WASHINGTON – With Russian troops from its base in the Crimea effectively occupying the Crimean Peninsula, the Western-backed central government in Kyiv at the same time is facing a further challenge of economic default by the end of March that could threaten its survival, according to regional analysts.
The interim government led by opposition leader Arsenniy Yatsenyuk as prime minister had taken over power from ousted President Viktor Yanukovych, who is hiding out in Moscow.
Putin initially had offered Ukraine a $15-billion loan along with major price cuts for Russian natural gas deliveries if Yanukovych joined Putin’s customs-free Eurasian Union as opposed to the European Union.
The European Union, however, couldn’t begin to match Putin’s concessions. Consequently, Yanukovych decided to side with Putin, which prompted the western part of Ukraine to erupt into protest demonstrations.
The demonstrations led to a takeover of government buildings in Ukraine’s capital, Kyiv. An interim government was created with the blessing of the Ukrainian parliament, forcing out Yanukovych.
Putin ultimately suspended the $15-billion loan.
Now, the country is about to default and promised loans from the European Union and even the United States not only will not be forthcoming in time, but any amount being considered won’t be sufficient to avoid default.
The International Monetary Fund, or IMF, has sent in a delegation to Kyiv to consider some form of emergency financial assistance.
The prospect of a default, coupled with not only the $15 billion in Russian aid, but also Moscow’s refusal to cut natural gas prices will make necessary the need for even more financial assistance.
While a western loan will help only in the short run, the increased financial burdens imposed by Moscow will only create greater financial stress unless even more western financial assistance is forthcoming.
The need for even a larger bailout will come with conditions that would include painful reforms the new government will find difficult to meet.
This would place the new government on shaky grounds, since any such decisions will be unpopular, especially in cutting subsidies, tariffs and social programs.
Analysts say that such measures could be “suicidal” to the new government, thereby throwing the fledging interim government into further turmoil.
This hidden crisis comes as the Russian Duma, or parliament, not only approved Putin’s request to move troops into the Crimea but went a significant step further and authorized the use of Russian troops for the entire “territory of Ukraine.”
The Russian Duma comes as Putin invoked a military doctrine that has been in effect since the end of the 2008 Russian-Georgian war in which Moscow would send in troops to protect Russian citizens.
As in 2008, when Moscow extended citizenship and Russian passports to residents of the breakaway Georgian provinces of South Ossetia and Abkhazia, the same thing is happening now toward ethnic Russians living in eastern and southern Ukraine where Russian influence is great.
Analysts believe, however, that Putin will restrict any military occupation just to the Crimea – for now – even though the western Ukrainian government in Kyiv has called up its military reserves in response to the Russian military takeover of the Crimean Peninsula.
This latest development could result in a major confrontation between the interim government in Kyiv and Russia.
In 2010, Russia had renewed its lease to 2042 on the Crimea base where its Black Sea Fleet is based. The deal was made with Yanukovych. However, the new Ukrainian government has signaled that it will try to scrap that agreement.
This development will only further inflame Moscow, which looks on the base in the Crimea as a major strategic asset to give it access not only to the Black Sea but the Mediterranean Sea.
The latest Russian military action in the Crimea has distracted officials in Kyiv from their focus on Ukraine’s immediate economic crisis.
The Western response to Russia’ military move in the Crimea, especially from the United States, was predictable, with President Barack Obama continuing to warn Putin against further military action and threatening not to show up at a G8 economic summit scheduled in Sochi, Russia, in June.
Now, the indication is that the G8 meeting might not take place at all, since Russia is a member of this august economic group.
The White House also warned of further “political and economic isolation” for Russia. However, that would require the assistance of Europeans, who are too dependent on Russian natural gas to exert any meaningful leverage over the Kremlin’s latest actions.
Similar inaction was seen following the 2008 Russian invasion of Georgia.
Not only is the new government facing economic and security problems, but it is confronting another challenge, this one being the make-up of the interim government itself in Kyiv.
At least three significant parties are not represented in the composition of the interim government or parliament, even though presidential elections are to be held on May 25, with parliamentary elections later in the year.
They are Yanukovych’s Party of Regions, the Ukrainian Democratic Alliance for Reform and the Communists.
Given the lack of proper representation in the parliament when the new government was formed, there is concern that it was done without going through all the legal steps, making the government’s mandate weak.
This comes on top of the Russian view that the interim government that overthrew the democratically-elected pro-Russian Yanukovych is illegal.
Analysts say the one advantage to this temporary interim government is that it can pass reform measures that would not pass under normal circumstances. However, the pressures both internal and external will be great on the interim government, in addition to that which Moscow will put on it.
F. Michael Maloof, senior staff writer for WND/ G2Bulletin, is a former security policy analyst in the Office of the Secretary of Defense. He can be contacted at [email protected].