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Forget the drama: A solution for Crimea

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President Vladimir Putin has disastrously miscalculated and Russia now faces deeper isolation, tougher sanctions and greater economic hardship than at any time since the Cold War. So declared President Obama after the NATO summit in Brussels.

European leaders have sounded even tougher than Obama, though less specific. Some whose countries lie far from Russia - for example, British Prime Minister David Cameron - have whipped themselves into a fury reminiscent of "King Lear": "I will do such things - what they are, yet I know not, but they shall be the terrors of the earth."

For more specificity we must turn to pundits. Geopolitical experts have predicted global anarchy because of the violation of postwar borders; economists have warned of crippling trade wars as European financial sanctions collide with Russian energy counter-measures, and eminent financial analysts have argued that investors and businesses are dangerously under-pricing enormous geopolitical risks.

Yet Putin seems unperturbed by these threats - and financial markets seem to agree with him. Since the Crimean referendum in mid-March, stock markets around the world have rebounded to almost their record highs, and the ruble and the Moscow stock exchange have been among the world's strongest markets. Investors seem to have accepted the Russian annexation of Crimea as a fairly harmless fait accompli, with no major consequences for global prosperity or even for Europe.

Markets do not always get politics right. But in this case there are persuasive reasons for putting more faith in the calm financial judgment than in dramatic headlines and belligerent political rhetoric.

Putin and the markets are probably right because the Russian leader has already achieved all the main objectives he set himself after the overthrow of President Viktor Yanukovich in Kiev. His initial objective was to punish Ukrainian nationalists and their Western allies for ousting Yanukovich by inflicting on Ukraine a serious geopolitical loss and military humiliation. This he has done spectacularly.

More important, Putin has delivered to the Russian people their first territorial conquest since the 1940s. And not just any old territorial conquest - but one with historical and strategic importance, as well as sentimental and cultural resonance for every Russian who had dreamt of retiring in the Crimea, a region whose status in the old Soviet Union could be roughly equated to Florida or the Cote d'Azur. By annexing Crimea, with its spectacular scenery, beautiful resorts and balmy climate (at least by Russian standards), Putin has won enormous popularity with the Russian public.

Perhaps most important, Putin's rapid reaction put a stop to any potential political contagion - where the populist overthrow of a corrupt and authoritarian oligarch in Kiev might have metastasized into a revolutionary movement that could sweep across Eastern Europe all the way to Moscow. Just as the Arab Spring had swept across North Africa to Cairo.

Not bad for a week's work. Now, as he plans for the coming months and years, will Putin prefer to enjoy the fruits of his victory in Crimea? Or will he seek further confrontation with the West by trying to expand Russian territory even more or trying to reconstitute the old Soviet Union?

Though nobody can be sure of the answer, the past behavior, not only of Putin but of most Russian leaders, has been primarily defensive. This makes the first option more likely - as long as the West and Ukraine do not seriously challenge the annexation of Crimea, which Putin must now regard as his greatest historic achievement and his guarantee of popularity and power.

Since all Western leaders recognize that Crimea will not be recovered - and is not worth fighting for - there will soon be no point in seriously challenging Russia's annexation, any more than the West challenges Israel's annexation of Jerusalem. Once Western pressures subside on Crimea, Russian threats to intervene in the rest of Ukraine will likely disappear.

That, in turn, will mean no tightening of Western sanctions against Russia. For despite the belligerent tone of this week's remarks from Obama and other Western leaders, their content was quite conciliatory. They all agreed that sanctions would be tightened only if Russia takes further action against Ukraine or other countries. If that doesn't happen - and there is no reason to think it will - the current cosmetic sanctions could remain in place forever without causing any major inconvenience to either side.

Once this stalemate is acknowledged, as it presumably will be after a few months of posturing, all sides in the conflict will have strong incentives to agree on a mutually satisfactory resolution. Putin will want to restore relations with the West. Ukraine will desperately want to restore Russian trade and avoid resentment among the Russian-speaking population. And the West will want Russian cooperation in stabilizing Ukraine - since Russian hostility would permanently cripple the Ukrainian economy, making it far too expensive for the European Union to support.

Luckily, the main conditions of a mutually satisfactory deal are clear and have in fact been suggested by all sides at different times. It includes a new Ukrainian constitution with decentralized powers for the Russian-speaking regions, de facto, if not de jure; acquiescence in Russian control of Crimea, and agreement that Ukraine will not be economic ready or militarily eligible to join either the North Atlantic Treaty Organization or the European Union for at least a decade or two.

Why, then, is almost nobody predicting such a conciliatory, negotiated resolution to the Ukraine crisis? The main reason is one I have often noted in this column, when discussing far more mundane battles over monetary and fiscal policy in Washington. Politicians, the media and even financial analysts often have vested interests in dramatizing confrontation - the media because battles are more interesting than negotiations; politicians because confrontations makes them seem tough; analysts because high drama justifies high pay.

Over-dramatizing is achieved through a simple rhetorical device. Political speeches and media stories ignore the events that probably will happen - like those described above - because these are deemed too dull. Instead politicians and commentators focus on the exciting and dramatic events that could happen in some improbable scenario, such as an all-out war between Russia and Ukraine, while ignoring the low probability.

But if high drama is more important than high probability, why bother with Putin, Obama and Yanukovich? Why not watch a truly great drama like "King Lear"?

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That, in turn, will mean no tightening of Western sanctions against Russia. For despite the belligerent tone of this week’s remarks from Obama and other Western leaders, their content was quite conciliatory.

In short, Obama tried to bluff when he was holding nothing and Putin called the bluff.

The bottom line here is that the U.S. and European allies (along with Aussie) have been routinely invading other countries for the last 10 years or so (Iraq, Afghanistan, etc.) and didn't have a legal or moral leg to stand on here.

-5 ( +2 / -7 )

an interesting read to a situation that was not driven by the west.

it was driven by Ukraine - who of course do not wish to lose thier country, do not like being left isolated by the west- which is where they are right now. Half the army and navy cannot fight- sure they are now back in Ukraine but they were not allowed to take thier families- so the families had to stay in Crimea.

the west will not sell arms (Jets, Ships, Tanks or small arms) to the Ukraine- and everything in Crimea now belongs to Russia.

this will not be the end, it may pause for a bit- but the current push is for the ukraine to allow for free movement of troops through ukraine to trans-deniester. So what would be the feeling of Japan if china demanded movement of troops at will through the islands without notification to get to another country?

-2 ( +0 / -2 )

So - Putin's "first territorial conquest since the 1940s" is the re-absorption of a barren peninsula that most recognize as Russian territory anyway, done at a very high cost in international prestige. Question here:

“I will do such things - what they are, yet I know not, but they shall be the terrors of the earth.”

This could be rewritten as, “I will do such things - what they are, yet I know not, but they shall be the savior of the Crimeans.” A recent article listing Putin's promises for modernizing that far-flung peninsula made me laugh. A full eighty percent of Russia's exports are raw materials; with Europe not so Russophilic, Russia will have to turn to China, which will no doubt use their new-found power to bargain hard. Where will the money to connect Crimea to Russia come from?

-1 ( +0 / -1 )

Somehow "the populist overthrow of a corrupt and authoritarian oligarch in Kiev" followed by Putin's invasion to "punish Ukrainian nationalists" isn't drama enough for Anatole Kaletsky.

Mr. Kaletsky seems satisfied with two decades of financial weakness in Ukraine (largely due to the corrupt and authoritarian oligarch President Viktor Yanukovich) as a necessary result in what he calls a "conciliatory, negotiated resolution."

If Mr. Kaletsky wishes to analyze the corrosive effect from rabid partisan pundits of television and the posturing of political ideologues that is a rich field for examination. However, the dangerous and reckless land grab Putin has executed isn't theater. Putin's Russia remains wildly corrupt and the people of Ukraine are paying an enormous price for trying to throw off the Russian yoke of corruption practiced by Viktor Yanukovich.

-1 ( +0 / -1 )

Territorial integration of Crimea and the Russian Republic is historically, economically, demographically, and democratically justified. The Russian naval base at Sebastopol represents the only anchor economic support for the region. The population is almost exclusively Russian speaking descendants of Russian speaking ancestors. This is not like the situation of the iron curtain Soviet satellites countries which were not linked to Russian history or culture but effectively became captives at the end of WWII. The Kiev based Ukrainians who want their nation to look west and foster an EU identity should see this as their chance. Ukraine could never "become" European and have a Russian military base. One or the other. Western economic and political sanctions are unnecessary and wasteful as a bulwark against further territorial shifts since they won't happen anyway. If Russia responded in kind and cut off all natural gas exports to Germany even for a year the entire EU economy would be knocked to its knees. Global commodity prices would skyrocket and resource rich Russia would benefit. Crimea is not (and does not want to be) the backyard of the Ukraine the EU or the US.

0 ( +0 / -0 )

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