Did Putin Win in East Ukraine?

September 8, 2014 9:45 AM

Did Putin win in east Ukraine? The short answer is "yes," at least on the geopolitical chessboard. In economic terms, the victory will prove costly to Russia. To understand Putin's victory, it's helpful to reach back 80 years to the League of Nations sanctions imposed against Italy in 1935, in a futile effort to reverse the Italian invasion of Abyssinia (modern-day Ethiopia). Several parallels can be drawn between that episode and the equally unsuccessful effort by the NATO allies to dislodge Russia from Crimea and east Ukraine using economic sanctions.

  • In 1935, Italy was a major power with considerable military strength. The same is true of Russia today.
  • Benito Mussolini assumed dictatorial powers by 1927. Vladimir Putin has governed with an autocratic hand since his election to a 6-year term in September 2011.
  • Mussolini's invasion was acclaimed by the Italian public. Putin's annexations are highly popular in Russia and his approval rating exceeds 80 percent.
  • Mussolini was a master of nationalistic rhetoric, illustrated by his declaration in October 1935: "To sanctions of a military character we will reply with our discipline, with our sobriety, and with our spirit of sacrifice."
  • Not quite as poetic, Putin had this to say in May 2014: "The unipolar model of a world order failed, and this is clear to everyone today, even to those who still try to operate within the familiar reference system, try to maintain their monopoly, dictate their rules in politics, trade, and finance, and impose their cultural and behavioral standards."
  • Dislodging Italy from Abyssinia or Russia from Ukraine rank among the most difficult objectives of a sanctions episode.
  • Yet the sanctions imposed against Italy, after the invasion in October 1935, denied a range of nonessential exports and credits, but did not include a ban on exports of coal, oil, pig iron, and steel.
  • Similarly, the sanctions imposed on Russia after the annexation of Crimea blacklisted several oligarchs and a handful of business firms, but did not interrupt financial transactions nor boycott Russian oil and gas exports to the west.
  • Following the cease-fire between Russian separatists and the Ukrainian government agreed September 5, 2014, the separatists firmly control a chunk of east Ukraine. Crimea is now part of Russia. In May 1936, Italian troops entered Addis Ababa, taking control of Abyssinia until the end of the Second World War.

Given these parallels, it is not surprising that Putin looks just as much a winner in 2014 as Mussolini did in 1936. But important differences are worth noting.

While the League's sanctions were discontinued in July 1936, becoming an earlier symbol of allied fecklessness against Axis aggression, European sanctions against Russia will be stepped up to deny funding to state-controlled oil firms and hit other targets. These and earlier sanctions are likely to remain in place for years, as are Russian counter-sanctions against the West (blocking food imports, among other reprisals). Political and economic permafrost seems the probable outlook for relations between the NATO allies and Russia for the indefinite future.

Whereas Abyssinia marked the high-water of Mussolini's African empire, east Ukraine may not represent the end-point of Putin's policy of "gathering in" of Russian-speaking territories of the former Soviet Union. First there was South Ossetia and Abkhazia in August 2008, then Crimea in March 2014, now east Ukraine in September 2014. Has Putin had a full meal? Or will he now reach for parts of the Baltic states, Belarus, or Kazakhstan?

Whatever Putin's appetite, Russia already faces significant economic losses from his Ukrainian adventures. Crimea alone will cost Russia billions of dollars of economic support, now that its tourist industry is dead. East Ukraine has long been an industrial rustbelt with dilapidated coal and steel industries. Russia must now pour in humanitarian supplies and cash to ensure minimum living standards for the separatists, whereas the rest of Ukraine could benefit economically and could become ever more eager to join the European Union and perhaps even NATO, which would not be a result sought by Putin.

More significantly, even the low-intensity sanctions now imposed by the United States and the European Union will grind the Russian economy. Western firms will hesitate to invest, even when permitted. These direct effects, coupled with the unsettling impact of political uncertainty, will ensure that Russian growth remains in the low single digits for years and possibly, over the long run, erode Putin's political standing from its extraordinarily high level today.