Ukraine Standoff Part of Kremlin Long Game, Not Harbinger of War

(Bloomberg) -- The flare-up between Russia and Ukraine off the coast of Crimea has stirred fears their conflict is set to reignite. Ukraine’s leader has warned dramatically of such a scenario.

More likely, according to an analysis by Chatham House, is that the aggression is simply the latest gambit in President Vladimir Putin’s long game to chip away at his neighbor’s economy to undermine the revolution that booted out its Kremlin-backed leader in 2014.

By limiting access to the Sea of Azov -- to which the two one-time Soviet allies have equal access under a bilateral agreement -- Russia knows it can disrupt sea shipments of metals and agricultural goods that travel through Ukraine. Those industries are Ukraine’s two biggest export earners.

Ukraine Standoff Part of Kremlin Long Game, Not Harbinger of War

“The situation is affecting local economies along the coast and destabilizing the Ukrainian ports of Mariupol and Berdyansk,” said Mathieu Boulègue, a research fellow in the Russia and Eurasia program at Chatham House. “Putting military pressure on Ukrainian assets in the Sea of Azov contributes to the Kremlin’s long-term strategy of keeping Ukraine politically weak and divided, especially ahead of the March 2019 presidential elections.”

Since Ukraine’s uprising and loss of Crimea, Russia has deployed an array of tactics to unnerve it. Sanctions have been imposed, trade barriers erected, mining assets seized and natural gas supplies cut. A new energy pipeline to Europe will bypass Ukraine entirely, erasing lucrative transit fees.

There’s no doubt these measures have hurt. But Ukraine has managed a modest economic expansion, with an agricultural revival playing a huge role.

Ukraine Standoff Part of Kremlin Long Game, Not Harbinger of War

For the Kremlin, incidents like Sunday’s are a way to maintain the heat on Ukraine while avoiding the costs of war -- be that dead soldiers or international scorn. Despite being blamed by NATO for what happened, Russia sold Eurobonds two days later and there appears little appetite in the West for more sanctions.

©2018 Bloomberg L.P.