Russia negotiates with Germany and France over Ukraine

ON THE morning of October 19th thousands of people in Donetsk, the main city occupied by the Russian-backed separatists of eastern Ukraine’s Donbas region, attended the funeral (pictured above) of a notorious warlord assassinated two days earlier. Arsen Pavlov, better known as Motorola, was a Russian irregular who boasted of killing Ukrainian prisoners-of-war and had started to act independently of Moscow. He was the latest of a half-dozen unruly separatist commanders to be eliminated in recent months, according to Nikolay Mitrokhin, a Ukraine expert at the University of Bremen. That evening, the leaders of Russia, Ukraine, France and Germany met in Berlin to discuss the region’s stalled peace process, known as Minsk-2.

The two events were both signs that Russia is trying to establish firmer control over the lawless Donbas. Though it has stopped trying to spread the conflict to other parts of Ukraine for now, it still wants to cement Donbas’s special status inside Ukraine. As part of Minsk-2, Moscow demands that Ukraine hold a local election in the rebel-held territories. Kiev has refused to do so until shooting stops and international monitors from the Organisation for Security and Co-operation in Europe (OSCE) are given access.

In Berlin, Vladimir Putin suggested he would let the OSCE in. Petro Poroshenko, Ukraine’s president, said this would pave the way for elections. That could create a Moscow-controlled region within Ukraine that could be used to block government reforms and international agreements by the Kiev government and undermine Ukraine’s integrity without direct military involvement.

Ukraine is at the centre of Russia’s conflict with the West, playing a vital role in Mr Putin’s ambition to restore Russia’s great-power status. The Kremlin has used the upheaval since Ukraine’s revolution of 2014 to cow its own dissidents by demonstrating that rising up against corrupt, authoritarian regimes lead to chaos. The West, meanwhile, wants to show that liberal democracy can succeed in a state that was at the core of the former Soviet empire.

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But while Russia and the West fight over Ukraine, it is events inside the country that will determine its destiny. Two years after the Maidan revolution, Ukraine is stuck in a grey zone of half-reforms and half-war. While the country has held together better than many had expected, it has not transformed itself into a modern nation-state. After the revolution, power was seized not by a new political generation but by “those who were the closest to the government chairs when the music stopped,” says Yulia Mostovaya, editor of Zerkalo Nedeli, a Ukrainian weekly. Young Ukrainians are frustrated by their inability to keep the revolution’s promises, but unable to form a political force strong enough to challenge the government.

One reason is the war, which has given the government a cause around which to unite the country without having to reform itself. Television channels are filled with images of the brutal fighting, in which 10,000 people died, and of volunteers carrying food and clothing to Ukrainian soldiers. Yet, as one Ukrainian observer said, the worst thing that could happen to the country now would be for the devastated Donbas region to return to Kiev’s control. Ukraine has neither the money nor the state institutions to re-integrate it. But Russia, which started the war, does not want Donbas either.

Western countries discouraged Ukraine from fighting when Russia invaded Crimea, and Mr Poroshenko resists calling the conflict a war. But the war has become big business on both sides of the border. Corruption, in both Ukraine and Russia, is so ubiquitous that it is better described as the capture of the state by oligarchs and vested interests. According to Zerkalo Nedeli some 30 defence manufacturers have been transferring state money into fake firms as “payment” for non-existent equipment. Some pro-Ukrainian militias, who answer to no one but their own field commanders, are growing impatient with corruption and the lack of reform.

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Yet instead of concentrating on fighting large-scale corruption, Ukrainian prosecutors are targeting journalists, activists and pro-European members of parliament. Sergii Leshchenko, an anti-corruption journalist and MP, has been attacked by the prosecutor’s office for acquiring a 7.5m hryvnia ($292,000) flat in Kiev, bought with a loan from a friend. “The purpose of this campaign is to discredit us, to show that everyone in Ukraine is the same and anyone who fights against corruption is himself corrupt,” says Mustafa Nayem, another pro-European MP.

Some new, clean institutions have been set up with the help of Western donors, such as the National Anti-corruption Bureau of Ukraine (NABU). But they are locked in a struggle with the old guard. The General Prosecutor, Yuri Lutsenko, is trying to limit the powers of NABU and hand over serious corruption cases to other agencies.

Francis Malige of the European Bank for Reconstruction and Development says there has been much progress in the banking and energy sectors. But the key tests, including privatisation of state assets, are still to come. The central bank has yet to deal with the country’s largest bank, PrivatBank, which belongs to Ihor Kolomoisky, one of its richest oligarchs.

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As for energy, the intermediaries between Gazprom, Russia’s state natural gas giant, and Naftogaz, its Ukrainian counterpart—a vast source of corruption—are gone. But Rinat Akhmetov, a former supporter of the deposed president, Viktor Yanukovych, is still making a killing on government-regulated schemes in the coal and electricity sector.

As Mikheil Saakashvili, a former president of Georgia and the governor of Odessa region, says, for all the differences between Russia and Ukraine, the elites in the two countries have much in common. “Ukraine has to build up a critical mass of reformers,” he says. The EBRD and the EU have launched a programme to reform public administration, hiring dozens of young Ukrainians to create new layers of civil servants in four key ministries.

But this will take years. What Ukraine needs most is a leader with vision and political will. In the words of Ms Mostovaya, Mr Poroshenko is like a “rusty and infected nail that holds things in place”. Pulling him out now would be dangerous, but he is hardly the man with whom to build the future. Mr Putin may hope that the combination of keeping Donbas inside Ukraine, growing disillusionment with the Maidan revolution and the radicalisation of some Ukrainian militias will be enough to cause the country to explode. It is up to Ukraine to prove that he is wrong.