If your base is wild nationalism, as is the case for both of them, you can persist for quite some time.
NP: What do you think will happen to Crimea. Russian opposition, Navalny and Khodorkovsky, have recently said that Crimea will remain Russian, while Ukrainians are adamant that it's theirs.
AA: Like in the case of the Baltic states during Soviet times, the West will never recognize Russia's annexation of Crimea, nor anybody else. The sanctions will stay on Crimea, it will be an economically dead zone for a long time.
NP: What about Western sanctions – will they be relaxed?
AA: The Western sanctions will absolutely not ease even if this conflict becomes slower and slower. If you have started sanctions and they don't accomplish what you intended, they persist. Sanctions are very inert, when they have been imposed, they stay.

“The … sanctions will absolutely not ease…”

NP: Do you think the West will toughen the sanctions, impose more sanctions?
AA: I think the sanctions are quite tough as they are. They are probably taking 2.5-3% off of Russia's GDP this year, or $50-60 billion. That's a lot of money. Particularly, financial sanctions, making it impossible for Russia to raise international financing. Maybe sanctions in some other spheres may be tightened, but financial sanctions are already quite severe.

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