Putin: Building the case for an invasion into Eastern Ukraine

In a previous post I wrote that in my opinion there was a 50% chance of a Russian invasion into Eastern Ukraine and that if it were to take place, it would almost certainly happen before the Ukrainian presidential elections scheduled for May 25th.

I also indicated that at the time I did not feel that an invasion would be imminent because the news cycle was not in Putin’s favor. With the capture of administrative buildings in three Eastern Ukrainian cities (Luhansk, Donetsk and Xarkiv) by pro-Russian protesters, the news cycle is now in Putin’s favor.

Watch for the Pro-Russian separatists to try to incite violence so the “Self-Defense Forces” can move in.


Also worth noting, from a friend:

Ukraine’s only hope is the genuine threat of obliterating Russia’s gas pipeline infrastructure.  Ukraine should start blowing up gaslines and infrastructure as soon as the invasion begins, the second a Russian soldier crosses the frontier.


The Obama Gas Gambit: Will it Backfire?

Having taken military options off of the table, Obama and the West are relying heavily on the threat of a Russian recession to counter any further movements by Putin into Ukraine.

There have been calls for Obama to deploy the strategic oil reserves as sanctions. Some commentators have even suggested that Obama discussed using this strategy during his visit to Saudi Arabia.

Indeed, this strategy on its face appears to have the potential to dissuade Putin from being rash. From Timothy Ash at Standard Bank PLC:

“What is crystal clear is that lower oil prices really hurt Russia. Indeed, oil prices are the Achilles heel for the Russian economy. Twelve years ago the Russian Federal budget balanced at USD22 per barrel for oil, now it is more like USD110. And I reckon a fall in the oil price to USD80 per barrel would already cause very significant pain to the Russian economy, balance sheet and its markets. At USD80 or lower, the Russian economy would head into deep recession, the budget and current accounts would run significant deficits, capital flight would accelerate markedly depleting FX reserves and putting hefty downside pressure on the rouble. You could indeed argue that a large part of Putin’s success over the past 13-14 years has related above all else to high oil and commodity prices – he has been fortunate in this respect. If oil and commodity prices fall Russia would be heavily exposed.”

However, it is also abundantly clear that Putin is a dynamic player and not just a static actor. Putin is looking East. As mentioned in my previous posts the reasons for this are twofold. First, Russia’s regional influence depends more and more on China’s energy strategy. Second, Putin’s narrative is that Russia is the only “Great Power” willing to stand up to American Hegemony.

Consequently, it appears that two large Petrodollar (i.e. deals denominated in oil, not USD) have been announced by Russia. First, a $20 Billion arms-for-oil deal with Iran. This substantially undermines the US’s negotiations with Iran on nuclear disarmament. As I’ve mentioned before, a consequence of Russia’s invasion of Crimea is that the post Soviet collapse world nuclear order is unraveling and paper deals no longer hold any credibility (as the collapse of the 1994 Budapest Memorandum is now the precedent). It also undermines the US’s policy with respect to Syria as Russian arms are boosting Assad’s fight against the rebels.

Second, it appears that China may be embracing Russia. A major Russia-China gas deal may be announced in May. This would offset the isolation strategy that the West is using.

In summary a new twist on the old quote: Without Ukraine Russia Is Just A Country, With Crimea and China Russia Is An Empire


In other news Russia paid lip service to the idea of deescalation along Ukraine’s border, but it doesn’t appear that there have been any significant troop movements away from the border. As a reminder there are approximately 40,000 Russian troops stationed on the Ukrainian border (with some reports of up to 100,000). NATO also continues to build up its forces along the Eastern Borders.

Also – Ukraine has released a report detailing the the Russian FSB was involved in the February sniper attacks against civilians.

Is a Russian-Ukrainian War Imminent?

May 25th is the key date. On that date Ukraine will have its Presidential elections. If the elections are successful, the transitional government will be legitimized. It would strip Putin of a key element of his story line: that Russian-Ukrainians need to be protected because the people in power do not represent them. Consequently, legitimate elections would weaken Putin’s ability to stage an invasion into Ukraine.

Here are the probabilities I’ve assigned to the outcomes of this crisis (an explanation follows):

  • Imminent invasion of Ukraine by Russia (within a week): 20%
  • Invasion of Ukraine prior to presidential elections (May 25th): 25%
  • Invasion of Ukraine after presidential elections: 5%
  • Deescalation: 50%

There are a number of key factors as to why I think a Russo-Ukrainian war is likely:

  1. There have been reports of substantial Russian military buildups. Some reports suggest up to 100,000 troops have been stationed along Russia’s borders with Ukraine.                                                                           March 29th Russian Army Movements
  2. Crimea’s infrastructure  is heavily dependent on Southern and Eastern Ukraine.
  3. Southern and Eastern Ukraine also have a high proportion of Russian Speakers (between 20-60%; although the percentage of ethnic Russians is lower). Southern and Eastern Ukraine also supported the deposed administration. Ukraine Presidential Election Results 2010
  4. South Western Ukraine borders Transnistria, a breakaway state from Moldova that supports unity with Russia. There are reports of up to 7,500 Russian military personnel already conducting war games there. Putin’s current narrative supports an invasion into Southern and Eastern Ukraine to build a land bridge to Crimea and this breakaway state.transnistria and other disputed areas in Eastern Europe and Central Asia
  5. By invading Southern and Eastern Ukraine, Putin would be able to completely land lock Ukraine allowing him to wield significant influence over the Ukrainian government.
  6. Putin is afraid of the democratic protests that occurred as a result of the Maidan Revolution. He needs a swift defeat in order to communicate to his opposition in Russia that similar protests in Russia would not work.
  7. Russian external communications have also been very bizarre recently. For example, Putin called Obama just yesterday to “Draw attention to Ukraine’s extremists” (note: they exist, but they’re not significantly influential). A few days prior a member of the Russian government sent a letter to Poland suggesting that Poland and Russia should split Ukraine into two – very strange and evident of the delusional thinking in Putin’s inner circles (tying into the broader theme of Eurasianism: http://www.truth-out.org/opinion/item/22760-brown-is-the-new-black ).
  8. Finally Putin’s speech on the Crimean annexation alluded to larger plans (http://www.bbc.com/news/world-europe-26652058).

The list of reasons why I think Putin will not invade Ukraine is shorter but no less convincing:

  • I have no doubt that Putin would already have invaded Southern and Eastern Ukraine had it not been for Chinese ambivalence on the matter. As The Economist recently pointed out “The precedent of secession is anathema, because of Tibet; the principle of unification is sacrosanct, because of Taiwan.” Russia has been unable to rely on China as an ally as it did during the Syrian crisis. This is fairly substantial since China is breaking Russia’s control over the gas basins of Central Asia systematically and ruthlessly and this may accelerate as a result of the Crimean crisis. Turkmenistan’s gas used to flow North, hostage to prices set by Gazprom. It now flows East. The politics are poignantly exposed in Wikileaks cables from Central Asia. A British diplomat is cited in a 2010 dispatch describing the “Chinese commercial colonization” of the region, saying Russia was “painfully” watching its energy domination in Central Asia slip away.
  • To a lesser extent, US, EU and other sanctions are having effects. The US and EU have imposed targeted sanctions on Putin’s inner circle of advisers and some key banks. Frankly the level of sanction is significantly below what is necessary to deter Putin. There have been some targeted sanctions against Putin’s inner circle and key banks that house funds for very high net worth individuals and politicos. Russia has also been expelled from the G7 (formerly the G8). The West has been lucky that Russia’s economy has been struggling recently. This has multiplied the effect of the sanctions. The World Bank is currently predicting Russia’s economy to grow only 1.1% in 2014, down from 2.2% as previously predicted. If the situation intensifies Russia’s economy could shrink by 1.8% (http://uk.reuters.com/article/2014/03/26/uk-russia-economy-worldbank-idUKBREA2P0X420140326).
  • Kerry (American Secretary of State) and Lazarov (Russian Foreign Minister) are scheduled to meet tomorrow. I suspect that Lazarov will try to hype Putin’s case and Kerry will rebuke him. Unlikely that an invasion would happen with such a high level meeting planned unless some sort of external event gave Putin the opportunity.

Note that I’ve also provided a lower probability for an imminent invasion, compared to a general invasion before May 25th. This is because it seems that Russian propaganda machine has made a few blunders lately. The plan to divide Ukraine with Poland, which I mentioned above, did not play out so well. The UN’s General Assembly also recently overwhelmingly passed a vote in support of Ukraine’s territorial integrity. The news cycle is not currently in Putin’s favor. If he is as savvy of a strategist as I think he is, and if he is going to invade Ukraine as I think he might, he will wait until the current events turn in his favor. UN Resolution Ukraine 3-28-14


I would advise you to take my forecasts with a grain of salt. I’m only an independent observer. But I will leave you with this passage from an email that a friend who is in Ukraine sent me today:

“Despite constant news reports that a 100,000 Russian soldiers have amassed on Ukraine’s borders I’m still sitting here in Kyiv secure in my downtown bubble of serenity and denial. I look around and I’m amazed at the outward sense of calm in the local population. The lack of Ukraine’s experience with recent danger of this magnitude may be understandable but to an outsider with prior war experience, the lack of personal precaution by the local population must look staggering and unreal. I can’t imagine a Bosnian sticking around his home town today if he suddenly had a military force of Serbs that big on his borders. That’s the level of denial in this country. But weren’t the cafes of Warsaw full the night before the Germans invaded on September 1, 1939, or Lviv two weeks later when the Soviets invaded Western Ukraine?  I suspect they were, even though there was ample objective evidence at the time that an invasion could happen at any moment, – and it did. I feel like I’m in that same moment of history.”

Ukraine Must Join NATO if Russia Swallows Crimea

(Originally published March 7th 2014)

On March 16th Crimea will hold a referendum on joining the Russian Federation. The referendum seeks to legitimize Russia’s current occupation. If the referendum in Crimea is free and fair, as verified by international election observers, Crimea should be free to join the Russian Federation. It is already clear, however, that the referendum will be illegitimate.

On February 24th, the Crimean Prime Minister recognized the new national government formed as a result of the protests in Kyiv.  On February 26th, the media began to report that Russian soldiers entered Crimea.

On February 27th, professional and heavily armed Russian speaking gunmen seized Crimea’s parliament. Under siege, the Crimean parliament approved a no-confidence vote and unconstitutionally appointed the head of the Russia Unity party as Prime Minister. On February 28th the full scale occupation of Crimea began and Russia soon gained full scale operational control of the peninsula.

On March 6th, the Crimean parliament approved the referendum on the future of Crimea. A recent poll shows that only 41% of Crimeans wish to unite with Russia. Just as the Crimean parliament elected the Prime Minister under the barrel of a gun, the Crimean people will vote to join Russia under the barrel of a gun.

Already there are signs that international observers will not be able to monitor the referendum. Journalists have not been allowed in Crimea since March 1st. On March 4th the Senior UN Envoy was threatened by a group of 10 to 15 gunmen and cut his mission short. On March 6th, the OSCE cancelled its military observer mission as the observers were not granted access.

Putin understands the significance of the current events. Unlike 2004’s Orange Revolution, the ousted government’s actions resulted in the death of 100 people. This left such a deep wound on the Ukrainian psyche that there was a clean break with the old political guard.

Putin’s pretext for occupying Crimea is that he is defending Russian citizens. This is a thin excuse. Crimea has an ethnic Russian majority and the Crimean constitution protects Russian as a language. Putin also hasn’t shown much concern for the actual Ukrainian and Crimean Tartar (Sunni Muslim) minorities.

The conventional thinking is that this pretext allows Putin to protect his interests in Russian naval bases in Crimea. These bases give Putin access to the Mediterranean, like the old Soviet naval base in Tartu, Syria, for example.

But potentially there is a darker and more troublesome narrative: having consolidated control of Russia, Putin is beginning to believe his own propaganda. Putin styles himself as a modern Tsar Nicholas I. He wishes to develop a stronger sense of religious and national identity within Russia to act as a counterweight to the West’s liberal ideologies.

Ukraine was the cornerstone of Putin’s Eurasian Union. The Union was an effort to restore some of the glory of the Soviet Union, whose collapse Putin called the greatest geopolitical tragedy of the 20th century. Under such a narrative Putin genuinely believes that he is saving Ukrainians from a mob of fascist and neo-Nazi protestors. Under this narrative Putin may not stop in Crimea. He may also attempt to gain control over Eastern Ukraine.

Tactically, Putin is drawing firm red lines. Crimea is under Putin’s control unless he decides to back down – he has the initiative.

By contrast, the West’s response has been hesitantly reactive. In 1994 Russia, the United States and the United Kingdom signed the Budapest Memorandum on Ukraine’s denuclearization. By signing that document the West committed to respecting Ukraine’s territorial and economic sovereignty.

Since then the West has mostly ignored Ukraine. Instead, Russia has kept Ukraine on a tight economic leash through reliance on gas subsidies. Had the West truly enforced the Budapest Memorandum, Ukraine could have slowly drifted out of Russia’s economic orbit over the last 20 years.

Unfortunately, inaction manifested itself into the Crimean crisis. The stakes are high. Instead of economic assistance, Western values and credibility are now on the line. The crisis serves as a reminder that in geopolitics tension builds over long periods of times and often snaps in large and unpredictable ways.

Consider the current nuclear agreement under negotiation with Iran. How will Iran respond if it sees that the West does not enforce its nuclear agreements over time? Or take China. If tensions flare between China and Taiwan or Japan, the Crimean crisis will serve as a modern precedent.

The Crimean referendum will not be legitimate. For Putin to drop the narrative that Crimea is willingly joining Russia, the West must threaten sufficiently large consequences. If a diplomatic solution is not reached and action is limited to economic sanctions, Putin may become isolationist. This may embolden him to make additional land grabs in former Soviet territories.

To prevent this, the West should signal that if Crimea illegitimately joins Russia, the rest of Ukraine will accede to NATO. Threatening to put NATO on Russia’s border increases the pressure on Putin to work within a credible international law framework. As a worst case scenario, after secession, it limits Putin’s land grab to Crimea. It demonstrates that the West enforces its international agreements.

Prior to World War II, Chamberlin signed the Munich Agreement which allowed Germany to annex the Sudetenland. Churchill issued sharp criticism. He said: “You were given the choice between war and dishonor. You chose dishonor and you will have war.”

The West now faces the same choice. To prevent war it must signal that it is ready for it. NATO must allow Ukraine to accede as a consequence of illegitimate Crimean secession. Otherwise, the West may again lose the initiative on the crisis. The consequences of which would be large and unpredictable.

Ukraine Shows the West it has yet to win the Cold War

(Originally published 12/3/2013)

Putin and the New World Order

With the growth of China and India the world is currently undergoing an unprecedented shift in economic power from West to East. As a corollary, a similar yet less visible shift is occurring geopolitically. In the last decade this latter shift accelerated as Vladimir Putin, Russia’s autocratic President, pivoted from Western integration to Eastern expansion.

The problem with this pivot was that it came at an ideological cost. Rather than open Russia to democracy, Putin began to rebuild an autocratic empire. In fact, Russia’s move away from democracy has been so severe that the former National Security Advisor of the United States likened Putin to Hitler.

The analogy is quite striking. Compare, for example, Putin’s persecution of homosexuals ahead of the 2014 Sochi Winter Olympics with Hitler’s persecution of the Jewish minority during the 1936 Berlin Olympics. Or, consider that both rose to power mostly through democratic means and then brutally began to consolidate power by outlawing all competing political parties, all non-nationalized media, and then controlling the judiciary. Or, contrast how both grew their territorial holdings with land grabs justified by ethnic and nationalistic means (Hitler with Czechoslovakia in 1938 and Putin with Georgia in 2008). Somewhat ironically, Hitler was named Time’s Man of the Year in 1938 and Putin was Forbes’ Most Powerful Man in 2013.

As Putin’s power increases and the world settles into new spheres of influence, the West must act to ensure that Russia will not be in a position to dictate terms. Putin recently showed the world how powerful he has become by flexing his muscle in Syria, while simultaneously shaming the United States through a New York Times Op-Ed (on September 11th of all days).

The current revolution in Ukraine may determine the extent to which Russia may challenge U.S. and European influence for the next generation. It is not a coincidence that the United States first publicly recognized the multipolar world in a 2009 speech by Joe Biden in Ukraine.


Ukraine is the second largest country in Europe in land mass (behind only Russia) and the seventh largest in population (about on par with Spain). It has ample natural resources, a highly educated, diligent workforce, and an advantageous geographical position.

The significance of Ukraine to most Europeans is due to energy, or more precisely gas. The EU imports about 20% of its gas from Russia on pipelines that flow through Ukraine. Ukraine also depends on Russia for about 30% of its gas supply. Russia is able to wield substantial influence over Ukraine via its control of Ukrainian gas supplies. This influence was most visible in 2010 when during a gas dispute the Russian President was able to extract a lease extension for Russia’s Black Sea Fleet on Ukrainian territory until 2042.

Russia’s Black Sea Fleet is the crown jewel of Russia’s Navy. It provides Russia with naval power over the Mediterranean and Indian Oceans. It also gives Russia a platform from which to launch offensive naval maneuvers. Losing this fleet would be a major setback for Russia’s influence around the world and particularly over the Middle East.

Beyond the Black Sea Fleet, Russia’s military also depends on Ukraine. For example, many of the intercontinental ballistic missiles (ICMBS) that form the key of Russia’s strategic nuclear forces were manufactured in Ukraine. These ICBMS and other military technologies require spare parts and maintenance that only Ukrainians can provide.

Most significantly, however, Ukraine is a symbol of democratic progress in Eastern Europe. As long as Ukraine is free and democratic, the parties in Russia that oppose Putin can point to their neighbors in the West and say: “if Ukraine can have freedom, then so can Russia.” The idea that peaceful democratic revolutions may succeed could be the best possible way to curb Putin’s influence.

The Association Agreement

The Association Agreement represented an expansion of democracy and stability in Europe that first began in 2004. At that time, although Ukraine was an independent country, the old power structures of the Soviet Union still existed. Just as Putin was able to suppress opposition parties in Russia, the current Ukrainian President, Viktor Yanukovych was consolidating power in Ukraine by falsifying elections.

But in November of 2004, about nine years ago, a stunning thing happened. In what was dubbed the “Orange Revolution,” hundreds of thousands of Ukrainians peacefully poured out into the streets demanding new free and fair elections. The protests were so powerful that new elections were held and Mr. Yanukovych was voted out of office.

A lesson that Ukrainians soon learned after the Orange Revolution was that asking for free and fair elections was not enough. Although the opposition had won the Presidency, the old power structures still remained in place and Mr. Yanukovych remained influential in Parliament. In 2008 Ukraine was hard hit by the financial crisis and the Ukrainians blamed the incumbent President. As a consequence Ukrainians narrowly voted Mr. Yanukovych back into power in 2010 in contested elections.

Mr. Yanukovych won because he presented himself as a different man who would listen to the people. He would work to integrate Ukrainians with the European Union as many Ukrainians wanted. Mr. Yanukovych’s first flight was not to Russia, but to Brussels, and in 2010 negotiations on the Association Agreement began.

But old habits die hard. Soon after being elected, Mr. Yanukovych once again began to consolidate power. Journalists began to suddenly disappear. He jailed the opposition leader Yulia Tymoshenko in what the European Court of Human Rights labeled “Selective Justice.”

The release of Ms. Tymoshenko was one of the conditions of entering into the Association Agreement (full text here). Further, among other things, the agreement called for reforming Ukraine’s judiciary, modernizing Ukraine’s economy to meet EU standards, and creating an EU-Ukraine free trade area. Ukraine’s entry into the agreement came after four years of intense negotiations and was supposed to be a validation of the EU’s eastern policy. But everyone underestimated Putin.

On November 9th just over two weeks before Mr. Yanukovych was to sign the Association Agreement, he flew to Russia to meet with Putin. Putin had already started to undermine the Association Agreement. He had imposed a trade boycott on Ukraine in August and threatened to take further action if the agreement was signed. He was able to offer lower gas prices and to write off debts Ukraine owes Russia. He also allegedly offered his support to Mr. Yanukovych to rig the 2015 Presidential elections.

In the last minute, Mr. Yanukovych demanded that the EU provide Ukraine with approximately $160 Billion in support. This is the cost that Mr. Yanukovych estimated that Ukraine would have to bear due to Putin’s retaliatory measures. When the EU declined, Mr. Yanukovych walked away from the EU and towards Putin.

The Endgame

In conclusion, the protests you see in Ukraine today aren’t only about the Association Agreement. They are about freeing Ukraine from the old Soviet power structures, including Putin’s unjust influence. The protests seem different than the protests of the Orange Revolution because the people recognize that free and fair elections are not enough, the old power structures must change. The protesters are fighting tyranny and people’s freedom hangs in the balance. To the U.S. and Europe, the protests symbolize that the Cold War has not yet fully been won.

To quote Ronald Regan: “I urge you to beware the temptation of pride… to ignore the facts of history and the aggressive impulses of an evil empire… and thereby [to] remove yourself from the struggle between right and wrong and good and evil.” The front line of the struggle is being fought in the streets of Ukraine today – and Ukrainians need your support.