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Ukraine: What lies behind the Russian escalation – Conference call notes

  • We consider reasons for the build-up of Russia’s military forces on Ukraine’s borders and in illegally occupied Crimea

  • Russia’s actions seen as intimidatory, not a harbinger of military conflict, although that cannot be ruled out

  • There are international calls for Russia to de-escalate; short of sanctions, it's unclear what else the West can do

Ukraine: What lies behind the Russian escalation – Conference call notes
Stuart Culverhouse
Stuart Culverhouse

Chief Economist & Head of Fixed Income Research

Tellimer Research
16 April 2021
Published byTellimer Research

We held a conference call on the Ukraine-Russia situation with Peter Dickinson, editor of the Atlantic Council's UkraineAlert Service and publisher of quarterly English-language journal Business Ukraine, on 13 April. We discussed what’s behind Russia’s recent military build-up against Ukraine, what it means, Putin’s objectives and what the international community can or might do. In this report, we provide a short summary of the call and offer our own thoughts on the situation. We would like to thank Peter for his time and insights.

Recent weeks have seen a build-up of Russian military forces on Ukraine’s borders and in illegally occupied Crimea, with not only an escalation of tensions and rhetoric, but also an increase in fighting and fatalities, on both sides.

Although skirmishes are not new, there is a sense that this is more serious than previous escalations. This is because of the scale. Reports suggest there are over 80,000 Russian troops involved, with around half on the border with Eastern Ukraine and half in Crimea (marking a significant increase on what was there before). What was initially dressed up by Russia as military exercises seems to be anything but. But to what end?

In short, Russia’s actions are seen as intimidatory, not a harbinger of military conflict. But we cannot discount the threat of military action, even if an invasion is seen as unlikely.

What lies behind this escalation?

Putin’s motivations and objectives are not clear to us (or, rather, those outside his close circle), with theories ranging from merely intimidation to full-scale invasion, but several reasons have been proposed. These include:

  1. Testing the new US Biden administration. But testing it for what? It is not clear what Putin gets out of this, beyond grabbing headlines and attention – subsequent to our call, Putin may have got what he wanted with Biden’s invitation for a bilateral summit (see below)

  2. Warning Kiev to take a pause in its fight against pro-Russian interests in Ukraine. In that light, Russia might be punishing President Zelensky for his recent actions against Viktor Medvedchuk, Ukraine oligarch and close friend of Putin (Kiev closed his TV channels and froze his assets). President Zelensky himself called Russia’s tactics intimidation. We remark, however, it may seem a somewhat disproportionate not to mention expensive method of intimidation.  

  3. Seeking confrontation to justify sending ‘peacekeepers’ to the separatist regions of Donetsk and Luhansk, possibly leading to the annexation of Donbas. That Moscow had reportedly provided over 440,000 illegal Russian passports to residents in Donbas by January 2021 is seen by some as evidence that Putin has long been preparing for this. Russia’s comments comparing the situation to Srebenica is a disturbing sign in this regard – laying the pretext for Russia to go in to protect its citizens, as it blames Ukraine for hostilities. But Donbas isn’t Crimea – Donbas is less uniformly Russian than Crimean, and even Russian public opinion doesn’t favour annexation of Donbas (as it did Crimea’s annexation).

  4. Preparing action to gain a land bridge to Crimea from Russia through Ukraine. Crimea is suffering from an acute water shortage, after Ukraine shut the 400km canal that carried water to the region after its 2014 annexation. But this would be a massive military operation, much more of an incursion into Ukraine territory than just taking Donbas. We remark that, if this is the reason, it makes us wonder why, six years on, Russia hadn’t sought to develop its own water treatment and desalination facilities, on a peninsula surrounded by water, when it has access to Crimea anyway via the Kerch bridge.

  5. Full-scale invasion. Despite the build-up creating the opposite impression, the consensus is that Russia is not about to invade. For one, with the visible build up, Russia has lost the element of surprise.

Why now? Or what’s new?

There might be three reasons:

  1. Biden. It is Putin’s first opportunity to test the new US President, assessing the new administration’s readiness for action. Putin reportedly took huge offence when Biden called him “a killer” last month.

  2. Russia’s upcoming elections. Russia’s parliamentary elections (Duma) are due on 19 September, and while we probably already know the result, Putin’s party is struggling, with the Alexey Navalny situation drawing nationwide anti-government protests. A foreign conflict may be a distraction from problems at home and provide a cause for people to rally around the flag. We remark that we may have seen something similar ahead of the last Duma elections in 2016, if on a smaller scale and closer to the election in August, when Ukraine reported Russia increasing its military presence in Crimea and Russia accusing Ukraine of terrorist attacks. Then, Ukraine President Poroshenko warned that Russia was preparing for invasion.  

  3. Ukraine’s own situation. Russia’s timing coincides with Zelensky’s own attacks against pro-Russian interests in Ukraine, and may therefore be a warning that it will not tolerate this. After two years in office, Zelensky now feels able to take such action, which is popular domestically, as he recognises Russia is hostile to Ukraine and pro-Russia sentiment in Ukraine has collapsed.

International response 

There needs to be a strong international response, now rather than later, and one that shows to Russia that there will be a cost to its actions; that the price of its aggression against Ukraine will be too heavy for it to bear. Any incursion into Ukraine is likely to result in a new wave of international sanctions against Russia. Besides sanctions, it is not clear what else the West can or will do.

Russia’s actions have prompted international condemnation, while Ukraine is rallying international support, having been praised for its restraint and calm response. A joint statement by G7 Foreign Ministers on 12 April expressed their deep concern over Russia’s actions. They called for Russia to cease its provocations and de-escalate tensions immediately. US President Biden has offered his unwavering support to Ukraine, although in what form is unclear, and warned of consequences.

Ukraine’s foreign minister Dmytro Kuleba has also met Secretary of State Blinken and NATO officials in Brussels. While Zelensky has taken the opportunity to further the case for Ukraine’s NATO membership, which however is seen as unlikely, the alliance will look to find other ways to move forward and support Ukraine.

Subsequent to our call, on 13 April, Biden proposed a bilateral summit with Putin to be held in coming months, following a phone call between the two leaders. But if Putin has got what he wanted, what does he do next?

Separately, on 15 April, the Biden administration imposed a new round of US sanctions on Russia including sanctions against a number of individuals, companies, and entities, the expulsion of diplomatic staff, and a ban on US financial institutions from trading rouble-denominated Russian sovereign debt in the primary market. The new US sanctions relate to Russia’s interference in the 2020 US presidential election and the SolarWinds hack, not to Russia’s recent military aggression against Ukraine.

Other discussion points

What does de-escalation look like? And what are the costs of de-escalation to Putin? It is not clear what de-escalation looks like for Russia. Withdrawal of troops may look like U-turn, and risks making Putin look weak (domestically and internationally). Indeed, now in the global spotlight, the cost of de-escalation may be made even higher for Putin. What can Putin extract in return? Sanctions relief would be the wrong message. But Putin can also cast the narrative in the way he chooses, and won’t worry if it is credible or not. He could argue the build-up was due to military exercises after all, although that doesn’t explain the escalation in fighting.

Is it an own goal for Russia? Without descending into conflict, if all it does is increase US and international support for Ukraine, with the US sending more military aid to Kiev (if not troops), strengthening its relationship with NATO and cementing the Western-leaning shift in Ukraine, then Putin doesn’t get much out of it. In fact, he may pay a price for little benefit. And we don’t sense Kiev is looking to compromise. Rather, it will attempt to rally international support.

What really lays behind Russian meddling? Has Russia misjudged Ukraine? Putin cannot accept that Russia has lost Ukraine. The Kremlin still sees Ukraine as its ward and thinks the West will get bored of the issue. Meanwhile, Ukraine has moved on and clearly looks to the West. And the situation now is different to what it was in 2014, when Russia came to the rescue of Ukraine’s then President Viktor Yanukovych. Ukraine has had two elections since, confirming its democratic and government legitimacy. After losing its influence, sabre-rattling and military aggression are Moscow’s only levers.

What is the benefit to Putin of sabre-rattling? First, telling Ukraine to calm down, and stop attacking Russia’s interests in Ukraine, although it seems unlikely that it will lead to Zelensky reversing course. That would make Zelensky look weak and the dismantling of pro-Russia interests in Ukraine has been popular. Second, it gains international attention, telling the world to listen to Putin.

Where does this leave the Peace Agreement? The Minsk II peace process was all but dead anyway. The ceasefire in July 2020, essentially the first of a number of steps, was effective at first but quickly broke down. The agreement sets out a roadmap for holding local elections in Donbas, and the promise of constitutional reform, which might confer some element of self-determination, although one sticking point (among many) is the sequencing, with Ukraine arguing that elections can only be held after the border has been secured, following the withdrawal of all foreign and foreign-backed troops, while Russia argues that elections should be held now. Might it be that Russia’s recent military action is a way of trying to influence the peace process in some way?

What to watch?

  • Incident(s) in East Ukraine – which could be engineered by Moscow as a pre-text for direct action.

  • Putin’s State of the Union address on 21 April – what will it say about Ukraine/Donbas, if anything?

  • The international response.