Ukraine Is In Crisis. Here’s Why the West Can’t Save It.
June 9, 2015
A Ukrainian national flag flutters in the wind at a position held by the Ukrainian armed forces near the town of Maryinka in eastern Ukraine. (Reuters/Gleb Garanich)
Nearly a year and a half after the Euromaidan protests ushered a new government into power in Kiev, Ukraine is still in trouble. Some 6,200 people have been killed, more than 15,000 wounded, and 1.2 million internally displaced in a civil war that had by mid-March, according to the new president, Petro Poroshenko, destroyed “around 25 percent of the country’s industrial potential.”
The country’s economy is out of control: Trending downward since the end of 2013, Ukraine’s gross domestic product is declining at a massive, accelerating rate. The World Bank predicts GDP will contract by as much as 7.5 percent during 2015. During 2014, the amount of money brought in on exports dropped by 40 percent, and between the beginning of 2014 and spring of this year, the goods and services available in the country became nearly 50 percent more expensive as the currency used to pay for them lost two-thirds of its value.
Ukrainians need rescuing. The question is: Can the policies favored by the new government save them?
After endorsing the anti-government protesters that filled the streets of Kiev in November, 2013, the United States gave its blessing to a change of government in the following February, one year ahead of Ukraine’s scheduled democratic elections. The government that rules from Kiev today is therefore distinguished from its predecessors by its distinct amenability to US interests—and dramatic coolness to Russian concerns.
In a sign of this shift, on June 27 of last year, this government, led by Poroshenko and Prime Minister Arseniy Yatsenyuk, signed the Ukraine-European Union Agreement—the rejection of which by the previous government had precipitated the protests. The EU agreement reorients Ukraine’s political, economic, and military activities toward those of Europe (and by association, the United States) and has become one of the chief instruments of Western influence in Ukrainian affairs.
The other instrument is an agreement with the International Monetary fund to receive $17.5 billion in bailout loans in exchange for key changes to Ukraine’s economic policy. By accepting this deal, Ukraine effectively forfeited its sovereignty, handing over to foreign governments the power to write its own laws. These loans are attractive to Ukraine because at the beginning of 2015 it lacked the money it needed to make payments due during the year on existing foreign debts. If Ukraine defaulted on those payments, it would risk losing the ability to borrow the money it needs to support its national budget—money which for a variety of reasons it is unable to generate itself.
So Ukraine is hard up, unable to help itself and in no position to make demands. This development, say many scholars and experts, means that this crisis has become an especially attractive opportunity for foreign interests looking to expand their wealth, property holdings and geopolitical influence. Writing and speaking from the margins of the discussion, these experts say that the policy solutions proposed by the West through the economic agreement and the IMF loans threaten only to deepen Ukraine’s troubles—and with nuclear powers struggling on either side, they risk a world war.
In an effort to get a clearer view of these developments and a sense of their probable outcomes, I asked three experts to join me for a video-recorded discussion in the Brooklyn office of Verso Books. They are Michael Hudson, a former balance-of-payments economist for Chase Manhattan Bank, distinguished research professor of economics at the University of Missouri, Kansas City, and an author of a major study of the IMF; Jeffrey Sommers, associate professor of political economy at the University of Wisconsin-Milwaukee and a visiting lecturer at the Stockholm School of Economics in Riga; and James Carden, a former adviser to the State Department on Russia and a regular contributor to The Nation. The three videos below are excerpts from our discussion.
Putin’s role in the current showdown between Russia and the West has no doubt been significant, but his actions have also been grossly distorted by the government propaganda and biased media of Western Europe and the United States. Hudson, Sommers, and Carden regard him with the same skepticism they would any contemporary leader, but here they are chiefly concerned with understanding what is driving Western involvement. They recognize, for instance, that Ukraine possesses an abundance of natural resources that, if developed, could produce vast fortunes for whoever held the claims of ownership. This includes reserves of oil, natural gas, and minerals, including uranium—the fuel for nuclear reactors and bombs. Two-thirds of the country’s surface is covered with a nutrient-rich “black earth,” soil which, despite being poorly utilized, has made Ukraine the world’s third-largest exporter of corn and fifth-largest exporter of wheat. US agricultural corporations Monsanto and Cargill have made no secret of their interest in this land.
Western energy interests have similarly worked to position themselves to gain access to Ukrainian petroleum. In spring of 2014, three months after the pro-Western government came to power, the Ukrainian energy company Burisma Holdings announced that Hunter Biden, son of US Vice President Joseph Biden, had been appointed to its board of directors.
These resources would become available to international interests mainly through the changes to Ukrainian economic policy prescribed in the Ukraine-European Association Agreement President Poroshenko signed in June 2014. But raw resources are not the only prizes sought by Western statecraft.
Formed immediately after the end of World War II to finance the reconstruction of Europe, the International Monetary Fund has operated for seven decades with a mandate to help develop the economies of less-than-wealthy nations by organizing and administering loans from creditors around the world (though mainly from the United States and Europe). The IMF offered its current package of loans to Ukraine under the pretense that, in addition to enabling the government to pay its debts, the terms that come with them will help develop the national economy and bring about needed reforms, including some aimed at cleaning up the government’s notorious culture of corruption. Hudson says these loans amount to little more than a tool for keeping the country “on a short debt leash”—a form of servitude that empowers the United States to use the Ukrainian government as a regional extension of US political, military and economic power. But we don’t need to begin with Hudson to realize that the IMF program won’t help ordinary Ukrainians. President Poroshenko himself told Ukrainians that neither the loans nor the reforms would help them.
“Life won’t improve shortly,” he said in mid-March, shortly after the fund approved the loans. “If someone understands the reforms as improvement of people’s living, this is a mistake.”
Sommers sympathizes with Ukrainians who want to believe that joining the West would raise their standard of living to that which became standard throughout the United States and much of Europe in the post-war period. But that’s not likely to happen, he says, because the policies being “offered” to Ukraine are the “exact opposite” of those that made Europe prosperous after World War II.
Indeed, certain reforms will make essential goods far more expensive for Ukrainians. In the name of bringing the price of oil in line with that sold on European markets, state subsidies for cheap heating oil will disappear. Estimates say the price of gas will rise 280 percent by 2017. Ukrainians who recognize this are not pleased.
“I’ll just have to stop eating, I guess,” 77-year-old pensioner Valentina Podenko told Business News Europe earlier this year. “I didn’t know [the gas charges] will increase, especially by that much.”
Further Reading: http://www.thenation.com/article/209329/ukraine-crisis-heres-why-west-cant-save-it?utm_source=facebook&utm_medium=socialflow#
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