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Ukraine: Who Is Holding Up the Needed Crisis Talks With Russia?
Thus starts a letter by the Russian President Putin to leaders of other European countries:
Ukraine’s economy in the past several months has been plummeting. Its industrial and construction sectors have also been declining sharply. Its budget deficit is mounting. The condition of its currency system is becoming more and more deplorable. The negative trade balance is accompanied by the flight of capital from the country. Ukraine’s economy is steadfastly heading towards a default, a halt in production and skyrocketing unemployment.
"Western" pundits agree:
Moody's recently downgraded Ukraine‘s sovereign debt from ”extremely speculative” to “default imminent with little prospect for recovery.” Moody’s based its decision not just on the escalating political crisis, but on Ukraine’s rapidly dwindling foreign currency reserves, its exploding level of debt (from 40% of GDP at the end of 2013 to a projected level of 60% at the end of 2014), and full-year 2014 economic growth that is optimistically forecast to be somewhere between -3 and -4%. Although the new government in Kiev isn’t to blame for the economic carnage now transpiring, the fact that Yanukovych and his cronies were responsible doesn’t do anything to change the reality of the situation: whether we like it or not, Ukraine is in economic free fall.
An IMF bailout of some $16 billion with lots of cruel strings attached could probably come in May. But those $16 billion are about as much money as the Ukraine owns to the Russian state owned energy company Gazprom. Without payments to Gazprom no further gas will flow and the energy intensive chemical and metal industries in east Ukraine will have to shut down. Unemployment and intensified general unrest will follow.
Some have argued that the European Union (in reality, German taxpayers) should bailout the Ukraine and they point to Poland as a successful case for an economic turnaround with EU help. But Poland got about $150 billion of foreign support over 10 years and will still need more. This back when the EU financial position was somewhat healthy. No one in Europe, especially not German taxpayers, are willing to invest anything like that to "win" the Ukraine. Neither will the U.S. provide any help. It gave a loan guarantee, which is in fact just a subsidy to U.S. banks, for a mere $1 billion loan the Ukraine may want to take up.
Since mid February the Ukrainian currency, the Hydrina, fell from $0.12 to $0.08. The loans and bills the Ukraine has to pay are in U.S. dollars or Euros. Each day the currency falls further increases the debt in ratio to the local GDP.
Since January Russia has offered talks with other European leaders to find a solution for Ukraine's economic crisis. The offer has not been taken up. It seems as if the EU and the U.S. are simply ignoring the problem and are calmly watching as the Ukraine defaults and slips even deeper into chaos.
What is their intend behind this? Why wasn't this foreseen when the U.S. and EU pressed for "regime change"? Is this just the childish attitude of "if I can't have it I will destroy it"? For what purpose?
Putin points out that a lot of gas to "western" Europe flows through pipelines across the Ukraine. Should Gazprom not get paid for deliveries to Ukraine itself it will stop the flow destined to Ukraine. Ukraine will then, likely, skim off the flow that is destined to other countries. This is a European problem. Why isn't the EU leading talks on Ukraine?
While there is a lot of anti-Russian bluster in the media no none can argue that Russia does not deserves to be paid for the gas it delivers. Russia can also easily suspend all gas deliveries to the "west" for a few month and fill its new pipelines towards the east and China. It does not the EU to survive. There is really nothing the EU can win by not talking to Russia and by not finding a solution for the Ukraine. What òr who is holding this up?
Boris Kagarlitsky has a very interesting piece at Counterpunch:
Crimea annexes Russia.
He points out two of the central problems in this crisis. The first being that the rulers of Russia are deeply invested in the neo-liberalism promoted by the Empire. And the second that the opposition to the rulers of Russia is even more oriented towards the west, begging NATO to attack Putin and objectively siding with the Russophobic fascists in Ukraine and elsewhere, including the Baltic states.
He adds that nothing would be more to Russia’s benefit than real economic sanctions from the west and expulsion from the WTO, because such moves would drive Russia to restore the economy’s industrial capacity and mobilise the enormous resources, particularly in skilled labour, currently being wasted as the oligarchs volunteer to be the Empire’s ‘hewers of wood and drawers of water’ making billions by selling off raw materials and fossil fuels at world market prices.
“….The liberal press is now setting out to frighten the public with the threat of economic sanctions on the part of the West, but the main danger to our economy stems precisely from the fact that there will be no such sanctions. If the West were in fact to impose serious sanctions, this would open up enormous opportunities, creating the preconditions for a growth of employment, for wage increases and for creating new jobs. Suspending Russia’s membership in the World Trade Organization would be a gift to our industry. Placing a blockade on technology transfers would make it necessary to revive Russian enterprises.
“We are in acute need of sanctions, since they would provide a chance for us to restore our industry, to diversify production, to wage a struggle against capital flight and to conquer our own internal market. But the ruling layers in the US and European Union have no intention of aiding Russia, so there will be no serious sanctions, merely symbolic acts aimed at calming public opinion in the USA and Europe and at giving moral support to the “patriotic” pretensions of the Russian elite.
“The Central Bank will, of course, press ahead with the policy of lowering the ruble exchange rate that it has already been pursuing since last year. On this level, the Ukrainian crisis and Crimea have proved extremely opportune, since they have allowed the bank to accelerate the process. Whether the bank’s hopes of raising the competitiveness of the Russian economy solely through devaluation will prove justified is, of course, a separate question.
“Contrary to the ideas of liberals and conservatives (who suffer, surprisingly enough, from the same hallucinations), the policies of the Russian authorities do not stem from any conscious decision to enter into confrontation with the West, but from an attempt to keep this confrontation – which is objectively inevitable, and does not depend on the will of the Kremlin – to a minimum.
“Nevertheless, an intensification of the conflict is predetermined by the overall logic of the economic crisis, which inevitably is sharpening the struggle for markets, destabilising international relations and strengthening the rivalry between the West and the BRICS countries (Brazil, Russia, India, China and South Africa). Meanwhile it is obvious that Russia, as well as being central to the BRICS chain, is also its weakest link. While lagging in its economic and especially industrial growth rates, and lacking a functional national elite, Russia nevertheless remains the only European country in this potential bloc, and retains a scientific, diplomatic and military potential that other societies will need decades if not centuries to accumulate. As a result, the policies of the Western elites toward our country are marked by a fundamental duality: while taking every opportunity to weaken Russia, the Western powers simultaneously do not allow Russia to take its distance from them, and in the process, to undergo a definitive rapprochement with the non-Western world.
“The Russian elites are themselves allies and hostages of these policies; the whole policy course of our ruling circles can in essence be reduced to a mirror image of the same formula….”
The conflict is not over neo-liberalism, which all parties appear to espouse, but the rivalry between Russia and the “west” now represented by the USA which was old before Columbus was born.
On the other hand the only way out for Russia, and the other “outs” in an imperial system stacked against them inevitably involves central planning, breaking with globalisation and, by raising the banners of equality and fraternity, mobilising the energies of the people.
It is always useful to remember, as we watch Putin run rings round his American antagonists and play the part of the patriot, that he used to work for Yeltsin, and in no mean capacity, either.
Posted by: bevin | Apr 10 2014 18:44 utc | 10
As I have posted here before (can’t find it any more) Gorge Soros, for his part, provoked the Ukrainian war to pressure Germany into issuing (tradable) Euro-Bonds or skip the Euro.
Now Christine Lagarde promises to bail out Ukraine, but not before end of april / may, and meantime she stipulates … Euro-Bonds with the wording “extraordinary measures by the ECB”.
http://www.dailymotion.com/video/x1nd5y3_lagarde-ukraine-aid-program-has-very-broad-based-support_news
Remember Strauss-Kahn?
Strauss-Kahn, in coordination with Schäuble, Putin and others, proposed an IMF-reform, that would give “emerging market economies”, especially “BRICS”, much more leverage and SDR.
The US can’t enforce the Dollar-debt on global markets forever and have to end QE before it damages the dollar exchange once more, now, that the “Euro crisis” had mostly been capped. The demise of the Dollar may come with a crash, which would probably kill at least 2 billion people, or there may be a transition preventing the worst. Inserting SDR of IMf, built of a basket of all major currencies, smoothly into the Dollar-economy was therefore a benign offer for the american people but it would subordinate the Federal Reserve, the Wall Street and the City of London to the IMF – instead the other way round, as it is mostly the case now.
You know what happened to Strauss-Kahn.
But the back side of the story, that led to the elimination of Strauss-Kahn, can be seen here:
The IMF-Reform Strauss-Kahn managed to put through in 2010, due in 2012, but blocked by the US:
http://www.imf.org/external/np/sec/pr/2010/pr10477.htm
more detailed:
http://www.imf.org/external/np/sec/pr/2010/pdfs/pr10418_table.pdf
You see, the shift to the developing markets was done at the expense of all traditional industrialized countries except the USA. That was the bait.
But of course the weight of the shares depend indirectly of the weight of the Dollar against other reserve currencies, especially the Euro, but to a growing extent it depends also on trade, debt and credit constructions in BRICS and SCO, and also bilateral trade of China-Japan, China-Iran and even China KSA / GCC, that circumvent the Dollar, partly backed by the gold reserve accumulated in China, Iran and India. For the way, the IMF shares and votes are used, depends largely on the relative weight and shares of the Dollar. The US can’t punish militarily or by economic leverage a bulk of the economies for not aligning with them.
So many big players in the US allied to drag the Euro deeper into the crisis they had provoked in 2008 and succeeded. But they couldn’t break the resistance of Germany and its allies against opening the Euro Sovereign Funds for any Dollar printed by the Fed, which would allow the US once more to export most of the burden of the transition off the Dollar world-curency.
That’s why I think, there is a poker game on now at the G7 summit. I reckon Germany, Italy and France clearly opposed to the plans of the US aligned with Japan and Canada, which leaves a heavy if not deciding part to the UK. That might have been the simple reason many of the western players had to escalate the war in Ukraine: Enforce the ban of Russia off the table in order to break the stalemate of four to four.
I don’t know which leverage Germany, France, Italy have against London, but the City of London for sure is at least more vulnerable to the Ukrainian war, than Wall Street.
Additional links:
http://www.avim.org.tr/bulten/en/85743
http://news.xinhuanet.com/english/world/2014-04/11/c_133254291.htm
http://news.xinhuanet.com/english/video/2014-04/11/c_133254510.htm
Posted by: TomGard | Apr 11 2014 12:12 utc | 82
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