Ceasefire called in Ukraine

(Business New Europe – bne.eu – September 4, 2014) Ukrainian president Petro Poroshenko called for a “permanent ceasefire” on September 3, following a call to Russian President Vladimir Putin, raising hopes that peace was around the corner in Ukraine.

Those hopes were dented later the same day when the Ukrainian presidential website where the announcement had first appeared revised the message to remove the word “permanent.”

But even the ceasefire is only a fragile first step in bringing about a lasting peace in the country that would clear the way for the long-overdue work of restructuring and reform necessary to get the almost bankrupt country’s economy working again.

Russia’s OSCE envoy Andrei Kelin told ITAR-TASS in an interview on Wednesday: “Temporary cessation of hostilities will be of no use. Truce concluded for several days will merely let the warring parties regroup themselves and go on fighting, the way it happened many times in the past. Such a pause is unnecessary. There should be a substantive, full-fledged ceasefire.”

Dmitry Peskov, Putin’s spokesman, further confused matters by saying the two leaders had only discussed steps that would facilitate a ceasefire,” before going on to say Putin could not agree to one, because “Russia isn’t a participant in the fighting.” Russia has consistently denied the involvement of regular Russian army forces in Ukraine even in the face of overwhelming eyewitness and video evidence to the contrary.

“Putin and Poroshenko really discussed the steps that would contribute to a ceasefire between the militia and the Ukrainian forces. Russia cannot physically agree to a ceasefire because it is not a party to the conflict,” Peskov said.

Peskov’s explanation follows on from Putin’s repeated assertions that Russia has no troops on the ground and hence cannot participate in a resolution to the conflict.

“Frankly speaking, we are not in the position to discuss some ceasefire conditions, about possible agreements between Kiev, Donetsk and Luhansk. That’s none of our business, but Ukraine’s internal affair,” Putin reiterated last week after talks with Poroshenko in Minsk.

The hair-splitting is a result of the Kremlin’s rhetoric that it is forced to adopt by the nature of the “hybrid war” it has been fighting – a war which Russia has been perpetrating by proxy. Russia’s military is too weak to stand against that of the West and so Russia has been hiding behind the confusion of using proxies. This allows it to fight the battles and at the same time avoid an open clash with the West. Although it puts Russia in somewhat of a ridiculous and damning position, laying it wide open to the charge of hypocrisy, this approach has introduced enough confusion into the debate over how to react to Russia’s aggression that Putin has successfully sown dissent amongst the EU members and several countries remain reluctant to press ahead with sanctions on Russia – a position that would be harder to maintain if Russia was fighting openly in Ukraine.

“Given the recent track record of ‘spin’, whatever the Kremlin says I am minded to think the opposite these days, e.g. No little green men in Crimea, no annexation, no troops in Ukraine, et al,” Tim Ash, head of research at Standard Bank said in a note to clients.

US President Barack Obama highlighted the issue in remarks made in the Estonian capital of Tallinn where he stopped off on the way to the NATO summit. Obama said a€ceasefire in€Ukraine could only be effective if Russia stopped “pretending” it was not active in€the conflict and€stopped sending troops and€weapons into€the country.

The next stage will be to work out a formula that Russia accepts so that it will be willing to withdraw its troops and support from Ukraine. Putin, on his way to a state visit in Mongolia, scratched out a 7-point peace plan on the plane, which was released after he landed in Ulaanbaatar.

“On my way here from [the city of] Blagoveschensk to Ulaanbaatar, I outlined some ideas and plan of actions. It’s here, but in handwriting,” Putin told reporters. “In order to stop bloodshed and stabilize the situation in the southeast of Ukraine, I believe the conflicting sides should immediately agree and carry out the following actions in coordination.”

1. Militias should cease military advances in the Donetsk and Lugansk Regions.
2. Pro-Kyiv armed forces should withdraw to a distance that excludes the possibility of shelling settlements.
3. Implement full and objective international control over ceasefire observation and monitoring.
4. Exclude the use of combat aircraft against civilians and villages.
5. Prisoner/captive-exchange via an Ôall-in-all’ formula, without preconditions.
6. Humanitarian corridors for refugees movement and delivery of humanitarian aid across Donetsk and Lugansk Regions.
7. Direct repair-crew access to destroyed social and transit infrastructure with supportive aid.

Putin expressed hope that final agreements between Kyiv and militia in southeastern Ukraine could be reached and secured at the coming meeting of the so-called Contact Group on September 5 in Minsk.

“I believe that the Kyiv authorities and southeastern Ukraine will reach final agreements [on the settlement of the situation] at the upcoming meeting of the Contact Group on Ukraine on September 5,” Putin said.

He called on Ukraine to take an active part in the work of the Contact Group for a final and comprehensive settlement of the situation in the southeastern Ukraine, of course, with full and unconditional assurance of the legitimate rights of the people who live there.”

Commenting on the phone call with the Ukrainian president earlier on Wednesday, Putin stressed that their, “views on ways to resolve the conflict are aligned.”

Many observers have called the ceasefire decision a PR coup for Putin, while others say the EU and US threat of more punishment forced it on him. “Putin pulls another rabbit out of the hat – the West really lacks any leadership at this stage. Ukraine looks like it is on its own at this stage. God help them,” Standard Bank’s Ash said in a note.

The announcement has stolen the thunder from Obama’s stopover in Tallinn, the Estonian capital, on his way to attend the Nato summit due to start in Wales on September 4. Obama was expected to heavily criticise Russian aggression, but in the in end held himself to comments about the US’ unwavering commitment to Article 5 of the Nato treaty that triggers an automatic declaration of war should any of the member states be attacked.

It will also undermine the Nato summit this week that was expected to concentrate on a message of unity in the face of Russian aggression and call for building more eastern bases as well as creating a new 4,000 strong rapid reaction force.

Finally the ceasefire deal comes only days before the EU were due to decide on yet another round of even tougher and more painful sanctions at a meeting slated for Friday. According to a three-page draft document outlining new possible new sanctions obtained by the Financial Times, the EU would join the US in barring Russian banks from lending money to Russian-controlled oil- and weapons-making companies through the issuance of bonds. This would affect Rosneft, the state-controlled Russian oil giant, which is on an aggressive path of developing Arctic and Siberian fields with ExxonMobil and other western supermajors.

Most painful of all would be other measures that recommend Europe to consider concerning “cultural and sports events” that would in effect be a suspension from participating in international sporting events and bar Russia from hosting the 2018 World Cup. Putin has invested a lot of his personal creditability into this project, which is also supposed to act as template for regional economic reform and investment.

FIFA president Sepp Blatter has reiterated that Russia’s hosting of€the 2018 World Cup is not up for€discussion. “We are not placing any questions over the World Cup in Russia,” he told an€event near Kitzbuehel, Austria, according to DPA news agency. “We are in€a situation in€which we have expressed our trust to€the organizers of€the 2018 and€2022 World Cups,” he added. “(A boycott) has never achieved anything.”

Analysts say that the ceasefire will strengthen Putin’s hand in the subsequent negotiations with Poroshenko as it creates a “frozen conflict” similar to those in Nagorno Karabakh or northern Cyprus in eastern Ukraine. Putin is expected to leverage this position to demand reassurances on Ukraine remaining out of the EU and Nato, as well as granting some sort of autonomous status to the eastern regions that will allow them to develop independent economic and trade relations with Russia.

“Let’s see if [the ceasefire] holds. Poroshenko will have to deliver on Putin’s agenda, and I really struggle to see how that can be sold domestically in Ukraine ahead of parliamentary elections in October,” wrote Ash. “I guess for the Ukrainian military this gives them a chance to regroup after recent military setbacks, and bide time to see what NATO and the EU delivers over the next few days in terms of deterrents to Russia for further intervention.”

The next round of negotiations on an eventual peace deal are due to be held between the rebels and the so-called Contact groups in Minsk on Friday September 5.

Poroshenko is now pinning all his hopes on a breakthrough at the meeting on Friday between the rebel leaders and the Contact Group in Minsk. “I pin my great hopes on the Minsk meeting Friday and expect that the peace process will eventually begin,” Poroshenko said on Wednesday.