The Hard Limits of Economic Power

If I was trying to design a case where economic statecraft would have a significant effect on world politics, I could do a lot worse than Russia’s leverage over Ukraine.  Geographic proximity, cultural affinity, and Ukraine’s energy dependence make that country a perfect target for Russian economic statecraft.  And, indeed, ten days ago Vladimir Putin’s Russian government appeared to eke out a win from its economic statecraft.  "Under threat of crippling trade sanctions by Russia," Ukrainian president Viktor Yanukovich appeared to accede to Russian demands, rejecting the EU’s Eastern Partnership and indicating that it would join Russia’s planned Eurasian Union. 

Geopolitically, this was a Very Big Deal.  For all of Putin’s Middle East diplomacy, Ukraine is far more important to his great power ambitions.  One of the very first sentences you’re taught to say in Foreign Policy Community College is, "Russia without Ukraine is a country; Russia with Ukraine is an empire."  And as Walter Russell Mead blogged last week, "The EU brought a baguette to a knife fight, and was harshly reminded of the limits of soft power."

Well… not so fast.  It turns out that a lot of Ukrainians were not happy about this turn of events, and have engaged in eleven days of massive protests. Even Yanukovich’s allies are now talking about reconciling with the domestic political opposition.  The New York Times’ David Herszenhorn aptly summarizes the current geopolitical state of play:

Many Ukrainians see the agreements with Europe as crucial steps toward a brighter economic and political future, and as a way to break free from the grip of Russia and from Ukraine’s Soviet past. The outcry over Mr. Yanukovich’s abandonment of the accords is pushing Russia into a corner.

The Kremlin, which has supported Mr. Yanukovich as a geopolitical ally for years despite its frequent annoyance with him, used aggressive pressure to persuade him not to sign the accords. Now the anger over Russia’s role has made it all but impossible for Mr. Yanukovich to take the alternative offered by the Kremlin — joining a customs union with Russia, Belarus and Kazakhstan. Any compromise with the protesters would have to revive the accords with Europe, and reduce Russia’s sway (emphasis added).

If that bolded assessment is accurate, then Russia has lost.  Furthermore, as the Economist points out, the way Russia has lost is even more damning.  Rather than EU pressure, it is domestic discontent that has stayed Yanukovich’s hand:  "It is far better for the EU that the backlash against Mr Yanukovych comes from the streets of Kiev rather than from Brussels."

It seems highly unlikely that the current Ukrainian government will resort to massive repression at this point — which means the worst-case scenario is that Ukraine doesn’t join either economic bloc.  The only way this ends as a win for Putin would be if he was able to use force to seize control — or coerce the Ukrainian security apparatus to do the same.  I seriously doubt that he is either willing or able to pull off such a coup d’etat

Stepping back, let this be an important lesson about the limits of economic power.  As I noted at the outset, most of the conditions for successful economic statecraft had been met by this case.  Had Putin been able to get Ukraine to spurn the EU and join the EAU, the foundation for Moscow’s domination over  Kiev would have been set.  The one wrinkle was the extent to which much of the Ukrainian body politic anticipated future conflicts with Russia.  That appears to have been enough to thwart Russian economic pressure.  Which nicely clarifies the hard limits of economic power as a means of affecting alignment in world politics. 

The Ukrainian desire to be part of Europe — rather than part of Eurasia — has disrupted the plans of The Most Powerful Man in the World According to Forbes.  Which suggests that maybe, just maybe, Forbes has no idea what the f**k it’s talking about when it talks about power.