Bread Basket Case of Europe: Inheriting Ukraine's Spent Economic Wind

Ukraine's Got Problems? Blame Russia!

by Peter Lee - China Matters

Orwell would be pleased that the pro-European opposition in the Ukraine stuck it to Putin and the ex-Bolshies.

Maybe he would have been less pleased with the linguistic legerdemain that is emerging the as the mainstay of the new Ukrainian regime.

The current situation in Ukraine is apparently pretty grim: flatlining growth, imminent insolvency, consternation and anger among the sizable ethnic-Russian community, a whiff of separatism in the Crimea, a bunch of outright Fascists who apparently see the coup as their Reichstag moment and a chance to bully their way into control of a decisive bloc of votes in the Parliament…

And it looks like the US-inspired coup that blew away an EU-sponsored transition pact has also stripped away Russian (as in Putin) and ethnic-Russian (as in the eastern & southern portions of the country) enthusiasm for helping the new government out in dealing with Ukraine’s difficulties.

Unless Russia can be prevailed upon to pony up the remaining $12 billion of the $15 billion it promised Yanyukovich, the new government is going to have to turn to the EU for the Western financial shovels that, hopefully, will dig the Ukraine out of its hole instead of digging it deeper.

Apparently, the standard recipe for a country that can’t pay its bills (Ukraine is looking at a couple of likely bond defaults this summer) is an IMF rescue package contingent on implementation of austerity measures.

In human terms, the prescription is for pain: devaluing the currency to boost exports (while making imports more expensive), making the economic environment more attractive for foreign investment (depressed wages, business-friendly laws & regs), and keeping the foreign bondholders happy (balanced budgets, focus on debt repayment, bye-bye services, pensions, & deficit stimulus).

The key question will be if misery achieves the level of Greece & Spain (likely) and if Ukraine will turn the corner toward economic growth with reasonable alacrity (?).

Thanks to the precipitous success of the coup, the new government finds itself with the prospect of the Ukrainian engine firing on only the European half of its geopolitical cylinders and a significant portion of the electorate presumably displeased with the Hobson’s choice of IMF austerity that the coup has forced upon it.

As a matter of human nature and political calculation, there is an obvious response to the new Ukranian government’s largely self-and-West-inflicted problem: Blame Russia!

Blaming Russia takes a certain amount of heavy lifting because Russia, while propping up Yanyukovich with the $15 billion loan and some bond purchases, was conspicuously passive during the crisis. Yanyukovich was apparently no particular friend of Putin, and Medvedev openly berated him for being a doormat in the final days. Russia let Yanyukovich stew in his own juice and, when he abandoned his presidential post, dropped him like a hot potato.

The EU and the United States, on the other hand, enthusiastically supported the opposition demonstrators, even when things got spectacularly ugly and, with the threat of sanctions (and probably more) materially supported—one might say *ahem* meddled in--Ukrainian domestic politics.

Fortunately, the Ukraine’s new rulers can count on the assistance of the West, if not with substantive assistance, then with vociferous lip service in blaming Russia for Ukraine’s difficulties.

With the fragrant smell of buyer’s remorse filling the international space, obviously it was time to turn to themes more pleasant than “Maybe America sh*t the bed in Ukraine”. Unleash the pro-Western diplomats, pundits, and correspondents!

NATO’s Anders Rasmussen obligingly reframed the ruckus in Ukraine as “freedom fighters v. autocrats” conveniently forgetting that Yanyukovich had achieved the presidency after a closely contested election that had received the “free and fair” stamp of approval.

"We stand ready to continue assisting Ukraine in its democratic reforms..."

John Kerry also stepped up to remind the world that the real problem was not a reckless and divisive coup rather irresponsibly encouraged by the United States. And by the way, the fight hadn’t been over the Russian vs. EU orientation of the country. With the publicizing of Yanyukovich’s gold-plated ostrich farm, it was time to roll out some new product: people vs. kleptocracy! while skating past awkward details like the enormous wealth somehow accummulated newly released heroine Yulia Tymoshenko:

Some Russian officials accuse the West of being behind the revolt against Yanukovych. U.S. and European officials have adamantly denied such allegations.

Kerry said the Ukrainian people had risen up themselves against a "kleptocracy" and added that he suspected that some elements in Russia had advised Yanukovych to crack down hard on his opponents.

And let’s not forget the Karl Rove jiu-jitsu move (the legendary strategist’s tactic of attacking an opponent’s strong point in order to turn it into a weakness. Most famous victim: John Kerry, whose military heroics trump card was Swift-boated into an electoral liability in the 2004 presidential campaign). So Russia didn’t intervene in Ukraine like the US did; well, it might. 

"I think Russia needs to be very careful in the judgments that it makes going forward here," Kerry said. "We are not looking for confrontation, but we are making it clear that every country should respect the territorial integrity, the sovereignty of Ukraine. Russia has said it will do that, and we think it's important that Russia keeps its word."

Most remarkably, Kerry also took the opportunity to stir the pot in Georgia (the Central Asian Georgia we want to integrate into the EU and NATO, not Hoagy Carmichael’s), since he was speaking at the U.S.-Georgia Strategic Partnership Commission:

[Kerry] announced additional, but unspecified, U.S. assistance "to help support Georgia's European and Euro-Atlantic vision." And, he denounced Russia's continued military presence in the breakaway Georgian territories of Abkhazia and South Ossetia in violation of the cease-fire that ended the 2008 Russia-Georgia conflict.

With all this going on, this assurance rang rather hollow:

"What we need now to do is not get into an old, Cold War confrontation," he said. "We need to work together in what does not have to be a zero-sum game to provide the capacity of the people of Ukraine to choose their future."

Since Kerry has given virtually the same assurances to the People’s Republic of China, there was probably a lot of cynical eye-rolling among the mandarins in Beijing.

AP ‘s Matthew Lee bylined this piece and deserves special mention for a misleading reference to the 2008 Georgia War:

Those steps have raised fears of possible Russian military intervention in Ukraine along the lines of its 2008 operation in Georgia, which was condemned by the United States and its European allies.

A quick review of the Wikipedia page for the Georgia War will inform the vast armies of the clueless in the West that it was Georgian forces that attacked South Ossetia—a largely Russian enclave which had broken away in the early 1990s and was patrolled by Russian peacekeepers under an agreement with Georgia—in an attempt to reconquer the wayward province, and got their asses handed to them in a Russian counterattack.

First irony alert: Georgia’s President at the time, Mikheil Saakashvili—a mainstay of the US-backed GUAM (Georgia, Ukraine, Azerbaijan, Moldova) alliance of pro-NATO anti-Russian states--launched the attack during the 2008 Beijing Olympics. Efforts to create a pattern of Olympic-related Russian misbehavior, as was done during the Ukrainian crisis, are BS. On the other hand, it looks like the West prefers to conduct its skullduggery at Olympic-time, when Putin is obliged to be on his best, global-buddy behavior.

Second, the truce agreement covering South Ossetia and Abkhazia—the one that Saakashvili broke—was signed in Sochi in 1992.

Third, and hopefully last irony alert. Saakashvili tried to bring his talents to the Ukraine in December as a member of a delegation of CANVAS, the U.S. supported democratization/color revolution outfit, but was declared persona non grata by the Ukrainian government, together with three dozen other CANVAS worthies who adore democracy but apparently don’t adore all democratically-elected governments.

As a concrete matter, I do not believe that Russia will be very interested in trying to reabsorb the Crimea, even if the local ethnic-Russian population cobbles together an independence movement (the province is already largely autonomous and has replaced the mayor of Sebastopol and taken a variety of other measures to prevent Kiev’s writ from ruling in Crimea) as the South Ossetians did.

There are 250,000 or so Tatars in Crimea, about 12% of the population, and they hate the Russians with a passion and good reason. Over 100,000 Crimean Tartars died at Stalin’s hands in the 1930s and, when Hitler’s armies arrived, there were a significant number of Crimean Tatar collaborators (as there were ethnic Ukrainian collaborators). As a result, the Soviet Union deported the entire Tatar population after World War II and almost half of the deportees perished from hunger and disease. The rest returned to their homeland after perestroika and, after independence, set up their own independent political body, Mejlis of the Crimean Tatar People, which declared sovereignty over the Crimean Tartar people, with a flag and national anthem. Living in a predominantly Russian district, the Crimean Tatars are vigilant against renewed Russian perfidy.

With this historical and organizational context, it is not surprising that the Tatars were able to put thousands of people on the streets of Simferopol, a regional capital in Crimea, pronto, to face down a few hundred ethnic Russians who were agitating about independence after the coup.

And, for extra credit, the Tatars are Muslim, and some were chanting allahu akhbar and “Tahrir Square” during the confrontation.

No, Russia does not want a piece of another Islam-inflected resistance movement and I expect Vladimir Putin has no plans to try to annex the Crimea.

Of course, if the Black Sea Fleet facilities are threatened, it’s a whole ‘nuther ball game, and I suspect that the Russian military drill that got everybody up in arms today, as well as Moscow’s undoubted behind-the-scenes machinations in the Crimea, have that particular contingency in mind.

The biggest problem for image-makers in the West and in Kiev will be to gloss over the Ukrainian-chauvinist feelings in the central government by celebrating painstaking efforts to set up a “unity” government (while ignoring the sizable contingent of out-and-out Ukrainian fascists who were central to the coup’s success, and embarrassing artifacts like the outlawing of Russian as an official language).

In this context, the anxieties of the ethnic Russians in the Crimea is a godsend, because lets the government and its Western allies conflate ethnic and regional resistance to the central government with Russian meddling.

The Guardian is already enthusiastically on board.

In its first version of the report on the Russian military drill , the lede described the Russian military exercise as:

…a move that will dramatically elevate fears of a separatist threat in Ukraine.

When the article was updated, cooler heads probably prevailed and the lede morphed into the marginally more accurate:

…appeared to be a display of sabre-rattling aimed at the new government in Kiev.

Who knows what refinements the next edition will bring.

What will be particularly interesting will be the effort to try to get Russia to bring a few billions to the table to help with the bailout, while at the same time berating Russia for fostering dissatisfaction with the current government. Heroic efforts by the Guardian and the rest of Western prestige media will be needed to keep that particular ball rolling.

But no matter the context, and in direct proportion to the floundering of the West-backed government, expect Russia to be the propaganda gift that keeps on giving.