Why has Russia invaded Ukraine and what does Moscow want?


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On February 24, Russia invaded Ukraine. The civilian death toll now stands at more than 100 people, with more than 500,000 Ukrainians fleeing to neighbouring countries, the UN said.

Less than a week into the incursion, a Russian military convoy stretching 64 kilometres along a road north of the Ukranian capital threatened Kiev as troops slowly advanced towards the city in hundreds of armoured vehicles and tanks.

Defying escalating trade sanctions from the US, Canada, EU and other countries, including Japan and Australia, Russian President Vladimir Putin said Ukrainian forces must surrender their weapons or bear the consequences.

"All responsibility for possible bloodshed will be completely and totally on the conscience of the regime ruling on Ukrainian territory," he said in a televised address. Ukraine's President Volodymyr Zelensky has declared martial law but asked citizens to remain calm.

This is the worst outcome predicted by analysts and potentially the start of the largest conflict since the US-led invasion of Iraq in 2003. But how did we get here, despite warnings from many analysts that war could be on the cards?

Why is Russia attacking Ukraine?

The conflict is rooted in hundreds of years of bitter history that has included famine and widespread political violence.

Essentially, Mr Putin views Ukraine as being a part of Russia and wishes to restore Moscow's control.

Ukraine was formerly part of the Russian Empire, which existed between 1721 and the Russian revolution of 1917. After the Russian royal family was executed by revolutionaries, Ukraine declared itself an independent state before being absorbed into the Communist Soviet Union in 1922, as Vladimir Lenin and Josef Stalin took control of Russia.

By the start of the 1930s, as the Communists attempted to remake Russian society through a rapid push for industrialisation, agricultural production suffered.

Famine took hold across the Soviet Union and while historians debate how responsible Stalin was for the crisis, at least seven million Ukrainians perished from starvation, a period referred to as the Holodomor, meaning death by starvation.

This episode, and increasingly draconian Soviet rule, fostered growing Ukrainian resistance against Moscow. During the German invasion in 1941, some Ukrainians allied with the Nazis, hoping that Hitler — or a Nazi-allied government – might be better than continued Communist rule.

Despite the fact many Ukrainians resisted the Nazis, Russian nationalists believe the country has never shaken off its WW2 far right ties and on Thursday Mr Putin said Russia would "strive to demilitarise and de-Nazify Ukraine," echoing remarks he made in 2014 when he said the Ukrainians were the "heirs of Bandera." Stepan Bandera was a Ukrainian nationalist who briefly allied with the Nazis.

What does Moscow want?

Since the Soviet Union collapsed in 1991, Russian nationalists like Mr Putin – a former member of the Russian intelligence service, the KGB – have wanted to regain control of former Soviet republics that gained independence in 1991.

Those countries, including Baltic States Latvia, Lithuania and Estonia, as well as Georgia and Ukraine, have forged growing ties with Nato.

Those ties were forged in the aftermath of Russia's war to bring former Soviet republic Chechnya back into the Russian sphere, which ended with the destruction of its capital city, Grozny, and the installation of a Moscow-allied government.

But an agreement to bring Ukraine and Georgia – which fought a short war with Russia in 2008 – into Nato did not begin until that year.

Nato's eastward expansion was seen as a threat by Moscow to its security interests, and efforts by the EU to form closer ties with former Soviet republics have been seen as highly contentious.

During the build up to Thursday's military assault, Mr Putin had issued various security demands to the US before he draws his military forces back. His list includes a ban on Ukraine joining Nato and an agreement that Nato will remove troops and weapons supplied to former Soviet republics.

With no diplomatic solution in sight, Russia has amassed an estimated 190,000 troops along its border with Ukraine over the past several months.

Last week, Russia also moved forces into separatist regions of eastern Ukraine, Donetsk and Luhansk, which have been contested by Kiev and Russian-backed secessionists since 2014. On Tuesday, Mr Putin recognised the two regions as being independent from Ukraine, so-called "people's republics" – a move that immediately triggered US, EU and British trade sanctions.

Previously, Russia had repeatedly denied it planned to invade its neighbour and said troop movements are routine. It claimed to have pulled some forces back and accused western critics of “hysteria”.

How did the recent tension begin?

Tension between Russia and Ukraine reached a peak in 2014 when protesters ousted Ukraine’s pro-Russian president Viktor Yanukovich, in what is now known by its proponents as the Revolution of Dignity.

Russia forcibly annexed Crimea at the same time, leaving Ukraine in a vulnerable position for self-defence, with a temporary government and unprepared military.

Mr Putin immediately moved to strike in the Donbas region of eastern Ukraine. The armed conflict between Ukrainian government forces and Russia-backed separatists has killed more than 14,000 people – but the US has said this toll would pale in significance compared to a full-scale war for the entire country of 44 million people.

How do Ukrainians view Russia and the conflict?

Since gaining independence 30 years ago after the fall of the Soviet Union, Ukraine has been mired in corruption and internal divisions. Ukraine is a divided country, with its western region generally supporting western Europe, while parts of its eastern side are pro-Russia.

Ukraine and the West accused Russia of backing the rebels with troops and weapons. Moscow said that any Russians who fought in the east were volunteers. Unlike its response to Crimea, Russia continues to officially deny its involvement in the Donbas conflict.

After Ukrainian troops were severely defeated in the battle of Ilovaisk in August 2014, envoys from Kiev, the rebels and the Organisation for Security and Co-operation in Europe (OSCE) signed a truce in the Belarusian capital of Minsk in September 2014.

The document envisaged an OSCE-observed ceasefire, a pullback of all foreign fighters, an exchange of prisoners and hostages, an amnesty for the rebels and a promise that separatist regions could have a degree of self-rule.

Russian President Vladimir Putin has issued various security demands to the US before he draws his military forces back. AFP
Russian President Vladimir Putin has issued various security demands to the US before he draws his military forces back. AFP

The deal quickly collapsed and large-scale fighting resumed, leading to another major defeat for Ukrainian forces at Debaltseve in January-February of 2015.

France and Germany brokered another peace agreement, which was signed in Minsk in February 2015 by representatives of Ukraine, Russia and the rebels. However, the deal is still far from being fulfilled and Russia has expressed its frustration.

Two rounds of talks in Paris and Berlin between presidential envoys from Russia, Ukraine, France and Germany have yielded no progress. Amid the deadlock in talks, the lower house of Russian parliament this week urged Mr Putin to recognise the independence of Donetsk and Luhansk.

Mr Putin indicated he was not inclined to make the move that would effectively shatter the Minsk deal.

Agencies contributed to this report

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.


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