European taxpayers pick up bill for Ukraine crisis

European taxpayers pick up bill for Ukraine crisis

by Stefan Hedlund European governments agree that nations have a […]

by Stefan Hedlund

European governments agree that nations have a right to choose their alliances – but had never considered what to do if Russia was determined to deny that right. As they begin to realise the magnitude of the damage to Ukraine, and that their taxpayers will have to pay for it, critical voices are being raised. In Germany, which will have to find a new vision, politicians and officials have begun publicly acknowledging that it was a mistake to shut the Kremlin out of talks with Kiev.

European taxpayers pick up bill for Ukraine crisis

The European Union entered 2015 with a host of troubles, ranging from renewed crisis in Greece, to the rise of right-wing political parties, and to the threat that Britain may simply decide to leave the show.

All are serious enough in their own right. But pride of place must go to the fact that, contrary to much wishful thinking, the crisis in Ukraine has not simply gone away.
European governments face the threat of a pending collapse of the Ukrainian economy. It may take the form of a sovereign default or a restructuring of foreign debt. In either case, European taxpayers will be called upon to contribute tens of billions of euros, over several years.

The parallel collapse in relations with Russia ensures that the Kremlin will do what it can to exacerbate, rather than alleviate, the trouble.

Military aid

By far the most painful realisation is that 2014 was the year when the ambitions of the European Union to achieve further eastward integration crashed and burned. That project has now been transformed into a de facto military stand-off, where Nato will be pushed to the forefront at the expense of the EU.

Rifts within the West are bound to open up both over the need to allocate huge sums to rescue Ukraine, and over how far to go in providing military assistance to the nation. Political leadership to manage these rifts is sadly lacking – on both sides of the Atlantic.

The stage for the current crisis was set in 2009, when the EU launched its Eastern Partnership (EaP). It was designed to block Russian aspirations to retain a decisive influence over countries in its ‘near abroad’ and aimed to bring Armenia, Georgia, Moldova and Ukraine into closer cooperation with the EU, without offering full membership.

Nagging question

That policy has now ended in utter failure. Armenia has succumbed to Russian pressure and agreed to join its rival integration project, the Eurasian Economic Union (EEU). Georgia has been dismembered, as Moscow has extended diplomatic recognition and military protection to the breakaway provinces of Abkhazia and South Ossetia.

Moldova has a frozen conflict in the Russian-dominated Transnistrian region which may be next in line to heat up. And Ukraine teeters at the edge of the abyss.

The nagging question that European governments must now confront is what led to this calamitous outcome, and whether any lessons will be learnt.

The EaP rested on the noble premise that every nation has a right to decide for itself what alliances it wishes to join. If Ukraine, for example, expressed a wish for closer integration with Europe rather than with Russia, then that was something Moscow would simply have to accept.

Summit meeting

The Kremlin attempted to make it very clear that closer Ukrainian association with Europe was a red line which must not be crossed.

But European governments would not be deterred. While Russia was busy preparing a package of counter-measures ranging from trade sanctions to outright military intervention, Europe remained in denial, insisting that Ukraine had a right to make its own choice, without Russian interference.

The showdown arrived in November 2013, when Brussels called a summit meeting in Vilnius, the capital of Lithuania, where the EaP countries were to sign Deep and Comprehensive Free Trade and Association Agreements.

In preparation for the gathering, the bureaucracy in Brussels had prepared a draft which it viewed as uncomplicated, but Russia was bound to view as hostile. This was where communication broke down and where the stage was set for conflict.

One meaning

The Kremlin voiced legitimate concern over the risk that cheap European goods would flow duty free into Ukraine and from there on further into Russia. It was also deeply concerned about the proposed integration of Ukraine into the EU’s foreign and security policy.

Although Nato was not explicitly mentioned, the following clause could only have one interpretation: ‘The Parties shall intensify their dialogue and cooperation and promote gradual convergence in the area of foreign and security policy, including the Common Security and Defence Policy’.

But European governments would not listen and continued parroting their mantra that Russia had no right to interfere in decisions by other sovereign states.

While there can be no question that the Kremlin’s subsequent response has been totally unacceptable, representing violations of a number of international conventions, it would be disingenuous to disregard Western complicity in causing a breakdown of communication and an effective closure of the space for compromise.

Balancing game

In its early stages, the EaP was a pet project mainly of Sweden and Poland, whose respective foreign ministers -Carl Bildt and Radoslaw Sikorski – would adopt a distinctly aggressive stance on Russia.

Two other nations were originally included in the EU concept for the EaP. Belarus was clearly never going to join and would soon be quietly eased out of the discussion. Although Minsk has long played a balancing game between Moscow and Brussels, which has been deeply irritating to both sides, there has never been any question about what side it would eventually choose.

It is a founding member, together with Kazakhstan, of the Russian-led Customs Union, formed in 2010, and of the EEU which came into force on January 1, 2015.

Azerbaijan has represented trouble both to Russia and to the EU. To Russia it has been a serious contender for the role as energy hub in the Caspian Basin and as a genuine military threat to Moscow’s regional ally, Armenia.

Bills due

To the EU, it has been an example of an authoritarian regime which violates human rights but is also a key player in energy supply. It has been destined to play a balancing game between Russia and the West.
Now that the EaP project has collapsed, and the bills for outstanding commitments are coming due, responsibility has been shifted to Germany. This has happened largely by default, and serious questions may be raised concerning the readiness of Berlin to shoulder that responsibility.

It is true that both Germany’s Chancellor Angela Merkel and Foreign Minister Frank-Walter Steinmeier have made valiant efforts to re-engage with Russia and to seek common ground for compromise and forward-looking agreements. The total lack of progress in these ambitions reflects just how disastrous previous policy on Russia and Ukraine had been.

As Western governments begin to realise the magnitude of the damage, increasingly critical voices are being raised, especially in Berlin.

Big mistake

High-ranking German politicians and officials have begun publicly acknowledging that it was a mistake to shut the Kremlin out of talks with Ukraine. Television talk shows have laid out the argument that there can be no solution to the crisis in Ukraine without Russia, and that humiliating Russian President Vladimir Putin was a grave mistake.

At a seminar in the capital shortly before Christmas, a senior German official recognised that it had been a big mistake to leave the Brussels bureaucracy to work out the text of an agreement that the Russians were bound to view as hostile.

Noting that it was all a matter of perception, that what may have looked good in Brussels would look very different in Moscow, he lamented that member state governments had not played a more active role. And Berlin was no exception. In Vilnius, he said, ‘We played gladly along’.

Kremlin action

The problem which has been revealed here represents a true dilemma. No European government will be able publicly to deny that nations have a right to choose their alliances at will. So much has been invested in touting this lofty principle that it simply cannot be dismissed.

But what nobody seems to have even considered is what to do if a larger nation, such as Russia, is determined to deny that right.

Now we know the answer. When the Kremlin took decisive action to prevent Ukraine from making a ‘European choice’, the European friends were reduced to verbal condemnations and deeply harmful economic sanctions, none of which was helpful to Kiev.

The painful lesson that is entailed here says that if Western governments proclaim lofty principles on rights and freedoms, and proceed to encourage other governments to act in accordance with those principles but then simply back off when the shooting starts, then we have a serious moral issue.

Nuclear defence

The same holds for security guarantees. When Ukraine agreed to give up its inherited Soviet-era nuclear weapons, the US and the UK joined Russia in offering these pledges.

The Budapest Memorandum signed in 1994 ensured that deprived of its nuclear defence, Kiev would still be able to rest assured that its sovereignty and territorial integrity would be respected. The Kremlin has shown that the value of those security guarantees was nil.

The principle of respect for sovereignty and the provision of security guarantees represent fundamental building blocks in the safeguarding architecture which the international community has striven so hard to build since the end of the Cold War. Both have collapsed in Ukraine, and it is doubtful whether they can be resurrected.

New vision

There is room for bold politics and diplomacy to chart a new course. Russia would gladly be rid of sanctions and other associated problems which have followed from its aggression in Ukraine. But a way out must offer both sides a means to save face.

Given that the US Congress will remain committed to punishing Russia, it will be up to Europe, which means Germany, to find a new vision.

It could bank on the fact that 2015 represents 40 years since the signing by the Soviet and Western blocs of the Helsinki Final Act – which recognised European frontiers, pledged respect for human rights and cooperation on economic and scientific affairs – and engage with Moscow in charting a new order where Russia has a constructive part to play.

Moscow’s choice

As for the Germans, a dawning realisation that mistakes have been made is one thing. Agreeing on what should be done now is a different matter.

German-Russia specialists are at war, with open letters signed by dozens of leading names being published in the press seeking to dishonour the other side. It is very emotional and will probably serve to block all serious discussion on what should be done.

It will in consequence be up to Moscow to determine just how far the situation in Ukraine will be allowed to deteriorate.

The West will be reduced to paying the bills, and on taking revenge by destroying the Russian economy. We are not looking at a happy new year.

Related GIS Articles

Source: Geopolitical Information Service


The views expressed on austriancenter.com are not necessarily those of the Austrian Economics Center.

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