Crisis in the Crimea
Crisis in the Crimea

Crisis in the Crimea

Urkaine-crisis-rally

There’s nothing like an invasion to shake up the world order. Russia’s take-over of the Ukraine’s Crimean Peninsula and the West’s inability to stop the annexation reveals the limitations of the current balance of power.  The confines of America’s power are certainly on display as the U.S. tries all it can to encourage Russia to leave the Crimea.  Starting sanctions against Russian businessmen did not yield any results. Neither did not allowing Russia to attend the G-8 meeting. More serious options, such as a military option or further sanctions against more players, are not being undertaken in hope that a diplomatic solution can be found.

Globalization influences the underlying causes and the impact of the invasion as well. This analysis will examine the role of international law, energy and international trade and investment in the Russian annexation of the Crimean peninsula.

International Law

First, there is debate whether Russia’s invasion of the Crimean Peninsula is legal under international law. Russia claims it is legal because: 1) the interim government is not legitimate since it was the result of a coup d’état,  2) the human rights of Russians living in Ukraine were threatened by the nationalist agenda of the interim government, 3) a humanitarian crisis was taking place on Russia’s border, 4) the Russian constitution guarantees the rights of its citizens living beyond their boundaries, and 5) President President Yanukovich and the Prime Minister of the autonomous Republic of the Crimea asked Russia to help stabilize Ukraine (Deeks, 2014).

Others claim it is illegal because Russia is part of the United Nations, whose charter explicitly states that there should be no trans-boundary use of force (Woolf, 2014). The invasion is also in contravention of the Budapest Memorandum. The Budapest Memorandum is a diplomatic document signed by Russia that requires Russia, United Kingdom, and the United States to respect Ukraine’s sovereignty and territorial integrity in return for the de-nuclearization of Ukraine. Ukraine has fulfilled its obligation and so the diplomatic document should be valid. The Budapest Memorandum is binding under international law. Unfortunately, there is no enforcement mechanism (Synovitz, 2014).

Second, many question the legality of the March 16th referendum by the Ukrainians living in Crimea who voted to become part of Russia. Some argue it was illegal because the referendum was held after the Russian invasion, thus tainting the results (Woolf, 2014). Others argues that the referendum was legal under Article 1 of the UN International Covenant on Civil and Political Rights (1966), which gives all people the right to self-determination (Faruqi, 2014).  The legality of secessionist movements is often determined on a case-by-case basis. In this case, the international community has not blessed the use of the referendum. In fact, the UN General Assembly passed a resolution calling the referendum illegal. This resolution though is not binding (Blitz, 2014).

Energy

Ukraine-gas-pipe
Arguing legality though does not really change facts on the ground. The international community is now dealing with a new reality: the instability of one of the world’s major energy suppliers. Russia has 67 billion barrels of conventional oil in its reserves and 80 – 140 billion barrels of shale oil in Siberia. The oil flow out of Russia on a daily basis is about 10 million barrels (Kramer and Jolly, 2014). Russia is also the world’s second largest producer of natural gas and provides 30 percent of Europe’s natural gas, most of which travels through pipelines running through the Ukraine (Surowiecki, 2014). European dependence on Russian gas has softened the European response in the short-term.

For the moment, it seems like business as usual for Russian oil and natural gas producers. Total, the French energy giant, has not cancelled its negotiations with Lukoil, one of the major Russian gas companies, to jointly develop shale oil resources in Sibera. Statoil and Shell, other Western oil giants, are also still exploring joint ventures to develop Russian shale resources as well (Kramer and Jolly, 2014).

The long-term impact of Russia’s impact though is not as rosy.  Moody’s is considering downgrading the credit rating of Russian state-run companies, Gazprom and Rosneft. Gazprom is the world’s largest producer of natural gas and Rosneft is Russia’s largest crude oil producer (Carroll, 2014). A downgrade could really hurt the Russian economy in the long-run. Furthermore, across Europe, many countries are re-thinking their energy plans and are looking for ways to decrease dependence on Russian energy. Paths include increase liquefied natural gas imports, development of European shale gas, further support for energy efficiency and use of renewables (Cunningham, 2014).

These long-term changes will require a different attitude towards domestic fracking, which is currently not supported by many European countries (Kramer and Jolly, 2014). Americans will also have to overcome their mixed feeling towards fracking as well in order to become a dominant world-wide supplier of natural gas. If this occurs, then Europe and the U.S. can enact sanctions that could cripple Russia, unlike the current sanctions, which do not address Russia’s energy exports.

International Trade and Investment

International trade and investment are part of the cause and can serve as part of the solution to the Crimea Crisis. Since Ukraine gained independence in 1991, its economy has been increasingly under control of oligarchs. The Orange Revolution of 2004 failed to produce any major economic growth and Yanukovich, a pro-Russia candidate secured the presidency. In the last few years, Ukraine had been seeking to forge closer trade ties with the European Union, though Yanukovich decided not to pursue closer a trade association agreement with the EU due to Russian pressure. This decision led to the Euromaiden protests in late 2013 and Yanukovich’s invitation to Russia to help get the situation under control (McMahon, 2014).

Russia feared Ukraine’s efforts to forge stronger ties with Europe and the West and wanted to bring Ukraine into its own Eurasian Union whose members would likely include Kazakhstan, Belarus, and Armenia. In addition, 80 percent of Russia’s natural gas flows through pipelines located in the Ukraine and Ukraine is a major market for Russian gas. Ukraine’s ports also serve as an important buffer for the Russian military. These factors make Ukraine’s ties to Russia extremely important and are one of the main reasons why Russia annexed the Crimea (McMahon, 2014).

Many pundits argue that trade sanctions are one of the key policy options available to the West to combat Russian aggression. Stronger trade relations between Europe and the U.S., as realized in the Trans-Atlantic Free Trade Agreement (TAFTA), could also help Europe wean itself off of Russian oil and gas.

What’s next?

The West is trying to use every tool available to them, except force, to punish Russia and make it leave the Ukraine. Most analysts feel that Ukraine matters to Russia more than it does to the West, so in this game of chicken, Russia is most likely to succeed. Success though, as pointed our earlier might only be short-lived as Europe finds alternatives to Russian gas and oil. This is probably healthier in the long-run for Europe as Russia uses access to energy resources as a means to force countries to acquiesce to Russia’s demands. Former Eastern Bloc countries are particularly vulnerable to this weapon.

Pundits around the world inquire if the response to Russia will impact other crises around the world, such as Iran’s effort to secure nuclear weapons or conflicts between North and South Korea. It’s hard to predict though how other countries will respond in to future crises. Each one is unique and the lack of military response in this situation does not mean that the U.S. will not use force in future conflicts.

The Russian annexation of the Crimean Peninsula was so unexpected and is incomprehensible to many in the West. Putin is a conundrum. Trying to understand his motivations and actions and his next move is not easy, if not impossible. It will be interesting to see if this annexation results in major energy and trade policy changes on both sides of the Atlantic. If so, this act may have reverberations for years to come.

Works Cited

Blitz, J. (2014, March 18). Is Crimea’s referendum vote legal? Financial Times. Retrieved from: http://blogs.ft.com/the-world/2014/03/is-crimeas-referendum-vote-legal/

Caroll, J. (2014, April 1). Gazprom debt rating at risk along with Rosneft, Moody’s says. Business Week. Retrieved from: http://www.businessweek.com/news/2014-04-01/gazprom-debt-rating-at-risk-along-with-rosneft-moody-s-says-1

Cunningham, N. (2014, April 1). How Crimea hurts Russia. Retrieved from: http://oilprice.com/Energy/Energy-General/How-Crimea-Hurts-Russia.html

Deeks, A. (2014, March 5). Russia in Ukraine: a reader responds. Retrieved from: http://www.lawfareblog.com/2014/03/russia-in-ukraine-a-reader-responds/

Faruqi, S.S. (2014, April 3). Double standards on Crimea. The Star. Retrieved from: http://www.thestar.com.my/Opinion/Columnists/Reflecting-On-The-Law/Profile/Articles/2014/04/03/Double-standards-on-Crimea/

Kramer, A., Jolly, D. (2014, March 28). Crimea Crisis has little impact thus far on Russian oil deals. The New York Times. Retrieved from: http://www.nytimes.com/2014/03/29/business/international/crimea-crisis-has-little-impact-thus-far-on-russian-oil-deals.html?_r=0

McMahon, R. (2014, March 18). Ukraine in crisis. Retrieved from: http://www.cfr.org/ukraine/ukraine-crisis/p32540

Surowiecki, J. (2014, March 24). Putin’s power play. The New Yorker. Retrieved from: http://www.newyorker.com/talk/financial/2014/03/24/140324ta_talk_surowiecki

Synovitz, R. (2014, February 28). Explainer: The Budapest Memorandum and its relevance to Crimea. Retrieved from: http://www.rferl.org/content/ukraine-explainer-budapest-memorandum/25280502.html

Woolf, C. (2014, March 19). Here’s the argument for why Crimea’s secession was against international law. Retrieved from: http://www.pri.org/stories/2014-03-19/heres-simple-explanation-why-crimeas-secession-was-against-international-law
Pictures: Rally, Gas Pipeline

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