Wednesday, February 26, 2014

Post-Euromaidan Risks

So, in the news lately...

The special forces' assault on Euromaidan was unsuccessful, President Yanukovych has been ousted and is currently nowhere to be found, the death toll is stable at 100+, journalists and economists are studying and publishing sheaths of inside accounting records from the presidential residence, dozens of influential politicians have left the Party of Regions, Tymoshenko has been freed from political imprisonment, those guilty for the military escalation are slowly being searched for and brought to justice. A new government is quickly being formed and gaining back control over the country.

All good news, right? Indeed, but there are very substantial risks ahead.

Domestic political risks

There is substantial risk of disappointment in the new political leaders, similar to what happened following the 2004 Orange Revolution. What will trigger this are things like: an overt focus on dividing portfolios and power amongst themselves without involving new leaders from Euromaidan, an absence of new faces, a focus on secondary issues such as the status of the Russian language versus Ukrainian, a lack of attention to systemic reforms in the judiciary and penitentiary system and in law enforcement, economic decline, etc.

These are very substantial risks, and it would seem that some are playing out right now.

Sovereign debt risks

Ukraine's currency has been rapidly losing value in recent weeks, and the country is close to bankruptcy. Its credit rating was lowered to CCC recently. The country's finances are in sorry shape, and the new government may have to make unpopular decisions in order to keep it afloat. European and Russian creditors are willing to help...

Risk of loss of territory

To try to understand Ukraine's delicate geopolitical situation and the vested interests of Russia and the West, I have found commentary by Polish-American analyst Zbigniew Brzezinski and former Putin aide Andrey Illarionov to be extremely helpful.

Basically, influential policymakers in the Kremlin, with Putin at the center, do not view Ukraine as a full-fledged country and are biding their time to get it — or a large chunk of it — back. Now is a time when Ukraine's strength and prosperity relative to Russia is at a historic low. The country is in the midst of political chaos. Russia's anti-Euromaidan propoganda machine is operating at full throttle and influencing the views of Russians and Ukrainians in Eastern and Southern Ukraine who follow Russian news sources.

Russian news channels have been calling Euromaidan protesters "extremists" and "terrorists" and have been making it seem like they hate Russians and present a physical risk to Russians in Ukraine. It would appear Moscow is preparing to use the pretext of danger to Russian citizens in Ukraine to use various "means" to "offer protection" to their citizens in such a "precarious state of affairs." As noted by former Georgian president Mikheil Saakashvili in recent publications, this tactic was put to use in Georgia (Abkhazia and South Ossetia).

The greatest risk is that Crimea will be destabilized and pressured to secede from Ukraine. There is a somewhat smaller risk that eastern regions such as Donetsk, Lugansk, possibly Kharkiv, and possibly Odessa will follow.

To understand how Ukraine and the West can help avoid this, read Brzezinski's recent article in The Financial Times. I'm no expert on geopolitics, but what he's saying makes more sense than anything I've read from other western analysts.

Cause for optimism

This time around, compared to 2004, Ukrainians seem to be quite a bit wiser and better educated. Social networks (i.e. Facebook, vkontakte, Twitter) have been key in distributing information during and following the Euromaidan demonstrations and confrontation. People are better aware of Russia's motives and the many risks involved. They are more prone to action, petitions, demonstrating, and are more courageous than ever before.

I am very proud of my Ukrainian friends and the Ukrainian people in general and thrilled to see them come to feel more united and empowered. But not everyone is on the bandwagon, though its numbers are growing. Ukraine will need to pursue careful reforms at home without disenchanting large parts of the populace, and wise policies abroad given its position between Europe and Russia.

1 comment:

  1. Thanks Rick for posting your understanding of the situation. It is a complex one for sure and the work for a stable country is far from over.