This article originally appeared in Financial Times
The peace agreement signed in Minsk, Belarus, last week regarding eastern Ukraine is undoubtedly welcome. Though fragile, the ceasefire provides some longed-for relief for the population of Donbass. A moment of relative tranquility on its territory is certainly something Ukraine needed desperately for two main reasons.
The conflict was a huge drain on the Ukrainian economy. The currency is collapsing and inflation is growing rapidly. Secondly, President Petro Poroshenko’s popularity is diminishing.
According to a survey conducted by Kiev-based RB Group, Poroshenko’s approval rating has fallen below 50 per cent for the first time. But despite the ceasefire, the Ukrainian leader will be left less satisfied with the final agreement than his Russian counterpart, President Vladimir Putin.
For a start, the border with Russia will remain under the control of the pro-Russian fighters, unless Ukraine amends its constitution to grant wide powers to the eastern regions, including the right to form their own police force and trade freely with Russia. This means that for the foreseeable future Russia can provide support to Donbass, be it humanitarian or military, if it chooses to do so.
Ultimately, eastern Ukraine will remain closely connected to Russia, giving the Kremlin exactly what it wanted – a leverage that can be used at will against Kiev. This ensures that Ukraine is unlikely to move towards NATO or EU membership in the foreseeable future – a major red line for the Kremlin.
Though eastern Ukraine will remain largely aligned with Russia politically, Kiev will have to pick up the pieces economically. Under the agreement Ukraine is obliged to restore banking services to the rebel regions and resume social payments, including pensions and salaries of those on the government payroll. Essentially Russia will be having its cake and eating it.
Whether the Minsk agreement holds will largely depend on whether a long term political settlement can be achieved for Ukraine. Understandably the priority for all sides was to achieve a ceasefire. However Ukraine, Russia and the EU will now have to deal with a much bigger hurdle – the future direction of Ukraine.
After everything that has happened, it is easy to forget that the roots of the Ukrainian conflict lie in the infamous tug-of-war for Ukraine between Russia and the EU during the second half of 2013. Russia remains concerned that the Association Agreement signed between Kiev and the EU will negatively impact on the Russian economy and, perhaps more importantly, irreversibly cement Ukraine in the European camp.
What could lie in store for Ukraine longer-term?
It is a welcome sign that following the recent summit in Minsk, the leaders of France, Germany, Russia and Ukraine have spoken in favour of trilateral consultations between the European Union, Ukraine, and Russia to eliminate Moscow’s concerns regarding a free trade area between Ukraine and the EU.
Nevertheless, these talks may take longer than one sleepless night. Firstly it is worth noting that these talks will only occur if the ceasefire holds long enough. Additionally, the disagreements between Russia and the EU are likely to be starker than during the ceasefire discussions.
Russia will likely push for a neutral Ukraine. This may well be the most logical path to take for Kiev. The country remains heavily linked to Russia through trade and business. In fact, Russia still remains Ukraine’s single largest trading partner. From January-October 2014, Ukraine’s exports to Russia totalled around $8.8bn, while imports were roughly $11.2bn. Additionally, Russia would likely offer financial assistance to a neutral Ukraine, as well as a low price for a winter energy package.
However, Kiev is unlikely to track back from its European course. This would negatively impact Poroshenko’s domestic popularity. At the same time he will need to take into consideration eastern Ukraine in order to prevent the pro-Russian separatists that reject the European path from causing trouble in the Donbass region again.
With the border with Russia under the separatist’s control, there will be nothing stopping the Kremlin from offering assistance to them, be it financial or military. Poroshenko will therefore have a difficult job on his hands balancing the two conflicting interests.
Similar to the Minsk ceasefire agreement, concessions will need to be made by all sides when deciding on the future of Ukraine. Reaching a compromise will not be easy, but last week has illustrated that diplomacy can still work. A diplomatic solution remains the only solution to the Ukrainian crisis.