Last Shot For Reality To Pierce Russian Fantasy by Ilan Berman
http://www.ilanberman.com/15246/last-shot-for-reality-to-pierce-russian-fantasy
On Tuesday, Russian president Vladimir Putin will meet with his Ukrainian counterpart, Petro Poroshenko, in Minsk, Belarus in an effort to bring an end to the crisis in Ukraine. The summit is shaping up to be a critical turning point in the six-month-old conflict over the soul of Ukraine.
It is by now abundantly clear that Russia is losing on the ground. In recent weeks, Ukrainian forces have made steady gains against pro-Russian irregulars in southern and eastern Ukraine. As a result, the territory controlled by separatists has shrunk precipitously, despite the Kremlin’s assistance. When assessed by the BBC in late July, Ukrainian rebels were found to hold less than a quarter of the Donetsk region, and less than a third of the Luhansk region. Since then, Ukrainian military advanceshave constricted the territory controlled by separatist forces still further.
Politically, the expected advantages from Putin’s Ukrainian adventure have not materialized. Russia’s president wagered that the March 2014 annexation of the Crimea Peninsula and his government’s subsequent attempts at subversion in eastern and southern Ukraine, to catalyze a “domino effect” of sorts that would provide Moscow with a greater sense of control over its periphery . But despite significant ethnic Russian minorities among the Baltic States, and even higher concentrations of Russian speakers there, grassroots calls for a Crimea-style referendum elsewhere in the “post-Soviet space” have been muted at best.
Economic costs, meanwhile, are already steep for Russia—and they are rising. Approximately $75 billion in capital is estimated to have fled the Russian Federation in the first half of 2014 alone as a result of Ukraine-related economic turbulence. According to some estimates, that figure is set to double by year’s end, with a projected total of $150 billion in capital flight by late 2014.
This trend has brought the Russian economy to the brink of recession, with officials estimating zero growth for the foreseeable future. All told, former Russian Finance Minister Alexei Kudrin has projected that the deepening confrontation between Russia and the West over Moscow’s continuing meddling in Ukraine could create “uncontrolled risks in economic, military and political spheres” that may end up costing Russian citizens as much as 1/5th of their annual incomes.
Meanwhile, Russia’s most visible prize — the Crimean Peninsula — has turned out to be an exceedingly difficult pill to swallow. The Russian government itself assesses that it will need to spend 100 billion rubles ($2.8 billion) this year alone to subsidize its newest holding. But the actual figure could be much higher; between annual subsidies to the peninsula and additional investments in the region’s dilapidated infrastructure, the true costs of Putin’s Crimean acquisition could range between $4.5 billion and $10 billion per year. Much of this money will be taken from the Russian national pension fund, meaning that in shoring up its newest holding Moscow will effectively be impoverishing the rest of the country.
Perhaps that is why the Kremlin is now frantically looking for ways to expand the economic pie. This summer, Putin signed a law authorizing the construction of casinos in Crimea and in another costly Russian boondoggle, the former Olympic venue of Sochi. And a draft bill recently introduced in the State Duma, Russia’s lower house of parliament, by supporters of President Putin floats the idea of levying of a 30%t income tax on Russia’s richest citizens — with the resulting revenue to be used to support development in Crimea.
Against this backdrop, the Kremlin might be expected to revise its expectations downward in Ukraine, and aim for something resembling a stalemate. But there is ample evidence to suggest that Putin still believes he is winning.
For one thing, his policies remain tremendously popular on the Russian street, at least for the moment. A July poll by Gallup found the Russian president’s popularity rating at its highest level in years, with 83% of respondents approving of his handling of their country’s deepening standoff with the West. And while that figure is almost surely inflated (the product of extensive official propaganda), it is still significant enough to convince the Kremlin that it is on the right track.
For another, the driving ideological impulse behind Russia’s intervention in Ukraine remains intact. The Russian government’s actions in Ukraine have been informed by a deep-seated and long-standing goal of reconstituting a “neo-Soviet sphere.” Notably, this ideological imperative is not solely a Kremlin pursuit. Rather, it is an objective —broadly shared across the Russian political spectrum, from the liberal left (embodied by such personalities as famous economist Anatoly Chubais) to the far right (e.g., political activists like notorious “Eurasian” theoretician Alexandr Dugin).
That makes Tuesday’s summit a high-stakes one indeed. It will mark the moment when Putin will truly be forced to decide between a pragmatic accommodation with Kiev and his own destructive imperial impulses. The West should watch closely, and react accordingly.
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