The war in eastern Ukraine, which has had more impact on the European economy than any news coming out of Frankfurt or Brussels, appears to be ending. Despite the sporadic attacks that have wrecked previous ceasefire attempts.
Investors have mostly assumed that the ceasefire would not hold, either because Russian President Vladimir Putin is deceitful and greedy for more territorial conquest, or because Ukraine’s President Petro Poroshenko would not accept the splintering of his country that Russia demands. But this fashionable pessimism is probably wrong.
The ceasefire no longer relies on good faith or benevolence but on a convergence of interests: Putin has achieved all his key objectives, and Poroshenko recognizes that trying to reverse militarily the Russian gains would be national suicide.
Admittedly, there is still a “party of war” in Kiev, seemingly led by Prime Minister Arsenyi Yatsenyuk, who has called on the North Atlantic Treaty Organization to back his country in an all-out war with Russia. But this week’s vote in the Ukrainian Parliament on temporary autonomy for the rebel regions suggests that most of the country’s politicians have abandoned hope of winning a war with Russia. They also understood that Western military assistance is not coming.
This may sound like a grimly defeatist analysis. Yet a modest victory for Russia was actually the least bad outcome to be expected — given that there was never any chance of economic sanctions stopping Putin, for reasons explained here in March. There are several good reasons to welcome the incipient Ukraine deal: