The horizon is not so far as we can see, but as far as we can imagine

The Chinese Solution to the Ukrainian Problem

The Ukraine was a mess even before the crisis:

  • Massively in debt.  35 billion needed over the next two  years.
  • Aging industrial sector, located primarily in the east, which produces steel goods that no one but Russia is willing to buy.
  • Massive inequality, and a private sector controlled almost entirely by oligarchs.
  • A genuinely split population, politically.
  • Vast corruption.
  • Unable to provide enough energy for its own industries and citizens.
  • Not able to sell enough to foreigners to pay for what it needs to import.

The IMF had offered 4 billion dollars, contingent on ending energy subsidies and opening the economy up.  Ending energy subsidies would double price of energy, which would mean that the aging industries would go out of business and many Ukrainians would freeze next winter, because they can’t afford the higher prices.  The EU trade deal was nothing special either: they don’t want Ukraine’s steel or lousy, Soviet era goods.

The Ukraine has almost nothing going for it.  But it does have one thing: it’s a breadbasket.  The Ukraine exports a ton of wheat.

There are growing food shortages, and food prices have been rising faster than inflation for years.  They will continue to do so.

The country which has expressed the most interest in Ukraine’s wheat is China.  They offered, at one point, to rent fully 5% of the Ukraine’s land to farm.

China is the country in the world throwing off the most money right now, their money creation dwarfs even the United States.  They cannot grow enough grain to feed their own population.  China is also the only great power which still offers development to its partners: the Chinese have built roads, ports, airports and factories in Africa and Asia.  Further, so long as deals are kept with them, the Chinese do not care what is done internally: they don’t consider it any of their business.  Their money is not contingent on other countries engaging in the sort of austerity that the IMF, Europe and the US like to force on anyone who goes to them for money.

China is also willing to lock into long term deals, and to pay somewhat more than the market rate to insure a guaranteed supply of whatever commodity they need, whether that be oil or food.

The Ukraine has two problems which cannot be tackled under the West’s aegis: inequality, and debt.  The West simply will not allow a massive restructuring or default of debt and still give the Ukraine money.  Does not happen: oligarchs are sacred in the West.  But what the Ukraine needs to do is restructure its debt: turn it all into 100 year bonds at 1% and tell investors to take it or leave it.  And they need to expropriate the oligarchs: take away their money, power and holdings.

Neither of these things, again, can be done under the West.  And once done, the West will generally refuse to trade the Ukraine what it needs.

So the obvious play is to expropriate the land needed to make a deal with China.  Cut a deal with China to take virtually all of the Ukraine’s grain exports, to develop the Ukraine’s land and make its farming even more productive, and to sell the Ukraine the goods the West will stop selling them.

Meanwhile, since Russia and China are on great terms, you don’t take the Western/IMF deal, you take the Russian offer, because in addition to food the one thing you MUST have is oil and natural gas, and Russia will give you a discount on those.  The only people whose debts you don’t roll over into 100 year bonds are the Russians (though you do renegotiate with them, and yeah, you can probably get great terms if you swing back into their sphere of influence and join their trade area.)

The odds of this happening, are, of course, exactly zero.  The Ukraine’s west, and the current government are caught in this weird delusion where they think that, like Poland, they can get prosperity by orienting to Europe.  They can’t, those days have passed, and Poland is not the Ukraine (among other things, it has very low inequality.)  And the current government is in bed with the oligarchs: they turned on the last government at the right time, and the new government is appointing them to key posts.

However, things change: Europe and the IMF will wreck the Ukraine (that’s what they do), and things will get worse for ordinary people (there may be a hiatus where things get better due to a land bubble, we’ll see).  When it does, Ukrainians will have another chance to realize that Western nations aren’t their friends, and only care about them as a took to screw with the Russians, or to the extent there is something of value left to loot.

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“Consequences” for Russia over the Ukraine


Western and Russian Hypocrisy on Crimea


  1. guest

    So depressing that 20 years after the break up of the USSR we are playing stupid real politik games of destabilizing governments whose ideology we don’t like rather than working with them to make more stability and prosperity for the commoners which is really the only thing that will make good allies, even if it takes a lot of time and money to cultivate. As if hurting our enemies and removing them from power, even if it works, will sow goodwill and trust in the people or in the favored governments that follow (and then it turns out those favored regimes sometimes are gone in a blink of an eye). I have the feeling the west would like to destabilize the Scandinavian socialist states if they weren’t strategically located.

  2. The problem is that while it makes sense for Ukraine to turn to Russia and China, the “Russia” part makes a big difference to a lot of Ukrainians, who can’t forget that Russians starved millions of Ukrainians to death in the 1920’s and 1930’s after wiping out the White Army, then killed hundreds of thousands of more Ukrainians in the 1940’s while in the process of wiping out the UPA. That’s all old history and anybody involved now is long dead, but old grudges die hard in that region.

    I will, however, note that you are absolutely correct that “The West” offers nothing to Ukraine except hardship and further transfer of assets to the oligarchs. The China model unfortunately appears to be the most viable model for governing right now, in that China is doing the hard things — reduction of population (via the 1 child policy) and via massive investment in renewable and nuclear energy — that are going to be needed to survive the future. I say “unfortunately” because China relies on suppression of dissent in order to function despite the constant propaganda from the West and some of the things they do in order to suppress dissent are… not nice.

  3. Celsius 233

    Well, Ian, there you go being rational. And I like it, but; Ukraine has been romanced and seduced by the western allure of freedom and democracy.
    In other words, they drank the kool-aide.
    Oh, if they buy into the IMF’s austerity, I think there will be hell to pay.
    Either way, Russia wins; they offer a genuine way out and the west offers poverty and starvation as they steal every last ruble.
    I see no good end to this unless Russia wins this tug of war…

  4. someofparts

    so depressing to be american
    thanks for the clarity Ian

  5. RJMeyers

    Thought I’d share this link here: “The Putin Doctrine”

    Excerpt (note that “succession” should be “secession” below):

    “What Putin is doing in Crimea is neither new nor unprecedented. In fact, Putin’s commitment of Russian troops to Crimea embodies what I will call the Putin Doctrine, and I will define the Putin Doctrine as follows:

    ● Putin Doctrine: Peoples in Russia’s near abroad who desire to be brought under the Russian security umbrella (whether Russian-identifying peoples, or Russian sympathizers) will be given Russian military assistance in succession from a nation-state to the extent that this succession results in a geographical region in which effective political control can be exercised by the succeeding peoples, with Russian assistance. Priority is given to geographical regions immediately contiguous with the Russian border, and de facto rule is the object, rather than formal recognition of sovereignty by the international community.

    The practical corollary of the Putin Doctrine is that Russia will project power in its near abroad where it has the cooperation of the peoples in these regions.”

  6. Greg T


    I think the allure of the West has more to do with Ukranian elites selling out to the IMF. The Ukraine population will get nothing but austerity from an IMF bailout, but elites who cut these deals will profit handsomely. Even if they lose power, they will be taken care of ( see Greece ). Aside from the cruelty of it, this is all terribly destabilizing. And the more countries which are destabilized, the harder it will be to maintain control overall.

  7. Feudal Newspaperman

    Uh…to recap the timeline here–

    > Russia and EU/IMF make rival offers to Ukraine

    > Ukraine takes Russian deal instead of EU/IMF “give us your firstborn and both your kidneys” deal

    > Ukraine gets colour-revolutioned (again!) for its impudence

    > New government takes power

    So the takeover was engineered basically for the sole purpose of getting the IMF its deal…it would be interesting though to see just how many times in a row Ukraine could be colour-revolutioned if each new government attempted to thumb its nose at the Empire after assuming power. How many successive Greek prime ministers did they chuck overboard for refusing to sell out, again?

  8. EmilianoZ

    Those factories that the Chinese build in Africa, do they produce more interesting stuff than the old factories currently running in east Ukraine? Examples?

  9. RJMeyers

    EmilianoZ: Generally speaking, having factories is better than having no factories. Even if the stuff they produce is only interesting to a few customers, its better than nothing. Their products can be improved over time as long as they’re protected by wise policy.

    I think the point here is that Ukraine has a valuable commodity (wheat) and a backward industrial sector. It can use the value of that commodity to acquire assets to pour improvements into industry, which is where the real long term payoffs will come from–grow their way out of debt, raise the standard of living, raise wages, etc. Under the IMF/EU deal, the industrial sector would die off and Ukraine would just be a poor agricultural country that will never be able to pay its bills. And the industrial sector would not be the only thing to die off–so would lots of Ukrainians absent outside aid.

  10. RE: RJMeyers

    Thanks much for quoting my piece on the Putin Doctrine, and since your above comment I have made the appropriate changes to my language.

    About your later comment, you wrote: “I think the point here is that Ukraine has a valuable commodity (wheat) and a backward industrial sector.”

    Actually, Ukraine’s industrial sector isn’t all that backward. We tend to sell the industrialization of former Soviet republics short while overstating the industrial capacity of China, for example. However, China buys the advanced turbofan engines that it needs for its military jets from Ukraine. The production facility is in Zaporizhia, which is in the majority Russian-speaking southeast of the country. (I wrote about this here:

    China does not yet possess the industrial tooling required to produce the supersonic-capable jet engines it needs for its fighters, but Russian-technology-based industry in Ukraine has possessed this industrial capacity for decades.

    Best wishes,


  11. RJMeyers

    Thanks for the information Nick! You’re right, at least in my case–I do sell former Soviet industry quite short, mostly out of ignorance it appears.

    And sorry for not pointing out the spelling error directly on your blog–its seems to require that I setup a WordPress account (or something like that) before I leave a comment. I’ll make the effort next time.

  12. Jessica

    “China does not yet possess the industrial tooling required to produce the supersonic-capable jet engines it needs for its fighters, but Russian-technology-based industry in Ukraine has possessed this industrial capacity for decades.”

    Thank you for that. I would not have known/believed that about either China or Ukraine. I’m making mental note of about the need to learn more.
    It also reminds me that in the West, anything Soviet or related is denigrated. There was plenty that deserved it (in the US and EU too) but not everything.

  13. Celsius 233

    March 7, 2011
    It also reminds me that in the West, anything Soviet or related is denigrated.
    Bingo. Sputnik, Kalashnikov, Yuri Gagarin, etc.
    American’s are indoctrinated with provincialism and even after spending time outside of their “homeland” they rarely “see” with any increased clarity.
    Every foreign culture is viewed through the lens of provincialism; compared and judged and dismissed as inferior. This has been my experience.
    Closed minds are stilted minds and thus dangerous minds.

  14. Celsius 233

    Damn, my comment to Jessica hit moderation, wtf?

  15. Formerly T-Bear

    It’s starting to look like the Chinese solution is going to to be the solution taken from here on out. Anything Duhmerican is proving to be bankrupt in providing a solution; their days of having some solution are long passed.
    Billary Clinton needs be sent to her room for a week without either her pudding or her barbie doll for suggesting anyone is hitler-like. The broad needs to become and act as an adult at some point in her life before she is allowed any further public office. How absolutely jejune a remark at one time would have been inconceivable.
    As for suggesting illegalities coming from the White House, it would be interesting to hear what the occupant’s idea of law in general and specifically is, it is highly doubtful the creature has the vaguest notion of which he pontificates. The relevancy quotient of the office is approaching nil.

  16. JosephConad

    Excellent assessment. The complex system economies and polities of the west are infected with ‘Human Agenda’ and ‘Complication’. ‘GAS’ drives them – Greed, Arrogance & Self-Aggrandizement. Ukraine is in a typical East-West bind because its proximity to Russia makes it part of the White West’s Russia-China ‘Encirclement Game. Hence the White West’s arming of the Nazi-Right Wing groups. The nation will be in Western-imposed CHAOS till 2020. Meanwhile, the nation must thank China for helping to save its people while the White West is merely trying to ROB & PLUNDER them…

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