Fortune’s reporter on the ground in Kiev sees a new government that seems very optimistic.
A young pro-Ukrainian sympathizer waves a Ukrainian flag in a park on March 8, 2014 in Simferopol, Ukraine.
With Russia threatening to wage war in Ukraine’s southern peninsula of Crimea and annex the Black Sea territory, you would think that the country’s new government would sound panicked about the precarious political state of their country.
In that, you would be wrong. Instead, the official message in Kiev is: Don’t worry, stay calm.
Over the past few days, the technocrats thrust into office by last month’s revolution have, at least in public, portrayed their country as largely stable and bursting with opportunities, as they significantly downplay the prospect of a violent conflict with Moscow.
Their tone might well be a matter of whistling in the dark: A hope that if they remain calm, no disaster will befall them. Russia’s military has four times the number of troops as Ukraine, leaving Moscow the near-certain winner in any fight.
Yet even so, the reassuring attitude from Ukraine’s new leaders stands in marked contrast to the diplomatic frenzy in Washington and Europe, where Western officials have scrambled to find a way to roll back the crisis—the deepest East-West tensions since the Soviet Union collapsed a quarter-century ago.
Ukraine’s latest message of calm came on Saturday morning, when the country’s acting Foreign Minister Andriy Deshchytsa addressed reporters in Kiev. Deshchytsa, a seasoned diplomat with a Ph.D. in political science from the University of Alberta in Canada, was appointed after the Russia-friendly president Viktor Yanukovych fled for his life. He was driven from office after months of giant demonstrators ended with security forces killing about 80 protesters on February 22.
On Saturday, Deshchytsa dismissed any possibility that Crimea would vote to break away from Ukraine and join Russia, when that region holds a local referendum on its status on March 16. Deshchytsa sounded confident, even though countless Crimeans have told journalists that they intend to vote for secession. The peninsula adjoins Russia, and was part of Russia until 1954, when Soviet leader Nikita Krushchev gifted it to Ukraine, then a Soviet republic. “Crimea is and will remain Ukrainian land,” Deshchytsa said, offering no specifics or political plan to back up his statement. “The borders of Ukraine are inviolable.”
Part of the problem for Ukrainian officials in forging a coherent strategy, is that their options are extremely limited.
Although U.S. and E.U. officials have deemed the referendum in Crimea illegal under international law, the new Russian-aligned local government seems determined to proceed with the vote, and there appears to be little way for Ukraine to stop it. When one reporter asked Deshchytsa whether Ukraine was more of a victim than a player in the drama that has gripped world leaders, he seemed at first unable to answer. The referendum, he said, would be ruled illegal under international law, since Ukraine has not endorsed it. “There is no other way to protest but to say that the results will not be valid,” he said. Yet he failed to explain how that would keep Crimea as part of Ukraine.
Deshchytsa told reporters Ukraine was confident that a “contact group” proposed last week by Sec. of State John Kerry, would allow Ukraine and Russia to negotiate face-to-face over Crimea’s status. So far, however, no direct talks have been set, and on Thursday, Kerry told reporters in Rome that such a meeting would depend on “Russia’s willingness to do this.”
About 70 more Russian military troop carriers rolled into Crimea on Saturday, and Ukraine’s Ministry of Defense estimated that Moscow now has about 18,000 soldiers in the peninsula. Russia’s intervention has been deemed illegal by President Obama and E.U. leaders, all of whom have voted to impose sanctions against Russia.
Away from the Crimea crisis, Ukraine’s officials display curiously little anxiety, when discussing the other issue on which the country’s future depends: Its economy. That might be because E.U. and U.S. officials have in the past week committed to billions of dollars in fresh loans and grants to Kiev.
Even so, the local currency has fallen nearly 20% this year, while the country’s foreign currency reserves are believed to have dropped sharply, since the giant demonstrations began last Fall. The uprising collapsed Yanukovych’s regime after he refused to sign an “association agreement” with the E.U., which would have increased trade links with Europe.
Despite the country’s dire financial state, Ukraine’s new Minister of Economic Development, Pavlo Seremeta, who has an MBA from Emory University in Atlanta, told reporters in Kiev on Thursday that the government was aiming for “high growth in the medium term,” and that Ukraine’s economy was in far better shape than it was five years ago.
One urgent economic issue facing Ukraine is the prospect that Russia might disrupt its gas supplies, as it did in early 2009, when it left millions of Ukrainians freezing through sub-zero winter temperatures.
In an echo of that economic crisis, Gazprom CEO Alexei Miller on Friday threatened to halt the Russian energy giant’s gas flows to Ukraine, saying that the country had failed to pay its February bill. Ukraine is heavily dependent on Russian gas, and about 25% of Western Europe’s natural gas flows from Russia through the pipelines that cross Ukraine, since the huge country straddles the two regions.
Still, Ukraine’s Foreign Minister Deshchytsa brushed off Gazprom’s threats, saying that they were nothing to worry about. “If Russia cuts the gas supply, no problem,” he told reporters on Saturday. “We will probably just look for other resources. Wood,” he said, appearing to speak off the cuff, with little forethought about his words. “Simply, we can stay without heat, because there is Spring on the streets. So we are very optimistic.”