Friday, March 24, 2017

Ukraine's Blockade Crisis

By Franklin Holcomb and Charles Frattini III

Rising instability in Ukraine has created an opportunity for Russia to further press its political-military campaign to weaken Kyiv and exert greater control over Ukraine. Ukrainian activists instituted a potentially crippling blockade against territory in Eastern Ukraine occupied by Russian proxies. The blockade has exacerbated tensions between the Ukrainian government and parts of Ukrainian civil society while increasing political and social tensions. Russia has further destabilized the situation by providing additional political and economic support to its separatist proxy forces, which have seized Ukrainian businesses and continue to conduct military operations. Russian President Vladimir Putin will continue to exploit vulnerabilities in Ukraine while American and Western policy remains in a transitional state. Efforts to strengthen Kyiv and enable it to defend Ukraine’s sovereignty against Russian aggression will be critical to U.S. interests in Europe.

An activist-led blockade of Russian proxy-controlled territory in Eastern Ukraine has increased political and social tensions in Ukraine. The activists, many of whom are Ukrainian veterans, intend to halt the flow of goods between separatist and Ukrainian territory. Blockade leaders condemned Ukraine for profiting from trade with separatists and demanded that Kyiv cease trade with the Russian proxies and release Ukrainian prisoners held by separatists. MP Semenchenko claimed that the blockade would “bring the entire war to an end” by putting economic pressure on the separatists. The blockade threatens a primary source of separatist income but it comes at a cost to Ukraine. The blockade prevents the transfer of anthracite coal, a shortage of which prompted Ukraine to declare a state of emergency in its energy sector on February 15, 2017, and continues to present economic risks. The blockade also provided an excuse for Russian-backed separatist forces to seize Ukrainian-owned and operated enterprises across their territory on March 01 as levels of fighting in the eastern Ukraine steadily increased. Ukrainian efforts to negotiate with the activists failed to make significant progress. Attempts to disperse the activist-led blockade on March 13 prompted protests in support of the activists nationwide. The Ukrainian government took no significant steps to disperse the activists, due to issue’s sensitivity, public support for the activists, and limited political capital to confront the veteran-led blockade. Ukrainian President Petro Poroshenko announced a suspension of cargo traffic with occupied-Donbas on March 15th, in an attempt to de-escalate rising tensions and in response to separatist seizures of assets. Poroshenko emphasized that the blockade will continue until the Russian-backed separatists return control of seized assets and comply with the Minsk agreements, an agreement signed by both sides to end the conflict. The Ukrainian government continued to condemn the blockade despite its policy shift. Ukrainian Prime Minister Volodymyr Hroisman condemned the blockade, stating that it was “in the interests of Russia” because it weakens the Ukrainian economy. Poroshenko accused the activists of finding and exploiting a “raw public nerve” and condemned the blockade as a “special operation aimed at pushing the occupied areas of Ukrainian Donbas towards the Russian Federation” on March 20.

Russia took steps to increase its economic and political support of its proxy forces in order to increase pressure on Kyiv as it struggles to deal effectively with the blockade crisis, and test Western reaction. The Kremlin maintains its objective of forcing Ukraine to re-integrate the separatist republics on Moscow’s terms in order to have a permanent lever of influence within Ukraine. The blockade threatens a primary source of separatist income and could lead to widespread unemployment and social crisis in separatist-held territory. Russia needs to intervene through financial support to prevent the economic collapse of its proxies, or end the blockade. Russia indicated that it would purchase goods from Donbas in order to maintain economic stability on March 06, although reports emerged that mines in Donbas were not operating on March 09. The Russian government also increased its political support for its proxies. Russia officially recognized legal documentation issued by separatist republics on February 18.  This decision prompted Ukrainian nationalist groups to barricade Russian state-owned banks across Ukraine, leading to an escalation of tensions and the 22 March announcement by Russian banks that they intend to immediately cease operations in Ukraine. The Russian lower house of parliament proposed giving preferences in employment and in pursuing Russian citizenship to citizens of the Donetsk and Luhansk Peoples’ Republics on March 20[i]. Russia and its proxies may use the blockade to justify further escalation of hostilities in order to force Ukraine to end its economic pressure and pursue legitimization of separatist forces on Moscow’s terms. The Kremlin will also seek to exploit any political crisis in Ukraine to destabilize the pro-Western coalition, undermine Ukraine’s reform efforts, and halt Ukraine’s integration with the West.

Ukraine took concrete steps to continue its fight against corruption and further integrate itself with the West despite increasing instability. The Ukrainian government suspended the Director of its State Fiscal Service due to a corruption investigation on March 03. This action may be a catalyst for a much-needed anti-corruption campaign. The International Monetary Fund (IMF) preliminarily approved Ukraine for a $1 billion loan on March 05. This loan strengthens the Ukrainian government’s ability to fulfill financial obligations that are key to its political stability. Ukraine and Canada extended their bilateral military cooperation through 2019, signaling Ukraine’s continued commitment to meeting Western military standards. The U.S. and its allies must continue to support Kyiv’s efforts to reform and counter corruption.