Stacks of red coffins being transported from Ukraine back to Russia after deadly fighting at an airport in eastern Ukraine last week are among the telltale signs of Russia’s responsibility for the crisis gripping its neighbor, said William B. Taylor, a vice president at the U.S. Institute of Peace and a former ambassador to Ukraine.

panel of speakers

The coffins carried at least 30 Russian citizens who had wound up on the front lines of a rebellion by pro-Russian separatists in Ukraine’s Donetsk oblast, according to news reports. Ukrainian police and military forces have struggled to turn back the insurgency in Donetsk and Luhansk oblasts, even as pro-Ukraine chocolate magnate Petro Poroshenko won office on May 25 in the country’s first presidential election that didn’t require a runoff.

“These are clearly Russians that are fighting in Donetsk and in Luhansk,” Taylor told an audience at USIP this week in a discussion of the crisis and the likelihood that western sanctions on Russia will have an effect. Taylor was among a contingent of Americans who observed the presidential election for the National Democratic Institute, one of several foreign organizations conducting election monitoring in Ukraine.

While there are some Ukrainians who feel alienated from the capital Kyiv and support the separatist movements, “these are clearly Russians who are leading, organizing and equipping,” said Taylor, who served as ambassador to Ukraine from 2006 to 2009. In the early 1990s, he coordinated U.S. assistance to the newly independent states after the breakup of the Soviet Union. Taylor cited pictures of anti-aircraft weapons and heavy armor that clearly have been transported into the former Soviet republic over the Russian border.

“Mr. Putin could stop this,” Taylor said, referring to Russian President Vladimir Putin. “He could solve this very quickly.” The persistent fighting in eastern Ukraine and periodic flashpoints elsewhere follow Russia’s swift annexation of the Crimean Peninsula in March. The moves have sent U.S.-Russian relations into a dive as the administration of President Barack Obama and European counterparts imposed a series of sanctions and other penalties against Russia in an effort to persuade Putin to retreat.

Global consequences

The crisis is having consequences worldwide, as national leaders feel compelled to take sides or question whether treaties and other agreements could be abrogated in the same way that a 1994 accord with the U.S., the U.K. and Russia for Ukraine to give up its nuclear weapons collapsed. That agreement, known as the Budapest Memorandum, had been intended to assure Ukraine’s territorial integrity and inviolability of its borders.

The conflict in Ukraine also reflects similar, though smaller, skirmishes and tensions across the former Soviet Union in the past decade, as Russia takes steps to lure back ex- republics or pieces of them. USIP will hold two scenario planning workshops in June and July to analyze trends in the region.

“While we recognize that the Ukraine crisis is extremely urgent, we also think it’s important to undertake a regional conflict analysis and look at the unconsolidated democratic transitions on Russia’s periphery,” Lauren VanMetre, USIP’s director of grants strategy and applied research on conflict, told the audience in the Institute’s event, which was webcast. “It’s a really important time to understand what crises perhaps might be next and to look at these so-called “frozen conflicts,” which I think we would all agree are, in fact, very dynamic and have been made much more so by Russia’s intervention in Ukraine.”

Taylor cited the example of Costa Rica, whose representative in a United Nations debate recently expressed concern over its dependence on international security agreements because it’s a small country and doesn’t have an army to defend its borders. For the U.S., “Russia has changed from a potential partner over the last 20 years to a potential enemy,” Taylor said.  “It’s clearly not a partner. It has violated all of the commitments that it has, all the standards, all the norms that we’ve been living by, certainly since the Cold War and I would argue since 1945.”

Effectiveness of sanctions

One question in the Ukraine crisis has been the effectiveness of sanctions imposed on Russia by the U.S. and European nations, and how much further western leaders can or are willing to go in exerting pressure on Putin. The Europeans, who have far more trade with Russia and depend on it for a portion of their energy supplies, are particularly worried about the potential effect on currency flows and on their recovery from their own recession.

George Lopez, USIP’s vice president for its Academy for International Conflict Management and Peacebuilding, said Europe likely will be able to go one or two more rounds of stepping up sanctions, particularly measures that could limit financial escape routes for more Russian business tycoons.

Probably the most critical pivot point determining whether the U.S. and Europe will escalate sanctions will be Russia’s treatment of Ukraine on natural gas prices, he said. If the Russians impose maximum prices and continue to call in past debts, that might trigger greater sanctions.

While the international community has wielded sanctions for decades, “this is the first instance in which a coalition of actors have imposed intense financial sanctions on a hugely diverse and strong economy,” Lopez said. That makes it particularly difficult to ensure impact.

Arguably, the effect of the current sanctions already has been significant, he said, in that U.S. President Barack Obama and Russian President Vladimir Putin have been in direct contact. They’ve spoken several times by phone and met briefly today during commemoration ceremonies in France for the 70th anniversary of the World War II D-Day Invasion.

“Sanctions are supposed to not only enrage the target, but actually engage the target,” Lopez said. “This is one of the highest degrees of communication between imposers [of sanctions] and target.”

It’s easier to track the impact of today’s sanctions on financial sectors than it was to gauge the effect of trade sanctions in the past, Lopez said.

“I think the data is pretty clear and undisputed,” Lopez said. “Investment banking fee income, which has been very, very helpful to the Russian economy from 2010, is about a third of what it was.”

Income from such fees fell about $166 million in the last quarter, he said. “That’s very, very serious.” Moreover, Russia had been counting on a significant increase in revenue from such fees, so the drop also signals future losses.

The Russian economy also is expected to contract further, and its stock market has dropped “dramatically,” he said. Restrictions on banking transactions also have created “great stress” on Russian financial institutions.

In the meantime, Ukraine’s next president will have to grapple with competing political and economic interests of his own, Taylor said. U.S. support is aimed at giving the country the space and capability it needs to make its own decisions of whether to align with the European Union or the North Atlantic Treaty Organization and what its relationship should be to Russia in the future.

There is “almost no one in Ukraine who doesn’t think that you have to have a relationship with Russia,” Taylor said. “The question is under what circumstances, what kind of relations and what kind of negotiations … So he’s got enormous challenges.”

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