Everyone Loses: The Ukraine Crisis and the Ruinous Contest for Post-Soviet Eurasia

^{CHAPTER FOUR} The negative-sum game and how to move past it

The crux of our argument is that the Ukraine crisis is the apotheosis of a broader regional dynamic: zero-sum policies producing negative-sum results. It is a game that has produced no winners. All major players are worse off today than they were when the crisis began.

Ukraine, the central battleground, has been hit the hardest. It has lost control over the Crimean peninsula and over a population there of more than 2m.[1] Pro-Russian Crimeans might have rejoiced in their new-found freedom from the Ukrainian government; the euphoria was short-lived. The peninsula’s status as a subunit of Russia is internationally unrecognised, hotly contested by Western states and ergo reversible. The most draconian of the US and EU sanctions, and probably the most lasting, have been imposed on economic interaction with Crimea. They are as stringent as those once levied on Iran: not only are Western firms forbidden from investing or trading, but even Russian firms that conduct business in the US or EU are effectively barred from operating there.[2] Budgetary injections from Moscow have been offset by rampant inflation caused by the Ukrainian blockade on exports to Crimea, the cutting off of irrigation water for agriculture, and blackouts following the severing of electrical lines on the Perekop isthmus joining the peninsula to the mainland.[3] Along with these economic challenges, the OSCE reports that the ‘human rights and fundamental freedoms’ of Crimeans are being abridged.[4] Amnesty International documents widespread abuses by the Russian authorities, including ‘a series of abductions and torture of their critics’ and an ‘unrelenting campaign of intimidation’ against independent media and groups speaking for the Crimean Tatars, the Muslim minority population that was deported by Stalin and spent more than 40 years in exile.[5]

The takeover of Crimea was bloodless, but the fighting in the Donbas, as noted in the Introduction, has claimed approximately 10,000 lives. Some 1.8m Ukrainians have been displaced internally, while nearly 1.1m have registered as refugees in Russia.[6] This latter number significantly understates flight to Russia since by all accounts most Ukrainians who did so have not gone through the formal registration process, preferring simply to find work or shelter with relatives.

The humanitarian impact goes beyond the tragedies of death and displacement. The UN, the OSCE and human-rights groups have documented widespread violations in the conflict zone committed by the Russia-backed rebels and by the Ukrainian government and paramilitary forces. ‘Both the Ukrainian government authorities and Russia-backed separatists in eastern Ukraine’, report Amnesty International and Human Rights Watch, ‘have held civilians in prolonged, arbitrary detention, without any contact with the outside world…. Most of those detained suffered torture or other forms of ill-treatment.’[7] The Office of the UN High Commissioner for Human Rights (OHCHR) has reported ‘a pattern of cases of [the Security Service of Ukraine] detaining and… torturing the female relatives of men suspected of membership or affiliation with… armed [separatist] groups’.[8] No less repugnantly, separatist forces have ‘imposed an arbitrary system of rules, established a network of places of deprivation of liberty where detainees are tortured and ill-treated, and cracked down on dissent’ in areas under their control.[9] The term ‘Donetsk basement’ became synonymous in 2014 and 2015 with makeshift subterranean prisons and torture chambers, where those suspected of pro-Maidan sympathies or other heretical views were held incommunicado.[10]

The lives of many rank-and-file Ukrainians in the conflict zone have been turned upside down by all that has happened. In government-controlled stretches of Donetsk and Luhansk, where livelihoods had depended on ties with the provincial capitals now under rebel control, economic activity has contracted steeply. And the tightening of the security regime at the line of contact has made crossing it an exorbitantly time-consuming activity, with queueing often taking 24 hours or more. In mid-2016, OHCHR stated that ‘Ukrainian authorities have often run afoul of the principle of non-discrimination through adopting policies that distinguish, exclude, and restrict access to fundamental freedoms and socio-economic rights to persons living in the conflict-affected area.’[11] Within the separatist territories, shortages of goods, and black markets, wage arrears and lawlessness are among the hardships of daily life. Since the start of the conflict, separatists have taken over at least 50 state-owned mines and looted Ukrainian- and foreign-owned businesses.[12]

For the country as a whole, the economic burden of the conflict and the revolution that preceded it has been extremely heavy. The World Bank reports that GDP contracted by 7% in 2014, only to fall by 10% in 2015. The Bank forecasted that the economy could grow by 1% in 2016 in a best-case scenario involving peace and progress on reform, but even that is merely the result of what economists call base effects, that is, an economy can only go up after hitting rock bottom. Ukrainians have been pummelled by inflation, with consumer prices rising 25% in 2014 and a whopping 43% in 2015. Industrial output dropped by 20% in 2014 and 13% in 2015. The currency has lost more than 60% of its value against the dollar since 2014. As the conflict in the east drags on, the economic domino effects can only get worse. As Ukraine’s heartland for mining and metallurgy, the Donbas accounted for 16% of the country’s GDP, 25% of industrial output and 27% of exports in 2013, the year before the conflict. Predictably, the nationwide macroeconomic downturn has seriously complicated the lives of ordinary people. Household expenditures were down by 20% in 2015, reflecting cutbacks in spending on food and other necessities; the calorific content of food consumed fell by 18% on average.[13] A Gallup poll in late 2015 reported that 79% of Ukrainians viewed the country’s economic situation as ‘poor’, while only 9% reported that they were thriving, compared with around 56% who said they were struggling and 36% who were suffering.[14]

One formidable source of economic distress has been the rupturing of commercial ties with Ukraine’s giant neighbour, Russia. Thus far, the contraction of Ukraine’s GDP, and particularly the collapse of energy-intensive industries in the east, has dampened demand for Russian gas. If and when its economy recovers, Ukraine will have little alternative to re-establishing the gas relationship with Russia. ‘Reverse flow’ of Russian gas from Europe has helped Ukraine get through the past few years, but all possible pipelines operating at full capacity can currently provide Ukraine with no more than 12bn cubic metres (bcm) a year; in 2013, Ukraine imported 27bcm of Russian gas.[15] In the past, the gas relationship with Russia was a key source of fiscal stability. In 2013 Gazprom poured US$3.1bn in transit fees into Ukrainian coffers, a sizeable percentage of gross state revenue. With alternative pipelines from Russia to Europe that bypass Ukraine via the Black and Baltic seas coming online in the next few years, the future of Kyiv’s gas-transit income is in doubt.

Ukraine’s structural dependency on Russia is not confined to gas imports and transit. One-third of its total exports went to Russia in pre-crisis 2013, or about the same as to the EU. By the Ukrainian government’s own estimates, it lost US$98bn in trade in 2014 and 2015 from sanctions imposed by Russia.[16] The net effect is significantly greater because of the composition of Ukraine’s exports. It mostly sells metal ore, ferrous metals, and grain and other agricultural goods to Europe. To Russia, by contrast, it has exported machinery, transport services and industrial products – that is, value-added goods and services that tend to provide more and higher-paying jobs.[17] Several huge enterprises, mainly in the defence and aerospace industry, had only Russian clients before the crisis. Kept afloat for now by subsidies and pre-existing contracts, they will soon either go bankrupt or have to be retooled. The Yuzhmash plant in Dnipro (formerly Dnipropetrovsk), which has subsisted since 1991 mostly by producing and servicing missiles for Russia, now works only one day a week and owes millions of dollars in back wages to its workers; the Antonov firm in Kyiv, which had produced large cargo planes jointly with a Russian partner, suspended production in March 2016.

While undergoing economic and conflict-related pain, Ukrainians have seen only modest improvements in governance since the Maidan Revolution. Several significant reforms have been enacted, but day-to-day realities in Ukraine have changed little, despite the soaring rhetoric often used by Ukrainian officials and their Western backers. National polls conducted in late 2015 found that nearly 80% of Ukrainians believed that the level of corruption was the same as or worse than before the revolution. Only 8% of Ukrainians had confidence in the national government, just 19% said the country was headed in the right direction, and Petro Poroshenko’s presidential approval rating fell to an abysmal 17%, ten points lower than Viktor Yanukovych’s on the eve of his overthrow.[18]

Ukrainian politics have also become more polarised and rife with extreme discourse and behaviour. National identity, it is true, has been vigorously contested ever since the country’s independence in 1991. Divergent visions of culture, history and language set apart many in the south and east from those in the west and centre. Given the highly centralised nature of the Ukrainian government, those in charge in Kyiv have always had the power to impose their views on the rest of the country. Before 2014, though, factionalism and disorganisation within the Verkhovna Rada and executive branch prevented any single part of the country from locking in total dominance. The Maidan Revolution marked a qualitative shift in this regard. As noted above, far-right nationalists were the armed vanguard of the uprising, and the post-revolutionary government was dominated by representatives of western portions of the country. Support for the Maidan movement was minimal in the south and east. One public-opinion survey in February 2014 showed that only 20% in the east (including the Donbas) and 8% in the south (including Crimea) sympathised with the Maidan protesters; this figure was 80% in the west and 51% in the centre.[19] The south and east have been increasingly marginalised since the revolution. The Party of Regions, the political machine prevalent there from the late 1990s onward, fell apart after Yanukovych’s fall, while the Communist Party of Ukraine, the other major party with support there, was banned by a Kyiv court in September 2015. The annexation of Crimea excluded 2m southerners from the polity, and the Donbas war disenfranchised those in rebel-held territory and also the hundreds of thousands of internally displaced Ukrainians and residents of districts near the line of contact where martial law has been invoked. In the first year of the warfare in the east, most front-line troops were not from regular army units but paramilitary volunteer battalions, some of which had abrasively nationalist leanings; one featured the neo-Nazi Wolfsangel on its banner.[20]

In government-controlled areas of the east and south, popular turnout in the 2014 parliamentary election was significantly lower than in the west and centre. This helped produce a parliament with a large declaratively pro-Western majority and inclined some to the conclusion that Ukrainians themselves had profoundly changed their views. It turns out that the quantity of votes cast for such parties was approximately the same as it had been for all previous elections; what had changed was the total number of votes due to low turnout in the south and east.[21] The presence of armed far-right volunteer battalions and their televised public humiliation of candidates who had been members of the Party of Regions (some of them dumped unceremoniously into rubbish bins in front of TV cameras) cultivated a climate of fear.[22] Several prominent figures associated with the party were murdered in 2015, including an outspoken pro-Russian journalist.

At the time of writing, far-right nationalist figures serve as speaker of the Rada (and thus first in the presidential line of succession) and in senior positions in the interior ministry. The historian who directs the official Institute for National Memory is a nationalist ideologue; he was the author of a ‘de-communisation’ law that has led to the renaming of thousands of streets, towns, villages and even major cities. Implementation has maximised the law’s divisiveness. For example, Moscow Avenue in Kyiv has been renamed Stepan Bandera Avenue in honour of the mid-twentieth-century Ukrainian nationalist who allied with the Nazis against the Red Army. Bandera’s name is anathema to millions of Ukrainians, particularly in the south and east of the country, and to many Poles and Jews who associate him with wartime atrocities committed by nationalist groups.

Beyond the empowering of ethno-nationalists, Ukrainians on both sides of the line of contact make a habit of dehumanising one another. To many rebels, the government in Kyiv is a ‘fascist junta’ and all of its supporters ‘Banderites’. In Kyiv, as one Western journalist observed in 2014, empathy has also been notable by its absence:

Such sentiments are stoked by political leaders, including Poroshenko, who in one statement compared the rebel territories with Mordor, the seat of evil in J.R.R. Tolkien’s fantasy novels.[24]

The Ukraine crisis has had a major impact on Russia as well. An economic downturn that began in 2014 has been the longest in its post-Soviet history.[25] After only 0.7% growth in 2014, and a 3.7% drop in 2015, the Russian economy is forecast to contract by 1.2% in 2016. Households have been hit hard; in 2015, real wages decreased by 9.5%.[26] In late 2016 the rouble’s exchange rate with the dollar was half what it was in January 2014.

Russia’s economic miseries can be traced back to Putin’s avoidance of structural reform and the threefold collapse of oil prices in 2014–15. The role of the Ukraine crisis at the margin is thus hard to quantify. One econometric study suggests that Western sanctions cost an average of 2% in quarter-on-quarter drop in GDP between mid-2014 and mid-2015.[27] But the indirect and long-term consequences of the sanctions and the conflict dwarf these direct, short-term ones.[28] Examples include an increase in capital flight that hit the Russian economy’s pre-existing weak spot, anaemic levels of investment – the primary threat to long-term growth prospects. Net capital outflows reached approximately 8% of GDP in 2014, before dropping to 3% of GDP in 2015, a relatively normal level for Russia, but still a near-insurmountable challenge to long-term growth. The effective closure of international capital markets to Russian governmental debt prevented the kind of pump-priming used in 2008–09 to stave off a deeper recession. It also forced the authorities to tap reserve funds established during the years of bullish oil prices in order to cover budget shortfalls. The Russian government’s long-standing ambition to modernise and diversify the economy away from oil and gas will now be much more difficult to realise because technology transfer from the West via direct investment, co-production and trade has been curtailed. Even if the sanctions are lifted, reputational and political risk will restrain Western firms from returning to the Russian market at pre-crisis levels.

The influence of the Ukraine crisis on Russian domestic politics is every bit as noteworthy. As of the winter of 2013–14, pluralism and democratic institutions were at their lowest ebb since the Soviet collapse. The Maidan Revolution, the annexation of Crimea and the war in the Donbas made a bad situation much worse. The crisis galvanised domestic support for President Putin, sending his approval rating above 80% in March 2014, and keeping it there for 31 months at the time of writing.[29] The Western sanctions, rather than turning Russians against their rulers, educed a defensive reaction, creating the perception of an external threat that the government leveraged to boost popular support.[30] The country’s war footing marginalised what remained by way of dissenting voices, since opposition to government policy became akin to treason.

The Kremlin has used the charged political environment to enact legislation that curbs free expression and strictly limits non-governmental links to the West. Examples include stiffer fines for support of separatism and for participating in unauthorised protests; a law requiring any blog with more than 3,000 daily readers to register and be regulated as a media outlet; and a provision allowing the prosecutor’s office to brand as ‘undesirable’ foreign non-governmental organisations that ‘threaten constitutional order, defence capabilities or national security’. Once so designated, an organisation is forbidden from maintaining an office in Russia and disseminating its work in the country. By autumn 2016, the US National Endowment for Democracy, the National Democratic Institute, the International Republican Institute and the Open Society Foundation, among others, had been designated undesirable.

As in Ukraine, the conflict also radicalised Russian political discourse. In the months following the seizure of Crimea, TV news anchors, talk-show hosts and pro-government politicians slandered the Kremlin’s opponents with the terms ‘fifth column’ and ‘national traitors’, terminology that Putin had endorsed in his 18 March 2014 speech announcing the annexation. Politicians and journalists who spoke out online against government policies were hounded by a paid army of pro-government internet trolls.[31] Many other online attacks – including some that contained threats of violence – came from Russian nationalists who were not on the Kremlin payroll. Nationalist – or more accurately, pan-Slavic neo-imperialist – groups, long frozen out by the authorities, felt newly empowered by the annexation of Crimea and the war in Donbas, in which their members played a role as volunteer fighters.[32]

Russia’s position in international politics has also worsened in certain ways since 2014. Its allies in the neighbourhood, while outwardly compliant, worry that one of them might be the next target and hedge against Moscow as much as their circumstances allow. Further west, countries that had previously been on the dovish end of the debate over policy toward Russia within NATO and the EU now see it very differently. In 2013, it would have been inconceivable for the German government to label Russia ‘a challenge to the security of our continent’, as its 2016 defence white paper did.[33] Berlin has led the effort to maintain unity within the EU on Russia sanctions. Moscow is at serious risk of permanently alienating the entire EU, which as a bloc has long been Russia’s largest trading partner and direct investor. With its Western partnerships blighted, Russia is becoming more dependent on China both economically and geopolitically, and over time that may limit its freedom of manoeuvre.

Both Russia and the West have been left worse off by the period of confrontational relations that began in 2014. This Cold War-like climate has impeded cooperation on shared challenges, raised risks of a military clash, and transformed civil conflict into proxy hot wars in Ukraine and Syria. In Europe, new tensions between Russia and NATO have led to a significant deterioration in the security environment. The US withdrew its last battle tank stationed in Europe in 2013; 6,000 had been deployed in Germany at the height of the Cold War. That trend, which facilitated a gigantic peace dividend for the US and the EU, is now being reversed.[34] The frontier between Russia and the alliance is the locus of a new build-up. The US earmarked US$789m in the fiscal year 2016 and US$3.4bn in 2017 to expand its military presence in East Central Europe, including periodic rotations of armoured and airborne brigades to Poland and the Baltic states. Following consultations at a NATO summit in Warsaw in July 2016, Canada, Germany and the UK now have troops on persistent rotation in the Baltic states. The alliance has also stepped up military rehearsals and manoeuvres, conducting the largest exercise since the end of the Cold War in June 2016.

The NATO moves are a response to genuine threat perceptions of East Central European allies over Russia’s behaviour since 2014. Regardless, Moscow sees in them nothing more than a continuation of the long-running process of NATO moving its military infrastructure closer to Russia’s borders. In response, Russia has announced a build-up in its Western Military District. In May 2016, Russian Minister of Defence Sergei Shoigu said that the army would form two new infantry divisions in the district by the end of 2016.[35] The Kremlin has also responded asymmetrically. Since 2014, Russia has abducted an Estonian intelligence officer; intensified submarine patrols in the North Atlantic; provided moral and, it has been reported, financial support to eurosceptical and anti-EU parties; and engaged in dangerous brinksmanship in the skies and on the seas, with repeated near misses between Russian air patrols and Western jets (civilian and military) and warships.[36]

NATO and Russia have come closest to a direct military clash in Syria. In September 2015, two days after a meeting between Putin and Obama failed to produce agreement, Moscow began bombing opponents of the Syrian regime – its first military intervention beyond the former Soviet region since the USSR invaded Afghanistan. Russian and NATO warplanes were operating in the same theatre but pursuing competing if not conflicting objectives. Less than three months later, a Turkish pilot downed a Russian military jet near the Syria–Turkey border, the first head-to-head clash between Moscow and a NATO country since the Korean War. Several close calls have occurred in Syria since then, including a near miss between US and Russian warplanes in June 2016.

It bears noting that the shattering of US–Russia ties as a result of the Ukraine crisis helped pave the way for Russia’s intervention in Syria. While the facts in and around that war-torn country were the primary motive for the move, it was the breakdown in relations that led Russian decision-makers to believe that only military force could compel Washington to take into account its interests in Syria. And the Ukraine crisis further incentivised Moscow to act in order to break out of the diplomatic isolation that the West had attempted to impose after Crimea and demonstrate that Russia could not be denied its rightful place at the high table of international politics.

The nuclear sabre-rattling associated with the Cold War has returned, although in different forms. In an interview in March 2015, Putin said that he considered putting Russia’s nuclear forces on alert during the Crimea operation. In November 2015, Russia’s state-owned Channel One displayed images of a general studying plans for a nuclear-armed torpedo, ‘Status-6’, a doomsday retaliation weapon that could irradiate the entire US east coast. US Secretary of Defense Ashton Carter has named Russia as a top threat to the US and spared the nuclear-weapons budget from any cuts, despite strict budgetary sequestration imposed by Congress.[37] Furthermore, several arms-control and confidence-building regimes that helped end the Cold War peacefully seem near collapse. This is particularly true of the 1987 Intermediate-Range Nuclear Forces Treaty. Russia and the US have accused each other of violating it, and the current atmosphere in the relationship makes a diplomatic resolution almost unthinkable. In short, there is a very real risk of returning to a time when miscalculations in Moscow or Washington can at any moment lead to the destruction of life on earth.

More broadly, this proto-cold war undermines the possibility of collective action to address global challenges. The international order, such as it is, depends on a basic level of comity among the permanent members of the UN Security Council. That level of comity between Russia and the West is gone and will not return for years, if not decades. Constructive interaction within the UN and beyond will thus depend on the ability of governments to compartmentalise, that is, not allowing confrontation on one front to prevent them from cooperating on another. Thus far, the post-2014 record is patchy. Russian and Western diplomats did work together on the 2015 deal to rein in Iran’s nuclear programme and on the Paris climate change accord of 2016. However, the tensions have led to the breakdown of cooperation on a range of matters that have nothing to do with Ukraine: Moscow’s boycott of the US-led Nuclear Security Summit of March–April 2016 and its renunciation of the Plutonium Management and Disposition Agreement in October 2016, or the suspension of joint counter-terrorism efforts in Afghanistan, to name but a few. Both the US and the Russian governments have been internally divided about the wisdom of compartmentalisation, with those opposed to any cooperation gaining the upper hand as time passes without any prospect of resolving the crisis.

Over and above the billions spent on defence and assistance to Ukraine, the sanctions war has taken an economic toll on the West, though less so than on Russia. One study finds that sanctioning countries had lost US$60.2bn in exports up to June 2015, or about US$3.2bn per month, as a result of the restrictions on trade and financing. The EU has been disproportionately affected, absorbing three-quarters of the loss.[38] Given the parlous state of many eurozone economies, they can ill afford this additional hit; and as a result, the pressure is growing within the EU to roll back the sanctions on the financial and energy sectors that are tethered to Russian implementation of the Minsk II peace plan. If this were to happen despite continuing non-implementation of Minsk II (a not-implausible scenario), major fissures between Washington and Brussels on Russia policy could emerge. Although there is little evidence that sanctions have affected Russian behaviour, they have unquestionably served as an important source of unity between the EU and the US in a crisis that could have easily divided them. A divergence on sanctions would put the current transatlantic consensus on Russia and Ukraine under major strain.

The Ukraine crisis is thus the paradigmatic example of the negative-sum dynamic in post-Soviet Eurasia. Ukraine, Russia and the Western countries involved are worse off than before. And the contest between Russia and the West over not just Ukraine but all the In-Betweens has only picked up steam. Indeed, Russia and the West have doubled down on the very approach to the region that led to the current stand-off. Across the region, a similar dynamic is playing out: neither the West nor Russia can prevail over the other, while the contest between them is doing damage to the In-Between countries themselves.

Although Euro-Atlantic institutions retain a nominal interest in integrating the In-Betweens, especially Ukraine, Moldova and Georgia, Russia has taken steps that effectively make membership impossible, even if these countries were to meet EU and NATO standards. It has transformed separatist conflicts into geopolitical levers, so that the territorial disputes over Abkhazia, South Ossetia, Transnistria, Crimea and the Donbas serve as blocks to joining the Western clubs. Although there is no formal rule preventing the EU or NATO from offering membership to states with disputed borders, neither institution wants to import unresolved conflicts that involve Russia. The EU learned its lesson after Cyprus became a member in 2004; the dispute between the Cypriot government and Turkey over Northern Cyprus threw a spanner in Turkey–EU relations and even NATO–EU relations. For NATO, since the Georgia war in 2008 and particularly the conflict in Ukraine, it has become clear that offering collective-security guarantees to countries locked in territorial disputes with Moscow could lead to direct NATO–Russia conflict.

Thus Ukraine, Georgia and Moldova cannot count on restoring their territorial integrity so long as Moscow considers that allowing them to do so would facilitate their membership of Euro-Atlantic institutions. For them, the trade-off is more or less clear: either forgo the aspirations to join the Western clubs or face de facto territorial partition. Putin is reported to have explicitly presented such a swap to Saakashvili before the 2008 war.[39] Most of the time, the trade-off is implicit. The In-Betweens that adhere most closely to Moscow, Armenia and Belarus, are the only two that remain whole. Azerbaijan, the locus of another perennial conflict, is somewhat atypical. Although the clash with Armenia over Nagorno-Karabakh persists, Russia has not stood in the way of a negotiated settlement. Since Baku was never interested in NATO or EU membership or even integration, this exception proves the broader rule that Moscow exploits protracted conflicts in order to gain advantage in the geopolitical and geo-economic competition with the West in the region.

While Russia can effectively prevent the West from winning this competition by preventing resolution of these disputes, it cannot achieve outright victory. By stoking separatist conflicts, it has alienated elites and publics alike in Moldova, Ukraine and Georgia. Its integration offerings remain far less appealing to decision-makers in these countries. Even with its close ally Armenia, Moscow had to coerce Yerevan into EEU membership. Of course, the In-Betweens themselves lose the most from these territorial disputes. Pervasively insecure, these grey zones present numerous challenges, ranging from contraband to human-rights violations.

Along with blocking resolution to festering conflicts, the stepped-up contest between Russia and the West has hamstrung the transition from communist rule in the In-Between countries. These states all suffer, to varying degrees, from a similar set of post-Soviet pathologies: dysfunctional institutions of modern governance; partially reformed economies that lack functioning markets; weak or absent rule of law; ‘patronal’ politics based on personal connections and dependence rather than ideology or coherent programmes;[40] pervasive corruption; and a close link between political power and control of major financial and industrial assets.[41]

Viewed in comparison with the post-communist countries that joined the EU in 2004 (Poland, the Czech Republic, Hungary, Slovakia, Estonia, Latvia, Lithuania and Slovenia; hereafter, the EU Eight), three of which were Soviet republics, the In-Betweens’ disappointing performance after 1991 comes into vivid relief. This can be seen in Figure 1, which shows the 2014 marks for the In-Betweens and a composite score for the EU Eight using measures of governance compiled by the World Bank’s Worldwide Governance Indicators project. Figure 2 compares them using Transparency International’s 2015 Corruption Perceptions Index. With the partial exception of Georgia, all of the In-Betweens score far lower than the EU Eight on all seven metrics. Figures 3 to 5 indicate the discrepancies in economic governance and democracy since the transition from communist rule began. The European Bank for Reconstruction and Development’s competition policy assessment (Figure 5), which measures efforts to reduce abuse of market power and promote a competitive economic environment, gives the In-Betweens and the EU Eight broadly similar marks in the early 1990s. By 2000, there is a significant gap, and it only grows over time. And while Freedom House’s political rights and civil liberties scores (Figures 3 and 4) deviate slightly at the start of the transition, that has now become a yawning chasm. Figure 6 demonstrates the meagre economic benefits populations have experienced since the end of central planning. Only Belarus (thanks to generous Russian subsidies) and oil-rich Azerbaijan are significantly better off than they were in the final years of the Soviet Union in terms of GDP per capita. Moldova and Ukraine are poorer today than they were when the transition began. When compared with Poland, Ukraine’s underperformance is particularly striking. Ukraine started with a higher GDP per capita, and it is now at less than one-third of Poland’s.

Figure 1: Governance

Figure 2: Corruption perceptions

Many factors contribute to these disparities. The contest between Russia and the West, while by no means the only one, did feed dysfunction in post-Soviet Eurasia in important ways. Firstly, it has helped sustain what Joel Hellman termed a ‘partial reform equilibrium’ in many of these countries.[42] Hellman noted that the post-communist countries that did not enact sweeping reforms early in the transition had, by the late 1990s, economies that concentrated gains among a small group of ‘winners’ at a high cost to society as a whole. The winners owed their wealth to the distortions and rents spawned by partial reform, and they used their economic power to ‘block further advances in reform that would correct the very distortions on which their initial gains were based’.[43] Hellman’s partial reform equilibrium has persisted in all six In-Betweens to the present day. Russian and Western willingness to subsidise political loyalty have played a part. Russia pours money into Belarus through waivers of oil-export tariffs and below-market gas prices; it was willing to demonstrate similar largesse to Ukraine under Yanukovych. The West has also played this game, often in breach of its policy of linking assistance to meaningful reform. Ukraine’s current US$17bn IMF programme is its tenth since independence; all previous ones have failed, in the sense that the Fund suspended lending because Kyiv did not implement the required reforms. Within 18 months of signing the current one, the IMF had to amend its by-laws to be able to continue dispensing funds. The notoriously corrupt Moldova would surely have gone bankrupt more than once without its EU lifeline.[44] Following the 2008 war, Washington committed US$1bn in assistance to Georgia, a country of fewer than 5m people. These financial infusions, spurred on by the Russia–West regional contest, made it much easier for governing elites to postpone structural reform indefinitely.

Figure 3: Political rights

Figure 4: Civil liberties

Figure 5: Competition policy

Figure 6: GDP per capita

Zero-sum policies on the part of Russia and the Western powers also exacerbated pre-existing political and ethnic cleavages in several of the In-Between states. In Ukraine, as noted earlier, the confrontation has mapped onto, and intensified, internal divisions over identity. Before the crisis, Ukrainians were split down the middle when asked if they would prefer membership of the EU or the Customs Union. The geographic breakdown within Ukraine was stark, with 73% in the western reaches of the country favouring the EU but 62% in the south and 46% in the east favouring the Customs Union in a 2013 poll.[45] After the Crimea annexation and the war in Donbas, the balance shifted somewhat, but regional schisms regarding NATO and EU membership remain.[46]

In Moldova, there are multiple axes of cleavage. Transnistria residents, survey research has consistently revealed, would prefer to become part of Russia than to reunify with Moldova.[47] Even in government-controlled territory on the right bank of the Dniester River, Moldovans are divided; as of October 2015, 45% favour joining the EEU over 38% who prefer the European Union, and the EEU has been gaining ground.[48] The November 2016 election of a president who favours closer ties with the EEU shows the strength of pro-Russian sentiment, although his narrow margin of victory demonstrates the persistent divisions in Moldova’s society on these matters. The Gagauz are also far more Russophile than the population as a whole.[49] As in Ukraine, being caught up in the Russia–West battle royal weakens social cohesion and sharpens ethnic and political divides, holding back market reforms and damaging fragile democratic institutions.

In Georgia, there have been similar gradients in opinion between the separatist territories and the rest of the country. Georgians in government-controlled areas are by a long shot the most pro-NATO and pro-EU in post-Soviet Eurasia.[50] South Ossetia residents are overwhelmingly in favour of becoming part of Russia, and Abkhazians are strongly pro-independence and anti-NATO.[51] Even before the 2008 war, these rifts bedevilled activities to reconcile grievances stemming from the conflicts of the early 1990s. Today, Russia’s determination to prevent Tbilisi from restoring control over the breakaway regions prevents any such activities from even getting off the ground. Until the late Soviet period, Georgians and Abkhaz lived in Abkhazia in relative harmony. Following the ethnic cleansing of Georgians from Abkhazia in 1992–93, a full generation of Georgians and Abkhaz have grown up without contact with each other; it is not likely that their children and grandchildren will have any such opportunity.

The geopolitical, geo-economic and geo-ideational tussle that permeates the In-Betweens has also warped party politics and supplanted democratic discourse with demagoguery. In Moldova and Ukraine, parties and leaders have declared themselves pro-Western to capitalise on popular desire for good government, which many citizens associate with the West. When in power, however, they all too often have proven to be as corrupt and incompetent as their so-called pro-Russian opponents.

Additionally, the contest for influence between Russia and the West has hobbled US and EU efforts to further reform in post-Soviet Eurasia. This is partly a function of practicalities: when geopolitical, geo-economic and geo-ideational issues are at the top of the agenda, other problems fall by the wayside. But at times when the contest is particularly intense, Western policymakers have deliberately downplayed human rights and democracy-related problems for fear of pushing countries into Russia’s embrace. EU backpedalling on conditionality with Yanukovych is one example discussed earlier. The tepid Western reaction to the crackdown on protesters in Tbilisi in November 2007 is another. As Human Rights Watch noted in its report on the incident,

Since the Ukraine crisis, this problem has become more acute. As Nelli Babayan notes, ‘the bargaining power of some [regional states] vis-à-vis the West seems to have increased, although their compliance with the rules and norms promoted by the West [has] not meaningfully changed or [has] in some cases even decreased’.[53] Belarus is a case in point. In February 2016 the EU rolled back sanctions on President Lukashenko and his coterie as well as several state-controlled firms. EU officials will admit that in doing so they ignored Minsk’s non-compliance with Brussels’ stated requirements regarding human rights, on the reasoning that Belarus had become a ‘battleground of powers’.[54] The US gladly joined the EU effort to placate a man former secretary of state Condoleezza Rice had once called ‘the last dictator in Europe’. In March 2016 a senior Pentagon official travelled to Minsk to meet with Lukashenko and restart a military-to-military relationship that had been on ice for nearly a decade.

All of this saps the West’s ability to push the region’s governments to reform. Soft-pedalling criticism of rulers who pledge fealty also feeds a widespread belief that public censure regarding human rights, democracy or reform is merely an instrument to punish disloyalty. Inconsistency in airing such critiques across countries or over time in particular countries undercuts those officials who do speak out about abuses or push their interlocutors to reform. It is easier for the latter to brush off such concerns if they receive mixed messages or can point to double standards. By treating the In-Betweens as spoils to be won, the West also gives all the region’s leaders a foil against almost any expression of disapproval: the threat of turning to Moscow. In the case of Ukraine post-2014, where such a threat is no longer credible, Western states have been reluctant to withhold public statements of support and financial assistance on the logic that the country cannot be allowed to fail. It is almost as if Ukraine’s rulers are holding their own country hostage and extorting ransom.[55]

The Cold War was brought to a peaceful conclusion by statesmen impelled by a sense of urgency, a feeling that they were ‘running against a clock’ and that the window of opportunity for decisive action might soon close. The regnant mood in the current crisis is one of resolve to maintain entrenched positions, not urgency about finding a solution. The frozen conflicts of post-Soviet Eurasia, up in number with the addition of Crimea and the Donbas, are mirrored in policymakers’ frozen thinking. Even a well-meaning OSCE Panel of Eminent Persons on European Security as a Common Project, commissioned in December 2014, came up with little that was new. The final report of the panel mostly rehearsed well-known Western and Russian narratives of the post-Soviet period.[56]

This historical moment is different from that of a generation ago. There is something to be said for caution, honouring the ‘Do no harm’ principle. But in this case caution has with time settled into stale and unreflective policies. It is high time to revive the debate over the future of post-Soviet Eurasia; to reconnect it with realities on the ground; and to move past summations of the problem, and of the misbehaviour of this or that side, to innovative and realistic proposals for moving past the negative-sum game.

Contestation over the region began unplanned, and remained a low-key affair for more than a decade after the end of the Cold War. With the passage of time, the main external actors became more purposive and disciplined in seeking unilateral advantage. Rather than developing the habit of cooperating to mutual benefit, they regularly aimed for wins at the other’s expense. Instinctual counter-escalation occurred in response, as governments doubled down on their policies, even when those policies were ill-considered and counterproductive. The regional players became less capable of playing the game with nuance, mostly because the outside powers were more likely than before to demand fully fledged commitment to their point of view.[57] All in all, zero-sum approaches to geopolitics, geo-economics and geo-ideas stood in the way of mutual accommodation. In turn, they also produced negative-sum results. State boundaries have been redrawn and animosities and even hatreds aroused, while relations among global powers are in tatters.

The sine qua non for a reassessment must be an acknowledgement that both Russian and Western policies toward post-Soviet Eurasia have reached a dead end. For Russia, that means recognition that the zero-sum approach to its neighbourhood has been costly in the extreme, risky and self-defeating. The recurrent resort to coercion, be it political, military or economic, has alienated countries that might otherwise have naturally been drawn to Russia. The US and the EU must acknowledge that, despite success in East Central Europe, further application of the solution of the 1990s – the extension of Euro-Atlantic institutions eastward toward the Russian border, but not across it – is no longer viable. This prefab paradigm, mechanical growth of pre-existing institutions without negotiating terms among all affected parties, including Russia, and without compromises, is now unworkable. Continuing with the status quo will perpetuate instability and poor governance in the states of the region and a long-term Cold War-like atmosphere in West–Russia relations. The Ukraine crisis that has been with us since 2014 amply demonstrates this reality.

One of the ironies of recent frictions is that at this juncture neither NATO nor the EU is in a position to offer full-scale membership to any of the In-Betweens. This would be the case even if there were no frozen conflicts in the region, and even if the In-Betweens met the standards of good governance, functioning markets and democratic practices required for either EU or NATO membership. NATO member states are at odds on extending security guarantees to countries that Russia habitually threatens and sometimes invades. The EU is in the deepest crisis of its existence, given the eurozone mess, economic torpor, unruly waves of migration from the Middle East and North Africa, terrorism and Brexit. With its survival in question, adding new members is not a priority.

Recognising the reality that the policy of institutional enlargement in post-communist Europe and Eurasia, its past successes aside, has run its course does not mean that the West must accept Russian domination of its neighbours. In fact, the further enlargement of Russia-led institutions in the region is not a plausible solution either, regardless of what policy the West adopts. Those already in the Russian institutional fold remain there either under duress or for lack of better options; most would likely run for the exits if they could.[58] There is little support anywhere else for the Russian blueprint for regional governance.

Western and Russian policymakers would also be well advised to rethink the geo-ideas that often underpin their policies. It is not tenable for the West to insist on the right of all countries to make their own choices while at the same time being unable or unwilling to grant them those choices (like NATO and EU membership) or to take responsibility for the consequences of choosing. The EU is poorly served by the pious assertion of normative hegemony – the inherent superiority of its systems and structures – in an area where that hegemony is contested, both by Russia and by the reform-allergic systems of the In-Betweens.[59] Russia’s concept of indivisible security often boils down to a yearning for an accord among great powers, Yalta-style, that would reinforce rather than remove divisions in the region. Such a deal would not work even if it were agreed to, which it will not be. The Kremlin’s idée fixe that Russia needs to be the leader of a pack of post-Soviet states in order to be taken seriously as a global power broker is more a feel-good mantra than a fact-based strategy, and it irks even the closest of allies.

The towel should also be thrown in on the geo-ideational shadow-boxing over the Russian assertion of a sphere of influence in post-Soviet Eurasia and the Western opposition to it. Would either side be able to specify what precisely they mean by a regional sphere of influence? How would it differ from, say, US relations with western-hemisphere states, or from Germany’s with its EU neighbours? Clearly there are differences, but they are rarely specified. Is it realistic to think that Russia, an order of magnitude weightier than the states at its doorstep, would have no influence over them? And is it reasonable to expect any country of Russia’s global significance to observe from the wings as geo-economic and geopolitical blocs closed to it gradually absorb many of the countries on its borders? As Charles Kupchan, who has served as the Obama administration’s senior National Security Council official for the In-Betweens, once wrote, ‘The United States would hardly sit by idly if Russia formed an alliance with Mexico and Canada and started building military installations along the US border.’[60]

Russia’s insistence that the In-Betweens and the Central Asians constitute its sphere of influence, or its zone of ‘privileged interests’ as Dmitry Medvedev put it, is as devoid of meaning as the fervent Western refutation of it. What exactly are privileged interests? Is the privilege asserted absolute, relative or at the margin? Is Russia truly claiming that it alone will have final say in the area, and would its writ be only over national security or also over domestic government, social policy and so forth? Are the ways the Kremlin chooses to exercise its influence not as important as the fact of influence itself? What would Moscow presume to do about the preferences of the states in this ‘sphere’, and especially those that have since 1991 sought alternative partnerships to balance against the regional hegemon? Even if Western leaders were to shed their qualms and seek a grand bargain with Russia, can any deal that might result really function if it does not take these countries’ views into account?

Breaking the taboo on open-ended, precondition-free dialogue on the regional order is the essential first step if we are to mitigate the ruinous geopolitical, geo-economic and geo-ideational competition and end the Russia–West confrontation that has reached such dangerous levels in recent years. For the West, allowing the ghosts of Yalta to stand in the way of such a conversation with Russia is negligent and in the final analysis self-defeating. For Moscow, it is untenable to expect that its neighbours can be forever excluded from a dialogue that will have direct implications for them.

Holding such talks in the current atmosphere of mistrust, mutual recrimination and fear-mongering will require a significant investment of political capital. And the process of moving beyond current adversarial approaches to the region and finding common ground will take time. For this process to succeed, all parties would also have to scale back their maximalist objectives and be prepared for compromises that will leave no one fully satisfied. The West needs to cease holding out for Russia to surrender and accept its terms. Russia must stop pining for the good old days of great-power politics, be it the Big Three of 1945 or the Concert of Europe of 1815–1914, and accept that its neighbours will have to have a say in any agreement that affects them. The neighbours should stop seeking national salvation from without, and recognise that it will be up to them, first and foremost, to bring about their countries’ security and well-being.

If such talks ever take place, they could consider new institutional arrangements for the In-Betweens that would serve as a bridge between the Euro-Atlantic institutions and their Russia-led counterparts.[61] Such an agreement would go a long way toward moving past the negative-sum game by both diminishing great-power rivalry in the region and alleviating some of the challenges faced by the In-Betweens. The following is a preliminary list of criteria the new arrangements would have to meet in order to do so:

• They must be acceptable to all concerned parties.

• Priority should be given for the foreseeable future to economic growth, reform and modernisation in the In-Between countries. The states in question should be allowed to pursue ties with both the EU and the EEU as they see fit, permitting multi-directional integration rather than insisting on obligations that make it impossible.

• Parties to the negotiations should pledge to seek mutual agreement before pursuing any change to the region’s institutional architecture, and should commit to regular, inclusive consultations. This would rule out attempts to make unilateral changes to the status quo.

• All parties must recommit to respect each other’s sovereignty and territorial integrity, and to refrain from the use of force in dispute resolution. As part of this process, Russia would commit to withdraw its military from areas where sovereignty is not disputed by any party, such as Transnistria and the Donbas, in the fullness of time.

• Rather than make the negotiations contingent on resolution of territorial disputes, the arrangements themselves should create status-neutral humanitarian, security and economic measures in and around the conflict zones. The parties would provide for a guarantee of status neutrality – explicitly putting the core political disputes on the back-burner – so that these measures can be negotiated and implemented without crossing any state’s red lines. Countries with irreconcilable positions would be able to address practical issues affecting inhabitants of the frozen-conflict zones without ceding their positions. Such steps would at a minimum ease tensions and human suffering and might lay the foundation for a political settlement.

Even if these broad criteria are satisfied, a great deal of tough negotiating would be unavoidable. It goes without saying that doing so under the current circumstances will be extremely difficult. But it is not impossible. The Helsinki Final Act, perhaps an even more ambitious undertaking, was hammered out in the mid-1970s, at the height of Cold War tensions.[62] Just as that document did not in itself end the Cold War, the negotiation we are foreseeing, even if it succeeds, could help to alleviate tensions but would not eliminate them completely. And with the In-Betweens present at the table, the ghosts of Yalta would not be awakened.

A necessary first step is for the West to seek explicitly a compromise along these lines as a matter of policy. Russia is unlikely to take this first step, in part because many in Moscow still feel spurned after Medvedev’s attempt in 2008–09. But it is worthwhile testing the proposition that Russia would respond positively to an offer of talks.

Taking that first step does not require the West to bow to Russian demands. The proposed bargain would require all parties to make painful compromises. The West would have to acknowledge that the model that worked so well in East Central Europe is not going to work for post-Soviet Eurasia. Russia would have to strictly adhere to the limits the new arrangements would impose on its influence and to forswear further military encroachment on its neighbours. At a more basic level, Moscow would have to accept that its neighbours are well and truly sovereign states and that they have to be treated as such, even when it is inconvenient to do so.

Fruitful talks on this set of issues are not just a way to create a modicum of great-power comity. Negotiating new institutional mechanisms for the regional architecture in post-Soviet Eurasia would give the countries of the region a more decent chance than they have had – discounting all the soaring oratory – at security, reform and prosperity. Pursuing the status quo of unbridled contestation is a recipe for continued insecurity, political dysfunction and economic backwardness within the region. We will see repetitions of ruinous scenes like the destruction of Donetsk’s Sergei Prokofiev International Airport, and maybe worse.

The uncomfortable truth is that today neither Russia nor the West believes that the other would be willing to accept a compromise. Those who rule Russia are convinced that the West will forever push to extend its reach right up to Russia’s borders, and even inside them. Many Western policymakers are convinced that Russia for its part is a predator state, absolutely committed to domination of its neighbours.

Sadly, neither of these threat perceptions is completely baseless. Those who hold them can rightly point to numerous reasons why the talks we propose might fail. But the frightening consequences of a lengthy confrontation more than justify an attempt to find agreement. Not making such an attempt – and thus ensuring a new cold war – would be the height of policy negligence. One cold war was enough.