Research

Research

Ukraine Politics: Minsk, Part II

EU pushes for peace, but success for the long-term looks unlikely, for now

The EU is pushing hard for a peace plan whose conditionality Ukraine will not accept easily, while the US no longer believes in the ability of diplomacy to deter continued Russian aggression, leaving it considering arms shipments to Ukraine. With considerable stumbling points still ahead of the mid-week sit-down in Minsk and significant questions surrounding the viability and feasibility of the peace plan, at this point we do not view a deal as likely.

Last week's rush of high-level shuttle diplomacy set the stage for a pivotal week in Ukraine. Merkel, Hollande, Putin, and Poroshenko are now slated to meet in Minsk on Wednesday, presumably to present a revived Minsk Memorandum ceasefire and peace agreement. The personal involvement of Merkel and Hollande is noteworthy – both in the trips to Kyiv and Moscow last week and their upcoming presence in Minsk this week; the failed Minsk Accords of September 2014 were signed by "diplomats" of questionable authority who lacked the influence to enforce the deal's real implementation (whether its implementation was ever intended is another discussion altogether).

The involvement of Merkel and Hollande, then, would suggest a deal is within reach. Whether the deal is good or bad, and for whom, still remains to be seen. The details of the prospective deal have not been made public, but media reports and various sources suggest it will include at least 4 main points:

1) A 50-70km demilitarized zone around the current front line

2) Autonomy for the Donetsk and Luhansk Oblasts within a federalized Ukraine

3) A guarantee that Ukraine will not join NATO (perhaps halt Euro-Atlantic integration altogether?)

4) No weapons deliveries to Ukraine

Notably, the US will not be present at the Minsk talks. The US and the EU have diverged on their apparent preferred path to resolving the Russian question: the US is reported to have lost faith in diplomatic overtures toward Putin and is seriously considering arming Ukraine, which is a non-starter for much of old Europe. EU FM Mogherini even confirmed in comments that the US may choose to arm Ukraine without support from Europe.

And so, we may be looking at a two-pronged approach to controlling the Russian bear (whether that approach is deliberate is unclear): European diplomacy/appeasement and the US re-arming of Ukraine. The latter may still be conditional on the success of the Minsk II Accords: No re-escalation, no arms supplies.

That brings us to the Ukrainian side, which seems to have snagged nothing more than a spectator's spot at the Grand Chess Match being played on its soil. President Poroshenko will have serious difficulty accepting the non-NATO covenant and being seen by the Ukrainian public as responsible for it. On the other hand, European leaders will be waving IMF financing conditionality in Poroshenko's face as an added incentive, one that will be difficulty to ignore, what with barely more than USD 6bn in the central bank's coffers and the hryvnia being slammed down to UAH 25/USD over the past week.

Moreover, the responsibility for financing the massive rebuild of the Donbas region makes the 2nd point of the prospective deal somewhat bittersweet for Ukraine: damned if you do, damned if you don't. The country is already laboring to secure the USD 20-21 bln it needs to avoid default and keep the economy afloat; the gargantuan reconstruction bill, which is surely a multiple of Ukraine's immediate economic needs, will also need to come from foreign sources.

On that note, although a meeting has been set for Minsk on Wednesday, there are still many stumbling blocks that will endanger the diplomatic efforts over the next two days. Merkel is in North America today seeking US and Canadian support for the diplomatic route, whereas Putin is already making noises about the summit's failure.

In summary: the EU is pushing for a peace whose conditionality Ukraine will not accept easily, while the US no longer believes in the ability of diplomacy to deter continued Russian aggression, leaving it considering arms shipments to Ukraine.

With considerable stumbling points still ahead of the Minsk sit-down and significant questions surrounding the viability and feasibility of the peace plan, at this point we do not see a peace deal as likely. If the deal were to be signed, however, we believe it would only govern a short-term period of relative stability (perhaps enough to placate the SWIFT sanction lobbyists and the arm-Ukraine proponents) before a new re-escalation of fighting.