- - Thursday, December 17, 2015

A few days after Secretary of State John Kerry’s trip to the tsar’s court in Moscow, several obvious things have happened. Russian President Vladimir Putin has admitted that Russian troops were in East Ukraine, the International Monetary Fund has declared the $3 billion bond Ukraine owes to Russia as “official,” and Mr. Putin has stated he is ready to “push” separatists to a settlement in Donbass. Russia has also ended a trade pact with Ukraine as tensions between the two former Soviet states worsen.

“We never said there were no people there who were carrying out certain tasks including in the military sphere,” Mr. Putin told an annual news conference on Thursday, Reuters reported. “But that does not mean there are Russian (regular) troops there, feel the difference.”

Mr. Putin is stating the obvious, but it is interesting to hear him utter the words. I have discussed before that Mr. Putin is a master at escalation and de-escalation. The Kremlin has its back against the wall economically and is saying what it needs to say to get the sanctions imposed by the West removed as soon as possible. Most likely, we are seeing the fruits of some grand deal struck by Mr. Kerry and Mr. Putin on his visit to Moscow.

The IMF declaration on the Ukrainian debt to Russia is a bone to the Kremlin. There is really no way the world’s lender of last resort could show complete political favoritism to a possible client state of the United States. So, the IMF pushed the two sides into negotiations. It tweaked the rules forcing the negotiations and then declared the debt official, splitting the difference between complete disrespect toward Moscow and destroying Ukraine’s financial future. Mr. Putin must have agreed to this as well, despite the Kremlin’s bluster Thursday morning to the contrary.

I have serious doubts about Mr. Putin’s words regarding the Donbass region of East Ukraine. We’ve heard all of this before. Moscow’s termination of a trade pact with Ukraine is evidence of the Kremlin’s intention to continue to attempt to reign in Ukraine’s EU aspirations. Mr. Putin may push the negotiations further down the road a bit, but he will retain Russia’s ability to cause trouble and threaten the Ukrainian government at will. This “concession” is really not a concession at all but a masked ploy to obtain Russia’s holy grail, sanctions relief.

Have no doubt, Russia will now get this relief in spades. Mr. Kerry has been begging the Russian leader to give him just enough in order to declare victory and kick the can to the next administration. In the end, Russia and Iran will control the Middle East, and Russia will maintain leverage in East Ukraine, and continue to make things difficult for Petro Poroshenko’s government.

But at least Mr. Kerry will be smiling.

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