Restive Ukraine signs EU pact and hands rebels self-rule

Signed, sealed, delivered: Ukrainian president Poroshenko. EPA/Sergey Dolzhenko

On the same day that it finally voted to ratify the EU Association Agreement that helped spark the Euromaidan protests in 2013, Ukraine’s parliament also voted to give self-rule to the rebels holding major cities in its east and extended an amnesty to fighters on the pro-Russian side.

These are vital elements of the ceasefire agreement signed in Minsk on September 5, an agreement that seems to be holding – if only just.

After all, the very day after the ceasefire began, Russian-based separatists (almost certainly supported by Russian servicemen) shelled the eastern edges of the strategic port city of Mariupol; the battle for control of Donetsk airport, where pro-Kiev forces are holed up, also continues.

While the guns have now fallen silent for the most part, barely a day passes without the sound of outgoing unguided Grad rockets or incoming artillery shells and mortars reverberating around Donetsk.

The ongoing spasms of conflict are still cutting off water and electricity in different parts of the city. Understandably, the more than 1m displaced persons who have escaped the conflict – including 814,000 people who have, according to the Russian authorities, moved to Russia – are carefully weighing up whether or not to return to their homes.

Taking the reins

The rebels have launched state-building processes in the territories they currently control. The DNR authorities have announced that the Ukrainian hyrvnia and Russian rouble will run in parallel until the end of the year, after which the Russian rouble will become its sole currency. It also aims to join the Russian-led Eurasian Customs Union.

Meanwhile, Sergiy Taruta, the controversial oligarch appointed by Poroshenko as governor of Donetsk region, claims that the DNR is deliberately destroying infrastructure and creating a humanitarian crisis to force Russia to come to its “rescue”.

In addition, the DNR has signalled its intention to assume control over the state pension fund, and has even appointed a new rector of the Donetsk National University.

But even as Donetsk and Luhansk are pushing ahead towards something like statehood, it’s still too soon to call their vision plausible.

Tall order

Surely the the DNR and LNR cannot expect to quickly reconstruct the war-ravaged landscape of the east (when, for example, over two thirds of the coal mines in their territory are not working) and carve out a viable future as an independent breakaway state.

The aftermath of shelling in Donetsk. EPA/PHOTOMIG

The rebels currently occupy the two largest cities in the Donbas, about a third of the territory of the two oblasts, and a peacetime population well in excess of 3m. But the Donbas, which was a “territorial production complex” during the Soviet era, is a highly integrated industrial region, with infrastructure designed for producing electrical energy and steel. Even following the ceasefire, the conflict’s frontlines still effectively intersect with established industrial supply chains.

For example, Ukraine’s largest company, System Capital Management, is owned by Rinat Akhmetov, who escaped Donetsk and currently resides in Kiev. The company is headquartered in Donetsk city, under rebel control – and yet two of its most important industrial assets, the Azovstal and Illyich iron and steel works, are located in Mariupol, which is controlled by pro-Kiev forces. These industrial companies depend not only on transporting commodities around the region by rail, which has been severely disrupted, but also on exporting from ports such as Mariupol’s.

The current rebel-controlled territory, and arguably the remainder of Ukraine, simply does not look economically sustainable without normal trade and investment relations between the hypothetical breakaway state and Ukraine proper.

This, in turn, leaves the country facing two possible scenarios.

High road or low road?

The ceasefire could represent the first step in a long peace process, in which the Ukrainian authorities and the rebels would agree to wide-ranging autonomy for the Donbas within a federal Ukraine and the West might accept a united Ukraine which is geopolitically neutral and free to integrate economically with both the EU and Eurasia. This could be formulated in a new Budapest Memorandum.

On the other hand, the Ukrainian authorities and the rebels could fail to reach consensus on how to represent the Donbas in a new Ukrainian constitution, or the West could fail to sufficiently accommodate Russia’s legitimate security interests around its western borders.

If that happens, a new period of armed conflict could ensue as the rebels supported by Russian troops seek to gain control of Mariupol as well as other territory to try to carve out an economically viable breakaway state in the future.

But even this scenario carries the risk that the resulting breakaway state would be cripplingly economically isolated, both from the rest of Ukraine and from the West.

Meanwhile, even with their new powers of self-rule, the rebels are hardly out of the woods. On September 12, the EU imposed visa bans and asset freezes on the self-proclaimed prime minister of the DNR, Alexander Zakharchenko, along with seven other DNR and LNR officials.

And even as Ukraine and the EU have now ratified the Association Agreement and the Deep and Comprehensive Free Trade Agreement, the trade agreement will be suspended until at least the end of 2015. Additionally, Poroshenko intends to proceed with parliamentary elections on October 26.

As these events unfold, their current ceasefire looks less and less like the start of a credible peace process and more like a pause – with the twin threats of renewed violence and Ukraine’s partition still looming.