Michael Hudson: EU Association Agreement with Ukraine Is a Gift to Kleptocrats

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This video is a great, accessible discussion by Michael Hudson on the Real News Network about how the widely-touted EU deal with the Ukraine is actually an exercise in looting by kleptocrats. Hudson explains that unlike earlier pacts, the EU is making no investment in Ukraine, nor is it allowing Ukraine, which has an agricultural producing region, to have the benefits of the CAP that French farmers enjoy. Hudson point out that the supposed benefit of Ukraine having access to the EU for exports is a smokescreen, since Ukraine is going to lose its main export market, Russia, and the Europeans don’t want to buy Ukraine’s products. Hudson contends that this deal is a de facto takeover, with kleptocrats to be installed in key governmental positions. He anticipates that the result will be mass unemployment and unrest.

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This portion of the transcript caught my eye:

HUDSON: Well, I’m going to begin by putting it in the big picture, and then I’ll get to the details. The big picture is that this is a form of colonialism almost identical to what Europe did in Africa and Latin America and the Near East. What it did in the 19th century in Africa, where property was owned communally, was it would go to the chieftains of a given tribe, as it did to the Saudi Arabian chieftains, and it would say, well, to make an agreement, you have to register all this oil of your country, but you register it in your own name. And once they registered it in their own name, then Britain or France or the other European powers could make a deal that the chieftains could then sell this property or make contracts on behalf of oil or minerals with the European colonial powers. And that’s how the colonial powers pried away all of this property from what had been tribal possession or communal possession.

Well, as you know, what happened in the Ukraine and the rest of Central Europe after 1991 was all of this public property that was the legacy of the Soviet domination was simply registered in the names of the factory managers. So Ukraine has been called the Nigeria of the North for a good reason. The factory managers and all the leading kleptocrats simply registered their factories in their own name and took it over. And now it’s time for stage two of the process, and stage two is basically the agreement that was signed last Friday.

And stage two:

WORONCZUK: But, Michael, when I’m reading the mainstream press here, it’s telling me that Ukraine is going to now have an export market of 28 nations, and that the economy is going to grow by 1 percent, and that this is especially going to make up for the loss of Crimea. How does this not equate to an economic gain for the nation?

HUDSON: Well, absolutely right, they’re going to have an export market of 28 nations. The problem is: what are they going to export? Right now what they’re exporting is largely military and other goods to Russia from Soviet-era factories in the Eastern Ukraine. But essentially part of the deal that was made with Europe is in Kiev they say, okay, we’re going to appoint governors of the Eastern Ukraine. It’s as if there was a military takeover of the United States and the military said, okay, we’re going to make Donald Trump governor of New York, we’re going to make the Koch brothers governors of Kansas and Missouri. They appointed kleptocrats to be governors to essentially loot the Russian regions. This guarantees that there’s going to be continual fighting as the Eastern Ukraine says, wait a minute, we’re being robbed, we didn’t vote for this, this agreement was not made under a legal Parliament, which is what Putin and what Lavrov were saying over the weekend.

So there’s guaranteed to be labor unrest and strikes in the East.

There’s not going to be any exports to Europe, because Europe, the last thing the Europeans want is any competition from the Ukraine, until such time as the Europeans can buy out Ukrainian agriculture, kick the Ukrainians off the land, and turn them into mechanized farming, and then take all the food and the land rent and the value of the food to the West. ….

WORONCZUK: Well, the terms of the economic association agreement also–from what I understand, the stipulation is that Ukraine now cannot join the Russian customs union. From what I understand, Russia is still Ukraine’s biggest export market. So how will this affect the Ukrainian economy?

HUDSON: Ha! That’s what nobody can figure out. Russia has already said, look, under the terms, if we were to let Ukraine continue to trade within the Russian Union, that means that we would let all the European goods go through the Ukraine and into Russia duty-free. And Russia’s already said that it has no intention of doing that. And it’s going to now have to raise the tariffs against Ukraine.

So in practice what’s going to happen is the goods that Russia used to get from the old Soviet-era factories in Eastern Ukraine–Russia’s going to build new, modern factories in Russia to make its own military goods and steel and the other things it got from Ukraine. So Russia’s going to become very quickly independent of Ukraine, leaving mass unemployment in the Eastern Ukraine and mass unrest. So you’re going to have Ukrainians without jobs and with nowhere to go, and it’s going to look like Greece or Ireland or Latvia without any of the European money that has gone into these associated countries.

Nice to see that Europe can take the colonial playbook off the shelf. And they haven’t lost a step, either, have they?

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  1. cwaltz

    I’m fairly certain this is why Russia is in no hurry. If the EU austerity train rolls over Ukrainians they won’t need to wage war for the region. They just need to sit back and wait for the region to beg to rejoin them.

  2. Clive

    I fear that Ukrainians (non-Russian speaking ones, anyway) outside of the oligarchy will all too quickly discover that while they may dislike — and stronger things than that — Russia, the EU (or the German hegemony it is becoming / has arguably become) ain’t nothing but a hound dog and it ain’t no friend of theirs.

  3. John

    If anyone thinks the AAs are altruistic should think again. Case in point is Turkey. Turkey has been knocking on Europe’s door since the early 1960s, begging, well, asking for full EU membership status. In short, Brussels has slowed rolled any progress with Ankara. There are 13 chapters for accession process for membership: Free Movement of Capital, Company Law, Taxation, etc… only 1 of them is closed — Science and Research — after all these years.

    The bottom-line is Turkey brings a lot to the economic table. Two key components of this economic power which spooks the EU bloc is the agricultural sector and the… people, which are Muslim. On the agricultural side the EU does not want the competition, the other, people, to put it politely, are not wanted. Period. There is a loathsome attitude towards people of color and towards Muslims in the European core. By the way, one of the core platform agendas for the far right, like in France, was to keep ‘immigrants’ out. You can see where this is going.

    Several prominent politicians in recent years publicly stated they did not want negotiations to start on pending chapters. When you take a close look at what chapter they were protesting, it was clear the EU core viewed it as an area of competition. For instance, France (no surprise) insisted chapter 5 (agriculture) was not open for negotiation. Cyprus was always tossed in as the rationale not to proceed.

    Deep down I hope Turkey avoids EU membership because they hopefully see it in their national interest not to sign up. Once a country joins up they lose their charm, which Turkey has a lot of. Like Mr Hudson stated about Ukr, countries that sign must agree to all sorts of taxes on labor — to make them competitive — loss of sovereignty, give up state-owned enterprises to kleptocrats, etc… Then again, we have a lot of bigots running around here that will be there to prevent any Turkish EU membership. Yep, its that ugly.

    1. John Jones

      I agree with what you say.
      But for Greece and Cyprus there are very serious past and present grievances that Turkey refuses to acknowledge and right. And an aggressive nationalistic stance towards both of them that I do not think should be rewarded by entry to the E.U(Had the E.U been a good club to join). Though I think the rest of Europe uses it as an excuse to keep them out and does not care about the underlying issues or concerns of Greece and Cyprus.

    2. Synopticist

      90% of Turkey is outside Europe, and huge swathes of it are still third world. It has borders with Syria, Iraq and Iran. It’s ruled by an increasingly erratic and wildly corrupt Islamist who has openly backed al qeada in Syria. It’s a middle eastern country, and it won’t ever join Europe.

  4. Banger

    It’s hard to figure out why Europe supported the coup and continues to support the UKR nationalist regime. I understand why the US created encouraged the coup as part of its policy of spreading instability and chaos but what possible advantage is there for the rest of Europe to support the Kiev regime? Have Europeans gone mad? The US has been working to undermine the EU for sometime–why do the Europeans put up with it? Why are they trying to destroy their social democracies?

    1. susan the other

      Oil. Ukraine has no value except as a strategic outpost close to the Caspian from whence to wage war on Russia.

        1. hunkerdown

          Hunter Biden’s got a shale lease, too. Though that could be cover for directional drilling into Russian territory.

    2. Mark M.

      As a European, I find it equally unfathomable. The only explanation I have is that our media and politicians are controlled by the NSA (they only let the ones they can control advance to top positions.) That’s also why such a bunch of corrupt, incompetent political clowns has been doing so much damage to our economies and societies in the last fifteen years or so. The common people have no idea how far the capture of the elite has gone, and how much damage it has already caused.

  5. Dennis Redmond

    Hudson is colossally misinformed about Ukraine. (1) The euro in its current form is deeply neocolonial (Yanis Varoufakis has the best critique of its flawed structure) but Ukraine is not joining the euro, Ukraine is adopting parts of the “acquis communautaire”. This is a Good Thing (TM), and means the deep and thorough-going democratization of the Ukrainian state, which under Yanukovych was a horribly corrupt and dysfunctional gangster-klatura. (2) Ukraine has a diversified, medium-technology economy which is not dependent on military exports to Russia, or on Russian consumer markets — only one third of Ukraine’s total trade is with Russia. Ukraine now has improved access to the EU’s GDP of 16 trillion euros, ten times bigger than Russia’s GDP, so it will do just fine. (3) Some political context: at its heart, the 2014 Ukrainian revolution was the uprising of Ukraine’s 99% against its 1%, a neocolonial comprador elite who skimmed off profits from Ukraine’s gas pipeline network (the gory details: http://www.theguardian.com/world/2014/jun/11/ukraine-tax-scam). Since 2013, the people of Ukraine have been rebelling against their own oligarchs and elites. In 2014, that uprising broadened to include a struggle against the Russo-imperialism of Russia’s petro-plutocratic state, which has been stirring up trouble via ethnic Russian minorities in eastern Ukraine.

    No, the EU is not perfect, and the people of Europe need to organize against euroliberalism. But as Yanis Varoufakis has noted, the ideals of the EU — transnational democracy, justice and equality — are worth fighting for. We 99 Percenters, the people of Ukraine, and the people of Europe are all in this together.

    1. Banger

      I don’t think so. Take a look at who is in charge of various ministries and who Poroshenko is, hardly a 99% person. The revolution certainly started as a revolt against oligarchs but finished up as a coup taken over by a different gaggle of oligarchs aided by nativist Ukrainians who would like to cleanse Ukraine of Russian speakers. I hope that Ukraine adopts some anti-corruption policies but I see no evidence of that. You can’t whistle away Poroshenko’s clearly fascist rhetoric and determination to inflict collective punishment on residents of the East. Policies and rhetoric from Kiev have been consistently violent and in accord with Washington’s confused policies of creating chaos everywhere. Should the EU ever grasp the importance of doing what is best for their union and separate itself from the imperialist ambition of some in the US government then I think Ukraine has a chance to do well.

    2. Fiver

      Dennis Raymond,

      While I don’t agree with Hudson in many respects, what you’re peddling is fantasy.

    3. Jugi

      You’re hallucinating. The EU is a corrupt plutocratic mess. Nothing even close to a democracy.

      Half of Ukraine is not behind the neocon-supported coup. Hundreds, if not thousands, have died in the civil war, . Mainly from punitive shellings by the fascist junta. Some 500,000 have fled to Russia. It’s like an Iraq, in Europe.

  6. OIFVet

    In rides the Euro prince on his white horse to save the girl Ukraine from the monster Ivan Putinovich, and then they lived happily ever after. The end. Or not. The misinformed one here is you I’m afraid. Ukraine replaced one set of comprador elites with another: our man Yats has been in government forever, Poroshenko has been in government previously and has gotten along with the whole succession of corrupt rulers, and it is notable that Turchinov appointed the very members of the gangster-klatura to be governors of the different regions, men like Kolomoisky. Basically one neocolonial rule has been replaced with another, neoliberal one. Yet here you are going on about the 99% while it is the very ethnic Russians whom you hold in such contempt who are resisting this neoliberal takeover of the Ukrainian colony, while you dear Maidanites’ revolution was infiltrated and hijacked by the neonazi scum on behalf of the western colonizers. Must be nice to bury one’s head in the sand like an ostrich and dream those beautiful dreams about the democratization of Ukraine. Sure bud, take a look at Bulgaria since it joined the EU and tell me just how much it has democratized and gotten rid of its gangster oligarchs and the corruption that they breed. The fact is the EU and the US could not care less about democracy and cleaning up corruption, those serve them just as well as they do any other would-be colonizer.

  7. Fiver

    It’s difficult to say if Ukraine or Russia has been more badly screwed by this naked US geocorporate power squeeze, but both have been for years to come.

    It is simply not credible that Ukraine will avoid a serious contraction this year and next, and a second IMF package has been in the cards from the moment they inked the first one. Ukraine at best is asset-stripped by its/Europe’s/US’s most ambitious criminals under a low-tax, low-royalty, fossil toxics industry and agribusiness-friendly producer prices regime (death to farmers) committed to trickle-down idiocy with austerity icing. It may even lose its position as key gas linkage to Europe if the Gazprom South Stream project is not blocked by the US in Bulgaria or another nation en route to Austria. The value of that gas pipeline infrastructure in Ukraine has been estimated at up to $50 billion. If Ukraine/US maintain this “We won’t negotiate seriously until Putin eats his shorts” attitude, Putin will have no option but to proceed as if this situation is permanent. Kiev is hallucinating if it thinks that a good thing. It will not be permanent, though, as the EU itself is one more real shock away from its own existential crisis. In the meantime, the more people who die, the longer this sort of hysterical anti-Russian stance is maintained, the deeper the wounds to future stability in the east.

    Russia has sustained real damage already financially, economically and politically. We must remember Russia’s goal, a perfectly legitimate one, was to deepen ties with all the countries on its peripheral regions, be they former Soviet Republics or not. It is for example certain that Putin was not looking for a fight with Europe, just the opposite. However, the US, having embarked on what reasonable people everywhere regard as lunatic policy without let-up at least since 9/11, was inclined particularly by Russia’s support for its one small ally in the Middle East under proxy US/Qatari/Saudi attack, Syria, to again openly frame Russia an enemy – with the mountains of propaganda that entails.

    Many have noted Russia’s forced ‘pivot’ to China and cast it as a Russian ‘win’, but coming so soon after Obama’s own ‘pivot to Asia’ I wonder (also with others) if the larger purpose for such brazen US deceit followed by a PR carpet bombing of over-the-top “who me?” belligerent intransigence really was intended to break Europe (mainly Germany) from Russia, not Ukraine. To continue with their plan after Nuland was so baldly outed, along with an effective effort by Putin et al to get Russia’s side out globally leading up to the coup, was a huge risk, and I think the size of the risk suggests this was for geopolitical keeps – as in, in anticipation of an inevitable Russian/Chinese resource/industrial/military bloc the logic of neo-imperial globalization has forced upon the last less-than-handful of potentially sovereign nations. In other words, the US has clearly decided to force the issue with respect to its openly stated top national security priority, which is to prevent any other power from ever attaining the status of real competitor with the US.

    Meanwhile, over in another booth, a couple are wondering why Iraq, Iran and Libya are having their oil effectively shut-in on them while much more expensive, energy intensive, often far dirtier oil with respect to emissions, and toxins is brought to market instead. Will these huge reserves of quality oil never see the light of day, perhaps saving billions from an early grave due to an over weaning fealty to the Saudis and Israelis.

  8. TheCatSaid

    To what extent do people living in all parts of Ukraine realize their interests have been hijacked?

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