Tuesday, October 7, 2014

The Economic Future of Eastern Ukraine ("Novorossiya")

Last May, I posted an item on the economic situation in the rebellious regions of Eastern Ukraine, or
“Novorossiya” (New Russia), to use the term increasingly favored by separatists and  their Russian sponsors. Novorossiya was the name of a province of Tsarist Russia that occupied much of the southern part of present-day Ukraine, stretching all the way to Odessa. At present, the separatist “Federal State of Novorossiya,” consisting of parts of Donetsk and Luhansk oblasts, lays claim to only a small slice of historical Novorossiya. As the map shows, expansion of the separatist-held territory toward the south-west would provide Russia with an overland route to Crimea.
In that earlier post, I outlined three possible outcomes of the conflict in Ukrainian Donbas, the heavily industrialized area around the cities of Donetsk and Luhansk that is the only part of historical Novorossiya that the separatists control as of early October. One was that Kiev would re-establish full control over the region with minimal concessions to local autonomy. The second was full Russian annexation, as of Crimea. The third was the emergence of yet another zone of frozen conflict like those of Transdniestria, Abkhazia, South Ossetia, and Nagorno-Karabakh.

Although the fighting has not yet entirely stopped, the conflict is rapidly congealing, making the third variant the most likely. It is time for an update, giving closer attention to that outcome. What would be the economic implications of a frozen conflict for the region itself, for the rest of Ukraine, and for Russia? >>>Read more

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