BY
If the summer has not been hot enough, both by
way of weather and political, diplomatic, economic and military engagement, the
Autumn is likely to get far hotter even as the summer sun fades.
31st August will see the constitutional
amendments relating to “decentralisation” strong-armed through the Rada,
delivering nothing like the outcome The Kremlin envisaged. It’s
interpretation of what Minsk II required of Ukraine being roundly rejected by
Ukraine, the USA and the Europeans alike.
The current up-tick in fighting on the Donbas
front line, the most visible and widely reported of the numerous “hot fronts”
being employed to display Kremlin displeasure. Whilst it may be able to
console itself that the “separate law” the constitutional amendments mention
with regard the Donbas is still in some way to play for, if a strong Ukraine
emerges over the next 5 years or so, legislatively it is far easier to repeal
the “separate law” than it is to change the constitution again to remove any
detailed constitutional status for the Donbas.
It is a matter of processes and Rada numbers
when it comes to the ease of legislatively doing things – or indeed, and far
more to the point, undoing things at a later date.
It remains to be seen whether the envisaged 1st
September ceasefire will hold or not. Recent history would suggest not,
but sooner or later one will (more or less) occur. Nevertheless, as it is
far from certain that it will hold, the remainder of this entry will be written
in line with consistent recent historical ceasefire failures. (To be
blunt, either prior to immediately after any ceasefire takes hold, we could
perhaps expect to see Zakharchenko “sidelined” somehow and replaced.)
Presumably the release of the MH17 report in
mid-October will be met by a defiant, albeit perhaps brief, up-tick in violence
by the Kremlin and Kremlin sponsored proxy forces – as well as a renewed
diplomatic and “troll” effort to mislead and misinterpret anything the Kremlin
finds distasteful/unhelpful within the text. By now it will have an
advanced copy of the report, thus its spin and rebuttal strategy is likely to
be well advanced too.
Ukraine will also have an advanced copy of the
report (as will other capitals), is Ukraine (or other capitals) as
PR/media/diplomatically prepared for its publication as The Kremlin will be?
Skipping past the local elections and the
opportunities for Kremlin subterfuge and sabotage to insure Ukraine appears
unchanged by way of democratic progress, and loudly condemning any democratic
failures (imaginary or real) internationally – perhaps sabotaging the election
process is not necessary considering the vested interests in Ukraine that will
corrupt the process for the sake of their own survival and/or influence – the
next “hot issue” will be a resolution to gas prices and pricing to and through
Ukraine as brokered with the EU.
With oil currently dropping and no significant
increase anticipated for quite some time, Ukraine will be keen on getting a gas
price of less than $200 per unit after transit fees to Europe have been
deducted.
Oil and gas pricing has a certain linkage within
the Kremlin petro-state machinery – and both Russian gas and oil State
companies are seeking subsidies and loans from the Kremlin. Anything
approaching a current market price, considering the grotesque mismanagement of
Messrs Sechin and Miller, would dictate actual losses once corruption,
managerial ineptitude and Kremlin politicking with their business unit
economics take their collimative effect.
How good a gas deal is reached remains to be
seen. On the one hand, The Kremlin can spin any good deal for Ukraine as
a market driven business transaction free of political linkage to its domestic
constituency. On the other, all know that Gazprom, Rozneft et al., are
simply extensions of the Kremlin/State and are often little more than tools on
the political tool kit. Their economic wellbeing secondary to Kremlin
realpolitik.
It is claimed by those who (should) know, a deal
will be reached by the end of October/early November. We will see.
Whether the lead up to, and aftermath of the gas deal negotiations is
accompanied by increased military front line engagement will depend upon the
Kremlin desire to separate what can be feasibly spun as an entirely business
arrangement from the politicking over Ukrainian future direction out of the
Kremlin orbit.
Any “Normandy Four” or “Contact Group” meetings
will continue to see the preceding and following notable up-tick in front-line
engagements and attempts at diplomatic framing. It would appear that the
Kremlin still believes an up-tick in the violence and threats via its proxies
of taking more ground, constitutes it “negotiating from a position of
strength”. It also appears to believe that when those negotiations do not
reach its desired outcomes, punishment at the front line will weaken rather
than entrench the Ukrainian negotiating position.
The “elections” within the “DNR” and “LNR” will
naturally not be recognised by anybody – perhaps not even The Kremlin
officially. It may simply “take note” of the results and try to
use them to try and force Kyiv (or have other capitals try and force Kyiv) to
enter direct dialogue. Either way it seems entirely unlikely Kyiv will
enter into direct negotiations from elections that are not conducted in accordance
with Ukrainian law – quite rightly too. This unless, as
inferred in yesterday’s entry, a special electoral law is to appear for the
Donbas which would naturally therefore be according to Ukrainian law (or at
least a law of Ukraine) that ultimately then facilitates direct dialogue.
A defiant up-tick in front line engagement once
Kyiv (and everybody else) refuse to recognise those elections would appear
probable if/when any 1st September ceasefire fails.
Another issue will be the $3 billion bond due to
The Kremlin at the year end, a bond that Ukraine seeks to restructure.
At the time of writing, it is particularly
difficult to see The Kremlin agreeing to this, for no other reason than its
domestic audience expects Russian “victories” rather than the Kremlin handing
“victories”, no matter how small, to Ukraine. Notwithstanding that, the
war the Kremlin is conducting against Ukraine is not just military. It is
political, diplomatic and economic.
For all the fluffy thinking about various ways
to delay the Ukrainian payment – for example not paying and reducing the $3
billion from the war reparation claims Ukraine has and continues to submit
against Russia etc., the bond is legally due.
If restructuring is not an option, Ukraine will
either pay – or not.
If it pays the Kremlin, then there will be the
perverse situation of financing a war against itself. If it doesn’t and
defaults, the question is how markets and other lenders will react.
There is then the key dates of 31st December
2015 and 1st January 2016.
At the time of writing there seems very little
likelihood of The Kremlin meeting the Minsk II agreement terms. It has
shown no desire to do so thus far – its only interest in Minsk II being that
Ukraine unilaterally meets all conditions that favour Kremlin outcomes in the
hope of pocketing them and then making yet further onerous demands, or simply
failing to deliver its side of the agreement.
Few realistically believe (or have ever
believed) that control of the internationally recognised Ukrainian border will
returned to Ukraine by the year end, particularly in light of the failure of
the Kremlin to force its interpretation, and thus desired outcomes, into the
new text of the Constitution of Ukraine.
Thus the year end in all probability (although
it cannot be ruled out that there may be a rapid change of policy by somebody
somewhere) will come and go, and the date within the Minsk II agreement pass
without successful conclusion.
An increase in front line violence seems very
likely in an effort to try and force new concessions from Ukraine in a Minsk
III agreement, yet there seems very little likelihood that any Minsk III would
gain further concessions from Ukraine. It no longer needs to buy time by
conceding space.
A major offensive by the Kremlin, despite
posturing, does not seem particularly likely either – although it cannot be
ruled out.
Thus any negotiations regarding Minsk II when
deadlines expire will probably related to new deadlines (that will probably
come and go once more) and a heated front line during those negotiations.
It should be noted that despite the numerous
mentions of increased military action at the front line, that does not
necessarily translate into territorial gains – or indeed the desire for
territorial gains from a Kremlin perspective. It does not want or need
The Donbas for any other reason than to use it as a Trojan Horse within Ukraine
to control, or at the very least, frustrate the Ukrainian future and stop the
trajectory from Moscow’s orbit.
Thus far that plan is failing.
The other major deadline that will arrive,
without any major concessions to The Kremlin will be the full implementation of
the EU-Ukraine AA/ DCFTA on 1st January. This seems very likely to see
The Kremlin simply put a ban on (almost) all imports from Ukraine in
retaliation – probably simultaneously.
Whilst the Ukrainian military is charged with
holding the line against Russian troops and Kremlin proxies, the next three
months (and into early 2016) are going to be defined by a significant battle of
governance and the holding of political nerve.
All of that being said, the biggest battles for
Ukraine still remain the internal battles – Rule of law, structure and
sustainability.
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