Can Europe Make It?

What is causing the conflict in Ukraine?

Understanding the economic roots of rebellion in eastern Ukraine suggests that the resolution to the crisis must address restoring economic and political justice.

Tymofiy Mylovanov
25 May 2016

At the June Summit, which will take place after the UK Referendum, the High Representative of the Union for Foreign Affairs and Security Policy, Federica Mogherini, will present the results of her global review of external strategy. As part of the review process, the Human Security Study Group, at the LSE, which is convened by Mary Kaldor and Javier Solana, has presented a report entitled From Hybrid Peace to Human Security: Rethinking the EU Strategy Towards Conflict together with twelve background research papers .

Conflicts are at the sharp end of contemporary crises. Refugees, extremist ideologies, criminality and predation are all produced in conflict. Contemporary conflicts are sometimes known as ‘hybrid wars’ or ‘new wars’ in which classic distinctions between public and private, government/regular and rebel/irregular, and internal and external break down. They are best understood not as legitimate contests of wills (the twentieth century idea of war) but as a degenerate social condition in which armed groups mobilise sectarian and fundamentalist sentiments and construct a predatory economy through which they enrich. Identifying ways to address violent conflict could open up strategies for dealing with broader issues.

In this special openDemocracy series, the Human Security Study Group outlines the main conclusions of our report in our introductory essay together with six essays based on some of the background papers. These essays include: an analysis of the conceptual premises of the Global Review (Sabine Selchow); three essays on specific conflict zones – Syria (Rim Turkmani), Ukraine (Tymofiy Mylovanov), the Horn of Africa (Alex de Waal); the importance of the EU’s justice instrument (Iavor Rangelov); and how EU cyber security policy is human rights focused rather than state focussed (Genevieve Schmeder and Emmanuel Darmois).


Workers of Illich Iron & Steel Works steel plant gather for an anti-war protest, supported by the management, in Mariupol, eastern Ukraine, May, 2014. Vadim Ghirda / Press Association. All rights reserved.

Following the change of the government in Ukraine in the winter of 2014, Russia annexed Crimea. Immediately after that, Russia and some Ukrainian political elites orchestrated a pro-Russian insurgency in the East of Ukraine.

By the early summer of 2014, there was a full-fledged war in Donetsk and Luhansk Oblast between the separatists and the Ukrainian armed forces. In the spring of 2015, there was a tentative ceasefire in place. The ceasefire continues to hold with sporadic violations. Figure 1 describes the time series of the violence in the east of Ukraine.


Figure 1. Violence in the East of Ukraine. Minsk I and II are ceasefire agreements.

The EU has played an active role in mitigating the conflict. It has served as a mediator between the parties of the conflict throughout the entire period since the beginning of the Euromaidan protests which toppled the government in February 2014. Since the violence began in the East, there have been two agreements, Minsk I and Minsk II, aimed to put a stop to the fighting. The current ceasefire follows the Minsk II agreement. The EU has also offered technical, financial, and diplomatic support to the new Ukrainian government.

Understanding the causes of the conflict in eastern Ukraine

During the beginning of the insurgency in the east of Ukraine in April 2014, some observers predicted that the separatist movement would spread to other parts of southeastern Ukraine.

Contrary to these forecasts, the insurgency remained surprisingly well contained. No region outside of Donetsk or Luhansk experienced such a large-scale armed conflict or fell under separatist control. Not only were separatists unable to realise the project of a greater “Novorossiya” stretching from Kharkiv to Odesa, they also failed to consolidate their grip within the borders of the Donbas. Just 63% of the municipalities in Donetsk and Luhansk Oblasts were under separatist control at any one time during the first year of conflict, and less than a quarter of these territories showed resistance to the Ukrainian government forces during Kyiv’s attempt to liberate them in the spring and summer of 2014.

In order to design the best policy to resolve the conflict it is important to understand the causes behind local variation in the intensity of the conflict.

As income from less risky legal activities declines relative to the income from insurgency behavior, participation in insurgency is expected to rise.

The most common answers to this question in the press and policy analysis have fallen into one of two categories: ethnicity and economics. The first view expects insurgency to be more likely and more intense in areas home to large concentrations of ethnolinguistic minorities ––in this case, Russians or Russian-speaking Ukrainians. According to this logic, geographically concentrated minorities can overcome some of the collective action problems associated with insurgency –– such as monitoring and punishing defectors ––while attracting an influx of fighters, weapons and economic aid from co-ethnic groups in neighboring states. Vladimir Putin, among others, has cast the Donbas conflict as a primarily ethnic one: “the essential issue is how to guarantee the legitimate rights and interests of ethnic Russians and Russian speakers in the southeast of Ukraine.”

An alternative explanation for the variation in the intensity of insurgency is economic opportunity costs. According to this view, as income from less risky, legal activities declines relative to the income from insurgency behavior, participation in insurgency should rise. As Maidan and the Revolution of Dignity proclaimed adherence to European values and set on the path towards Europe and away from the Eurasian Customs Union with Russia, the opportunity costs of insurgency declined in the Donbas. As a heavily industrialised region with deep economic ties to Russia, the Donbas was uniquely exposed to potential negative economic shocks caused by trade openness with the EU, austerity and trade barriers with Russia. A rebel fighter with the Vostok battalion summarised this view: “many mines started to close. I lost my job. Then, with what happened during the spring, I decided to go out and defend my city”.

Micro-level data on violence, ethnicity and economic activity in eastern Ukraine allows us to evaluate the relative explanatory power of these two perspectives. The evidence suggests that local economic factors are stronger predictors of violence and territorial control than Russian ethnicity or language. Ethnicity only had an effect where economic incentives for insurgency were already weak. Separatists in eastern Ukraine were “pro-Russian” not because they spoke Russian, but because their economic livelihood had long depended on trade with Russia, and they now saw this livelihood as being under threat.

The economic roots of the pro-Russian rebellion are evident from new data on violence and control, assembled from incident reports released by Ukrainian and Russian news agencies, government and rebel statements, daily ‘conflict maps’ released by both sides, and social media news feeds. The data include 10,567 unique violent events in the Donbas, at the municipality level, recorded between the then President Viktor Yanukovych’s flight in February 2014 and the second Minsk ceasefire agreement of February 2015. Figure 2 shows the geographic distribution of rebel violence and territorial control during the first year of the conflict.


Figure 2. The geographic distribution of rebel violence and territorial control during the first year of the conflict.

To explain the variation in the timing and intensity of violence and control, one can consider the proportion of Russian speakers residing in each municipality, and, the proportion of the local labour force employed in three industries, each vulnerable in different ways to the post-Euromaidan economic shocks.

These included machine-building, which is heavily dependent on exports to Russia, highly vulnerable to Russian import substitution, and, currently lacks short-term alternative export markets. At the other extreme, there is the metals industry, which is less dependent on Russia, and is a potential beneficiary of increased trade with the EU. Finally, there is employment in the mining industry, which has grown dependent on Yanukovych-era state-subsidies, and become highly vulnerable to International Monetary Fund-imposed austerity measures.

Given the relative exposure of these industries to the post-Euromaidan economic shocks, one should expect the opportunity costs of rebellion to be lowest in machine-building towns and highest in metallurgy towns, with mining towns falling in the middle.

Figure 3 below shows the spatial distribution of these variables. The analysis also accounted for a host of other potential determinants of violence, including terrain, logistics, proximity to the Russian border, prewar electoral patterns, and spillover effects from rebel activity in neighboring towns.


Figure 3. The spatial distribution of native language and local employment.

A statistical analysis of this data reveals that a municipality’s prewar employment mix is a stronger and more robust predictor of rebel activity than the local ethnolinguistic composition.

A statistical analysis of this data reveals that a municipality’s prewar employment mix is a stronger and more robust predictor of rebel activity than the local ethnolinguistic composition. In municipalities more exposed to negative trade shocks with Russia (municipalities with high shares of the population employed in machinery and mining), violence was more likely to occur overall, and was more intense. In the median Donbas municipality, an increase in the machine-building labour force from one standard deviation below (4%) to one standard deviation above the mean (26%) yields a 44% increase (95% credible interval: a 34%-56% increase) in the frequency of rebel violence from week to week.

These municipalities ––where the local population was highly vulnerable to trade disruptions with Russia ––also fell under rebel control earlier and took longer for the government to liberate than municipalities where the labor force was less dependent on exports to Russia. On any given day, a municipality with higher-than-average employment in the beleaguered machine-building industry was about twice as likely to fall under rebel control as a municipality with below-average employment in the industry.

By contrast, there is little evidence of either a “Russian language effect” on violence, or an interaction between language and economics. The impact of prewar industrial employment on rebellion is the same in municipalities with a majority Russian-speaking population as it is where the majority is Ukrainian-speaking. Russian language fared slightly better as a predictor of rebel control, but only under certain conditions. In particular, where economic dependence on Russia was relatively low, municipalities with large Russian-speaking populations tended to fall under rebel control earlier in the conflict. The “language effect” disappeared in municipalities where any one of the three industries had a major presence. In other words, ethnicity and language only had an effect when the economic incentives for rebellion were weak.

Conclusions: recommendations for the EU

If we accept the premise of this paper, that one of the key factors underpinning the crisis in Ukraine is economics, then the resolution of the crisis ought to address the issue of restoring economic and political justice. This requires rebuilding the economy and providing the general public with economic opportunities. Creating such opportunities will undermine the ability of the networks interested in maintaining the conflict from gathering support.

I argue for the creation of economic opportunities for the general public (economic resolution) and using a bottom-up approach to include all parts of society in the deliberation processes concerning how to resolve the conflict (political resolution). These policies should be complemented by strict unconditional support from the EU, requiring anti-corruption policies that (a) dismantle the state economy, and (b), more importantly, dismantle the rent-seeking networks of the oligarchs and restore justice.  

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