Self-Determination, For Rich Countries

Citizens of Ukraine – some of them, anyway – gained a remarkable if tentative triumph against their domestic oppressors over the weekend. Now they need to be on guard against the machinations of foreign friends.

The departure from Kiev of Victor Yanukovych and his government is widely seen as a defeat for Russian President Vladimir Putin and a corresponding triumph for Western governments, especially the European Union. Yet on Sunday, while Yanukovych remained at an undisclosed location and the Ukrainian legislature busily appointed replacements for him and his top ministers pending new elections this spring, Russia and the West were in solid agreement on one thing: Ukraine must not be partitioned. Or, as German Chancellor Angela Merkel said in a statement on her website following a phone call with Putin, the two leaders agreed that Ukraine’s “territorial integrity must be respected.”

Foreign leaders consider this principle so important that they are apparently prepared to fight to the last Ukrainian to defend it.

Their reasons are not difficult to fathom. For Putin, Ukraine is more than just the keystone of the association of former Soviet states, which he wants to draw more firmly into his political and economic orbit in order to help maintain his global clout in an era in which Beijing, rather than Moscow, serves as yin to Washington’s yang. Because of its control of Crimea and the port of Sevastopol (where Russia has rights to base its Black Sea fleet until 2042), Ukraine is Russia’s gateway to the warm, strategically important waters of the Mediterranean. It also sits astride the main routes for Russia’s lucrative gas exports to Western Europe. Putin places great importance on maintaining a Russian-leaning government there.

But Ukraine, which is home to the Soviet nuclear ruin at Chernobyl, has an economy that is almost equally a wasteland. Its bureaucracy is ranked among the most corrupt on earth, its industry consists of subsidized Russian gas and thus cannot compete with developed economies, and its famous agriculture has not fully recovered from communist mismanagement.

Europe has plenty of economic problems of its own. The EU is still dealing with the costs of absorbing many backward eastern economies, including Merkel’s native East Germany. There is little appetite for financing Ukraine’s development, and none at all unless the country agrees to make dramatic reforms prescribed by the International Monetary Fund. Europe wants Russia to stay engaged with Ukraine so that it can share the cost of national development, at least by providing a market for Ukraine’s industries. But it is a tab Putin is unwilling to pay on Europe’s terms.

Both sides are acting inconsistently when they insist that Ukrainians should decide their country’s fate on the one hand, while prejudging the question of whether Ukraine ought to remain unified on the other.

Politically, the nation is a hodgepodge of territories that were thrown together amid the various conflicts of the 20th century. Consider the western, anti-Yanukovych city of Lviv – not to be confused, as many Americans do, with the Polish city of Lvov. The confusion is understandable, though; they are the same city. The allies agreed at Yalta, late in World War II, that Stalin could push Europe’s postwar borders westward, so Lvov became part of Ukraine, and thus the Soviet Union. German cities such as Breslau and Danzig became the Polish cities of Wroclaw and Gdansk, respectively. It is little wonder that western Ukraine is heavily oriented toward Poland and its EU partners. There is a very good argument that, historically, that is where it belongs.

Eastern Ukraine and Crimea are another matter entirely. Only a quarter of Crimea’s population is ethnically Ukrainian. Crimea came under Russian control in the 19th century, in the Crimean war, and was a nominally autonomous Soviet republic before World War II. After recapturing the peninsula from the Germans in 1944, Stalin exiled the dominant Tatar ethnic group for allegedly collaborating with the Nazis and flooded the region with ethnic Russians. Crimea only became part of the Ukrainian Soviet republic after Stalin’s death, and that was a distinction without much meaning until after the fall of communism.

I am not prepared to say that Ukraine should be divided. (It isn’t my country, after all.) But I do not see why – apart from self-interest – foreigners should say certainly that it should not be, either. The violent breakup of Yugoslavia in the 1990s is sometimes cited as a reason not to divide existing countries. But Czechoslovakia divided itself peacefully, to resolve ethnic and regional tensions that were not unlike those in today’s Ukraine. Both the Czech and Slovak republics today coexist peacefully within the EU. Dutch-speaking Flemish and French-speaking Walloons are engaged in a long-running discussion about partitioning Belgium, whose capital, Brussels, is the EU’s very seat. Even Scotland will hold a referendum in September on the matter of separating from Britain. In Spain, many in the prosperous Catalan region that includes Barcelona support independence, an idea Madrid and the EU are resisting, entirely peacefully.

All of these separations came, or would come, with economic and political complications. None would be cost-free. Yet some countries are left pretty much to their own devices to weigh the pros and cons, while others, such as Ukraine, must deal with substantially more involved neighbors. If there is a common thread, it seems to be that rich countries get to decide their futures for themselves, while for those with the misfortune to be both poor and strategically situated, territorial integrity becomes a principle with fighting for.

Especially when someone else is doing the fighting.

About Larry M. Elkin 551 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

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