The popular uprising in Ukraine has produced its first fruits — or at least its first intended fruits. The Euromaidan protests erupted when former president Viktor Yanukovich abruptly changed course and rejected a political and trade alliance with the EU last November, and signed a deal with Moscow instead. The new and newly-empowered Prime Minister that replaced Yanukovich after he fled last month, Arseniy Yatsenyuk*, has signed a deal with the EU that locks in the political alliance, although the trade agreement has been postponed until after national elections in May:
The European Union and Ukraine signed the core elements of a political association agreement on Friday, committing to the same deal former president Viktor Yanukovich rejected last November, a move which led to his overthrow.
Ukrainian Prime Minister Arseny Yatseniuk, EU leaders Herman Van Rompuy and Jose Manuel Barroso, and the leaders of the bloc’s 28 nations signed the core chapters of the Association Agreement on the sidelines of an EU summit in Brussels.
The current president of the European Council offered a pointed barb at Moscow and its seizure of Crimea:
Van Rompuy, the European Council president, said the agreement would bring Ukraine and its 46 million people closer to the heart of Europe and a “European way of life”.
“(This) recognizes the aspirations of the people of Ukraine to live in a country governed by values, by democracy and the rule of law, where all citizens have a stake in national prosperity,” he said.
This is not the same as EU membership, which would be a rather large provocation that Yatsenyuk can ill afford at the moment. It carries no mutual-defense obligations. Its value is symbolic, a statement of solidarity between Ukraine and the West, and a message about how Ukraine sees its future. On the other hand, the West signed the Budapest Memorandum that actually did have some security assurances for Ukraine, and that hasn’t exactly been a winner for Kyiv in this crisis.
Moscow had its own message to send. As the EU and Ukraine finalized their political association, the Duma completed the seizure of Crimea:
In another sign of defiance, Russia’s upper house of parliament unanimously approved the ratification of a treaty Friday that formally joins the Crimea region to Russia.
Russia’s lower house of parliament, the State Duma, had overwhelmingly passed the treaty Thursday.
Russia’s moves to annex Crimea, following a contested weekend referendum in the Black Sea peninsula, have turned a confrontation with Europe and the United States into the biggest crisis in East-West relations since the Cold War.
Russia may have gleefully gobbled up its old province, but Moscow is getting at least a little bit of indigestion over it. The Russian stock exchange, the MICEX, tumbled three percent in opening trading after the US and EU increased sanctions on Russia over its aggression, raising hopes that Vladimir Putin might think twice about repeating the exercise in eastern Ukraine:
Russian shares fell sharply on Friday as investors took fright at tougher than expected U.S. sanctions against President Vladimir Putin’s inner circle over Moscow’s seizure of Crimea from Ukraine.
The United States added 20 names to its sanctions blacklist, including Kremlin banker Yuri Kovalchuk and his Bank Rossiya, oil and commodities trader Gennady Timchenko and the brothers Arkady and Boris Rotenberg, who are linked to big contracts on gas pipelines and the Sochi Olympics, as well as Putin’s chief of staff and his deputy, the head of military intelligence and a railways chief.
In one immediate consequence, U.S. credit card companies Visa and MasterCard stopped providing services for payment transactions with Russia’s SMP bank, owned by the Rotenberg brothers, the bank said.
President Barack Obama said Washington was also considering sanctions against key economic sectors including financial services, oil and gas, metals and mining and the defense industry, if Russia made military moves into eastern and southern Ukraine.
Diplomats said the mere mention of such a possibility would chill investment in Russia, charging an immediate price for Moscow’s action in Crimea and serving as a potential deterrent to going further.
That’s the hope, anyway. When sanctions first hit last week, the MICEX dipped initially then rebounded as Russian optimism soared over their easy conquest in Crimea. This could be a case of reality belatedly reviving. Russia has a narrow economy based on energy that needs the West for sales and engagement, and the threat of getting cut off will play out worse for them than for Europe. The EU is moving toward a unified market for Russian energy for the first time in order to provide themselves more leverage and to eliminate Russia’s ability to split the West based on price and supply favors. That will keep Moscow from selecting one or two countries to cut off as a means of stymieing any further sanctions.
If that doesn’t work, though, Kyiv faces a very bleak future. Russia might attempt to seize Moldova or at least its Transdniester region, which has attempted to break away from the tiny republic as an autonomous Russian enclave. Russia could access Transdniester with some difficulty through its faithful ally Belarus, although there is no clear corridor to Moldova except through western Ukraine. King Banaian and I discussed that on yesterday’s TEMS, so be sure to watch that segment, starting at the 40-minute mark.
* – Russian and Ukrainian names are not consistently transliterated into Latin alphabets, and different news services will provide different spellings of the same name.
Update: Belarus does not share a border with Moldova, but it could help Russia access Transdniester a little more quickly. In order to access Moldova, Russia would have to overfly Ukrainian airspace, either from the Black Sea or from Belarus. Getting an aircraft carried up close to Odessa might create a lot more issues for Russia than just Ukraine, though, so Belarus would be a better strategic platform. However, unlike what I wrote earlier, this still would leave Ukraine open to Europe through large borders with Poland and Romania and smaller borders with Hungary and Slovakia. I’ve changed the last paragraph accordingly, thanks to multiple readers who e-mailed me on the issue.