Who'll bail out Ukraine, West or Russia?

The Ukrainian crisis is quickly becoming a geostrategic conflict. The Crimean parliament's declaration of independence from Ukraine ahead of the March 16 referendum indicates Crimea may possibly join Russia. As Russian President Vladimir Putin maneuvers to restore Russia's right to behave with a superpower's impunity-particularly in its own backyard-the West pushes back.

But economic forces also have shaped this confrontation, especially Ukraine's record as the world's worst performing industrial economy over the last 20 years.

It was popular discontent with this disastrous performance that fomented the recent dissent. This, in turn, triggered a bloody response from ousted Crimean President Viktor Yanukovych. His response consolidated the opposition-and ultimately cost Yanukovych his job.

Beyond this week's political and military maneuvers, the outstanding question is: Who will bail out the Ukrainian economy? Russia, or the EU and the United States? A bailout will be the price of drawing Ukraine into one of the two trading systems on offer.

Stated simply, Ukraine is the economic equivalent of a failed state. After gaining independence in 1991, the country moved briefly to liberalize its economy along the same lines as most of Eastern and Central Europe.

However, Ukraine soon jettisoned its reforms in favor of the state-oligarch model, which was also evolving in Russia. Some 20 years later, Ukraine's GDP has shrunk 30 percent.