Jan Dehn, head of Research at Ashmore discusses the conflict between Russia and Ukraine and why Russia stands to gain the most from a peace agreement.
A year ago all sides in the Russia-Ukraine dispute only saw political upside in engaging in conflict. Europe wanted to show Russia that annexing parts of other countries is unacceptable.
Ukraine had an election to win. Russia saw arming rebels in Eastern Ukraine as a counter-weight to likely EU-US sanctions.
Today, the political upside of further fighting has been exhausted on all sides, while the economic costs of the conflict have escalated considerably. The key break-through, in our view, was the pronouncement late last year by Ukrainian Prime Minister, Arseniy Yatsenyuk, that the question of Crimea can be relegated to future generations.
This pronouncement in effect removed the only genuinely intractable obstacle to ending the crisis and from then on it was just a question of time to get the ‘ducks in line’.
The peace agreement reached last week between the members of the Normandy Quartet (France, Ukraine, Russia and Germany) and the cease-fire that came into effect at the weekend have good chances of success, in our view.
The sharp deterioration of the situation on the ground in Eastern Ukraine in the past weeks was mainly due to efforts on both sides to position themselves more advantageously ahead of talks.
Even so, peace is by no means assured: the likelihood that armed conflict resumes is always greatest in the immediate aftermath of a cease-fire. Weapons are still at the ready, trust is at low levels and emotions are raw.
Still, if the cease-fire holds it will be excellent news for Ukraine, for Russia and for Ukraine’s Western backers, particularly the Europeans, who have not previously been adept at resolving international conflicts.
German Chancellor Angela Merkel in particular stands out as a strong leader in a Europe sorely lacking in leadership in so many areas.
Beyond securing the peace on the battle ground, the next steps are the following: talks to establish as sustainable political arrangement for Eastern Ukraine; new gas supply agreements between Russia and Europe; economic and financial recovery in Ukraine; and a dismantling of sanctions against Russia.
As it stands, this settlement appears to be a victory for Russia. Russia keeps Crimea, which reverts to Russia exactly 60 years after General Secretary of the Communist Party of the Soviet Union, Nikita Khrushchev, ceded the island to Ukraine.
A political settlement that keeps Donbass within Ukraine is also not a bad outcome for Russia, because Russia will now have direct influence in the Rada, the Ukrainian parliament, via pro-Russian representatives from Eastern Ukraine. If the peace agreement sticks, Russia can look forward to a gradual dismantling of sanctions.