Yves here. A tongue-in-cheek article in the Financial Times, Putin putting Europe in its place, written from Putin’s viewpoint, concluded:
“As to your plans for emergency economic aid for Ukraine, this is an excellent plan. They could use the money and I’d rather not shell out myself. Incidentally, to save time why not make the cheques payable to Gazprom?”
Wolf’s article suggests the energy payments are the only funds that might wind up being used as intended. The level of corruption in the Ukraine makes Greece look as clean as the driven snow.
By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Testosterone Pit.
Secretary of State John Kerry jaunted to Kiev on Tuesday and offered the newly installed Ukrainian government $1 billion in aid. EU Energy Commissioner Guenther Oettinger announced the same day that the EU would help the Ukraine pay its gas bill of about $2 billion, owed Russian state-controlled Gazprom. On Wednesday, the rest of the EU aid package was announced: €11 billion, contingent on the Ukraine’s inking a deal with the IMF and implementing tough reforms. The IMF is still working on its own aid package.
As always, it’s about preventing a default during which bondholders and lenders, including numerous Western banks, hedge funds, and other speculators, would finally feel the teeth of a free market and be forced to take losses, big losses, perhaps big enough to sink a lender or two, which would be a welcome sign of housecleaning by market forces. But that won’t be allowed to happen. Instead, taxpayers in other countries will be shanghaied into bailing out these bondholders and lenders, but indirectly, under the guise of bailing out the Ukrainian people.
The new Ukrainian government, after discovering googly-eyed that there was nothing left in the treasury, that everything had already been pilfered or had otherwise evaporated, and that in fact there was nothing left to pilfer, had begged for €25 billion in aid, spread over two years.
“In order to be saved, the Ukrainian economy doesn’t need 35 billion dollars or even 135 billion dollars,” retorted the former Ukrainian Economy Minister Bogdan Danilishin on his Facebook page. His comments were picked up by Valentin Mândrăşescu, editor of The Voice of Russia’s Reality Check and occasional Testosterone Pit contributor [see his spectacular article... Russia's Plan For The BRICS To Dismantle The Dollar System].
And that aid money? It won’t do any good, Danilishin wrote. “It will be stolen anyway.”
His alternative to throwing a ton of money at the Ukrainian government?
They just need to check and evaluate all privatization deals made during the last years. All that which has been bought for a reduced price or illegally must be nationalized, or the difference must be paid to the state budget. All taxes that oligarchs have been exempt from for the last three years must be paid.
He should know. He’d worked for former Prime Minister Yulia Tymoshenko from 2007 to 2010. In October 2010, he was arrested in the Czech Republic after the then new government had put him on Interpol’s wanted list for failing to show up for questioning by the Ukrainian police, which accused him of abuse of office. He later obtained political asylum in the Czech Republic, along with Olexander Tymoshenko, the husband of Yulia Tymoshenko who was rotting in a Ukrainian hoosegow (released recently by the new government). Everyone accuses everyone of corruption.
But Danilishin’s idea that aid cannot save the Ukrainian economy because the money will simply be siphoned off by pandemic corruption, and that instead the state should go after the oligarchs who plundered the country? It “can’t be implemented because the ‘revolution’ in Kiev has been partially sponsored by the oligarchs who will not let the state become stronger,” Mândrăşescu explained.
The new government might go after a few oligarchs who ended up on the wrong side of the fence. But those who’d backed the uprising directly or indirectly and who are now backing the new government would be able to hang on to their property, their ill-gotten wealth, and their tax privileges.
Transparency International ranked the Ukraine as one of the most corrupt countries on earth, in 144th place out of the 175 countries on its Corruption Perception Index, an honor it shares with five other cesspools of corruption of the same rank, including Nigeria.
And the reforms that the EU and the IMF will doubtlessly demand and upon which the aid money will be made contingent? “There will be no reforms,” Mândrăşescu wrote. “Western aid will indeed be stolen, and it won’t help the country’s economy.”
That’s what taxpayers in other countries can look forward to.
So Speaker of the House John Boehner said it was “time to stand up to Putin” and drew his own red line. NATO met. The UN Security Council met. EU Foreign Ministers met. Sanctions, that’s the common denominator. But it’s complicated. Read…. “Targeted” Sanctions, A Triumph For Russian Isolationists