• The Anti-Terrorism Operation (ATO): Despite slow progress in the last two weeks, public support remains in favor of continuing the ATO (55% of Ukrainians). With the Russian backed terrorists now confined to essentially five areas (Donetsk-Makyivka, Horlivka, Stakhanov, Krasnodon to the Russian border, and Luhansk – although much of Luhansk has already fallen to the Ukrainians), the current trajectory is that the war will be over within a month – barring increased Russian intervention. In the meantime, war rumors are more abundant than JFK assassination theories. For example: is the terrorist commander Strelkov dead or alive? Are the terrorists really deserting by the dozens? Is Ukraine concealing the true body count of its’ soldiers? Have hundreds of women in Luhansk been raped by Russian, Serbian and Chechnyans terrorists? Time will provide the answers to all these rumors.
The most pressing question is what is Putin’s endgame here? With the massive influx of heavy weaponry over the last week from Russia, Christmas has come early for the terrorists in Donbass. The gifting of heavy weaponry to the terrorists at a time when they are losing the war can be explained by several theories: 1) Putin is trying to keep the terrorists supplied long enough hold off the Ukrainian advance until he can negotiate the “peace deal” he wants. 2) This is a last gasp of the terrorist assault in an attempt to reclaim territory before the peace/frozen conflict negotiations. The more territory the terrorists control, the more concessions they can win. This would partially explain the attempted attacks behind Ukrainian lines in recent days as well as the recent arrival of 40 top Transnistria officials (including their leader Antyufeyev) into the Donbass. What better way to create a “Transnistria on the Azov” than to have two score of Transnistria gangsters managing it? 3) The final theory is that this is precursor of a Russian invasion. By pinning down the bulk of Ukraine’s best forces in the Donbass to fight the heavily armed terrorists, Russia could encircle the Ukrainian army by moving in from Kharkiv in the north and up from Crimea in the south. Kyiv would largely be undefended and thus, more likely to accept whatever “peace” Putin dictates rather than attempt to put up a costly defense. Again, only time will reveal the truth.
• Seven Dates to Watch in the Next Two Weeks: unless there are Russian paratroopers in Kyiv in the next two weeks (in which case everything will be clear), there are seven important dates to watch:
1. August 23 (Saturday), Poroshenko and Merkel meeting in Kyiv. This meeting is most likely to result in Merkel pressuring Poroshenko to end the ATO and sign a peace deal with Putin which could potentially give large autonomy to the Donbass. In return, Germany would give financial guarantees to rebuild the Donbass and ensure that Russian gas transits to Europe without a hitch this winter. Smelling a potential peace deal on the horizon, French President Hollande is hoping to hijack the behind the scenes peace talks with a return to the “Normandy Format” of France, Germany, Ukraine and Russia in early September. Every third country leader loves to be a peacemaker and now its’ a race between France and Germany for the potential limelight.
2. August 24 (Sunday), Independence Day in Kyiv. President Poroshenko is expected to give an address to the nation which will contain at least two key elements. First, the parliament is illegitimate and therefore he is dissolving the body and calling new elections (likely on October 26). Second, Ukrainians must prepare for sacrifices in the coming weeks to bring peace to the country, survive the harsh winter (presumably with far less Russian gas) and overcome the economic crisis. By managing expectations now and appealing to patriotic sentiments, Poroshenko hopes to win a decisive majority in the next parliament which will allow constitutional and other reforms.
3. August 26 (Tuesday), Customs Union Meeting in Minsk. Things are so upside down in Europe these days that Lukashenko is now considered a peacemaker. Joined by Kazakhstan President Nazarbayev, Lukashenko hopes to iron out a peace agreement between Poroshenko and Putin. Both Nazarbayev and Lukashenko have experienced buyer’s remorse over joining the Customs Union but given the large ethnic Russian populations in their countries, they cannot afford to upset Putin by publicly showing it. They can however, win international public relations points by attempting to settle the Donbass conflict. The US State Department has already praised the meeting since there is likely to be a mano i mano between Poroshenko and Putin. This gives Ukraine and Russia to resume talks over the intermediate issue of winter gas supplies and the most urgent issue of bringing peace to the Donbass. Will Putin surprise everyone by cutting off the terrorists and making a gas deal in exchange for gaining financial control of some of Ukraine’s key military industries like the Pivdenmash missile factory and other concessions? With Lavrov noting that “progress” has been made as well as Kyiv optimistically talking about having a roadmap to peace within “two weeks”, stranger things have happened. Control of the Pivdenmash rocket factory (where former President Kuchma was the director) would be helpful to Russia in competing with US technology (especially now with the effect of sanctions) and rumors are already swirling to this effect.
4. August 29 (next Friday), the IMF Meeting in Washington. This is the only date in which the result is 99% certain. That is, on this date, the IMF will approve the next tranche of loan money ($1.4 billion) for Ukraine. While the IMF will certainly issue warnings and give stern lectures about the need to reduce corruption, Ukraine will receive the next IMF tranche to keep the country operating until the next tranche arrives in December (which Kyiv then hopes to receive a double tranche of $2.2 billion). The West is fully invested in Ukraine at this point as the country would collapse without the IMF aid. Thus, while improvements are needed in energy efficiency, communal services prices, reducing corruption and a multitude of other areas, promises from the Ukrainian government are sufficient for the IMF at this time and until the war is ended.
5. August 30 (next Saturday), Poroshenko’s visit to Brussels. Ideally by this date, Poroshenko will have a peace plan in hand to take with him to Brussels. This in turn would translate into financing to rebuild the Donbass, secure gas transit to Europe this winter via Ukraine, as well as some add-on financial goodies and investments from the Europeans. As they say in Odesa though, “hope for the best but expect the worst”. In the absence of a “peace deal” (and/or one under negotiation), Poroshenko’s trip to Brussels will focus on persuading Europeans to buy their Russian gas on Ukraine’s eastern border so that Ukraine may negotiate a separate transit (and in some cases, reversal) agreement. Poroshenko will also be able to use the visit to continue to rally European support and press for more sanctions assuming Russia continues to supply the terrorists.
6. September 2 (a week from next Tuesday), Parliament returns to session in Kyiv. The lame duck parliament (due to being dissolved by Poroshenko) will once again consider election law changes (ridiculous after the campaign has already started but common in Ukraine), budget issues, energy matters and finally passing the economic part of the EU Association Agreement (although that will take place later in the month). With the election looming (most likely on October 26), parliament will be in a rush to pass needed legislation in order to return to the campaign trail.
7. September 4-5 (a week from next Thursday and Friday), NATO Summit in Wales. With Poroshenko invited and planning to attend, the alliance will begin to discuss ways to bolster NATO’s defenses against Russia, strengthen Ukraine’s security and end Putin’s aggression. However, the likelihood of anything concrete for Ukraine as a result of the summit is low. This is because “New Europe” (Poland, Baltics, etc) have to yet to overcome “Old Europe’s (Germany, France, Italy) as the dominant members of the alliance. President George W. Bush championed Membership Action Plans (MAP) for Ukraine and Georgia at the Bucharest Summit in April 2008 but came away with only vague promises of membership for those countries sometime “in the future”. Given that alliance members have been unable to overcome Obama’s obstinate objection to a MAP even for mildly controversial Montenegro, MAP for more controversial Ukraine, is unlikely until the next American President takes office (whether HRC or GOP) and decides to champion their cause.