Bill for Ukraine's Putsch Comes Due

Now the bill for the putsch in Ukraine comes due: Austerity by International Monetary Fund mandate. I always wondered why anti-government Ukrainians were so fervent about aligning with the European Union when the price of membership was obvious for all to see. All one need do is look to Greece, a country being dismantled by the IMF and European Central Bank according to the usual neoliberal prescriptions: privatize public assets, reduce social benefits and slash public sector employment. This is what is in store for Ukraine and her citizens, and this is why President Viktor Yanukovych balked at the the trade deal with the EU last November: It would have been political suicide if he would have signed it. David Herszenhorn outlines the precarious nature of Ukrainian finances in an offering today, "Regional Rifts Pose Hurdle to New Coalition in Ukraine":

The I.M.F. has made clear it is unwilling to help Ukraine without a commitment from the country to undertake painful austerity measures and other restructuring. Mr. Yanukovych’s resistance to those demands was a principal reason he backed away from a trade deal with Europe and sought help from Russia instead.

In a statement on Monday, the acting finance minister, Yuriy Kolobov, said Ukraine would need a staggering $35 billion in assistance between now and the end of next year, as well as an emergency loan within the next two weeks that he said was expected from Poland or the United States. 

In his statement, Mr. Kolobov said he hoped to organize a conference with international donors. “The situation in the financial sector as a whole is complex but controlled,” he said. 

That could change at any moment, however, should Russia decide to follow through on previous threats of devastating trade sanctions if Ukraine moves closer to Europe.

Given the animosity of the new Ukrainian government toward Russia, Ivan Tchakarov, an analyst with Citibank, said that Ukraine could turn only to the West for help, and would inevitably face demands for tough reforms and a near-certain recession as a result.

“Assuming that Russia will pass, it will be up to the I.M.F. and E.U. to pick up the tab,” Mr. Tchakarov said. “The I.M.F. will impose hard constraints on the economy, and these will most probably mean a recession in 2014.”

Still, Mr. Tchakarov noted that there would be long-term benefits to Ukraine’s undertaking desperately needed measures, like ending subsidies of gas prices and cutting the thickets of business regulations that weigh down the economy. These actions could potentially allow it to emerge far stronger, like its neighbors Poland and the Baltic countries, he said.

To gauge the economic strength of a Baltic neighbor, let's take a look at Latvia, care of an article, "Ukraine's Sickness," by Eric Draitser:

The Ukrainian people however would do well to examine the precedent of Latvia to understand what lies in store for them. As renowned economists Michael Hudson and Jeffrey Sommers wrote in 2012:

What enabled Latvia to survive the crisis were EU and IMF bailouts…Elites aside, many emigrated…Demographers estimate that 200,000 have departed the past decade – roughly 10 per cent of the population…Latvia experienced the full effects of austerity and neoliberalism. Birth rates fell during the crisis – as is the case almost everywhere austerity programs are imposed. It continues having among Europe’s highest rates of suicide and of road deaths caused by drunk driving. Violent crime is high, arguably, because of prolonged unemployment and police budget cuts. Moreover, a soaring brain drain moves in tandem with blue-collar emigration.

The myth of prosperity to follow EU integration and bailouts is just that, a myth. The reality is pain and suffering on a scale far greater than the poverty and unemployment Ukraine, especially the western portion of the country, have already experienced. The most highly educated, those most equipped to take up the mantle of leadership, will flee en masse. Those leaders who remain will do so while lining their pockets and ingratiating themselves to the European and American financiers who will flock to Ukraine like vultures to carrion. In short, the corruption and mismanagement of the Yanukovich government will seem like a pleasant memory. 

The “liberalization” that Europe demands will create massive profits for speculators, but very few jobs for working people. The best land will be sold to foreign corporations and land-grabbers, while the resources, including the highly regarded agricultural sector, will be stripped and sold on the world market, leaving farmers and city dwellers alike in grinding poverty, their children going to bed hungry. This will be the “success” of Ukraine. One shudders to think what failure would look like.

Herein lies the rub. Western governments (at least for public consumption) have labeled events in Ukraine a people-power uprising by pro-democracy activists, rather than a putsch by armed, back-mask-wearing hooligans, as Russia sees it. So what happens when the Ukrainian citizenry rises up and rebels against the austerity that is shooting down the pike? According to Andrew Higgins' story, "Ukrainian Protesters See Too Many Familiar Faces in Parliament After Revolution," a rumbling is already audible:

[T]he prospect of a new order dominated by established opposition parties, almost as discredited in the eyes of many Ukrainians as Mr. Yanukovych’s Party of Regions, has left a bitter feeling that what comes next could end up disappointing as much as the government that followed the 2004 Orange Revolution.

“We need new people who can say no to the oligarchs, not just the old faces,” said Ms. Nikanchuk, referring to the wealthy billionaires who control blocks of votes in the Parliament but who, with a few exceptions, hedged their bets until the end about which side to support in a violent struggle that left more than 80 protesters dead between Mr. Yanukovych and his opponents. 

***

“The problem is that the old forces are trying to come back to take their old chairs,” said Vasily Kuak, a shipping broker who stood outside parliament waving a sign that read: “Revolution, Not a Court Coup!”

*** 

All the same, the sight of luxury cars dropping off members of Parliament at the colonnaded legislature building, is now guarded by “self-defense” units that previously battled government forces, has stirred dismay and anger.

“Again we see Mercedes and BMWs bringing deputies who are supposed to represent the people,” said Mr. Kuak, “We don’t want to see these people again. We want to see people from the square, from the revolution.”

***  

“We need people from Maidan, not people like you,” screamed an angry woman as Volodymyr Lytvyn, a former speaker of the Parliament known for shifting with the wind, left the legislature building. As he tried to answer questions from the crowd, protected by two bodyguards and a solid wrought iron fence, a cry went up clamoring for “lustration of everybody,” a term usually associated with the purge of officials and politicians suspected of serving Communist regimes before the revolutions of 1989 across Eastern and Central Europe. 

Peppered with angry demands that the Parliament raise pensions, reopen closed hospitals and find work for the jobless, Mr. Lytvyn struggled to respond but basically called for patience, a virtue that is likely to be in short supply if the interim government does not manage to convince people it is working to improve their lives, not line its own pockets.

Will Obama publicly demand restraint when violence is directed at the Ukrainians demonstrating to reopen hospitals and restore slashed pensions? Of course not.

But first things first. The putschists have to actually form a government that can accept the U.S./Poland financial lifeline and the bailout package from the IMF. Putting aside the question of whether this government will actually be legal -- remember, just like the United States, Ukraine has a constitutional process for removal of a president; it's called impeachment; and nothing I have read has said impeachment proceedings are underway in the Rada -- Oleksandr Turchynov, new speaker of the Rada, has said he will form a government by Thursday.

There are two things it would be wise to keep our eyes on here. First, Russia. Russia holds all the cards, as the Gray Lady makes clear in her pathetic editorial this morning, "Ukraine's Uncertain Future": "Ukraine is broke, and a vindictive Russia could easily make things more miserable by closing the border or raising gas prices." Second, by now it should be apparent that like his predecessor, W., everything that Obama touches turns to shit. Run down the list: NATO intervention in Libya, the roll-out of his signature healthcare law, his kowtowing to the Gulf sheikhdoms on Syria, his inability to get any pro-worker legislation through Congress, and on and on. There is no reason to believe that Ukraine will be any different. In other words, we can expect an outcome that is not the one intended by the West.