Russia’s effort to gain preferential market access to countries that used to be part of its imperial project has been at odds with the resolve of the United States to capitalize effectively on Russian military weakness and regional security uncertainties. The recent referenda in Donetsk and Lugansk and the character of the government in Kiev reveal what has been already common knowledge in Russia since Putin’s rise to power in 2000. The end of the Cold War would be treated only as a temporary break and not as an irreversible status quo that would keep Russia always on the loser’s side.
Bolton and Roland (1997) model the breakup of nations as a result of divergent policy preferences over redistribution across different regions in the same country. They suggest that when the preferences of local political majorities vary substantially in content, then a breakup of the country is inevitable, despite the existence of efficiency losses associated with secession. Bolton and Roland (1997) prove that those losses are offset by the relative political gains for local majorities exactly for the same reason. They also indicate that poorer regions gain more from integration than wealthier ones. This means that it is rich regions, which would have a higher incentive to secede, if the underperformance of poor regions makes the preservation of the unified country very costly.
In the light of the developments around Ukraine, it becomes obvious that the non-representation of the Eastern and Southern provinces in the central government in Kiev increases the probability of secession and as time passes this probability becomes higher.
In the light of the developments around Ukraine, it becomes obvious that the non-representation of the Eastern and Southern provinces in the central government in Kiev increases the probability of secession and as time passes this probability becomes higher. Moreover, under the current status quo in Kiev, Lviv and Vinnitsya have much more to gain from a unified Ukraine than Donetsk and Odessa, because they are poorer and thus in greater need of fiscal transfers by the central government. Wealthier regions would accept to finance the development of poorer regions within the same country, if they were compensated with a higher representation quota in government and thus a significant monitoring capacity over public spending as well as rents collection for their local political majorities.
This explains why the inclusion of representatives from the Russian-speaking regions in the new Ukrainian government is right now more necessary than ever. Ukraine is not going to become a European-style economy tomorrow. Russia’s support is an inherent component of any form of Europeanization in the Ukrainian economy, unless the European Union decides to commit itself to a series of extensive aid packages, similar to those disbursed to the crisis countries of the European South. The uneven geographical distribution of resources and industry in favor of the Russian-speaking regions raises serious doubts about the intentions of the transitional government in Kiev, despite its proclaimed adherence to the maintenance of the country’s territorial integrity. The legacy of central planning and its informational asymmetries between planners and managers allowed the latter to hoard resources and become wealthy at the expense of the large Soviet working class. Transition in the 1990s simply confirmed this injustice, linked with huge efficiency losses due to corruption and rent-seeking. Former Communist Party members and managers were able to use privatization strategies, in order to formalize property rights that they had already obtained with unofficial means and acquire an incumbent status in Ukrainian business and politics. Yanukovych and Tymoshenko are products of this process and offer stereotypical examples of what post-Soviet oligarchy is. Yacheniuk’s successful career path as an administrator and his political rise after the Orange Revolution leave no doubts that if the United States consolidate their influence on Ukraine, then he is going to be a key player in the long-run.
Nations do not breakup because of a financial crisis or an unfair electoral result. In the case of Ukraine, neither Ukrainian nationalism nor Russian imperialism can offer a sustainable solution to the country’s pressing public debt, failing welfare state and rising inflation. If the scenario of a Ukrainian partition is fulfilled, Western and Central Ukraine are going to pay a huge price for their independence, when Eastern and Southern Ukraine become associated territories of Russia. The anti-American rhetoric in Russia and the anti-Russian rhetoric in the United States have become again state ideologies. It is now the time for more Europe.