Ukraine's False Choice

There are no winners in the geopolitical tug of war between Russia and the West.

The recent headlines about the alleged leaked recording of U.S. officials discussing the crisis in Ukraine are all focused on an expletive spoken in a moment of pique about the European Union. The press seems to have faithfully done the bidding of the most likely suspects behind the leak -- one assumes either the Russians themselves or pro-Russian elements in the Ukrainian government -- and focused on the alleged U.S. dissatisfaction with a supposedly weak-kneed E.U.

That such tensions exist even between the closest allies during a difficult crisis is hardly shocking. What is surprising about the conversation, if it did in fact occur, is that the United States still believes it can unilaterally create sustainable political outcomes in Ukraine while keeping Moscow in the dark. Lost in the reporting is that most of the alleged conversation is about cobbling together a political compromise and sealing the deal -- before Russia has time to react.

Ironically, the E.U. seems to have already responded to the implicit call to action in the period since the recording was allegedly made and its publication today. On Monday, Feb. 3, the E.U. announced that it is considering a new financial aid package for Ukraine. Given Moscow's recent suspension of its own $15 billion unilateral aid package and distraction with the Sochi Olympics, Brussels has apparently decided to strike back against Russia's previous moves to block Ukraine's E.U. Association Agreement. (Details about the E.U. package are apparently still being finalized.) While a decision to extend assistance to Kiev, if taken, might answer the call to "do something" about Ukraine, in the long term it would almost certainly backfire -- as the plans discussed in the leaked alleged call between U.S. officials already have.

It is precisely this 20-year tradition of geopolitical one-upmanship that led to this crisis in the first place, by allowing a parasitic political-economic system to bargain its way out of reform, and by sharpening the existing divisions in the Ukrainian polity. The fact that neither the West nor Russia seem ready to accept is that one side acting alone cannot resolve the crisis. In fact, unilateral action is likely to make it worse. The dysfunctional, deeply corrupt political-economic system that caused so many Ukrainians to take to the streets depends for its very survival on the absence of Russian-Western substantive exchanges about Ukraine policy. All Ukrainian governments since independence have been able to defer the structural reforms needed to change that system thanks to mastering the art of triangulating between partners who are chronically incapable of mutual dialogue. Kiev's success in playing the two sides off of one another in order to reap ever-greater geopolitical rents is a direct function of both sides acting alone, and keeping each other in the dark.

The pattern of unilateral action and lack of dialogue also sharpens the regional divisions that are currently threatening to tear asunder the delicate fabric of the Ukrainian polity. Both Russia and the West have themselves to blame for the highly divisive, widespread perception in Ukraine that the country faces a binary choice between Europe and Russia. While many in western Ukraine -- and a large number of those still protesting on the Maidan -- might support a move toward Europe that entailed cutting ties with Russia, clear majorities in the economically-dominant south and east of the country do not. The nine regions there account for 21.5 million of the country's 45 million population; whereas about 7 million live in the seven western regions.

So when José Manuel Barroso, president of the European Commission, said on Monday that "most Ukrainians ... want to come closer to the European Union," one has to wonder where he gets his polling data. A USAID-sponsored survey released in December 2013 shows the percentage of Ukrainians who say that the country should have closer economic relations with Russia statistically equivalent to the number who say it should have closer economic relations with Europe. Thus, it's simply not politically sustainable for any Ukrainian government to decisively move toward Europe in such a way that threatens ties with Russia.

By the same token, a definitive alignment with Russia and a severing of ties with Europe is also not a viable option. After all, even President Viktor Yanukovych to this day proclaims his intention to pursue Ukraine's "European integration," if on different terms than the E.U. is currently offering.

In short, either side acting alone can succeed in scoring points in the geopolitical tit-for-tat, but in so doing they deepen the structural drivers of Ukraine's troubles --bankrupt governance and a divided polity. The only international mediation effort likely to foster a viable long-term solution to Ukraine's crisis is one that both Russia and the West can support. Such common ground seems like a pipedream given current tensions. But the alternative is perpetual crisis. And in the short term, even greater mutual transparency would be a major improvement over the status quo, under which, as we have learned, signals intelligence is apparently the only way to understand what the other side is planning.

The pattern of Russia and the West refusing to talk about, let alone cooperate on policy in their so-called "common neighborhood" has deep historical roots. In the eyes of many in Moscow, the United States and the European Union have long been engaged in a strategy of neocontainment in Ukraine, striving to minimize any and all Russian influence. They see no need to talk openly to Western counterparts whose mission, they believe, is to undermine their interests.

On the other side, Western decision-makers' resistance to dialogue is driven by an assumption that any dialogue with Moscow about Russia's neighbors would inevitably involve imposition of outcomes against their will. It evokes a lingering revulsion at the Yalta Agreement, the deal that gave the Soviet Union free rein to impose Communist regimes on the states of Central and Eastern Europe. These historical associations explain U.S. and E.U. officials' constant repetition of support for the principle that the former Soviet countries should freely determine their own foreign-policy orientation. This is certainly a fine principle, but it has become a trope for reasons besides its inherent virtue. As a result, both Russian and Western decision-makers view each other's actions in Ukraine as inherently hostile to their respective interests. That might explain the current state of non-dialogue. But it's no excuse.

Indeed, simultaneous to their studious avoidance of engagement on Ukraine's crisis, Russia and the West have been in regular, intensive dialogue on the crisis in Syria. Despite serious disagreements, their diplomacy culminated in a first-ever face-to-face meeting between the Syrian parties after three years of horrific civil war. Of course, getting to that point was not easy, and the results of the so-called Geneva II process leave much to be desired. But Russia and the West demonstrated an ability to work together constructively regarding Syria. They should begin the process of trying to do the same about Ukraine, a crisis that is far less severe but far closer to home.

Reaching a consensus might prove impossible due to accumulated mistrust and resistance from hardliners on both sides, but if common ground can be found on Syria, surely Russia and the West can at least have a substantive dialogue about the crisis brewing in the heart of Europe. The time to start talking is now.



No, China Did Not Already Win the Global Battle for Supremacy

Debunking Eric X. Li's dangerously wrong ideas.

As the U.S.-China relationship grows more complex and important, one Chinese commentator stands out for provocative ideas undiluted by caveats or diplomatic hedging: the U.S.-educated, Shanghai-born venture capitalist Eric X. Li. Over the past several years, he's built a significant audience. Affiliated with the Aspen Institute and the Berggruen Institute on Governance, he delivered a TED Talk in June 2013 entitled "A Tale of Two Political Systems," and wrote widely discussed articles for Foreign Affairs and the New York Times. Li's most recent offering, a Feb. 4 Huffington Post article entitled "The Middle Kingdom and the Coming World Disorder," recycles some of his favorite themes: He enumerates the defects of a U.S.-centric international system that he perceives to be crumbling, praises the deftness and strength he sees in China's statecraft, and predicts a coming period of international volatility as China displaces the United States. By circulating his ideas so widely, his articles provide an excellent opportunity for debate and discussion.

And this is good, because most of Li's ideas are dangerously wrong. In his latest article, Li argues that in its maritime neighborhood China has already accomplished its goal of changing the status quo without military conflict. He believes China has accomplished this by making its naval presence a de facto reality across the disputed area in the South and East China Seas -- where several Southeast Asian nations and Japan also have claims -- ending an era of intentional ambiguity about Beijing's position.

But to claim that China has achieved this after just a few years of pushing the boundaries is like saying that the United States' Vietnam policy was a success -- in the early days of the Vietnam War. Many of China's neighbors are stepping up their militarization as a result of anxieties over China's posture. In 2013, Japan flew hundreds of sorties over the Diaoyu, the disputed islands in the East China Sea which Japan administers and calls the Senkakus, in an effort to demonstrate its ongoing capacity to keep them under its umbrella. Many security analysts believe an unfortunate mishap between rival forces is increasingly likely, if not inevitable. Li is calling a victory for Beijing, well before the game is over. At minimum, Li must recognize that whereas China's neighbors were mostly quiescent toward China's rise a decade ago, many are now contemplating a response to reduce what they see as Chinese overreaching.

Li's view of economics resembles his view of international relations. Simply put, Li believes China has won because it has bent the rules to its advantage, pumping up its own economy to the detriment of others. In his Huffington Post essay, Li writes that China "negotiated its way into the WTO (World Trade Organization) on preferential terms." On one level, this is a simple error. The nation applying to the WTO makes all the concessions in such negotiations, not the incumbents, who decide which exceptions to normal treatment they insist on imposing.

But Li's error is important because it speaks to a serious misconception: that China's successful WTO negotiation allowed it to keep its capital account closed, thereby insulating the country's financial infrastructure from the recent financial crisis. Indeed, finance was one of several sectors that China, like other WTO countries, protected from international competition. But Li neglects that the 2008 financial crisis in fact had a profound impact on China, despite the country's capital controls, with vast amounts of hot money flowing across its borders. Beijing cannot, as Li suggests, quarantine itself from monetary pressures while fully trading with the world. Moreover, by keeping foreign financial competition limited, China created even more serious problems by isolating its domestic financial entities. No developed economy would trade its financial sector problems for China's today, especially because to sustain its partly-insulated model Beijing has had to live with weak domestic capital markets. China's stock markets and other exchanges have essentially destroyed wealth ever since their reestablishment in the early 1990s, because cordoning them off from international competition and populating them with politically-connected issuers has made it impossible for them to mature. Li's industry -- private equity -- is a hot ticket in China precisely because those public equity markets are moribund. 

Li commends Beijing for free-riding on U.S. security rather than sharing the burden. "Who can blame them?" he asks. But China is rapidly ramping up its power projection expenditures: It will spend $148 billion on its military in 2014, one third higher than 2009 and more than any country in the world except the United States, according to IHS Jane's, a consultancy which tracks defense spending.

Contrary to what Li writes, Beijing has little choice but to make up for the time it lost free-riding on the security contributions of others, because for the first time in its history China is extremely dependent on foreign raw materials. Over 50 percent of China's iron ore, oil, edible oils and potash fertilizers must be floated across the oceans to satisfy the country's needs. China's leaders now see a world full of Chinese travelers, money, and interests that the country has little ability to protect in times of trouble. (Beijing learned this the hard way in trying to extract roughly 36,000 of its citizens as Muammar al-Gaddafi's Libya collapsed in 2011.) Li says China sits naturally in this new world order, while maintaining an ancient policy of keeping out foreign troubles, not stepping into them. But that luxury ended in 1993 when China became a net importer of oil.

Yes, Li plays a valuable role by giving voice to Chinese pride in the Middle Kingdom's economic, diplomatic and geostrategic achievements. But his fellow private equity professionals know that an investor always "talks his book" -- that is, reads the facts in a way that flatters the investments he has chosen to make. As Chinese pundits reach out to a wider western audience, it's important to listen to them -- but also to think carefully about their blind spots.

James Duncan Davidson/Creative Commons 3.0