Guest post: the west must show the Kremlin it means business in Ukraine | beyondbrics

Guest post: the west must show the Kremlin it means business in Ukraine | beyondbrics:



"Natalie Jaresko, Ukraine’s finance minister, is in London this week to drum up support for her country’s ailing economy. It is badly needed. The physical destruction of property, the loss of production and the disruption to trade and finance caused by Russia’s military intervention mean that Ukraine has lost around a fifth of its economy in the last year. Forecasts that it will contract by a further 5.5 per cent this year are widely seen as optimistic. With the value of the hryvnia down by 70 per cent, inflation at around 35 per cent and foreign currency reserves running low, the IMF’s recently agreed $17.5bn support package already looks like a sticking plaster solution for an economy that needs a blood transfusion.



Ukraine can withstand Russia’s onslaught if its economy recovers. The west’s unwillingness to provide military support makes the economic dimension more important still. With the Minsk ceasefire largely holding, financial markets are the new frontline in the struggle for Ukraine’s future. Sanctions on Russia are hurting, as Vladimir Putin acknowledged last week. Real wages have fallen by nearly 10 per cent and the country’s financial reserves are shrinking rapidly. Yet those driving Russian policy sense a lack of western resolve and seem to believe that time is on their side. If they can continue to destabilise Ukraine and raise the cost of supporting its government, Washington and Brussels will eventually give in. 




This basic calculation will not change unless clearer messages are sent. If the west is not prepared to outgun Putin, it must at least convince the Russian president that it is willing to outspend him. This should be seen as an investment in our own security. Success in Ukraine would simply enlarge Putin’s irredentist ambitions and move the line of confrontation further west. The long-term costs would be far greater than the sums needed to underwrite Ukraine’s survival today. It therefore makes no sense to approach this question with the mentality of a bank manager, quibbling over budget lines and repayment schedules. Western financial support should be of a scale and nature required to send an unmistakable signal of strategic intent."



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