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

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 regional fallout

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.