Crimea Strife Gives Putin New Chance to Test West's Resolve

(Bloomberg) -- The latest spike in tensions between Russia and Ukraine over Crimea offers Vladimir Putin a fresh chance to test the West’s commitment to defending Kiev at a time when the U.S. and Europe are divided and distracted by internal squabbling.

But the weekend skirmish that saw Russian naval forces fire on and seize three Ukrainian ships in the narrow channel between the Black and Azov seas could also set back Putin’s chances for rapprochement with the U.S. The Kremlin had been hoping his meeting with President Donald Trump at the Group of 20 summit this week in Argentina would lead to concrete steps toward a thaw in relations.

Ukraine gained the early diplomatic advantage despite both sides pointing the finger at each other for orchestrating Sunday’s confrontation for political reasons. European capitals came out strongly denouncing the Russian action. The U.S. ambassador to the United Nations, Nikki Haley, laid the blame for the escalation on Moscow’s “outlaw actions,” but said Washington would let its allies take the lead in responding.

The timing of the incident hardly works to the Kremlin’s advantage with Western governments ahead of the G-20 gathering in Buenos Aires. Still, Putin’s never been one to miss a chance to capitalize on a crisis, whether created by accident or design, according to Alexander Baunov of the Moscow Carnegie Center.

“On the one hand, this type of foreign-policy escalation is risky and won’t help relations with the West,” Baunov said. “But if they swallow it, then it will look like another diplomatic victory.”

Putin Gamble

It’s the kind of gamble that’s become increasing common for Putin, who’s sought to take advantage of the waning international focus on the Ukrainian conflict to steadily increase pressure on his counterpart in Kiev. Rekindling the patriotic fervor that accompanied his annexation of Crimea in 2014 and support for rebels in eastern Ukraine could help offset growing domestic discontent over stagnant incomes and changes to Russia’s pension system.

Likewise, Ukrainian President Petro Poroshenko, who came to power after street protests forced his Kremlin-backed predecessor to flee the country, is facing an election in March that polls suggest he’s unlikely to win. Poroshenko, whose campaign slogan is “army, language, faith,” has asked parliament to approve a declaration of martial law, a step some opposition lawmakers see as a ploy to boost his re-election bid.

Crimea Strife Gives Putin New Chance to Test West's Resolve

Prior to the weekend incident, Kremlin officials had been cautiously optimistic about the meeting Putin and Trump have scheduled for the G-20. They said the momentum behind calls for new sanctions that followed Trump’s enthusiastic embrace of Putin at their last meeting, in Helsinki in July, had seemed to fade.

Even with the flare-up, which sent the ruble and Russian stocks down the most in emerging markets Monday, western reaction will likely be tepid, according to Eurasia Group.

“The most that Washington and Brussels are likely to impose at this stage is more sanctions against individuals and entities,” Eurasia Group analyst Alex Brideau said in a note. “Stronger sanctions that might target new economic sectors or major Russian oligarchs are unlikely unless the episode escalates.”

U.S. Response

The U.S. will maintain its current Crimea-related sanctions on Russia, Haley, the ambassador to the UN, said in her speech. She stopped short of threatening further restrictions, saying only that “further Russian escalation of this kind will only make matters worse.”

The latest violence came after months of rising tensions in the region as Russia incrementally squeezed Ukraine’s access to the Azov, a key waterway for exports of metals and farm products from ports just south of the breakaway regions of Luhansk and Donetsk. The bridge Russia completed this year linking its mainland to Crimea spans the Kerch Strait, which separates the Azov from the Black Sea, opening global markets via the Mediterranean.

The Kerch bridge limited the height of ship traffic. Russia began inspecting vessels headed to and from Ukraine over the summer, prompting the U.S. State Department to denounce what it called “harassment of international shipping.”

The tensions continued, however, and Russia closed the strait to all ships for several hours Sunday for what it called security reasons. Ukraine says its vessels were intercepted in international waters, while Russia accused them of violating its territorial zone and ignoring warnings to change course.

Alexei Chesnakov, a former Kremlin official who now consults authorities in Moscow on Ukraine policy, said Russia “couldn’t have acted any other way” in light of Ukraine’s behavior along their maritime border.

“If a country shows strength then sanctions are possible,” he said. “But if a country shows weakness then sanctions are inevitable.”

©2018 Bloomberg L.P.