Every once in awhile you run across a comment that so adequately sums up a story that you can’t help but marvel at the brilliance of the commenter.
While reading the most recent David Stockman and Contra Corner post on the economic destruction of Ukraine, entitled, “Ukraine Economic Indicators Down 20% And Still Plunging: Thanks For The Coup, Washington!” I ran across this comment that summed up the entire Ukraine fiasco, from start to middle, to what’s next, in a simple 13 bullet points.
Ukraine is like Tar Baby of the Uncle Remus story. Tar Baby has come to mean a sticky situation or an object that nobody really wanted but that stuck to them if they touched it.
1. Ukraine’s GDP in 2013 was about the same as in 1992 when the USSR collapsed. It has never recovered from the worldwide 2008 financial crisis.
2. Ukraine’s mining and industrial sectors (east Ukraine) are antiquated and energy-inefficient, and have survived only on cheap oil and gas from Russia. These sectors cannot survive if exposed to competition from modern EU factories and EU-quality goods.
3. Since 1992, Ukraine’s economy has been plundered mercilessly by its oligarchs, many of whom are former crime bosses, all of whom are now billionaires and most in league with the Kiev government.
4. Ukraine is ethnically, linguistically, and philosophically divided, with: (a) an industrialized Russian-speaking east; and (b) an agricultural west of Ukraine speakers which was formerly parts of Hungary and Poland, and is largely anti-Russian in the extreme.
5. Ukraine has survived since 1992 on IMF loans, subsidies from Russia in the form of loans and cheap oil and gas, and on preferred access to Russian markets.
6. One of the first actions of the Kiev government under Yatsenyuk was to pass laws outlawing the use of the Russian language in government and education. The Russian-speaking east took this as a demonstration of Kiev’s intention to make Russian speakers second-class citizens, and reacted by choosing to leave Ukraine.
7. One of the triggers of the Maidan coup was then-PM Yanukovich’s refusal to sign over Ukraine to the US/EU/NATO by adopting the Association Agreement (“AA”). The AA would have cost Ukraine $20 Billion in direct market adjustment costs, which Ukraine asked the EU to help with. The EU, being broke, having just bailed out the PIIGS, refused. Russia then offered cheap natural gas, a loan of $15 Billion, and a customs union. Yanukovich accepted the Russian deal, so US/EU/NATO ousted him and replaced him with the puppet Yatsenyuk.
8. Having taken control of Ukraine, the US/EU/NATO bloc did not want to take financial responsibility for bailing out or modernizing Ukraine, but told Kiev to seek IMF loans. The IMF stood on its earlier demands for market and budgetary reforms, and control by Kiev of the whole country. Kiev declared war on the eastern separatists, who have fought the Kiev army and Neo-Nazi National Guard to a standstill.
9. In addition to installing NATO missile bases, the US/EU/NATO bloc wanted Ukraine to: 1.Kick Russia out of its Black Sea naval base in Crimea; 2. Give control of Ukraine’s oil and gas fields and potential fields to Western oil companies; 3; Frack shale areas for oil and gas; and 4. Get control of the Black Sea areas off the Ukraine and Crimea coastlines to drill for oil and gas. With Crimea now part of Russia, and the east gaining autonomy, Kiev has lost these areas and much of the Black Sea bed. This reduces the payoff for the West considerably.
10. Sanctions against Russia have not got Crimea back, nor brought east Ukraine back to Kiev, but have effectively closed off the Russian market for Kiev, and are reducing access to the Russian market for all of the EU countries. Russia is compensating for lost EU imports by sourcing friendly countries and by import substitution from local sources. Russian businesses are delighted at the disappearance of EU competition.
11. Sanctions and the propaganda campaign against Russia stand to seriously weaken the already-fragile EU economies, and are leading to a strengthening of the non-US dollar international trade worldwide.
12. Ukraine’s refusal to pay Russia for the gas it received, and Western sanctions against Russia are prompting Russia to squeeze gas exports. The EU Commission is blocking the Southstream gas pipeline which would bypass Ukraine – trying to help Ukraine and squeeze Russia, but imperiling the EU gas supply. Russia remains the lowest-cost and most secure source of natural gas for the EU. Continued sanctions against Russia may result in short-term and long-term supply interruptions and increased costs for EU industries and citizens, and loss of employment.
13. Anyone else want to take responsibility for Ukraine? Going cheap! Going, going, going……