Ukraine – Counting Crimea’s Cost

Tanya and I are pretty much in a brown funk.  We have crawled in a mental hole and pulled the hole in after us.  Our niece Sveta said she has stopped reading everything.  I would love to but am glued to the computer.  I have run out of freebies on The Economist, Foreign Affairs, Financial Post, New York Times, Washington Post and several others. So I send the story names to friends and get the articles back.  Also articles linked in the Kyiv Post don’t count, I guess and I can read them for free.

If Putin planned on scaring the crap out of people, he has succeeded. He says he has no more designs on Ukraine.  Right.  How far can you bounce an anvil in a swamp? Trust him that far.  The Russian military buildup along our border continues.  Hitler and Stalin are not just names from history books.  In this part of the world they were real people with real actions and real consequences.  When taxi-drivers in Dnipro start dropping those names, you know the whole country is worried.

No one knows what Putin will do next.  Every pundit on the planet has a different version.  He is just sitting waiting to see what the EU and USA will do.  They need to do enough to be noticed but not so much that they have nothing left for his next move.  At least America has done something.  The EU is another story, though they are certainly helping Ukraine.

Sanctions per se don’t hurt much but they kind of make the business world sit up and take notice.  So far that is hurting far worse, interest rates up, loan negotiations cancelled, ruble down, etc.  The oligarchs have a great deal to worry about but if they object to Putin’s policies, they will end up like others before them: dead, in jail or bankrupt.  Oligarchs do NOT run Russia; Putin and only Putin does.

At the same time, incorporating Crimea itself will not be cheap.  The narrow land bridge with the mainland happens to end in Ukraine (so far).  Electricity, water, gas, food and consumer goods all come from Ukraine.  A bridge across the 4.5 km Kerch Strait will run 4 or 5 billion; an electrical station another 1.5 to 2.5 billion; overhauling the port at Sevastopol 10+ billion; rebuilding the entire water canal from the Dnipro river along with all the irrigation system unknown.  Best estimate, (throwing in corruption, since Crimea is a hot bed of crime anyhow and the new “president” nicknamed “The Goblin” is associated with various criminal activities), is another Sochi or $50 billion, which Russia doesn’t have.

The value of Crimean offshore oil and gas has supposedly raised the value of Gazprom $50 billion, so maybe it is a break even.  Certainly if it weren’t for the oil and gas, Ukraine is better off without Crimea.  Seizure of Ukrainian national property might be used by Ukraine to write off several billion dollars of Russian debt as well.  Who the winners are is up for grabs but the losers are the Crimeans; and the Crimean Tatars most of all. 

There are already threats by Crimean Russians to take back their land and run them off.  As Putin uses Russian Nationalism as part of his bag of tricks at home, xenophobia is rising rabidly against new targets (migrants from Central Asia and the Caucuses, gays) and old targets (people with dark skin, Jews, ethnic Chinese, Gypsies). “Over the last year, the percentage of residents of the Russian Federation who support the slogan “Russia for the Russians” has risen from 56 percent to 66 percent, and the share of the population who favors expelling immigrants rather than helping them adapt has gone up from 64 percent to 73 percent,  according to the Levada Center”.

http://windowoneurasia2.blogspot.com/2014/03/window-on-eurasia-xenophobia-in-russia.html

Why is Putin doing this?  According to his speech last Tuesday to the Russian Duma, he is mad as hell and not going to take it any more.  Apparently he feels miffed that the evil West ignores him, is plotting against him and so forth.  His speech contained enough lies, bullshit and disinformation, you would think it was written by Fox News. 

http://phronesisaical.blogspot.com/2014/03/the-president-of-all-russias-speaks.html

http://www.rferl.org/content/ukraineunspun-putin-rewrites-history/25302796.html

There are two good explanations; one or both may be right.  Russia tends to see things only from a Zero-Sum or Win-Lose perspective.  It is impossible for them to conceive that a country could trade with both the EU (and the rest of the world) and with Russia.  Russia is terrified of NATO.  In fact the Cold War was brought to you 50% by Stalin’s fear of NATO and 50% by American propaganda telling us how terrible and fearful the Communists were so they could expand their own empire while “protecting” us.

Now NATO was established to protect us from the USSR.  It really doesn’t need more countries to protect, however the countries which broke free from Moscow at the dissolution of the Soviet Union were/are desperate to get into NATO, to make sure they never again fall under Russian rule.

U.S. Ambassador George F. Kennan (the “Father of Containment” during the Cold War) described Russia’s mid-century foreign policy this way: “The jealous and intolerant eye of the Kremlin can distinguish, in the end, only vassals and enemies, and the neighbors of Russia, if they do not wish to be one, must reconcile themselves to being the other.”  Russia had been behaving that way long before Kennan figured it out, and it’s still behaving that way today.

Vladimir Putin isn’t a communist, but he is a product of the Soviet Union—he worked counter-intelligence in the KGB and spied on foreigners and diplomats in Saint Petersburg—and his view of Russia’s neighbors is no different now than it was then.

So when Ukraine could no longer tolerate being Putin’s vassal and overthrew his proxy Viktor Yanukovych, Ukraine instantly moved into the “enemy” column and is being treated accordingly.  What he most fears is that Ukraine might join NATO, removing yet another buffer state between himself and the West and kiboshing his plans for the Eurasian Union, a euphemism for a 21^st century Russian empire.

http://www.worldaffairsjournal.org/blog/michael-j-totten/what-vladimir-putin

The second theory is that since the Russian economy is going/gone to Hell, Putin needed a diversion and someone to blame.  In his speech, he bluntly stated in so many words that those who disagree with him are traitors

The state of the Russian economy, especially in the regions, meaning 100 kilometers in any direction from Moscow with the exception of St. Petersburg, is horrid.  The corruption has eroded so much of the country’s infrastructure, health and education systems that much of the country is literally held together with duct tape. Hard currency received for gas and oil is the only thing propping the entire scheme up, and Putin knows better than anyone that this state of affairs is unsustainable. He could have invested in the country’s development, but didn’t, since a developed, democratic Russia would have no place for a president-for-life.  Instead, he built the largest kleptocratic apparatus in the world, with which abuses of the Viktor Yanukovych regime simply pale in comparison. By now, this kleptocratic machine has gained so much momentum that it cannot be stopped until it crashes. Being a pragmatist, Putin clearly understands this landscape.

So how can a leader, with an economy sliding off the skids and heading towards a cliff, preserve his power? No amount of propaganda would keep an impoverished population facing the prospect of no future, in check. Eventually, and inevitably, the level of discontent would grow beyond a manageable level, and Putin would have to deal with it. In his book that means cracking down, hard. Whether the crackdown succeeded or not, it would be a no-win situation for him.

http://www.kyivpost.com/opinion/op-ed/jay-tkachuk-the-demise-of-putinism-340380.html

http://www.businessinsider.com/the-truth-about-russias-economy-2014-3#ixzz2wcYxDjhd Charts