Crisis in Crimea: What Ukraine, Russia, the U.S. and the EU Should Do

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As the West struggles with how to respond to Russia’s increasing military presence in the Crimean Peninsula — a move that followed months of protests culminating in the removal of Ukrainian president Viktor Yanukovych — businessman Alexander Gordin discusses how global political leaders can avoid a full-blown disaster.

Gordin is managing director of the Broad Street Capital Group, a New York based international private merchant bank, and author of a book titled, Fluent in Foreign Business: Grow Your Company by Expanding into Foreign Markets. He has had extensive business dealings in Russia, Ukraine and multiple countries in Eastern and Central Europe/Central Asia.

Global media have exploded over the last few days with news of Russia’s ostensible invasion of Crimea, an act that shows Russia snubbing its nose at Ukraine’s newly elected government and largely ignoring threats from the U.S. and the European Union. It could lead to a disaster of epic proportions — I am afraid to even think about the possibility of a World War III — yet I believe none of the parties involved wants a war. There is a way out of this mess.

What qualifies me to write this article? I have done uninterrupted business in Russia, Ukraine and multiple countries in Eastern and Central Europe/Central Asia over the last 24 years. I have also worked closely with all three trade and development Agencies of the U.S. government and with the Department of Commerce, as well as with senior government officials of several Eastern European and Central Asian countries.

For the Western world to try and embarrass Russia by putting democracies in its backyard creates a source of perennial irritation. The U.S. never liked having a Communist country 90 miles off its shores.

As a result, I have come to understand the geopolitical forces tugging at the region. I have been on official U.S. government trade missions to Georgia right after the war with Russia and to Crimea. I worked as part of the United Nations Development Programme’s outreach to Belarus and managed a U.S. public company with interests in Moldova. Although I try to stay away from politics, it is clear that business and politics in that region are inextricably linked, so I will offer my thoughts on what needs to happen in order for the ongoing crisis not to turn into a disaster.

Refocus on the Underlying Interests 

Let’s call a spade a spade. For the Western world to try and embarrass Russia by putting democracies in its back yard creates a source of perennial irritation. The U.S. never liked having a Communist country 90 miles off its shores. Why would we for a moment assume that having the West back Georgia, Moldova or Ukraine would bring joy and comfort to the Russian leadership?

It is in Vladimir Putin’s interest to have Ukraine come into Russia’s sphere of influence, or at least not allow the country to fall under Western control.

The West’s interest is to have Ukraine come into its sphere of influence (the EU, NATO), or at least have it remain democratic and territorially whole without the West having to engage militarily. So how do all sides get what they want?

Let Ukraine be! Both sides should immediately agree to leave Ukraine alone and stop pulling it into their respective orbits. Under Leonid Kuchma, the second president (1994 – 2005) of independent Ukraine, the country has been able to masterfully balance the interests of both forces while remaining independent and prospering economically. The same thing should take place now. Let business and economics be the drivers, and the free market will work to balance respective interests out. All sides should stop stoking the separatist tensions and agree to stop pulling independent Ukraine into their respective orbits. The country is large enough and rich enough, and it can certainly regain its rightful place in the geopolitical arena.

Jointly Address Recovery and Rebuilding

Simultaneously, both the U.S./EU block and Russia should provide joint economic aid to Ukraine to let it come out of the economic liquidity crisis, which was the result of looting and mismanagement by the previous administration. This tit for tat response should be moved from the missile offensive to the economic aid arena. Each side (the EU, U.S. and Russia) should commit $15 billion, which would total $45 billion in badly needed economic aid for Ukraine. Let the country rebuild itself because the economic stakes are enormous. Exxon, Shell, Chevron, Cargill, the European Bank for Reconstruction and Development and Franklin Templeton Investments have billions committed in direct investment, as do EU countries and Russia, which have massive equity stakes or interests in the oil, gas, aerospace, agriculture, coal extraction, retail and telecom sectors.

Both sides should agree to a stalemate, have Russia pull the troops out and proceed along a non-interference policy.

U.S. and European exporters have billions at stake from losing Ukrainian markets for agricultural, extraction and production equipment. Ukrainian steel, pipe and agricultural producers have vast market opportunities in Russia, the EU and Asian countries. Undermining their ability to export will further choke off much needed tax revenues and foreign currency inflows.

Change the Game

Although I foresee the possibility that NATO would put an aircraft carrier group in the Bosphorus strait to block exit from the Black Sea — or have its own military exercises somewhere, let’s say Poland, as a show of counter force to the Russian troop deployment – the U.S. and its allies need to refocus the entire game plan. Going toe to toe and engaging militarily is a losing proposition. Both sides should agree to a stalemate, have Russia pull the troops out and proceed along a non-interference policy.

At the same time, Russia and the U.S. should refocus their cooperation in areas where common ground exists between them: preventing nuclear weapons in Iran, stopping the spread of radical terrorism globally, and deepening trade and economic ties between them. The way things are going right now, Putin is playing chess, while the West is playing checkers. Both sides need to start playing Monopoly and stop antagonizing each other.

Sounds simplistic? Not really, yet it is very difficult to implement. However, if basic tenets and philosophies similar to the ones outlined here are adopted by all sides involved, a peaceful resolution is very possible. This is especially true given the fact that over the last 25 years, there has been a tremendous fusion of assets, people and cross-border economic and cultural ties between Russia, the U.S., the EU and Ukraine. Let the cooler heads prevail.

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6 Comments So Far

Shekar Iyer

Pity, the author makes no reference to the corruption and endemic crony capitalism that are significant roadblocks to sustainable growth in that country.

joe kovar

Sadly, while I agree with the author about what the U.S., the E.U., and Russia can do to solve the crisis, the fact is, it is as much a fantasy as hoping the current situation resolves itself easily. The outcome suggested by the author would bring democracy and success to Ukraine, but that democracy and success is what Russia for now cannot accept. It is in a way like saying, “Oh, the baby is crying because he dropped his toy. I know! Let’s leave the toy where it is and see if he stops crying.”

Easow Samuel

What does the author mean by ‘Ukraine’s newly elected government’? There was no election with the people. It was a cook-pot revolution. In Central Kiev open area by a bunch of heavily financed well equipped people with guns and petrol bombs. They fixed a government by themselves. Again what is ‘For the Western world to try and embarrass Russia by putting democracies in its backyard’? If US and there allies approve of any change in another country then it is ‘Democracy’. The whole problem was created by the West due to their Post World war attitude that they are the Guardians of Democracy in the World – there type or approved by them.
As far as Ukraine or much of Europe is undergoing low development as the whole of West dependent on their prosperity to economic or Political ‘Colonization’ and that except US the other countries are not powerful enough to follow suit in the last few decades. US followed the ‘Oil for money or Arms and the free flowing US Dollars’ succeeded in growing rapidly. Europe could not. So All Europe except for the industrial belts is slowing down. Ukraine and few other countries survived on subsidy given by the Russian Federation. And that the administrations and their cronies amassed wealth. But the revolutionaries are also not the working people. The so called Opposition came to do the same the earlier ones did but with out an election. A public space where they gathered and fought is not the whole Ukraine. So the current government is not representing Ukraine.

This article is not worthy of Wharton in my opinion. It is simple Internet blogging/commentary.

Kanan Jaswal

When Crimea and some other parts of eastern Ukraine are so decidedly pro-Russia and the rest of the country pro-EU, it won’t be a bad idea to consider dividing the country. The pro-EU part can become an independent country and Crimea etc. can follow suit or join the Russian Federation.

Andrew Corradini

“Call a spade a spade?” – “putting democracies in Russia’s backyard? – what a disingenuous false equivalence. First of all – isn’t Russia *ostensibly* (emphasis intentional) a democracy? How’s it putting a finger in the eye of the R.R. to have a democracy next door? Let’s actually call a spade a spade, Alexander: you mean “a U.S.-friendly/beholden”, not “democracy” vs. “communist”. And “embarrassment” is a poor choice of word – more like provocation and severe inconvenience, and of Putin and his fabulously wealthy and powerful cronies, not Russia. (Try “indignant”, and “furious”.)

We’ve heard this tune before, with satellite states and spheres of influence and dominoes – the lyrics are different but the song remains the same. (grin). It’s about projected power; oil/gas; a naval base and maritime power resources; and a hell of a lot of ego-based chest-puffing. (Certainly NOT about ideology, democracy-vs.-communism — this is pure power and naked self-interest with a bunch of ego mixed in. Note that I’m not pointing any fingers either way, here.)

[Read Power, by Bertrand Russell, 1943.]