Russia and Ukraine Grow More Distant

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As 2015 comes to a close, the relationship between Russia and Ukraine is still deadlocked. The most immediate issue between the two is the suspension of Ukrainian electricity supplies to Crimea. There is also the disagreement over Ukraine's trade agreement with the European Union, which has led Russia to threaten restrictions on agricultural imports from Ukraine. Both sides appear to be preparing for these problems to go unresolved for some time, but progress is still possible. The same probably cannot be said for the standoff over eastern Ukraine, which is likely to continue well into next year.

Analysis

The disruption of electricity supplies from the Ukrainian mainland to Crimea began the weekend of Nov. 20-22. As Crimean Tatar activists demonstrated near electricity infrastructure in Ukraine's southern Kherson region, explosions knocked out the four main power cables that supply electricity to Crimea. No one has claimed responsibility for the explosions, but they were almost certainly perpetrated by the activists and unofficially supported by the Ukrainian government. Electricity supplies to Crimea have not resumed.

This is not the first time electricity or energy supplies from Ukraine to Crimea have been cut off since Russia's annexation of the peninsula in March 2014. However, the length and severity of this disruption is unprecedented, and the reaction - or lack thereof - to the cutoff by Russia and the West is itself unusual. Russia has made no formal response except to call on Ukrainian authorities to repair the electricity lines as soon as possible, and the United States and European Union have remained quiet on the matter. If any talks about resuming electricity supplies have occurred, it has been behind closed doors.

And Moscow is preparing for an extended disruption. On Dec. 2, Russian President Vladimir Putin attended the launch of the first leg of an energy bridge from Russia to Crimea. A second leg is scheduled to come online next April, and Russian officials have said it will free the peninsula from its dependence on Ukrainian electricity supplies. The 800 megawatts of electricity planned from the two lines, however, will not match the 1,200 megawatts that Ukraine sent to Crimea before the cutoff.

In the meantime, Russia and Ukraine held talks recently on a different issue: the status of Ukraine's trade agreement with the European Union. Russia has warned that it will restrict all agricultural imports from Ukraine starting Jan. 1, when the economic component of Ukraine's association agreement with the European Union comes into effect. Russian, Ukrainian and EU officials have held trilateral talks over the course of the year to avoid such restrictions, but no progress has been made; a Dec. 1 meeting between Russian and Ukrainian representatives mediated by EU Trade Commissioner Cecilia Malmstrom ended without an agreement. Following the talks, Malmstrom said another meeting could be held on the issue the week of Dec. 7, though Russian Economy Minister Alexei Ulyukayev said it was "very probable" the sides would not reach an agreement before Jan. 1.

Ukraine phased out many of its agricultural exports to Russia over the past year, suggesting that Kiev has been preparing for a complete ban for some time. Ukraine's agricultural exports to Russia fell by more than 70 percent in value year-on-year from January to October, to just over $250 million, while agricultural trade with Asian and European countries has increased.

As this has been going on, Russia and Ukraine have made very little progress in broader strategic negotiations. The Minsk talks saw some success in September and October, when the cease-fire between pro-Russia separatists and Ukrainian security forces was observed almost completely, but fighting has more recently increased along the line of contact between the two sides in eastern Ukraine. This uptick likely stems from a failure to advance the political components of the Minsk agreement. Russia is pushing Ukraine and the Europeans to give the separatist territories more autonomy with constitutional amendments, but Kiev and the West insist that Moscow must give back control of the border between Russia and the separatist territories first. The two sides are interpreting the Minsk agreement differently, making it difficult to move toward a lasting resolution of the conflict.

In 2016, the Europeans have already made it clear that they will back Ukraine and keep the pressure on Russia. The European Union is all but certain to extend sanctions against Russia for six months at the European Council meeting on Dec. 18. But this does not preclude any progress in talks between Russia, Ukraine and the West in the coming year. A compromise could still be reached on the more tactical issues - electricity supplies for Crimea and Russia's ban on Ukrainian agricultural products - although both sides appear to be preparing for prolonged cutoffs. There is also the chance that movement could be made on implementing the Minsk agreement and that fighting along the line of contact could die down again, as it has periodically throughout the year. But as things stand now, the two sides are moving further apart, and the Russia-West standoff is likely to endure well into 2016.

A Stratfor Intelligence Report.
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