The situation in Ukraine and in insurgent areas of the Donbass is steadily deteriorating. This is proved by the clashes of the last few days, which, though limited, have certainly been the most violent since January 2015. The “Minsk 2” agreements are in a process of dissolution, and this largely due to the Kiev government. This was predictable. We must therefore review the situation in order to attempt to understand how we got here.
The ceasefire imposed as a result of the Minsk 2 agreement has never been fully respected. OSCE observers insist on the fact that these violations are, most often, the fault of Kiev’s forces. The bombardments have, since the end of May, become steadily heavier, provoking the insurgent “counter-offensive” on Mariinka. But, after having taken control of this little town—from where spotters were directing the Kiev forces’ artillery strikes—the insurgent forces did not press their advantage further.
President Poroshenko’s June 4 speech in Kiev before the Parliament (Rada), in which he mentioned thousands, even dozens of thousands, of Russian soldiers in the Donbass, should be taken for what it is: propaganda.  Kiev has blatantly wanted to play the card of a strategy of tension to try and rebuild its international support which today appears to be disintegrating. The least that can be said is that this attempt has instead rebounded on its authors.
It is not these ceasefire violations alone which indicate a possible resumption of fighting. They are significant only insofar as they are set within the context of the non-application of the Minsk 2 agreement. Let us recall that Minsk 2 envisaged an important political component in addition to the military component (ceasefire, exchange of prisoners). This political component envisaged a de facto federalisation of Ukraine and respect for the territorial integrity of the country, by means of granting a very broad autonomy to the Donetsk and Lugansk regions. From the outset, the Kiev government has demonstrated a strong reluctance to implement the political component of the agreement. But if the implementation of the political component is not carried out, the military question necessarily resurfaces. It is because we are in a political impasse that there is the risk of a generalised resumption of fighting.
The war party
Here it must be said that, on both sides, there are people pushing for this resumption of hostilities. On the side of the Kiev forces, various extreme-right, even openly fascist, groups are obviously pushing for a resumption of the fighting. Beyond the hope of winning victories on the ground, these groups have understood that they will not have any importance in Kiev’s political arena without maintaining an atmosphere of hostility and conflict. Let the tension reduce, and these groups will be exposed for what they are: gangs of dangerous Nazi enthusiasts and nostalgists. Other forces throw fuel on the fire: these are certain oligarchs, who make up the backbone of the Kiev régime, and who seek to prosper on military aid (American in particular). They also have an interest in a resumption of fighting.
On the side of the insurgents, there are groups of people who regret that the forces of the DPR and the LPR were not able to press their advantage in September 2014. At that point, Kiev’s army was completely routed. It would have been possible to retake Mariupol, even to push towards Kherson. If the DPR and LPR forces’ offensive halted where it did, this was due to Russian intervention. The Russian government made it clear to the insurgents that they had to stop. Here is found one of the paradoxes of the Ukrainian crisis: the countries of the European Union, and the United States, should have taken into account this attitude of Russia’s. This was not done at all, which contributed in no small part to convincing leaders in Moscow of the bad faith of their interlocutors. If relations today are truly difficult between these countries and Russia, this is equally the result of their attitude towards Russia at a time when the latter did everything to calm the military situation.
Moscow’s relations with the DPR and the LPR are complex. Those who want to ignore an autonomy of decision-making in Donetsk (more so than in Lugansk) are making a serious mistake. Naturally, the leaders of the DPR and the LPR seek to be on good terms with Moscow, but their objectives do not necessarily coincide.
Life under the status quo
Without an implementation of the political component of the Minsk agreement, life tends to organise itself around a de facto independence of the Lugansk and the Donetsk regions. And it is clear that this life is anything but easy. The total population of the areas under the control of the insurgents is approximately three million, including around one million who are refugees in Russia. The persistence of fighting along the front line prevents for now any serious efforts at reconstruction, with the exception of the re-establishment of the railway line between Lugansk and Donetsk. One of the reasons, moreover, for the maintenance of fighting and incessant ceasefire violations by Kiev forces, is the openly avowed will of Kiev leaders to keep the population of the Donbass in major insecurity and in an atmosphere of terror.
The Kiev government has suspended the payment of benefits and pensions, which amounts, after a certain fashion, to an acknowledgement that it no longer considers Lugansk and Donetsk as falling under its jurisdiction. Let us recall, besides, that the Russian government had always maintained benefits and pension payments to Chechnya throughout the period when Dudaev had proclaimed the so-called independence of that republic. It can be said that the Kiev leadership has not weighed all the legal implications of this action. One of the points of the Minsk 2 agreement was precisely to ensure the resumption of these payments. Needless to say, Kiev continues to oppose this. The population is largely dependent on Russian humanitarian aid. Minimal production continues to come from the coal-mines and some factories. Until December, this output was sold to Kiev. Subsequently, after the destruction by Kiev forces of the railway line, these sales were interrupted and were replaced with sales to Russia.
Let us stress this point: it entails a progressive scarcity of the hryvnia in the Donbass and a rise of the Russian rouble. Moreover, considering the greater solidity of the rouble compared to the hryvnia, the rouble has overwhelmingly become the instrument of savings and the unit of account in the Donbass. Now, the question of the circulating currency is eminently political. The choice for the authorities of the DPR and the LPR is therefore between three solutions: to preserve the hryvnia (and to recognise that the DPR and the LPR are autonomous republics within the framework of Ukraine), to go over to the rouble, which would take on the dimensions of an annexation by Russia, or to create their own currency, and claim their independence. This last solution is not impossible. The Baltic states, before adopting the euro, each had their own currency. But it raises problems that are extremely difficult to resolve. In reality, surrounding the question of currency is the question of the institutional future of the Donbass. For now, the authorities in the DPR and the LPR are preserving the hryvnia. However, the scarcity of notes and the availability of roubles may well oblige them to change their opinion some months from now. It can be seen, then, what is at stake. Will Donetsk and Lugansk have the status of autonomous republics within Ukraine, for which the Constitution must then be revised, or are we moving towards a de facto independence, which will not be recognised by the international community? For now, Russia is pushing rather towards the former solution, whereas the leaderships of the DPR and the LPR do not hide their preference for the latter.
The Western position
Faced with this situation which is deteriorating from the lack of a will to put in place a political solution, a certain evolution has been noted these past weeks in the position of the United States and of the countries of the European Union.
The United States, through the voice of its Secretary of State, John Kerry, insists henceforth on the necessity of Kiev applying the Minsk 2 agreement.  Very clearly, the United States does not intend to carry the burden of Ukraine, whose economy is disintegrating and which could, in the coming days or weeks, default on its debt, as the failure of negotiations with private creditors seems to indicate. 
Ukraine, which is experiencing runaway inflation for these last months, and whose production could fall by 10% in 2015—after a fall of 6% in 2014—is desperately in need of massive aid. Now the United States has no intention of providing it. It [the US] is turning to the European Union, but this last is itself also more than reluctant. Of course, the Secretary of State for Defense, Ash Carter, insists that new sanctions be enacted against Russia.  But this is more to put on the record the now recognised ineffectiveness of the previous sanctions.
The French position has begun to change over these last months. Not only does it begin to be recognised at the Quai d’Orsay that the question cannot be resolved into a confrontation between “democracy” and “dictatorship”, but a real fatigue begins to be felt, in certain declarations, in regard to the positions of the Kiev government which does nothing to apply the Minsk agreements. One begins to regret, no doubt too late, being entered into a diplomatic logic dominated by the EU institutions, which give a weight out of all proportions to the positions of the Poles and the Baltics on this topic. The European Summit of May 21-22, held in Riga, in fact sounded the death knell both of Ukrainian hopes as well as of certain firebrand countries within the EU. 
Germany too is beginning to shift on this question. After having adopted a hysterically anti-Russian position for months, she appears to have been wrong-footed by the United States’ change of position. She quite clearly perceives that if the latter succeed in foisting the Ukrainian burden on to the European Union, it is Germany who will have the most to lose from this logic. It is extremely interesting to read in the results of the Riga meeting that the application of the Free Trade Agreement—or Deep and Comprehensive Free Trade Agreement (DCFTA)—is henceforth subject to a trilateral agreement. Two of the parties being obvious (the EU and Ukraine), one can only think that the third party is Russia, which is to recognise the interests of the latter country in the agreement to bind Ukraine to the EU. In fact, we have returned to the situation demanded by the Russians in 2012 and 2013, but this after a year of civil war in Ukraine.
It thus seems that only Great Britain continues to support an aggressive position towards Russia, whereas in other capitals it is rather the weariness with corruption, the incompetence and the political cynicism of Kiev which dominate.
Russia in the position of arbiter
The latest events demonstrate that Russia is in reality in the position of arbiter in the case of Ukraine. The official position of the Russian government is to demand the full application of the Minsk 2 agreements. However, on the other hand, it knows that time is on its side and it could be tempted to let the situation fester.
Incapable of self-reform, prey to a dramatic economic crisis, Kiev is already plagued by increasingly serious problems. The war of oligarchs which is being conducted in the shadows clearly shows that within the governing alliance in Kiev, important divergences exist. The nomination by President Poroshenko of the former President of Georgia, Mikheil Saakashvili—the man responsible for the 2008 war in South Ossetia, and who is wanted for abuse of power in his own country—as governor of the Odessa region demonstrates that Kiev avoids like the plague the great Ukrainian feudal lords who are prone to changing allegiance from day to day. A recently conducted survey shows that Poroshenko’s popularity differs greatly between the West and the East of the country. The events of the past eighteen months have in no way eliminated Ukraine’s political and demographic heterogeneity.
The reality of the country, a varied and fragile nation, traversed by important conflicts, can be hidden for a time by repression and terror, as has been the case these last months. However, these practices do not resolve anything and the problems remain.
But, above all, even the Ukrainian government understands the determining economic role played by relations with Russia until 2013. Without an agreement with Russia, Ukraine cannot hope to recover and reconstruct itself. This, the Russian government also knows. Russia thus knows she is going to win, be it with a Kiev government that becomes progressively more sensitive to her arguments, or be it through the collapse of Ukraine. She would prefer to win at the lowest cost but, be sure of it, she will not skimp on the price to pay for this victory. Let us recall the stanzas of the poem, The Scythians:
Russia is a Sphinx. Rejoicing, grieving,
And drenched in black blood,
She gazes, gazes, gazes at you…
 On the question of Russian forces in the Donbass and the “threat” to Ukraine, please refer to the testimony of General Christophe Gomart, Director of Military Intelligence, before the Committee of National Defence and the Armed Forces, March 25, 2015, (in French).
 Helmer, J., 19.05.2015
 Karin Strohecker and Sujata Rao, “Ukraine and its creditors far from an agreement on debt”, Thomson-Reuters, June 6, 2015 (in French).
 http://www.challenges.fr/monde/20150606.REU6999/ash-carter-souhaite-d-autres-mesures-contre-moscou-sur-l-ukraine.html (in French).
 See the final resolution, (link to pdf download).
Jacques Sapir dirige le groupe de recherche IRSES à la FMSH, et co-organise avec l’Institut de Prévision de l’Economie Nationale (IPEN-ASR) le séminaire Franco-Russe sur les problèmes financiers et monétaires du développement de la Russie.
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