Monday, December 2, 2013

Ukraine's EU Snub? It's the Economy, Stupid!

If Viktor Yanukovych were to sign the EU agreements as they stand, the economy would suffer and he would probably lose to whichever rival candidate arch-foe Yulia Tymoshenko gives her backing in 2015.

Seems so strange that a small number of Ukrainian citizens would go out and protest for something that is going to further harm them? Before we talk economy just an observation on the protests- Strange that the western msm media is giving this all so much coverage? Well over 1,000 articles at Google news today? Even though the protests really do not appear that vast.Keeping in mind the Ukraine has a population of  more then 45 million
  Can't help but notice the wide variations in reported numbers of protestors?  From thousands to10,000 to 100,000 up to 300,000. Looked at a bunch of pics and am not buying the 100,000 and up amounts. 
These protests have such a familiarity... Iconic locations.  Lot of flags. 

 “The Russians are now spectators to what is going on,” said Steven Pifer, a former US ambassador to Kiev and now an analyst at the Brookings Institution in Washington. “It’s something that’ll take place between the street and Yanukovych.

Digression out of the way, on with the news!

*Russia imports more goods from Ukraine than the entirety of Europe, according to the Ukrainian government, while supplying almost two-thirds of gas that Ukraine consumes. Many of these goods are produced in eastern Ukraine, which together with Crimea, represents the power base for Yanukovych and his supporters.
Russia has already made it painfully clear that the billions that the Ukrainian economy has already lost because of recent trade restrictions introduced by Moscow will only be the beginning if Kiev signs the AA and DCFTA.
EU officials claim Russian officials told Ukraine that introducing EU requirements would have cost as much as $100 billion, while Russia cutting off trade and imposing other restrictions on Ukraine would have hurt the country to the tune $500 billion, Reuters has reported.

And even though the EU knows Russia would punish Ukraine economically, it has shied away from offering a comprehensive package to compensate for Kiev’s potential losses.
As former Clinton administration adviser Andrew Weiss has rightly put it, “What the EU has come up with is a kind of partnership on the cheap.”
But suppose Moscow didn't act on its national interest in anchoring its post-Soviet neighbours. Let's also imagine that Moscow would for some reason keep in place trade perks favouring Kiev, even though that would mean its producers being exposed to EU goods re-exported onto the Russian market through Ukraine.
Even then Ukraine could still not afford westward integration on the terms the EU is offering.
By Yanukovych’s assessment, Ukraine needs $160 billion to shift to European standards by 2017, as required by the proposed agreements with EU. Yanukovych is most probably exaggerating, but even if the cost was 10 times smaller, it would still be a hefty sum for a nation that is set to run a budget deficit of more than $6.5 billion this year. On top of that, the IMF is reportedly refusing to issue the loan that Ukraine needs to prop up its economy, unless Kiev doubles gas prices for consumers.

So, why are some Ukranians protesting? Because they want to pay double the prices for gas?
Does that make sense? Are they protesting because they want to become debt slaves worse then they already are? I don't get it?

One has to ask, would leaders in the EU double gas prices for their population and divert billions of dollars needed to pay pensioners and public servants to spend on reaching somebody else’s expectations only a little more than one year before an election?
I doubt EU leaders would take these actions prior to an election.
Loss at the February 2015 presidential elections for Yanukovych would not just mean an end to his tenure, but also the loss of his and his allies’ business assets and possible jail time. After all, that’s what he has subjected former Prime Minister Yulia Tymoshenko to. Why should  the next leader of Ukraine treat him any differently?
If Yanukovych were to sign the EU agreements as they stand, the economy would suffer and he would probably lose to whichever rival candidate arch-foe Tymoshenko gives her backing in 2015.
Having lost part of his core supporters over the pain inflicted on Ukraine's economy and budget by a combination of Russia's punitive measures and costs incurred by bringing Ukraine's standards in line with EU's, the incumbent would still fail to win enough voters among the pro-Western crowd, who largely hate his guts.
In short, the Ukrainian president’s decision to suspend the EU drive is the rational choice of a politician concerned with his own survival.
In contrast, if Yanukovych were to enter Ukraine into the Russian-led Customs Union, he could at least count on enough loans and gas discounts from Russia to prop the economy up long enough to win the 2015 election.
I think the citizens would be pleased with less debt and taxes and lower gas prices?

And yet Yanukovych knows from experience that siding with Russia, which seeks to anchor Ukraine to itself, has its disadvantages. Upon his inauguration in February 2010, Yanukovych undertook a number of steps to accommodate Russia.
These included cancellation of his predecessor’s campaign for recognition of the Holodomor famine of the early 1930s, suspension of Ukraine’s drive for NATO membership and an agreement to extend the stay of Russia’s Black Sea fleet until 2042.
The overtures made to Russian leaders early in Yanukovych's presidency have achieved little, in the opinion of his aides, other than a modest discount for gas. The perceived failure to re-ignite the relationship prompted Ukraine’s deputy Prime Minister Valery Khroshkovsky to quip that “it all started as light flirtation, but ended in hardcore porn.”
Yanukovych is therefore most likely to continue balancing between EU and Russia – a policy his mentor and former president Leonid Kuchma described with the Russian saying about “a smart calf sucking milk from two cows.”
His hope for now must be that the trilateral talks between EU, Russia and Ukraine that he has proposed will allow him to somehow integrate into the Western European economic space while preserving the perks of trading with Russia.
Whether, however, EU and Russia will continue put up with Yanukovych playing them off one another is another matter.
 Zbigniew Brzezinski: "without Ukraine, Russia ceases to be an empire, but with Ukraine suborned and then subordinated, Russia automatically becomes an empire."


  1. Putin: Kiev protests have nothing to do with Ukraine-EU relations, prepared ahead of elections

    Russian President Vladimir Putin has said that riots in Kiev have no direct relation to Ukraine and the EU deal, but rather it's an attempt by the opposition to undermine the country's legitimate government.

    1. thanks brian

      I would agree with Putin on that, completely.
      It looks like a destabilization attempt
      of the same type we have seen time and time again
      The spin is the EU agreement, as if joining the EU is some gold standard or some desired outcome

      I haven't figured out why it is anyone, any nation wants to join that union
      I don't want to be part of the NAU, but, corrupt politicians in Canada/US/Mexico are sneakily working towards that goal

  2. Greetings Penny,

    Thank you for exposing your readers to political sanity. I really appreciate your work here.

    Quick question: Which one of Brzezinski's publications is that quote from?

    1. Greeting Arevordi!
      You are most welcome and may I say..
      The feelings are mutual.

      The quote is supposed to come from the book/briefing mentioned below whichever it is I am not certain.

      Brzezinski, Zbigniew, "The Premature Partnership," Foreign Affairs 73
      (2) (March-April 1994): 80.

      When I have more time I will dig up some more info
      Hope this answers your question

  3. Thank you Penny,

    When you come across material pertaining to Russia or Eurasian geopolitics in general please do not hesitate to forward them to me.

    1. No problem Arevordi!
      Glad to work cooperatively anytime

  4. Keep up the good work.