Ukraine Politics: Putin’s Growing Isolation

Макроэкономика 17.11.2014 Russian President Vladimir Putin went into the weekend’s G20 Leaders’ Summit in Brisbane confident and full of military vigor. He left – ahead of schedule – rebuked by the West. The EU may now be considering additional sanctions on Russia in the wake of last week’s renewed influx of troops and weapons into eastern Ukraine, but the likelihood of those sanctions seeing the light of day will depend on several factors, including the outcome of this week’s Iranian nuclear talks in Vienna, where the West needs Russia’s support. A cold shoulder at the G20 Summit This weekend’s G20 Summit in Brisbane saw Western leaders serve notice to Mr. Putin that continued aggression in Ukraine will only deepen Russia’s isolation internationally. That message alone is unlikely to dissuade Putin from continuing with his Ukraine strategy (if indeed he has one?), but the rhetoric and optics of the weekend summit do reinforce the view of a united Western front standing in opposition to Russia. Heading into the weekend, the news of Russian warships heading to the Australian shores, Russia’s plans to start air patrols in the US’ backyard in the Gulf of Mexico, and fresh evidence of Russian submarine activity near Sweden likely helped strengthen the resolve of Western leaders to present a unified front. Putin’s decision to leave the summit early, citing a long flight back to Moscow and a need to catch up on sleep, brings up the question: has Putin blinked in the face of overwhelming negativity from G20 leaders, including the BRICS nations? On the other hand, Putinists and pessimists alike would counter that Putin is unlikely to lose sleep over a rude welcome from Canadian PM Stephen Harper and Australian demands to apologize for MH17. It is indicative that while Ukraine and global security were not on the official agenda for the summit, the weekend’s economic communiques were largely lost amidst the media focus on Ukraine. And while it remains to be seen whether the Ukrainian crisis re-takes top billing on the foreign policy agenda from the recent focus on the Islamic State, the willingness of Western leaders to deliver a cold shoulder to the Russian president is encouraging. 4th round of sanctions vs. other global considerations At this point, it looks likely that more sanctions are being actively considered and may already be prepared. The renewed flow of weapons and troops from Russia into eastern Ukraine last week passed with the feeblest of diplomatic resistance publically, but Western leaders likely saw the G20 weekend as the right stage for rebuking Mr. Putin’s actions. The last time the West ignored a heightened flow of military equipment and troops into Ukraine in mid-August saw Russia and pro-Russian terrorists mount a serious campaign to counteract the Ukrainian Armed Forces’ summer successes; European and US leaders are unlikely to let this one slide as quietly into the night. The EU Foreign Ministers will meet on November 17 to assess the situation and discuss further steps. Notably, however, those talks come just a day ahead of the start of the final stage of talks in Vienna on Iran’s nuclear program – much will depend on Russia’s willingness to play ball and on the West’s need to secure Russia’s signature on the nuclear deal. Western sanctions on Russia and the decline of crude oil Sources: Bloomberg, Wikipedia, SP Advisors Note: We are not suggesting causality and a direct correlation between sanctions and moves in the global prices of crude oil products; the oil weakness of late is the result of numerous factors that include the sanctions on Russia, a key global producer of crude oil Admittedly, our call for a fourth round of sanctions depends also to an extent on what was discussed between Putin and other global leaders on the sidelines and behind the headlines and what, if anything, Putin promised. His early departure from the Summit suggests consensus and agreeable statements were few and far between in Brisbane. Western sanctions on Russia and ruble depreciation Sources: Bloomberg, Wikipedia, SP Advisors The question, then, is whether the West will find the political will to proactively introduce sanctions (to head off renewed aggression, even though sanctions would be in reaction to last week’s events) or if it will, again, wait to see Russia’s next move. The West’s diplomatic cold shoulder towards Mr. Putin at the weekend will mean little without substantive additional measures. Should those measures not come soon, Putin would likely take advantage of that weakness. Biden to visit Kyiv; arms deliveries not on the table Next week, US VP Joe Biden will visit Kyiv on November 21 to commemorate the first anniversary of the Maidan. Talks are scheduled with President Poroshenko and they will reportedly include preliminary discussions over the possibility of arms supplies in the event of a full-scale invasion; arming Ukraine is, therefore, not currently on the US agenda given Russia’s covert military operation. Coalition talks stall over ministry portfolios On the domestic front, talks over a parliamentary coalition have stalled as the five parties invited to form the government spent the last week battling over ministerial appointments. With little clarity into an opaque process, we will delve deeper into coalition talks, the future government, and prospects for a parliament capable of fulfilling its legislative duties in a future brief.