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Putin ready to go to stealth mode in Ukraine

by Leonid Bershidsky

Bloomberg

Russian President Vladimir Putin has officially agreed to leave Ukraine alone. That doesn’t mean, though, that he will leave it alone unofficially.

Putin this week asked the Russian Parliament to cancel his mandate to send troops into Ukraine, which he had requested on March 1. That request led to the annexation of Crimea, and chilled relations between Russia and the West. It also had economic consequences, sending the ruble and Russian stocks tumbling and restricting Russia’s access to global finance. Moscow’s isolation created a $20 billion void in the global bond market, which was filled by issuers from other nations.

Putin’s latest move, tantamount to a promise to refrain from military intervention, sent Russian stocks and bonds bounding up. Is it fair to assume, then, that the threat of wide-ranging sanctions against Russian companies worked? That Putin panicked and gave up his aggressive plans? That is certainly what Western politicians, including U.S. President Barack Obama, will now claim (while saying as little as they can about Crimea, which they have failed to prevent Russia from retaining). It will be true on some level, too; both Putin and Russia’s Western business partners have signaled a desire to go back to business as usual, forgetting the annexation.

There is, however, more to Putin’s sudden dovishness, which comes days after a new Russian troop buildup at the Ukrainian border. It appears to be a response to the Ukrainian government’s sea change in approaching negotiations on the armed conflict in eastern Ukraine. Earlier this week, after months of statements from officials in Kiev that the government would not negotiate with “terrorists,” talks finally took place in Donetsk.

It was quite a cast of characters. On one side of the table, representing pro-Russian separatists, was Alexander Borodai, a Moscow political consultant now calling himself prime minister of the self-declared Donetsk People’s Republic; pro-Russian Ukrainian politician Oleg Tsaryov and several little-known local leaders.

On the other side, seemingly representing the government of Ukraine, sat the Russian ambassador to Ukraine, Mikhail Zurabov, and two Kiev politicians: former President Leonid Kuchma and Viktor Medvedchuk, his former chief of staff, who is thought to be close to Putin. Swiss diplomat Heidi Tagliavini, representing the Organization for European Security and Cooperation, was also there, sanctifying the gathering.

Current Ukrainian President Petro Poroshenko appeared almost Putinesque in his Byzantine handling of the talks. His envoy, Kuchma, holds no official position, nor does Medvedchuk, who met with Poroshenko before the talks. Officially, Kiev is not talking to the pro-Russian separatists and Moscow is not backing them. The pretense, understood by all, made progress possible. The separatists accepted Poroshenko’s offer of a ceasefire until June 27, which they had previously dismissed as a ploy.

After the unofficial consultations — the word “negotiations” was not uttered by Kiev representatives — Putin called Obama. Next, he recalled his request for permission to invade Ukraine.

That doesn’t mean Ukraine can breath a sigh of relief. “Putin has no intention to cease destabilizing the situation in our country,” Ukrainian columnist Vitaly Portnikov wrote on Newsru.ua. “Putin just wants Obama to believe in his intentions. He is still convinced that only two tools work in global politics: deceit and bargaining.”

Given his rubber-stamp parliament, Putin can gain permission to send troops back to Ukraine at any time. Besides, if Putin’s goal is to keep Poroshenko off balance, an invasion isn’t necessary. Russia has already succeeded in drawing out the conflict, arming rebels and making it possible for Russian citizens to fight on the separatists’ side. So much for “deceit.”

As for “bargaining,” it has now started in Donetsk, with Ukrainians from both camps searching for compromise. Medvedchuk’s ties to both Putin and Poroshenko — along with the possible backing of one of Ukraine’s richest men, Rinat Akhmetov — suggests a resolution with the armed rebels is in sight.

The rebels have been useful to Putin, but they are unreliable over the long term. The Kremlin prefers to work with familiar pro-Russian politicians and businessmen in Ukraine’s east to make sure Ukraine doesn’t end up in the Western bloc.

In effect, Putin is now ready to enter the quiet phase of his Ukraine operation. The West will acquiesce to his game — but only after claiming that sanctions have been a success.

Leonid Bershidsky (lbershidsky@bloomberg.net), the founding editor of Russia’s top business daily Vedomosti and the first publisher of the Russian edition of Forbes, is a Berlin-based writer for Bloomberg View.