EU and Russia (EUC Report)

Earl of Oxford and Asquith Excerpts

Tuesday 24th March 2015 Lords Chamber

[The Earl of Oxford and Asquith (LD) (Maiden Speech)]

My Lords, I should first like to express my deep appreciation for the assistance and guidance that I have received from all those who work in this building. I know that my experience differs in no way from others who have come before me, but it has been a real encouragement to encounter such courtesy and helpfulness from the officials, staff and doorkeepers on whom the functions of this House depend. It is not just their civility that I wish to pay tribute to but their infinite patience.

I welcome the committee report which has prompted this debate. I have lived and worked in Russia and Ukraine for over 30 years, and I continue to take a close interest in the region, as detailed in my entry in the register of interests. The report contains a great range of insights and level-headed recommendations, but I shall try to limit myself to a few specific points arising from it. Before I do so, I should like to make some observations on the current situation in eastern Ukraine in particular, which of course post-dates the publication of the report.

It is always rash to make predictions of events in time of war, but in my assessment, Putin has achieved militarily what he wanted to achieve in Donetsk and Lugansk: he has won his battles and humiliated the Ukrainian leadership; he has created an island of instability in eastern Ukraine; and he has destroyed much of Ukraine’s economy—the mines, factories and infrastructure in the region are shattered and people have fled.

Undoubtedly, there will be flare-ups, but for the time being at least, and assuming as an overriding caveat that Kiev observes, or accepts, the ceasefire, in my view the Russian military phase is largely over. Economic pressure, I believe, will characterise the next steps. In the last month, the Russian Government have relieved Russian private banks of their exposure to Ukrainian businesses. Over $50 billion of bank debt will be absorbed by the Russian Government, allowing the Russian commercial banks to restructure their balance sheets and giving surety over Ukrainian assets to the Russian state. I believe that, in the next 12 months or so, there will be a Russian push to buy out distressed Ukrainian assets. To put the policy in perhaps simplified but, I believe, not misleading terms, Russia’s aim will be to become as close to a 100% shareholder of Ukraine as is possible.

In that context, therefore, I want to make just three points. The first relates to the evidence that the report collects on “hard questions of strategy”, integrated foreign policy and diplomatic competences. I believe that one day Russia’s interventions in Ukraine will be seen as a critical mistake. Nevertheless, if we are to attempt to resolve the great instability in eastern Europe, at some stage we will have to negotiate with Putin—with Russia. Who “we” are is another matter—a most important one, indeed—but there has to be a process of negotiation on strategic issues. At the moment there is no process.

Of course, the German Chancellor and the French President have twice now gone to Minsk. They have shown much courage and persistence, but these very necessary negotiations were essentially about a ceasefire and peacekeeping. We know that there is a strategic basis on which Putin will negotiate. There is a specific framework. But we have not yet entered that stage and, until we do, I agree with the report that there will be no real settlement of this conflict.

Secondly—although I say this with regret—part of the problem lies now with the Ukrainian Government. They came into being with much promise of renewal and democratic process, but, as with previous Ukrainian Governments, there is constant constitutional conflict between the Prime Minister and the President. As the report recognises, the seeds of this crisis have been sown over 20 years of Ukrainian government mismanagement, but the mismanagement—if that is the right word for it—continues. Even now, and despite Minsk, the Ukrainian leadership says that the constitution should not be altered—that is code for abandoning Donetsk—and it believes that the country should join and be armed by NATO. That reads to me like a suicide note which the Ukrainian nation will not accept. At the same time, with the war receding, deep splits are being exposed in the Ukrainian power elites. These threaten stability and play to the Russian line that the country is sliding into lawlessness.

That leads me to my final point, where I would like to pick up on those parts of the report that allude to an ideal of a Ukraine transformed into an attractive civil society with a people whose energies are released—a model state, dare one say, for the region. Over the past year, the mood of the country has fluctuated through hope and disillusionment, but I see that at most levels of civil, social and economic activity there is now a widespread recognition that the country has missed the turning point that occurred, for example, in Poland some 10 years or so ago, when there was a fundamental change of direction. There are and there have been innumerable reform programmes for Ukraine on the table, but I believe that there is now a recognition that it is time to find the political will to implement some major changes, starting with legal reform—without which, in my view, there is little point attempting others. It is time that genuine mechanisms were devised and enforced so that investment funds reach the real economy.

For Ukrainians, the only incontrovertible answer to Russian pressure is to develop in their country a prosperous climate that will deliver the rule of law and economic success. That is the forward-looking, optimistic scenario on which I should conclude, but not before saying how truly honoured I am that your Lordships have welcomed me to your numbers.

[Noble Lords]

Hear, hear.