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Ukraine’s Unelected Government Imposes IMF Austerity

2014 March 28
by Ian Welsh

This is perhaps best article on what actually happened in the Ukraine and Crimea: the story is a little different than what you’ve been hearing on TV or reading in the newspapers, at least if you’re in most of the West.  The author does leave out some bits (like the Tatars boycotting the Crimean referendum), but overall it’s accurate.

Meanwhile the new PM in the Ukraine is imposing IMF austerity measures, like removing subsidies on Gas (50% increase) and cutting pensions (50%) cut. He says he’s on a Kamikazee mission.  That’s because he’s not elected, so he can do thing that an elected leader could never do.

Which is to say: there is a coup, backed by a popular uprising in the capital, which puts in place an unelected government, which does things that elected governments repeatedly refused to do.  The East and South of the country, which voted in the last elected government, is unhappy with this.

It’s really hard to conclude that Crimea didn’t do the right thing for most of their population by joining Russia.  50% increase in natural gas prices and 50% cut in pensions?  Would you stand still for that? Oh, and the average pension in the Ukraine is—$160/month.  $80 after it’s cut.

The last government may have been a bunch of corrupt assholes, but it’s hard to conclude that taking Russia’s deal of 15 billion dollars and subsidized gas wasn’t, actually, a better deal for most Ukrainians than approximately the same amount of money from the West + IMF austerity.  And these are only some of the measures: the civil service will be slashed, the government natural gas company will be privatized (meaning even higher prices down the road), the ban on selling agricultural land to foreigners will be lifted, and so on.

The EuroMaidan’s legacy won’t just be losing Crimea, it will be turning the Ukraine into Greece.

If I were Crimean, I would have voted yes in the referendum. Russia’s a corrupt oilarchy run by a near-dictator, but it has a stronger economy and better standard of living than the Ukraine, and that’s before the IMF gets through with the Ukraine.

I don’t know what Putin’s going to do.  If NATO membership were truly off the table, he’d be best served by doing nothing more.  Let the Ukrainian’s destroy their own economy through IMF austerity, and in a few years, at least the eastern half of the country will be begging to join Russia.

However, if NATO membership is on the table, and it seems to be, Putin may feel he has no choice to invade.  Problem is, after the West lied to Gorbachev about not expanding NATO, could Putin believe any Western promises if they were given?


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32 Responses
  1. DupinTM permalink
    March 29, 2014

    I loved Parry’s article. His point about Obama keeping all the false narrative people like Robert Gates, and putting in more people at the top who are reliable narrative-followers like Clinton and Kerry is well taken. Kerry, for all his stentorian droning, is such an interesting character – no one else, save John McCain, has given up so much for his chance at the brass rings of President or Sec of State.

    Anyway. In an earlier post you mentioned how all this antagonizing of Russia will deliver it securely to China’s arms as a vassal resource state, and how this is ultimately a better deal than any we will give it, much to our loss. In another you showed how Ukraine’s way out would be to use that agricultural sector in the West to sell to China – hence why in Parry’s article those rich lands will be allowed to be bought up by private interests and so captured by us. After Piketty’s capital classification, do you have any idea of the true, Marxian power of those agricultural lands? Is that breadbasket worth all those billions thrown around to roust Neo-Nazis and turn a portion of Ukraine’s elite into simpering neo-liberal Harold Ford clones?

    I keep trying to figure out the (for lack of a better analogy) real Risk power of all the pieces. Piketty seems to be a conscious muddying of those waters, by his own delusion that finance/stock market stuff is all that matters (which is what the Western elite believe, b/c it’s the rigged game they worship above all us and what enriches them). So when I hear that some amount of billions are dropped in a country, and then they hear later that, say, Ukraine’s agri sector is possibly less in real $, I get confused. I know that prime farmland is clearly better in our age of scarcity than a $16 billion unsecure WhatsApp messaging service, but is there a metric that can tell me by how much?

  2. James permalink
    March 29, 2014

    I like how Parry described Hillary as “neocon leaning”. HRC is a full-bore neoliberalcon. Things will really get interesting after she’s elected.

  3. Pelham permalink
    March 29, 2014

    So if Ukraine is taking the screws to its people, what is it doing with the billions it will get in Western money? How do these funds benefit the Ukrainian people?

  4. 1Dave permalink
    March 29, 2014

    @Pelham

    The leaders of the Ukraine are still corrupt. The oligarchs are still in charge. They and their underlings will end up with it. Same as most IMF loans.

  5. Ian Welsh permalink*
    March 29, 2014

    Those billions are used for loan payments.

  6. Ian Welsh permalink*
    March 29, 2014

    Well, and to pay for more-expensive natural gas.

  7. Greg T permalink
    March 29, 2014

    This situation is getting dangerous. The Ukraine people will soon find out what’s in store for them- the IMF riot. Reduced pensions, reduced government services and higher gas prices. They are getting the Greece treatment through and through. The US has instigated a coup d’etat, an overthrow of a corrupt, but duly elected government. The neo-Nazis were used as the catalyst for the coup, but now the government is to be handed over to the “technocrats” who will oversee the asset stripping of Ukraine’s economy.
    The west is hoping they can eliminate or payoff enough of the neo-Nazi leadership to let the banker supplicants run the government without interference. That may not be as easy as it sounds.
    Meanwhile, Vladimir Putin watches and waits. Not only is Putin not dumb, he’s much brighter than western leaders, less arrogant and knows he has the high ground in this instance. Before long, I suspect ethnic Russians in Ukraine will ask Russia to liberate them from the harsh IMF sanctions enforced by the coup government. If NATO attempts to install ABMs or offensive rockets in Ukraine, Putin will invade, knowing the US is incapable of stopping it. He may invade anyway, as a preemptive measure , figuring the US won’t risk nuclear escalation for the Ukraine.

  8. Greg T permalink
    March 29, 2014

    Every time the US shakes its fist at Russia or China, it encourages the BRICS to form a counterweight to American power. As Ian wrote in earlier post, Russia could agree to become a resource supplier to China. Moreover, both nations could spearhead a movement to end US dollar hegemony, the source of much of its power.

  9. March 29, 2014

    I read this article from a link given by a commenter on the Parry article. Lots of detail:
    http://www.thepolemicist.net/2014/03/charge-of-right-brigade-ukraine-and.html

    I agree that this is a dangerous situation. Parry, for reasons known only to him, sees Obama as a reluctant player in all of this. That he “must now join in denouncing the Russian president and demanding sanctions.” Who cares whether he is forced to or not. Who cares the reasons? If he’s surrounded by mediocre and incompetent or crazy people or he believes it himself, what difference will it make if we are all blown to smithereens?

  10. Greg T permalink
    March 29, 2014

    Yes, Parry seems to think Obama is not on board with all of this saber rattling. Even if he isn’t, the President is not changing the dynamic in any meaningful way. He won’t replace shitty advisors with better ones and he won’t fire troublemakers at the higher levels of the government who are causing these problems.

  11. trish anderson permalink
    March 29, 2014

    to Pelham re western money

    this from Michael Hudson, professor of economics at the University of Missouri-Kansas City:

    ” the [IMF] has told the kleptocrats, the ten or 12 billionaires that run the country, we will make you very, very rich if you join us. We will give you a lot of IMF money, you can transfer it into your banks and your bank accounts, you can then send it abroad to your offshore banking centers, and the Ukrainian people will owe it. So you can do the Ukraine what the Irish government did to the Irish: you can take the public money, you can give it all to the private bankers, and then you can tax your people and make them pay…
    But as soon as the IMF gives the loan to the Ukraine…Russia says that Ukraine owes $20 billion, dating back to the Soviet Union era in exchange for, in addition, to about $5 billion or $6 billion for the oil subsidies that it’s been given. Russia said it is going to charge Ukraine the normal oil price, not the subsidized price. So all the money that the IMF and the U.S. gives Russia says is immediately owed to it itself.
    Whatever happens, either the Russian government will get the IMF money for gas and imports or the kleptocrats will. None of the money–and I think Jeff agrees–none of this money’s going to go to the Ukrainian economy any more than the IMF money went to the Irish economy or the Greek economy or the other economies that are there. IMF money doesn’t go to the country and it doesn’t go to the people. It goes to the billionaires who run them to take the money and immediately send it back to the West so it’s a circular flow, and it goes in and out of Ukraine in about 20 minutes.”

    michael hudson, http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=11614

  12. March 30, 2014

    I can easily imagine an elected government doing this sort of thing — but, then again, I live in the US…

  13. uhplatypus permalink
    March 30, 2014

    I just posted your article on a Ukranian website and got slammed – hard – when the links failed and
    just none of it could be verified more than rumor. I took a beating for linking your article. Some of the foreign language links from the quoted articles were 404 dead.

    In the future, kindly vet your sources better before you post stuff. What a fricking embarrassment.

    Feeling really frustrated at the moment.
    A humiliated reader who will never link one of your posts again. Ugh.

    Uhplatypus

    (Ian — I’ve checked, and so have others — all the links work.)

  14. Celsius 233 permalink
    March 30, 2014

    @ uhplatypus
    March 30, 2014
    ~~~~~~~~~~~
    …and you’re blaming Ian? How incredible…

  15. Dan H permalink
    March 30, 2014

    Every single link above works for me…

  16. March 30, 2014

    It’s quite a shame, isn’t it, that so many Ukrainians took to the streets demanding integration with Europe apparently little knowing what the terms would be.

  17. S Brennan permalink
    March 30, 2014

    I think LibbyLiberal has a pretty good wrap-up of the US foreign policy as it relates Obama’s coup in Ukraine to his other acts that comprise a litany of “wars of aggression” in Libya, Syria, Venezuela:

    http://www.correntewire.com/always_look_on_the_bright_side_of_war_part_2_of_2#more

    One thing that really rings clearly is that Obama [& his supporters] are really murderous thugs that match Bush step for step forming a singular administration of 16 years. In fact, Obama now supports the Iraq invasion….just listen:

    In order to cover the incredidably hypocritical statements eminating from Obama, his Brussels speech defended George Bush’s invasion of Iraq by saying:

    “We did not grab its resources for our own gain. Instead, we ended our war and left Iraq to its people in a fully sovereign Iraqi state that can make decisions about its own future.” – Obama

    This is an outright lie by Obama. Anybody who has rudimentary knowledge of the conflict remembers Paul Bremer’s Laws which distributed the publically held Iraqi oil rights to American & invasion countries private oil industries. We were able to steal Iraqi oil after conquering the place by paying/arming Shiites to engage in a genocide of Sunni.

    Another outright lie in defense of the Bush administration by Obama:

    “But even in Iraq, America sought to work within the international system.”

    “What President Obama said is false,” said Caputi. “The U.S. did not attempt to work within the international system. We acted unilaterally, without the approval of the UN Security Council.”

    -Ross Caputi, member of the Iraq Veterans Against the War

  18. Ian Welsh permalink*
    March 30, 2014

    I just checked, all the links work. Wonder why they aren’t working for someone from the Ukraine.

    Odd.

    Here’s another one, doesn’t include the gas price increases (it’s older than their announcement), but it includes many of the cuts, including the pension cuts.

    http://euromaidanpr.wordpress.com/2014/03/14/ukrainian-governments-austerity-action-plan/

  19. March 30, 2014

    @ S Brennan

    Bremer’s 100 Orders in 2004 were a whole bunch of ways we grabbed Iraqi resources. One of the worst for me was Order #81 which demanded that Iraqi farmers buy Monsanto seed and not be allowed to save their seed from year to year. More on the 100 Orders at http://www.fictionpost.com/f5/bremers-100-orders-rape-iraq-11538/

    Yes, i thought Libby Liberal’s links on Ukraine were especially good. Oh, and as always, Glen Ford weighs in with a great article. http://blackagendareport.com/content/obama-putin-baiter-and-preventive-detainer
    And Paul Craig Roberts: https://www.youtube.com/watch?list=LLR6zpzPSu_1mf48ckC8odAw&v=re807ZpwiKg

  20. markfromireland permalink
    March 30, 2014

    @Ian

    I just checked, all the links work. Wonder why they aren’t working for someone from the Ukraine.

    Gentle reminder: Never ascribe to hacking and blocking what can be ascribed to ineptitude.

    mfi

  21. markfromireland permalink
    March 30, 2014

    And yes they all work for me too and yes I did double check by going first through a VPN whose address is in the range:

    5.104.32.0 to 5.104.63.255

    and then through another one whose address is in the range:

    109.254.0.0 to 109.254.255.255

    ‘Nuff said.

    mfi

  22. Jerome Armstrong permalink
    March 30, 2014

    @DupinTM, maybe it will go full circle and the $16B WhatsApp will be used by that Ukrainian-born lad to buy the farm land back.

  23. markfromireland permalink
    March 31, 2014

    For those of you who read German Jens Jessen has a good article in Die Zeit, Teufelspakt für die Ukraine.

    For those who don’t read German:

    Jessen’s article deals with German attempts to pry Ukraine loose from Russia first during the First World War and then again during the Second World War. He points out certain realities ignored in the West particularly by ‘Liberals’ and ‘Progressives’.

    1: Crimea was never an integral part of Ukraine (Die Krim war nie integraler Bestandteil der Ukraine).

    2: But neither Ukraine nor Belarus, nor any of the newly created entities had ever been thought of as sovereign states (He means by the Soviets – mfi). That they exist and are accepted as such today is one thing: (But it is – mfi) a misunderstanding of the former Soviet nationality policy. (Aber weder die Ukraine noch Weißrussland, noch irgendeine der neu geschaffenen Entitäten waren jemals als souveräne Staaten gedacht worden. Dass sie heute als solche auftreten und akzeptiert werden, ist vor allem eines: ein Missverständnis der ehemaligen sowjetischen Nationalitätenpolitik. ).

    3: The first heroes of Ukrainian independence hailed by the ‘Orange Revolution’ were German stooges. (Die ersten Helden einer ukrainischen Unabhängigkeit, die noch heute von Angehörigen der Orangenen Revolution verehrt werden, waren nämlich Helden von deutschen Gnaden).

    4: See from a Russian perspective the West has consistentlyinterfered (he means with hostile intent – mfi) in the Ukraine – in the form of German and Polish meddling in the 20th Century and now in the form of EU and USA. And is that perspective so wrong? (In russischer Perspektive hat sich der Westen immer an der Ukraine vergangen – in Gestalt von Deutschen und Polen im 20. Jahrhundert, in Gestalt von EU und USA heute. Und ist die Perspektive so falsch?)

    What I have found disgraceful but utterly unsurprising is the depth of Russophobia in America, including – especially, amongst those who describe themselves as ‘liberals’ and ‘progressives’.

    mfi

  24. markfromireland permalink
    March 31, 2014

    Oops I meant to tranlate the title before hitting return:

    Teufelspakt für die Ukraine:

    “Pact with the Devil for Ukraine”

    mfi

  25. markfromireland permalink
    March 31, 2014

    @ Ian:

    However, if NATO membership is on the table, and it seems to be, Putin may feel he has no choice to invade.

    What you’re either missing or not giving sufficient weight to here is that even to give up the predominantly Russian areas around Kiev is going to be seen amongst a large part of the Russian establishment as a disgrace. Putin has to keep his constituency happy. If he doesn’t invade he’ll have to pay a political price. Quite a high one too if the various contacts, comrades, and colleagues I’ve been speaking to since this American and Polish manufactured crisis blew up are to be believed and they’ve always proved truthful in the past.

    mfi

  26. Formerly T-Bear permalink
    March 31, 2014

    Did Italy have an elected PM when Burlesque-carni (Berlusconi) was deposed? Same theme worked there, why not try the Ukraine as well. Note the same troika (note the EU Commission, EU Banksters and IMF at work suborning democratic institutions). Same song and dance replacing Greek representational government also. The method is tried, tested and approved – who shall be next and how soon?

  27. March 31, 2014

    Great piece Ian

  28. S Brennan permalink
    March 31, 2014

    I agree with this point by Mark:

    “What I have found disgraceful but utterly unsurprising is the depth of Russophobia in America, including – especially, amongst those who describe themselves as ‘liberals’ and ‘progressives’. ”

    But again Mark, I’ve been reading, listening & watching the mainstream media…not one, not one, not one story that even begins to have a grain of truth, all lies, all the time. US media is far worse than the Soviet Propaganda machine in terms of large scale, long term lies.

    Nobody US born in the last 20-30 years even has shot of understanding the world as it is unless they have access to an elite education. And by “elite” I mean special and unusual.

  29. S Brennan permalink
    March 31, 2014

    Thanks MontanaMaven, I missed your comment on my read through.

  30. Gaianne permalink
    March 31, 2014

    The US is faithless, and its promises are worthless. Wasn’t always true, but is now, for some decades. Now only the facts on the ground matter. Go for the zero-sum solution, and cut your losses. The Russians understand this implicitly, they will do what they gotta do.

    Ironically, Americans have no clue how negotiating from strength* weakens their options. Any benefit to anyone else is perceived as a loss to oneself–which systematically precludes positive outcomes. But that is a problem for America, and only a secondarily a problem for everyone else.

    The current American tantrum is the natural outcome of these policies. If you can’t negotiate, and you can’t force your will, what do you do? Throw a tantrum like a two-year-old!

    The era of the Pitiful Helpless Giant, so feared by President Nixon, and which he unknowingly did so much to create, has arrived.

    Dangerous times.

    *Only negotiate when you are in the stronger position. But hey! If you are in the stronger position, why bother to negotiate at all–just take what you want with the threat of force.

    –Gaianne

  31. Kfish permalink
    March 31, 2014

    @SBrennan: While I agree that some of the print media over there is really bad (especially the Washington Post) most people commenting on the issue have access to the Internet, where reporters and eyewitnesses from both sides have been posting their impressions. I’m in Australia where the reporting is almost as bad, but have been able to read up on the history of the region online, as well as hearing from bloggers with a variety of viewpoints.

    It’s not so much about access to information, but the fact that that information contradicts pre-existing filters.

  32. S Brennan permalink
    April 1, 2014

    Kfish,

    You have to have a background in order to know where to fish. If you don’t have an accurate history, you’re clueless. For the young, 30 years of false context, creates a false history.

    Here’s one that few under 30 have a clue on; Libya had nothing to do with Lockerbie.

    Iran & a splinter PLO did the job in revenge of the US shooting down a Iranian passenger plane. AND THAT’S WHAT THE STATE DEPARTMENT SAID [for 2 years?] UNTIL THE STORY SUDDENLY CHANGED WITH A PRESIDENTIAL STATEMENT. “The Iranians got a bum rap” said Bush [the 1st].

    How many remember and could accurately Google for underage male prostitutes visiting the Bush [the 1st] White House? Not many I bet. Google hides a lot of stuff in plain sight by putting pages and pages of worthless garbage between you and the truth. You have to know the actual words used to pull the old stories.

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