The war in Ukraine and its consequences to Romania and the rest of the world

Student: Eduard MIHES, Xth A grade; Coordinating teacher: Alina POPA; School: “Samuil Vulcan” National College

Why has eastern Ukraine returned to full-scale conflict?

                Fighting started in April 2014 and raged for months until Ukraine and the separatists came to a deal on 5 September to halt the violence and free prisoners. But the ceasefire never held entirely. Although the intensity of the conflict subsided, the clashes never really ended and both sides used the relative lull to build up their forces.

            The battle raged for the control of the ruined airport at Donetsk, with Russian-backed rebels trying to seize a strategic and symbolic asset.

            A new rebel push began with the start of the year, culminating in the capture of the airport's main terminal on 22 January.

 Why did the ceasefire break down?

                Each side accused the other of tearing up the peace deal.

            For the government, it was the rebels' decision to hold their own local elections in November 2014, in defiance of the Kiev authorities.

            The separatists, however, were unhappy that the government had responded by saying it would scrap the special status of their two regions, Donetsk and Luhansk.

            Among the terms of the truce there were a commitment to pull back heavy guns from the front line by at least 15km (9 miles), a release of prisoners and an agreement for international observers to monitor the truce and a buffer zone on the Ukrainian border with Russia. Ukraine would also grant wider self rule to Donetsk and Luhansk.

Why did the fighting start in the first place?

            In April 2014, pro-Russian activists seized control of government buildings in towns and cities across the Donetsk and Luhansk regions.

            The events were a repeat of what had happened in Ukraine's Black Sea peninsula of Crimea.

            “The aggression against Ukraine has become one of the worst setbacks for the cause of democracy in the world in years,” Ukrainian President Petro Poroshenko told a joint session of Congress in September. The Moscow-backed assault on Ukraine’s stability and sovereignty threatened global security everywhere, he warned, and the Ukrainian army — “underequipped, and often unappreciated” — was desperately trying to forestall the nightmare that a Russian victory would mean for all of Europe. To do so, it needed weaponry, Poroshenko stressed. While Ukraine appreciated nonlethal assistance, such as blankets and night-vision goggles, he mentioned that“one cannot win a war with blankets.”  

(Donetsk airport)

Who has the upper hand now?

            The rebels certainly have made big gains, with the capture of Donetsk airport and advances around Debaltseve.

            The airport gave them a strategic asset a few miles from the centre of Donetsk city, their biggest stronghold.

            The control of what one commander called the "Debaltseve tongue" would give them access to two main roads and a railway hub that leads into the two rebel regions.

            Even before the airport had been captured, Ukraine accused separatist forces of seizing more than 500 sq km (194 sq miles), mainly around Debaltseve and Mariupol, but casualties on both sides have been heavy and journalists say the separatists have suffered major losses.

             However Ukrainian forces made significant gains last summer, many of which have not been reversed.

 What consequences does this war have for Romania?

            With limited exports to Russia and Ukraine, a relatively low dependency on Russian gases and with no connections to the Romanian banking sector and the financial institutions from the two countries, Romania is not exposed to significant risks in the recent geopolitical context.

            Any eventual economical restrictions or disruptions of commercial exchanges could affect Romania's exports or its gas supply, but the risks generated by the tensions in Ukraine regarding Romania seem more "manageable"  according to the "Romania: Recent Macroeconomic & Banking System Developments" presentation made by the NBR governor. The presentation was held at the Meeting of the Asian Ambassadors, last week.

            Romania's exports to Russia and Ukraine represent only 4.7% of its total exports, and so, with a decrease of 10% of those exchanges would reduce with 0.16% the growth rate of Romania's GDP.

            At the same time, whilst the imported natural gas come from Russia, Romania covers from its internal production, around 80% of its gas necessity. Last year, only 15% from the consumed gas was imported, Romania, occupying the third place in the European list of countries with the most reduced energy import dependency. A total block of gas imports wouldn't have tangible effects until November-December,  according to the NBR presentation.

            Russian investors have a significant presence in Romania, be it direct, or be it through registered holdings in other EU states, but, none of the companies with Russian shareholding has a "systematic importance", says the governor, making reference to the steel industry (the Russian group, TMK) or the refining sector (LukOil, who owns the Petrotel Ploiesti refinery).

            The Romanian banking sector does not have direct connections to Russia or Ukraine. The banks from Romania do not have Russian or Ukrainian shareholders, and the exposures of Romanian banks on entities from the two countries are "insignificant", notes NBR.

            The only vulnerabilities of the banking system in Romania to the geopolitical crisis from the neighboring country make reference to the potential effects of "overflow", considering the exposure of Austrian and French banks on Russia and Ukraine.Comfortable solvency and liquidity of the Romanian banking system should cover such risks, if they materialize, shows NBR.

            The impact of the tensions in the region on the capital and exchange market was moderate so far and had no lasting effects, reads the report.

            From the total of Romania's exports to Russia, 59% represents machinery and transport equipment, 17% processed goods, and 13% chemical products. Romania's imports from Russia consist almost entirely of petrol, gas and various energy products or natural resources.

Ten global consequences of the Ukraine crisis

1.   Raising the stakes in Russia. In the future, the annexation of Crimea may look like a watershed moment for Russia itself. It has dramatically intensified the internal political and economic strains that Putin’s authoritarian regime was already facing and thus created a domestic pressure cooker, which may relatively quickly spawn either fully-fledged authoritarianism or the collapse of the regime – the exact contours of the outcome remain anyone's guess for now.

2.   An open challenge to the European Order. By annexing Crimea and intervening in Ukraine, Russia has raised fundamental questions about the principles of the European order. Russia was always against the principle that countries are free to choose their alliances and has consistently, though often covertly, tried to derail NATO enlargement into its neighborhood. But Putin is now challenging these principles explicitly. Russia wants to both restore and re-legitimize spheres of influence as an organizing principle of European order. This is a direct challenge to Europe and the West as a whole: although some countries might be willing to accept implicitly Russia's view of European order, none can afford to do so explicitly. But it seems even less likely than before that Russia will accept the Western-led order.

International law

 3.   Contest for international norms. We face a contested international normative terrain. Russia's actions under Putin represent a two-pronged attack on Western ideas of international order. First, Putin challenges the principled basis of Western policy, asserting that the US and Europe only pretend to respect international law but in fact they are happy to act outside it when their interests are at stake. He cites Kosovo, Iraq, and Libya as evidence. Secondly, he presents an essentially illiberal vision of world order that he claims to be more realistic, based on spheres of influence, opposition to popular empowerment and favoring one's own national or linguistic group – in each respect a direct opposite of Western ideas of liberal order.

 4.   The West loses the Rest.Despite the fact that Russia’s use of force to annex territory sets a precedent that threatens widespread disorder, the world has not taken the West's side. The large number of abstentions in the UN General Assembly vote shows that many countries see this as a struggle between power blocks rather than as a fundamental question of international order and do not accept the West's self-identification as the guardian of liberal order. The “Rest” – that is non-Western countries – have found some of the actions cited by Putin troubling and do not separate their views of Western-backed liberal order from their conviction that the West enjoys an unjustified position of privilege in the international system. We should reject any equivalence between controversial Western actions and Russian action in Ukraine, but we also need to revisit and strengthen the international foundations of the liberal vision.

Middle East & North Africa

 5.   The beginning of the end of sanctions. The West's Middle East adversaries have been at the sharpest end of the impact of punitive US-led economic sanctions – from Libya and Iraq and more recently Iran, which continue to this day. The Ukraine crisis could mark the beginning of the denouement of economic sanctions as the preferred instrument of contemporary US coercive power. Going after Russia, the world's 9^th largest economy, may represent the kind of overreach in economic coercion that the Iraq war demonstrated in the military arena. Expect some acceleration of efforts by an "alliance of the threatened" to develop circumvention options (bank and payment systems, reserve currencies) to insulate themselves from the US Treasury’s Office of Foreign Assets Control. This will have implications for the Middle East and far beyond. And Europe too might want to question the desirability of being so exposed to the predilections of the US treasury – as the current predicament of BNP Paribas indicates.

 6.   Looking to MENA for energy. Any European strategy to reduce energy dependence on Russia will inevitably turn its attention to the Middle East. Alongside existing sources in Algeria and the states of the Gulf Cooperation Council, the Ukraine crisis could make the sanctioned Iranian energy market look ever more attractive – encouraging Russia-Iranian competition as opposed to cooperation. Or Europe might refocus attention on Libya and to bringing its potential 1.6 million barrels per day back online, or see new opportunities in the Kurdish or other regions of Iraq especially given new pipeline options via Turkey. The prospects for a serious Middle East energy pivot may prove as elusive as they are tantalizing, but they should be on Europe’s radar.

Asia & China

 7.   Asian countries are competing to woo Putin. As tensions increase in Asia, many countries in the region are trying to strengthen their strategic relationships with external powers – and despite its actions in Ukraine, even Western allies in Asia have continued to woo Putin’s Russia. For example, Japanese Prime Minister Shinzo Abe has opened up to Russia because he is seeking a territorial settlement over the four islands that both Tokyo and Beijing claim, and wants to keep Russia from joining China’s side. Similarly, South Korea is engaging to get Moscow’s cooperation with North Korea. By comparison, Europeans do not have in Asia the leverage that would allow them to enlist Asian countries’ full cooperation on issues such as Crimea and Ukraine.

8.   Asia hates western intervention even more than self-determination.Given that many Asian countries worry about their own secessionist regions, you would think that they would oppose Russia’s annexation of Crimea. But the Ukraine crisis illustrates how they worry even more about Western intervention. Given the choice between self-determination and holding sovereignty sacred, Asia mostly chooses the latter. Even India, which should worry about any referendum on secession because of the Kashmir issue, and especially China, which sees a chance of enlisting Russia in its own territorial gambits. 

European Union

9.   European unity in escalation.In the past, relations with Russia were the most divisive issue in European foreign policy. But the EU has maintained cohesion in responding to Putin’s aggression with limited sanctions, political and economic support for the new Ukrainian leadership, and the maintenance of diplomatic channels with Russia. Poland and the Baltic states wanted a bolder response but compromised in the name of European unity. The recent decision of the Bulgarian government to suspend the construction of South Stream shows that the European Commission’s pressure is working. And Europe still possesses its weapon of mass destruction which gives it a  leverage on Russia: access to its financial sector. The EU has to work on how to fine tune this weapon and use it as a deterrence.

 10.  The risk of disunity with de-escalation.However, the crisis has also showed that this unity, as much as it is valuable, has been fragile and lacking leadership. Most notably, neither the Weimar Triangle, nor the Visegrad Group – two formats which could provide stronger impulses for both crisis management and long term strategy towards EaP countries and Russia – have  been efficient. Sure, many countries previously most engaged in the EU Eastern policy (Poland, Germany, Slovakia, Czech republic, Hungary) have managed to agree on relatively low-common-denominator reactions to the ongoing developments in Ukraine. But they remain divided on the long term issues that will determine EU policy in the future: most notably a possible energy union and the lessons learned from the failure of the Vilnius summit. Competing readings of the mistakes made by the EU in its policy towards Eastern partners (“bad communication of this policy to Russia” versus “insufficient offer to Ukraine”) may make the current consensus difficult to sustain.

Bibliography:

http://www.kyivpost.com/content/ukraine-abroad/echo-moskvy-ukraines-forgotten-city-destroyed-by-war-376840.html

http://www.bbc.com/news/world-europe-28969784

http://www.ecfr.eu/article/commentary_ten_global_consequences_of_ukraine272

http://www.bostonglobe.com/opinion/2015/02/03/give-ukraine-military-aid-needs-for-its-defense/lb9YCkIxvS7NIMhLDc8ESJ/story.html