11.09.2015 | Ukraine: no early thaw in frozen conflict

While the West remains reluctant to confront Russia directly, Ukraine is unlikely to secure the levels of investment and support that it would like, writes Adrian Stones from the Yalta summit.

Unsurprisingly there were no official Russian delegates at the 12th annual Yalta European Strategy (YES) summit. But Russia’s presence loomed very large. The stand-off between Kiev and Moscow is being called a frozen conflict and to say their relationship is frosty is quite an understatement.

The YES summit was held for the second year running in Kiev rather than in Yalta, the capital of Crimea, the Ukrainian state annexed by Russia in March 2014. The 400 or so delegates came together to debate possible solutions to Ukraine’s problems which include a lack of investment, debt restructuring, institutionalised corruption and the hostile actions of its neighbour to the East.

The summit was also held on the eve of two important international events. President Vladimir Putin of Russia was soon to address the UN General Assembly in New York; and in early 2016 European sanctions imposed on  Russia over Crimea are due to be reviewed.

But chatter about possible improvements for Ukraine tended to overlook a giant obstacle that was generally only tacitly acknowledged: the West’s lack of will or capacity to deliver what Ukraine wants.

The crux is that Russia tends to feel secure only when its neighbours feel insecure. And at present Russia remains as insecure as ever about the West’s ambitions, while the West, distracted by Syria, Iraq, Iran, Europe’s biggest refugee crisis since the Second World War, China, the global economy, and more, is not ready to add direct confrontation with Russia to that list.

Kiev is increasingly drawn westwards as its democracy matures, its economy improves, and its security status deteriorates. Russia wants it to remain if not loyal, then certainly no closer in alignment to the West than it is at present.

This is not a new situation. At the first YES summit over a decade ago, just 30 delegates discussed military and economic issues, even the prospect of Ukraine joining NATO. This year the summit was a stage for Ukraine to seek to attract investment and keep the world’s attention focused on the country.

Investment from the West is not just held back by the situation with Russia, it is also hampered by widespread corruption.

Some 20% of Ukraine’s GDP is controlled by just 10 oligarchs. Such inequality must be tackled as without reform, including of the judiciary and of the energy sector, inward investment will stall, despite the lure of huge gas reserves that could make the country self-sufficient in energy for decades.

Even then, finance will be hard to come by. It was Dominic Strauss Khan, the colourful former head of the IMF, who put it most delicately, saying the international donor agencies have a lot on their plates, telling Ukraine to do what it can without necessarily expecting much in the way of international lending.

Some, however, believe aid should in time become part of a wider strategic policy. Indeed, Larry Summers, the former Treasury secretary, insisted that aid now could be regarded more as an investment in security, which will yield a dividend in terms of greater sums not being needed in the future.

So there was plenty to discuss. Those present, including Jose Manuel Barroso, Strobe Talbott, Shimon Peres and various retired five-stars, were not today’s powerbrokers but they do still have influence and their presence brought much needed international attention.

Back home, they may be able to work behind the scenes, lobbying and advising the frontline politicians. They are also in pole position to influence like-minded investors – those with deep pockets who might be able to help to build Ukraine’s infrastructure and profit from investment in the energy sector.

With the UN General Assembly and the sanctions review approaching, the timing of the summit could not have been better. But do not hold your breath waiting for the West to engage comprehensively with Ukraine, or to take stronger action against Russia to protect the legal and internationally recognised border of Ukraine.