Ukraine’s Next Crisis? Economic Disaster

Yves here. While it’s not hard to imagine that war is bad for economies as well as living things, this post gives an overview of some of the costs that the proxy war in Ukraine is inflicting on the economy and hence on the population. Note that this tally does not include the impact of the efforts to render cities in the east uninhabitable by destroying water supplies and other critical infrastructure.

My question for readers more knowledgeable about the region: what do they see as the unanticipated consequences of creating a failed state in Eastern Europe? One might hazard that the neocons hoped that the fighting in the east would create an exodus of the Russian speaking population for Russia, putting even more pressure on Putin. But if the western part of the country goes into an economic tailspin, how can Europe prop it up when austerity is all the rage? And is it conceivable that enough people located in the West would move into neighboring countries to make political and economic trouble?

By Robert Bensh, an energy and energy security expert with over 13 years of experience leading oil and gas companies in Ukraine. Cross posted from OilPrice

Ukraine’s next crisis will be a devastatingly economic one, as violent conflict destroys critical infrastructure in the east and brings key industry to a halt, furthering weakening the energy sector by crippling coal-based electricity production.

The Ukrainian military’s showdown with separatists in the industrial east has forced coal mines to severely cut production or close down entirely. This has led to an electricity crisis that can only be staunched by cutting domestic production along with exports to Europe, Crimea, and Belarus — or worse, getting more imports from Russia.

In the coal centers of Ukraine’s industrial east—Luhansk and Donetsk—fighting has forced the full closure of an estimated 50 percent of coal mines, while overall coal production has fallen 22 percent over the same period last year.

Key industry sources say they will potentially run out of coal in less than three weeks.

For Ukraine, the second largest producer of coal in Europe, this will have a devastating impact on the energy sector, which is in a state of emergency, unable to get coal to thermal power plants that provide some 40 percent of the entire country’s electricity.

In the wider energy picture, the halt of coal production sets Ukraine back a decade. The plan was to rely more on coal in order to reduce dependence on Russian natural gas.

But the new reality has insiders wondering how Ukraine will produce more of its own natural gas, after the implementation earlier this month of an amended tax code that targets private gas producers with a tax so high that they will significantly reduce production through the end of the year and beyond that is anyone’s guess. (Full disclosure: my firm, Pelicourt LLC, is the majority shareholder of Ukraine’s third-largest gas producer, Cub Energy, and I have advised the U.S. and Canadian governments on the potential harm the new tax will cause.)

Economically, the conflict in the east is a disaster for Ukraine, which has traditionally been a net exporter of thermal coal for power generation. Now it will have to increase imports of fuel to make up for the loss. But even then, the destruction of supply routes makes this challenging.

Not only have coal supply routes been destroyed in the conflict, but other critical infrastructure has taken a hit as well, threatening other industries.

Across the board, Ukraine’s industrial heartland is reeling from cut-off supply and shipping chains that threaten to destroy as much as 5 percent of Ukraine’s gross domestic product in the second half of this year.

In the meantime, observers can be forgiven their confusion over various measures Kiev has taken since the intensification of the conflict. Indeed, the signals coming out of Kiev have been mixed, at best.

While parliament has passed a bill allowing for sanctions against Russia, the state-run Naftogaz leadership has been quick to point out that we probably shouldn’t expect sanctions against Russian gas giant Gazprom, and the new bill doesn’t implement sanctions of any kind—it simply makes it legal to slap sanctions on Russian individuals should Kiev decide to do so. Another paper tiger.

Parliament has also adopted a bill approving the joint-venture lease of Ukraine’s gas-transit facilities with Western firms.

At the same time, however, Kiev passed a new amendment to the tax code that doubles taxes for private gas producers and promises to keep Western investors as far away from Ukraine as they can get.

Each move is designed to negate the other. The economy is being destroyed, yet Kiev is itself destroying any chance of bringing in Western investment to prop it up. Western firms are invited to invest in Ukraine, while at the same time Ukraine makes a mockery of transparency and ensures that the investment climate is suddenly even less attractive than it was two weeks ago. Lip service is paid to developing more resources to build energy independence, but a new tax doubles costs for private producers who will stop producing and pick up stakes.

It’s hard not to conclude that Energy Minister Yuriy Prodan is working hard to discourage new investment in the energy sector.

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  1. John

    We must keep in mind Europe is very tribal in thinking. We have a very long history of toleration that sometimes turns ugly. Many of these countries have very fractured politics separated by language, culture and religion. Almost every country, except perhaps the Nordic ones, have some form of separatist party ready to spring loose. My guess is if one of them separates, like Scotland, it could be a floodgate. Things could get really messy since divorce is always a hard thing to do. However, many of these movements have weathered the sky-will-fall threats from their masters but are undeterred and are willing to suffer considerable pain to get what they want.
    Using force within our borders to put down separatists should not be waved off since it has happened.

    As for Ukraine, many people there identify more with Russia than with the Ukraine. Ethnic Russians comprise about 40% of the eastern population. Like what is happening in Ferguson, Missouri, minorities are getting tired of being pushed around, neglected and stepped on. The Russian minorities are looking to east for help, which Russia seems eager to oblige. Splintering of the country is already happening with Russia’s annexation of Crimea. We can expect more.

    A serious economic deterioration across the eurozone and in the Ukraine could bring about an emboldened separatist movement with a bit violence thrown in.

    1. digi_owl

      Even the nordics have this issue. While they are for the most part quiet these days, up north there is the Sami across Norway, Sweden, Finland and Russia.

    2. David Petraitis

      Interesting that you bring up the ‘tribal’ thinking level of Europe. I was wondering as we see the devolution of so much of the modern period’s industrial capacity, would we see a devolution in major modes of thinking. It takes some historical perspective to see the modern thought, capitalist modes of production were actually an ADVANCE over tribal and feudal/aristocratic/autocratic modes of thinking and organizing. Future historians may note that there was one brief period between 1965 and 2015 when the modern/capitalist/individualist modes of thinking could have reached a new level post-postmodern/sustainable/integrated of thinking and producing, but failed to do so.

      Or was that just my own pipe dream?

      1. hunkerdown

        That’s a bit of a categorical statement. By what teleology is this an advance? The teleology of MOAR?

  2. Christopher Dale Rogers


    My knowledge of “separatist” groupings within Europe is not as strong as it should be, but if we are just remaining within the EEA area of Europe, we have movements in Scotland, Wales, Spain, Belgium and Northern Italy, these being the largest and most well established, usually a more loose or Federal/Confederation would appease most of these movements desiring more local autonomy from highly centralised states, rather than out and out full separation, the only reason we are where we are in Scotland is because Cameron, supported by the three legacy UK parties refused to allow the Scots to vote on “DevoMax”, which would have easily been voted in had it been on the ballot, instead we have a simple “yes” or “no” argument for those in favour of the Union and those against, which by the way was not what Alex Salmond desired.

    However, within the EEA we have Switzerland, probably one of the most fractured states within Europe based on lingual and ethnic lines, and yet the Swiss Confederation goes from strength to strength, it being one of the oldest and peacefully “settled” states within Europe. Regrettably our elites don’t like discussing Confederations, preferring instead to focus on Federal solutions as witnessed by the EU organisation itself, or highly centralised solutions, such as France and the UK, although the UK itself has always been a hybrid state due to Scotland retaining its own legal code and education system under the 1707 Act of Union – this never applied in Wales, which was heavily anglicised to say the least despite the fact that the Welsh had their own language, mores and customs – many of which of course still exist today.

    With regards the Ukraine, the Russians have clearly indicated that a Federalist solution can solve the ethnic issue, this combined with equality of language. Obviously this is too much for the nationalists in Kiev and their Western sponsors, many of which just wish to loot the country and no doubt will be happy that Russia has another “failed” state on its borders – one which will be a continued thorn in its side. As for economics and costs, well no one in their right mind could possibly contemplate and approve of what’s actually happening – they need only look to Iraq as a poster child of all that is wrong with the present policies.

    As I often say, with friends like the USA, EU and NATO, who actually needs enemies, which seems beyond the scope of those running the show in Kiev presently.

    1. guest

      Just to make things clear:

      1) Despite being officially called “Confoederatio Helvetica”, Switzerland is a federal state. Its form as a confederation was abolished in 1848.

      2) Switzerland underwent a last, mercifully short civil war in 1847.

      3) A forceful separatist movement in the French speaking parts of mainly German speaking Berne canton from 1948 to 1978 resulted in the excision of a part of the Berne territory to create a new French speaking canton. The issue of the remaining French speaking minorities in the Berne canton is still lingering (though no longer as divisive or polemical as it was).

    2. Tsigantes

      Switzerland goes from ‘strength to strength’ despite its multiplicity of divisions because of its unique democratic structure. It is a bottoms-up, truly grassroots democracy in which even the most minor local issues are put to the local vote. Nobody outside the country can name the PM…

      1. guest

        Very true.

        But there is no PM in Switzerland, only a president who changes from one year to another…

  3. vlade

    Ukraine was a hotbed for organized crime pretty much since the fall of USSR (and one could argue that even before that). It seems it’s already hitting the rebels (the introduction of death penalty), and if large parts of UA are in chaos, this is perfect ground for OC. That would mean more drugs, arms, but for me most importantly slave trafficking into the EU. Especially if the western Ukraine gets closer to EU, but even through Romania/Bulgaria.

    If that happens, and I’d see it almost as inevitable, it will strenghten EU right-wingers and nationalists. That will have impact on EU as a whole, and I’d expect that it will speed up EU’s disintegration.

    Basically, EU will either contain and improve the stability, cut down on size (which I don’t see how it can easily do – except by gradual core/non core), change substantially (core/non core split) or disintegrate.
    Given that it didn’t manage to do properly integration of Romania/Bulgaria (they were so corrupt before that EU wanted to stop it, but in the end let them in conditionally – except that the conditions were then ignored), I’d say that the latter are more likely.

    If EU will disown UA, all bets are off.

    1. Veri

      I once visiting the River Palace, not for the girls but for other reasons, and ran into a State Dept. idiot who was showing the son of a very rich Ukrainian around. Of course, this is personal information and can not be verified. We sat and he bought my drinks while politely asking what it was exactly that I was doing there. Final words, “We both know what we are doing, so let’s enjoy the night.” He finally gave up. This was in 2010.

      That State Dept. flunkie reminded me of when finishing up business contracts, that the other party would fly in – not to sign the contract that they already knew they were going to sign – to be chaperoned around to the strip joints and clubs. In order to seal the deal.

      For those who don’t know, The River Palace was essentially a floating brothel and night club in Kiev that was raided and shutdown after I left Ukraine. None of my doing.

    2. Christopher Dale Rogers


      Eastern European gangs operating in the UK, specifically around London make the Kray Twins look like pussy cats – they are armed and dangerous, the spillover effect is that even the UK’s police are becoming militarised and with all the unpleasantness associated with this arming of our police.

      Further, and as we have touched upon in previous exchanges, today we have news reports of a slave gang ring of Eastern Europeans being broken up in Northern Ireland. Slavery in the 21st century, the majority of victims being from Eastern Europe, with an emphasis on prostitution. I have nothing against prostitution, personally I’d legalise it, I am opposed to sex slavery and this is rampant across the EU.

      As far as the UK goes, its impossible for the UK to absorb more immigrants, particularly from Eastern Europe, together with Spain, Greece and Ireland, the UK cannot even house its own citizens, never mind legal immigrants from within the EU and all the illegal immigrants that we have within our borders. Christ, they don’t even know what the population is of the UK, which is an insult given we are an actual island.

      For any Eastern European wishing to come to many of the UK’s formerly heavily industrialised regions, they are swapping one shithole for another, but they seen ignorant of the UK and its own social issues, preferring the streets paved with gold myth that London exudes. For want of a better word, its just wage slavery and out and out exploration, which benefits the elite. God, even the Home Office minister charged with immigration was found to be employing an illegal, who has now been deported, such is the elites charity.

      As a working class left-winger immigration from the EU is just exacerbating huge problems found within our communities, be it housing, poverty, drug and alcohol abuse and rampant unemployment. Of course our masters do not wish to pay a living wage, which presently in the UK is estimated at above £30,000 per household is required in after tax income just to have a basic lifestyle and a home to call your own, and yet in Wales and many other parts of the UK, many incomes are at approx. £15,000 before tax, which essentially is all those being paid the UK minimum wage, which itself is not guaranteed under law. Its just crass exploitation, one which benefits a small minority and is highly detrimental to most of the working class across the EU.

      Further, many just don’t seem to understand that economic migrants don’t actually desire to leave their families and actual homes, I know I certainly have never been happy living outside of Wales. Adventure is one thing, but forced exile is quite another and rather heartbreaking, just go ask my mother!

      1. vlade

        Well, I have two views on the economic immigration. One is that immigration can/will strain resources that were already strained. In the UK, this is particularly hot topic, as some of the vital resources (housing, social services like education and health) were grossly mismanaged for decades. I can’t see any other explanation when I compare UK situation with some countries I lived that do provide these services at comparable or not much higher costs and much better value.

        On the other hand, I know business people who wanted to employ UK guys, but when your Polish applicant’s english is better than his local lad, and has the skills that you can use on day one, it’s really a non-brainer. For the record, they paid the Poles the same as they would have paid a UK applicant.

        Blaming Poles (a synonym for East-of-Germany migrants in itself, saying something) for the failure of successive UK governments (and I’d say part of the UK society, for I hold strongly that populations tend to get governments they deserve) for that is really bad. It’s not bad because it’s xenophobic – almost all of us are xenophobic to some extent (hah, just look at Londoners vs. shires vs Scotland … ). It’s bad because we’re continuing to deny the real, deep problem and try to solve what is really a symptom rather then the problem. Of course, solving the problem is hard and lengthy, and there’s hardly anyone interested in what would likely span generation(s).

        Oh, and on the economic migration – you’re wrong. I can’t say I’m myself an economic migrant (my reasons for moving around the world were never economic in the first place), but I know more economic migrants that you can shake a stick at, across the whole class spectrum and across a number of countries. A conservative estimate would be that about 25% of people I know are economic migrants. Some of them would want to go back, some of them would never go back. Some of the do go back, only to re-emigrate again after finding out that they idealised the country they were born in (in fact, a very very large percentage of those that do go back to post-Soviet block re-emigrate). But that’s true of any and all migrants, not the economic ones only – that is, unless by economic migrants you mean people coming over to the UK for a few months of seasonal work.

        I’ve met political migrants, who pined about their old country and went back to get jailed rather than have free and full life elsewhere. I’ve met economic migrants who severed all connection with the old country but the family, and who saw their loyalty as purely to the new country that accepted them and offered them new life they could never have in the old one.

        1. Christopher Dale Rogers


          First and foremost the term “economic migrant” can be abused like any other tern, and thus needs defining, which itself is a minefield shall we say. So lets simplify and for our purposes say that an “economic migrant” is someone who is forced to move for economic reasons in order to have a reasonable standard of living – and we are not talking a US definition of what constitutes “reasonable” or “middle-class”. We are essentially discussing securing a roof over our heads, food on the table and a few of lives luxuries, such as a TV, Refrigerator, cooker, decent cloths and decent heating or cooling, oh and an ability to put some funds away each month.

          Although luckily enough to gain a decent education, upon leaving university my choices were quite simple, a poorly paid job in Wales if lucky, move to where the economic action was, namely London or the South East, or move abroad and see how that panned out. I did the latter as there seems little difference in living in London or Hong Kong, both being expensive cities to say the least. Of all those I studied to go to university with, approx. 70% left Wales after they graduated university, which constitutes a massive “brain” exodus – and I consider myself among the lucky ones, namely, at least we had a option to leave, most do not have that option. So if the bulk in the former industrialised areas of the UK do not have a real option to leave, and their access to work is compounded by new arrivals from the EU, you get major social issues.

          I can only speak about Wales, so can inform you from first hand knowledge and from the Census that Wales has not suffered a massive deluge of EU citizens, although some of out towns have actually been changed greatly because of an influx from Poland and a few other former Warsaw Pact nations and former Soviet territories – fact is, and without opening your mouths it quite difficult to discern where a European originates from in areas that were always mixed to begin with, in the instance where I like we had Poles from WWII, Italians from before WWI and Spanish, not too mention those with Irish ancestry, we were and remain mongrels in our neck of the woods.

          However, the Wales and formerly heavily industrialised regions of the UK experience is different to what you’ll find in the South East of England as as far as immigration from the EU is concerned, and the impact has been great indeed, for not have we witnessed inward migration, particularly of the most educated, but we have witnessed a huge influx from the EU, specifically from Poland, and we just do not know where Greek, Spanish or other formerly EC immigrants are heading, and for one simple reason in the UK, we have little clue who actually resides within our national borders.

          Correspondingly, living in HOng Kong, the authorities know exactly who’s in the country because it has stringent boarder control and all who reside in HK must have an ID card, whiteout you are a non-person and have zero rights – Hong Kong being quite multicultural. Me, I prefer my homeland, but by law am prevented from returning, which I find strange given anybody from the EU can just pitch-up tent shall we say – hence, the somewhat anti-immigrant stance some take and growth in support for the UKIP, which is not a political grouping I’d ever associate with.

          1. vlade

            Well, if your definition of economic migrant (EM) includes the word “forced”, then of course it’s truism that they would not want to move. I personally define EM as someone who moved to get better economic quality of living (definint it as “quality of living” alone would be way too wide, as not being in jail is a better quality of living). But forced implies lack of choice, and I would argue that you weren’t forced per se, it wasn’t “starve or..” scenario. But let’s leave it at our opinions differ as to what EM is.

            I actually do see your point, as one of my best friends when I lived in NZ is Welsh from Cardiff. And even in NZ he was very proudly Welsh – but he would not return to Wales, not only because of economic constraints, but because he just liked NZ (and now Sydney, where lives with his Kiwi wife and son) better. So his experience was not miles away from yours by the sound of it, but the results were different.

            Re the social issues – I don’t disagree, but my point is that they are a result of much deeper problem. And to be honest, I don’t believe the problem is the de-industrialization by Thatcher per se (hey, few people realise that UK is still more industrialised than France in terms of GDP produced, indeed just about anyone in Europe bar Germany), but rather how UK reinvented itself more or less just as a financial centre and almost nothing else (now areas around Cambridge and Oxford are getting traction, but you can’t have spin-offs of world class uni research in every town). The reinvention means that you get parts (London, South-East, now Leeds and Edinburgh as well) that are so rich that it skews the whole picture and hides the fact that other parts are very very poor (because average looks okish).

            I’m curious you say you can’t return (presumably from HK to Wales) because of law….

            1. Christopher Dale Rogers


              I can’t utilise a term such as “forced” because most economic migrants at least have a choice, not much of a choice, but a choice nonetheless, whereas what’s currently being witness in the Ukraine is actually most “coercive”, hence its forced migration full stop, or more appropriately, ethnic cleansing.

              As for the other little legal issue, I’m married to a non-EU spouse from a third world nation, so unless she’s a nurse, she’s unwelcome in the UK, something to do with our ConDem government hitting the easy targets to curtail immigration. I can only get around this by having US$100, 000 deposited in a bank for 6 months, with a full history of where I got it, or a job in the UK guaranteed for three years paying a salary of a minimum £18,700 or more, but requiring savings to cover any stint of unemployment, the actual figure we are never made aware of, hence revert back to first figure, or a requirement by me and the family to live and work in another EEA State for a minimum of three months and then get issued a EEA family visa, which circumnavigates the UK’s onerous immigration laws due to the Single European Act – however, its expensive to move the family to Spain, Ireland or France for a short stint until getting the EEA Visa to move to the UK legally. So much for the Conservative Party’s support of family values, it only values money I’m afraid. So, I’ll be adopting the US$100,000 route, which has had a severe setback within the past month regrettably.

              1. vlade

                I agree with you that the Ukrainian migrants will be forced – not sure I’d term it economic though, as it’s as much political migration as economic. Let’s call them refugees.

                On the other situation – Ouch! is all I can say. I had thought that all that needs to be satisfied is KOL and English language stuff.. Which I still think is dumb but hey. Best luck.

                1. Christopher Dale Rogers


                  In corresponding with you this evening, I not only have concerns about my immediate family, but others who are in my home at this moment, namely a Ukrainian’s daughter who’s playing with my daughter. Like my daughter, the girl is mixed and no doubt will be holding a Ukrainian Passport, so, and keeping to fair play and at least the consideration of a Pan European commonwealth, EU membership by the Ukraine would have been a benefit, and yet there was not requirement to go this route, they could have instead focused on EEA membership, which is much larger than the EU itself. Suffice to say, all that was really on offer to the people’s of the Ukraine was the “slavery of capital”, which essentially is all that the EU is about nowadays – any one in their right minds would never allowed the former Warsaw pact states to join the EU as it was constituted after 1992, they only had to use the template of East Germany and German re-unification to see what the reality would be – it was ignored. At the end of the day, unless Europeans begin thinking about themselves as Europeans, and this means also including Russia into our equation, we are doomed, for the ruling elites likes nothing better than wedge issues and a bit of racism to cement its power whilst ripping us all off left, right and centre. Sooner or later we’ll get a socialist Europe, if only because our very survival will depend on it. Obviously the elite love socialism for themselves, regardless of the cost to the rest of us, which effectively is the wanton destruction of our planet. God I detest these idiots.

                  1. vlade

                    From my talking to UA friends, they suffer(ed) a common EU delusion on what it’s like there. It’s common enough – grass is always greener on the other side, no matter what. There were few who were saying that it could not possibly be worse than UA.

                    And that’s the part of the problem.

                    There’s a lot of talk how neocons expanded NATO, how EU beaurocracts wanted to expand their power etc. etc. To be honest, I consider this a bit of western chauvinism (we run the world!), implying massive control to CIA and the likes, and entirely ignoring the populations of the states in questions. Poles, Czechs, Slovaks, Hungarians etc. wanted to be in NATO as fast as possible, because they feared (and historically very correctly) Russia. They wanted to be in EU to get them recognized as Europeans again (as opposed to be always labeled “Eastern European”, not that it changed). The popular push for this was extremely strong. It’s entirely possible it fit what neocons/others wanted (although I do know that Czechs and Poles had to push Clinton hard to get into NATO), but it wasn’t orchestrated by them. The fact is that the populations had enough of Russians (and their version of socialism), and wanted to be seen as European again.

                    Where I believe EU and NATO failed miserably was to consider the impact this would have on Russia. Russia (and pretty much all of the ex-USSR), for all terms and purposes ignored, as if it didn’t exist, or at best to be treated as had-been second order state, possibly with less status than say UK or France (like they would deserve the status… ).

                    That alone grated on Russian’s ego, for better or worse. It’s easier to forgive war than being ignored (see Russian relationship with Germany vs. US). There was little thought, engagement for role Russia could/would/should play in the new world. Putin and his cronies are the result. Ukraine and the mess are the result.

                    So from where I stand, and my personal experience of the 90s in an ex-WP country, West hasn’t failed ex-WP countries as much as it failed Russia, and it now pays the price. Or you could say it failed the whole region.

                    In 1930s USSR was pushed to Hitler (and Molotov-Ribbentrop) only when talks with West failed, because West failed to understand Russia.

                    1. OIFVet

                      Sorry but I don’t buy the “benign neglect” of Russia argument. The 1990’s saw the Clinton and Yeltsin regimes being BFFs, to the point where the former ignored the latter’s assault of the budding Russian democracy that was emerging in the early 1990s. After all, Yeltsin was instituting the neoliberal policies that his Western advisers were recommending and had the potential to both benefit Western corporations and weaken Russia even more. A weak Russia could more easily be stripped clean, so Clinton was rightfully enamored with the vodka swilling Yeltsin. It didn’t quite pan out as intended, but certainly not for lack of trying.

                      As for the Eastern Europeans and EU/NATO, we will see the blowback sooner or later. Hungary is already disillusioned, acting as such, and being treated as a pariah because of it. More will follow eventually: both the Czechs and the Slovaks were unhappy with the sanctions and also shot down any talk of allowing NATO troops to be stationed on their territories. That would seem to indicate a growing awareness that the Western masters are not much of an improvement over the Eastern one, as their national interests are being sacrificed at the alter of US/EU elites.

                    2. EmilianoZ

                      In 1930s USSR was pushed to Hitler (and Molotov-Ribbentrop) only when talks with West failed, because West failed to understand Russia.

                      It was not a failure to understand Russia. The elites of the West hated communism more than they hated fascism. If Hitler had been reasonable, like Franco, he could have lasted as long as him.

                    3. FederalismForever

                      @OIFVet. The historical account you’ve given implies that Clinton and Yeltsin were extremely focused on the short term – almost to the point of absurdity. Were the neocons so focused on short-term highway robbery that they could not foresee the long-term damage that their policies would likely inflict? Which, in turn, would only create hostility to economic liberalism and cause the populations of these countries to reject Western solutions? Why would they do that?

                      To me, the following explanation of Ukraine’s post-1991 malaise is worth noting:

                      “Much of the country’s machine-building and engineering industries also went down when they lost their connections with the former Soviet republics, and what remained was not so competitive compared to Western European production.”


                      (I would very much be interested in your thoughts on this article – though I realize it’s a long read.)

          2. Kevin Smith

            “Me, I prefer my homeland, but by law am prevented from returning, which I find strange given anybody from the EU can just pitch-up tent shall we say ”
            difficult to follow your logic – why are you prevented by law from returning to your homeland ?

            1. Christopher Dale Rogers

              Perhaps read my other posts, from today and on other occasions, however, as anyone who is a UK citizen, but happens to be married to a non-EU passport spouse, we are treated as second class citizens, particularly after 2012 when the ConDem government changed immigration rules, meaning, as I’ve explained previously, that unless you have at least US$100,000 in the bank, then forget about trying to live in the UK with your non-EU spouse, and this applies to American’s, Canadian’s, Indians, Australians and you name it. But hey, our lovely UK government is all about families is it not!

    3. OIFVet

      Greed trumps principles in the EU every time. Bulgaria/Romania were let in and said conditions were always meant to be symbolic, more of an ideal to strive for than an actual goal to be achieved using the carrot and the stick. After all, the EU needed the markets and the cheap labor, much cheaper than that of the “Polish plumbers”. Now here comes Ukraine with its much larger population, even lower wages, and world-class corruption. I agree that should it be let in, the EU disintegration is pretty much assured. Personally, I will not shed a tear over it but will rather pop the champagne. EU long ago ceased to be a vehicle for integration and became a vehicle for German/corporate dominance and for the destruction of the European welfare state and social democracy. Good riddance to the neoliberal eurocracy.

  4. Tom Bradford

    So 50% of Ukraine’s coal-mines have been closed, coal production has fallen and the country will run out of coal in two weeks, and the author of the article presents this as a catastrophe.

    Then again, in yesterday’s links in NC (8/18/14) in the article:
    it was pointed out that “…coal is responsible for more carbon dioxide than oil is—about 25 percent more. That number is likely to increase, because coal consumption is growing much faster than oil consumption” and goes on to discuss the pressing need to reduce coal use globally.

    So perhaps it is a catastrophe for the Ukraine, but it’s an ill wind….

  5. vidimi

    i expect a deluge of ukrainians, perhaps as many as 5 million over the next 5 years to flood into an already-xenophobic poland and putting even greater downward stress on low wages there. the influx of ukrainians into poland should have a spillover effect on other EU countries, notably the UK, germany, and ireland. the ultranationalist right will benefit from that as anti-immigrant sentiment rises. if the goal is fracking, then that shouldn’t be affected as the far right is generally sympathetic to such forms of exploitation, but the EU doesn’t have the framework to absorb another million+ people into its economy. this will certainly mean an increase in unemployment and a decrease in wages and a prolongation of the depression.

    looked at cynically the way the psychopathic policymakers might, the conditions will be right for a mowing of the lawn, so a war culling europe’s unemployable youth may indeed be on the cards.

    1. MW

      “into an already-xenophobic poland” – statement based on what exactly? Explain.
      “the influx of ukrainians into poland should have a spillover effect on other EU countries, notably the UK, germany, and ireland” – how? Explain.
      “the EU doesn’t have the framework to absorb another million+ people into its economy.” – why? Explain.

      “so a war culling europe’s unemployable youth may indeed be on the cards.” – no need to explain here. Pure sci-fi.

      1. vidimi


        1 – based on the fact that a large segment of the population supports the truth and justice party whose main ideological vision is a poland for poles
        2 – there is and long has been a steady stream of emigration of poles to those countries. while this has diminished greatly in recent years, maybe even reversed a bit, it can only pick up once again if there’s an influx of cheap available labour into poland.
        3 – the EU already has high structural unemployment, especially among the youth, so the fact that a large increase in people would make this worse is a truism
        4 – whatever you say, mate. maybe the policymaking class is driven by a noble vision this time.

        1. MW

          Ad.1 – when was the last time that party won the election. Also, are you saying that people in the UK are xenophobic because of UKIP? Or people in France because of Le Pen?

          Ad.2 – kindly show a logical link or historical support for that thesis (ie increased emigration because of cheap labour influx)

          Ad.3 – Explain how an influx of low skilled labour will increase the structural unemployment.

          Ad.4 – I guess we agree that there’s no need to expand here; a matter of opinion.

          1. vidimi

            1 – yes, and having lived in both countries, i find britain to be more xenophobic than france. one just has to look at the daily parade of anti-romanian and anti-bulgarian scaremongering in the [mostly] muroch press to get a feel for it. furthermore, even the mainstream conservatives were forced to adopt a more anti-EU/immigrant platform in order to avoid being outflanked on the right by UKIP. but that’s neither here nor there, as poland is on another level. PiS is nativist in a way that UKIP of FN aren’t and the fact remains that they actually have won an election, unlike their french and british counterparts, and if the party leadership hadn’t been killed in that plane crush in russia, who knows whether they wouldn’t have still been in power. i didn’t say that poland is the most xenophobic country in europe (others, like hungary, may make a stronger claim), but it’s undeniable that it is deeply xenophobic.

            2 – i’m not aware of any studies on migration in countries that are recipients of large numbers of refugees, but consider a mathematical argument. assuming that immigration is the result of finding better opportunities elsewhere (a simplification, i know, but a large amount of it is indeed due to this) then it follows that a decrease in opportunity at home would lead to an increase in emigration. in an economy, you have a supply of labour and a demand for its consumption, which we can define as the means to afford it. ukrainian migrants would bring their own supply and demand with them and, unless they were more wealthy than the economy absorbing them, would add more to the supply than they would to the demand. this will necessary put a squeeze on wages before you even take into account the fact that just about every major wave of refugees has created high food inflation. all things being equal, these conditions should increase emigration from the country. of course you need somewhere to go, but with EU open borders, that shouldn’t be a problem.

            3 – nobody said the ukrainian refugees would be low-skilled, so they wouldn’t put downward pressure only on undesirable jobs. but as already mentioned earlier, the fact that an increase in labour supply increases unemployment is a truism. if you have 100 people but only 80 jobs, you have a 20% rate of unemployment. if you add 5 people, that becomes 26%. refugees may account for some new jobs created, and provide a boon to the underground economy, but they will generally be low-paid mcjobs.

            1. MW

              1 – not going to question your opinion on UK/France, since that’s not really my interest. PiS was in power between 2005 and 2007, after which they have been forced into early election due to losing majority in parliament. Smolensk plane crash happened in 2010, 3 years later (the party has not been in power since 2007). This tell me that clearly you don’t know what you’re talking about. Not to mention the fact that apart from phrases such as “PiS is nativist in a way that UKIP of FN aren’t” or “it’s undeniable that it is deeply xenophobic.” you do not offer ANY arguments.

              2. – “i’m not aware of any studies on migration in countries that are recipients of large numbers of refugees,” – I rest my case. Not interested in your back-of-the-envelope “mathematical” arguments.

              3. – “the fact that an increase in labour supply increases unemployment is a truism.” – how exactly is that a truism? Are you saying that increased labour supply ALWAYS increases unemployment? And how can you coherently put sentences like “nobody said the ukrainian refugees would be low-skilled” vs “refugees may account for some new jobs (…) but they will generally be low-paid mcjobs.” in the same paragraph?

              1. vidimi

                you don’t read very well, but i’ll bite.

                1 – i clearly offered arguments. they were a) poland’s far right enjoys greater support than the far right of the UK and france ad b) poland’s far right actually won an election, whereas UKIP and FN only have “good showings”. also, kaczynski was president at the time of the plane crash regardless of his party’s parliamentary representation.

                2 – tr@ll

                3 – i clearly did not say that ” increased labour supply ALWAYS increases unemployment”. i clearly said that “unless they were more wealthy than the economy absorbing them, [ukrainian refugees] would add more to the supply than they would to the demand”. that is, if D2 was greater than D1, where D2 is ukrainian demand and D1 polish demand, an influx of ukies would actually help the economy.

                if you had better reading comprehension, you could understand that you can have high skilled immigrants coming in but only low-skilled jobs for them to do. it’s the reason why immigrant taxi drivers in big, north american cities are some of the best educated people in the country. if you have ukrainian engineers coming into poland, new engineering jobs won’t be created for them, though they will put pressure on existing ones. new fruit vendor jobs may be created, though. it’s really not that hard to understand.

                1. Lambert Strether

                  I’m not sure that civility is enforceable, or even recognizable, but I could wish that commenters would demonstrate increased originality in their tropes; if I were, oh, a major search engine operator, and I wanted to flag and downgrade sites with problematic comment sections, then one phrase I’d surely look for is the hackneyed “reading comprehension,” which has rather the sound of a sword being whipped out of its scabbard, but not necessarily by a competent swordsman (“Tybalt, you ratcatcher, will you walk?”).

                  And if it’s too much too come up with original wording for a hackneyed trope, maybe it’s best just to leave that part out.

                  I’m not making a moral judgment here, dawg knows I’ve unloaded my fair share of tropes, but as I come to a better understanding of SEO, this is the sort of thing I think about.

                  1. Lambert Strether

                    I hate to be foily, but I’m starting to fit Ferguson into the idea of a “test bed,” like Ukraine, and Syria, and Iraq, where the powers that be seem to have been looking for the next war, or how to manage the next war, all summer. (Richard Morgan, in his SF books, has the great phrase “conflict investment”, as in “I already have a doctorate in conflict investment. I don’t really need the gifted-amateur reading list.”)

                    Because Ferguson, despite its small size as a town, and the small geographic size of the protests, and the small number engaged in them, is still going on. That suggests it’s still useful. The cops whack a kid and leave his body in the street? Happens all the time. But it’s not every day the cops get to arrest journalists, beat their heads in, force them into holding pens, and point guns at them all during a newsworthy event. (What next? “Embedded journalists” in the police force?) So getting those tactics normalized is useful; it certainly would have saved a lot of bother with Occupy, for example.

                    (Note that given the hellholes de-industrialization has created throughout the midwest, there are Fergusons all over. It was only a matter of time before a Ferguson happened. And then, look! Opportunity for conflict investment! I don’t see any reason to think the elites helped the process along.)

                    1. Ned Ludd

                      I’ve been quiet tonight I’ll have a big selection of pics later, was embedded with tac team, crazy night, many shots fires at cops

                      – David Carson, St. Louis Post-Dispatch staff photographer.

                      While embedded, he scare-mongers about a “big Molotov cocktail” and defends the police from criticism: “I’ve seen [them] exercise great restraint at times”.

                  2. vidimi

                    you’re right and fair play for calling me out on it. in my defense, i was misrepresented so it wasn’t, technically, offside.

    2. Steve H.

      “For the gods by that one’s loveliness joined Troy and Hellas in battle, causing death so that they might draw off from the earth the outrage of unstinting numbers of mortals.”


    3. Doug Terpstra

      Failed states, divide-and-dominate chaos, seems to be the evil empire’s overt objective en route to full-spectrum global dominion. Human life is inconsequential, so culling the herd is not certainly not inconceivable.

  6. Veri

    A protectionist law designed to exclude foreigners from private nat-gas production. This would benefit those in power – themselves oligarchs like Kolomoisky and those who wish to be the next oligarch – by allowing themselves or their cronies preferred access. It also might mean that for foreigners to get in on the action, they’ll have to do what Joe Biden’s son – Hunter – did; join a Ukrainian owned joint venture – Burisma – where foreigners are allowed to own only 49% of the company.

    Preferred investing status for those on an officially approved list.

    1. Jim Haygood

      ‘The economy is being destroyed, yet Kiev is itself destroying any chance of bringing in Western investment to prop it up. Lip service is paid to developing more resources to build energy independence, but a new tax doubles costs for private producers who will stop producing and pick up stakes.’

      Call it the Argentina model:

      Ukrainian lawmakers backed a tax increase needed to qualify for a $17 billion bailout by the International Monetary Fund and rejected the prime minister’s resignation after warnings that the country risked a default.

      “The first major economic news today is that Argentina went into default,” Prime Minister Arseniy Yatsenyuk told lawmakers after the vote today. “And the second is that Ukraine didn’t default, and it never will.”

      Ukraine is relying on the IMF’s funding for its budget needs and for making about $10 billion in foreign debt payments by year-end. The Washington-based lender’s mission urged the government and the legislature to adopt austerity measures before its board decides next month on the second disbursement of a $1.4 billion tranche.


      Adopt austerity and raise taxes on an economy whose real production is collapsing — yeah, that oughta work a treat!

      Knowing nothing about Ukraine, my uneducated guess is that Ukrainians freeze in the dark this winter. If I were there, I’d be headed west to sneak across borders right now, while it’s still warm enough for trekking.

    2. bluntobj

      “At the same time, however, Kiev passed a new amendment to the tax code that doubles taxes for private gas producers and promises to keep Western investors as far away from Ukraine as they can get.”

      You may deride the officially approved list, but mercantilism and economic colonialism should be stamped out. “Western” investors have this little habit of pillaging natural resources from their third world colonies; Ukraine is simply another in a long list. This is the fate that the west would like to impose on Russia. It is easy to understand the conflict when cast in this light.

    3. Tsigantes

      Protectionism and protectionist laws are 100% off the table when the IMF is involved, since guarantees for their loans are your assets. Ditto for the EU. And one little advertised condition of EU’s offer to Ukraine – back before the coup, when Yanukovitch was in power – was a 100% shut down of all Ukrainian industry. Most of this is in the Russophone east.

      As a Greek, one little detail that caught my eye is the ‘majority’ vote in parliament scraping through with 2 votes – how often must history repeat itself before we catch on? A 2-vote majority in yet another unelected, [appointed & self-appointed] parliament. To provide a semblance of democracy in its absence.

      The EU and IMF have barely bothered to hide their economic interests in Ukraine: big-scale agriculture, destroying industrial plant or retooling it for relocated industry, fracking, controlling the pipeline, destroing South Stream. Add to this NATO installations, military control of Russia’s underbelly, the push across Asia to China…

      The EU has forbidden entry to Europe for Ukrainians. The Ukrainians’ role is to provide ultra cheap labour and survive on next to nothing, with limited or no heat. There is no concern for Ukrainians.

      As for the drug, people and arms smuggling and crime mafias, the Ukrainian mafias are already well established across Europe. The US uses these profits: consider the re-establishment of the poppy trade under the US military occupation in Afghanistan, where the Taliban had stamped it out. The key crime ‘state’ in Europe is US controlled Kosovo.

      Therefore those who do escape to the EU will be by means of crime networks, and usually involved in crime.

      To sum up, Ukraine was already a failed state divided up between oligarchs. Even so, Yanukovitch managed to continue to support by way of loans a reduced soviet-inherited welfare state framework which provided heat, pensions, medical care, housing, food. Thus : no social collapse. Post-coup, Ukraine’s wealth will be taken over by foreign US and EU ‘investors’ and the welfare structure all but dismantled. This makes it a desperate satrapy that no doubt will be violently ‘contained’ and policed. Since wealth exists in both halves, the West will most likely disallow separation, though some form of federalisation might be permitted under trusted oligarchs, ie Ottomanisation!

      1. zapster

        There is another angle here, and that is that this destruction is largely unintentional and out of the control of Kiev. Kolomoisky is driving this, with his Bandera thug militias who do not admit to any authority by Poroshenko. They are bent on genocide, and feel that once they control the gas fields there, they will control Europe. Poroshenko’s attempts at cease-fires were simply ignored by these guys. If they make good on their threat to turn on Kiev, the war on the front will instantly stop, because the regular Ukrainian soldiers really would rather not fight.

        There is also the angle that Kolomoisky and some of the other oligarchs do not intend for people to return to these areas once driven away–the whole area will be given over entirely to fracking, which will make the land worthless for any other purpose anyway. My guess is that they feel that their complete control of the gas fields and pipelines will solve their economic woes quickly, once they are able to clean out the “Russian vermin.”

        These people are used to the ravages of capitalist predators and “sacrifice” isn’t a big issue to them. A poor understanding of economics, short-sightedness, political calculation, and ideological fixation on the Bandera notion of racial purity puts them well beyond the bounds of rationality.

  7. Moneta

    We already have proof that The EU will not save the weaker countries. So in this context, why would Russia save Ukraine when 1. it knows this and 2. it can just wait for an economic implosion and then just come in and pick up the broken pieces.

    1. EoinW

      Exactly! Though I’m not sure Putin will want to even touch the broken pieces any time soon. It’s striking how Russia facing a military opportunity realized it was an economic nightmare expedition and has passed on it. Meanwhile America has never met a military opportunity it could turn down. Even goes out of its way to create new ones for itself.

      1. MW

        “realized it was an economic nightmare expedition and has passed on it.”

        First, he “passed on it” not because of economic, but political reasons. Second, constantly supporting separatists with army equipment and manpower does not exactly spell out “passing” for me.

        1. EoinW

          If such support is taking place then you certainly can’t blame the government for supporting fellow Russians. But who is to say it’s government policy. Given the close ties on both sides of the border it could be individual Russians choosing to aid their kin across the border. certainly not comparable to the US arming ISIS and similar entities.

          Bottomline: Putin’s policy is a mature one American leaders, with their arrogance and hubris, lost their maturity ages ago.

          1. MW

            Ok, explain this; how come there was no (supposed) social unrest of the ethnic Russian until now? How come “individual Russians choosing to aid their kin across the border” started happening as soon as angered and frustrated Ukrainian public gathered in Maidan and managed to oust a corrupt puppet of a president?

            It is very disturbing that people in Western Europe/US believe in all the propaganda crap proclaimed by Putin. He INVADED an independent country, annexed part of it, and you’re calling his policy “mature”? Next thing you’re going to tell me is that Ukraine is currently ruled but right wing extremists and that Putin is saving everyone from incoming Kiev nazis.

            1. vidimi

              are you serious? maybe it’s because policy towards them and their lands had changed since yanukovich’s ouster?

            2. Banger

              There has been social unrest on and off for quite some time in Ukraine—have you been sleeping?

              You evidently don’t understand how the U.S. National Security State has functioned since WWII and ignore or support the pattern established in places like Greece, Italy, Iran, Guatamala early on and expanding to many countries since that time. If there is a conflict within a society and that country lies in a strategically important position the National Security State moves in both through official operations (CIA etc.) and private organizations like the NED (which replaced many of the CIA functions after the Church Committee findings in the late seventies) and other shadowy organizations which were and are very active in many parts of the world including, particularly, Ukraine.

              The coup was a coup and replaced one corrupt regime with another regime which. That original regime, however, had the virtue of being a result of real elections carried out when there was peace in the country. Ukraine was then and is now ruled by oligarchs and gangsters who aren’t all bad but when you add the geo-political machinations of Washington then you have something quite different.

              Putin has proved his worth as a statesman both in his resurrecting Russia from Washington’s machinations after the end of the Cold War and as a world-power–his swift and sane handling of the Syrian Gas crisis (which I think more people, as time passes, understand was a false-flag operation (some say the Turks others say the Saudis–who knows?) when the Western propaganda organs all were howling for War was quite remarkable. Even if you hate Putin/Lavrov you have to admire the Chess game they play.

              In short, I don’t believe you understand the full scope of the situation. Personally, I don’t have a particularly favorable opinion of Putin nor the chauvinism that the Russian media promotes but that is not my problem. My problem is Washington because I live in the USA and the cause of our collective problems also, because I spent most of my life in that cesspool (wasn’t always as bad as it is now), I think I have a “gut feeling” for how the National Security State operates and what its general goals are–currently there is a lot of danger because that State is itself in conflict and therefore future policy is unpredictable at this time.

            3. EoinW

              A pretty simple reason really. The majority in the east voted Yanukovich in a democratic election. Then they saw that who they elected was overthrown by a bunch of Kiev “students’. Only natural they would not recognize the new government. Given the economic resources are in the east you basically had a situation of these people creating much Ukrainian wealth, which they would send to Kiev but they had no say in who made up the government. You really think people would not rebel on their own in those circumstances?

              Next you throw in the ethnic differences, plus anti-Russian parties like Svoboda and the Right Sector having a role in the new government. Add Timoshenko talking about exterminating Russian-Ukrainians. What ethnic Russian in their right mind would want to be ruled by Kiev?

              Finally these people grew up in the USSR and have always considered themselves Russian, not Ukrainian. They were forcibly separated from Russia 20 years ago. Thus the overthrow of their democratically elected government has served as the excuse for them to rejoin Russia.

              This is basic common sense. Doesn’t take any Putin provocations to spark an uprising. The Russians, in fact, want peace as natural gas through Ukraine is big business for them. I’d think that if you gave Putin a choice he would have preferred to see no uprising in the east. Plus his rhetoric has been consistently for more regional rights for the east but not separation.

            4. zapster

              Well, that “frustrated public” was demonstrating in favor of *elections*, not a nazi putsch. They continued to demonstrate after their “success” because that was *not* what they wanted. They are still opposed to the corrupt government in Kiev.

      2. Tsigantes

        Since the 90s the US military has been used exclusively to secure economic and energy interests.

    2. Richard

      There is also the increasingly possible scenario that the rebels might actually win. If that happens the oligarchs will flee like rats from a sinking ship and the pieces will still remain. The recovery will take a long time after that. One thing is certain the Donbass region will never be under full control of the Putsch government even if they overtly win as a long term insurgent war will continue regardless. The crimes committed cannot be forgiven by those people in the region. But, the reports coming from inside the Donbass indicate that things are going badly for the Putsch government forces. The losses of men and equipment are unsustainable and the command structure is continuously being replaced (under arrest for treason for failing to obey ridiculous orders) leaving poorly trained, and increasingly demoralized soldiers to fight leaderless. It is a complete disaster for everyone and in particular the people of Ukraine.

  8. paul morphy

    I was in the Ukraine twice in 2007 and 2009 for several months on both trips.
    What was apparent to me during both trips was the difference between what is now West Ukraine and East Ukraine.

    The second trip to East Ukraine was an eye opener. Because having been to Western Ukraine (proximate to Kiev), I assumed that, for example, the shore caps and drain caps along the roadways would have illegally removed as they were in Western Ukraine. Instead Eastern Ukraine had fully functioning main roads equipped with drain covers and shore covers. I was told later that criminal gangs operating in Western Ukraine just to remove the manhole covers and sell the metal as scrap!

  9. Moneta

    In high school, in our biology class, we soaked celery in very salty water and then looked at the cells in our microscope. The celery was passive or in other words, did not stand a chance. The system was looking for equilibrium.

    In university, a teacher in an environmental class explained to us that the wealth discrepancies between the first world and third world countries were so huge, that we would not be able to close our borders. There were so many people out there that our fate would be like the celery… we would be invaded by boat people and because or our civilized nature we would be forced to accept them.

    So over the last 2 decades, instead of closing our borders, which would have not worked anyway, we opted for globalization but surprise, surprise, it is not working either.

    The reality is that the wealth discrepancies between developed and emerging are too large as well as the world’s population. The system is forcing an equilibrium which, contrary to the celery, we are trying to fight off. Humans might feel they have free will but in the grand scheme of things, they don’t really.

    1. fds

      I agree with your observation (though border control would have been effective, i.e. East Asia border control policies), but how much of a differeence is there really between countries now? For instance, one can only live on minimum wage if they share communal housing, don’t get sick, etc. Yes, the dollar is more powerful than the peso, but still. Same with educated labor, the salary is higher than Egypt in my profession, but the work conditions and job availability is less than many third world countries…

  10. steviefinn

    Microeconomics – In the East there are old age pensioners who are already in great need of some Nuland cookies.

    1. EoinW

      Didn’t we see this in Russia 20 years ago? The pensioners starved but at least Chelsea got a championship football club out of it. Hurry! Someone invite Kolomoyskyi to Turf Moor. Burnley needs a Sugar Daddy.

      1. Banger

        This is why U.S. policy-makers are so furious at Putin. He staunched Russian wounds which were a direct result of Soviet corruption and the plague of “contractors” who descended on Moscow after the fall of the USSR. They ripped the country up, enriched and empowered oligarchs and gangsters and took their loot to Washington where you saw, in the aftermath, an extraordinary growth of luxury housing in the DC suburbs. Putin came along and, for all his obvious faults, brought Russia back as a legit world-power. For this he must be made to pay. In the same way the fall of the Shah of Iran (installed by the CIA) ended the rule of the CIA in Iran–btw, I know personally CIA people who said that Iran was their “playground” during the seventies–CIA people had extra-legal rights there and loved being assigned there. For this the Ayatollahs will never be forgiven.

        1. EoinW

          Certainly that’s the starting point. I’d add that first Snowden, then preventing America’s war in Syria was the last straw. These DC people seem to believe their own propaganda and actually think the majority of westerners support them for standing up to Russia after Russian violations by supporting that “criminal” Snowden and “evil” Assad. Thus our psychopathic leaders are now more out in the open and more aggressive than ever. They actually believe most westerners see them on the side of good. Next we’ll have our “let them eat cake” moment for the people of Ferguson, Mo.

          1. Tsigantes

            Actually the DC people have simply mapped out a plan for economic commodity control (backed up by the military) and don’t/can’t advertise this. Thus propaganda is needed to keep the population on board.

        2. Crazy Horse

          Add to that Putin’s recent successes in diplomacy and PR.

          —Winter Olympics staged successfully with none of the protests and terrorist attacks predicted by the western press.

          — Successfully thwarted the US sponsored false-flag chemical warfare attack upon Syria. Obama was within days of pushing the button for a planned bombing campaign and intervention when Putin made that impossible by arranging for Syria to publicly destroy its remaining stock of outmoded poison gas. Obama must of been livid to have been so thoroughly out-maneuvered on the world stage. And to the limited extent that Obama is actually in charge of policy that trip to the woodshed might account in part for the economic warfare against Russia now being ramped up.

  11. Linda Amick

    Seems to me the US global strategy has become “if I can’t have it (control it) then nobody can”. Spreading chaos around the globe might, in the future enable confused, desperate citizenry to accept anything better even if “better” is a stable Hitlerian ruler.
    I can not cite one positive thing going on globally in the way of nation building and rights of citizenry.

  12. Banger

    We have to remember that U.S. operatives have been working for something very much like the current situation to develop–yet the Euro populations support these policies–policies that are designed to directly harm their own interests. Why? It is blatantly obvious that the USG and its clients are the only groups that benefit from chaos, i.e., more chaos, more fear, more need for military tactics to control populations and much less power for the average citizen which, in the U.S. at least, is no longer a citizen but a subject.

    All that is happening except the partial success of resistance in Eastern Ukraine was predictable by anyone who was paying attention. It is fairly obvious that the current situation is exactly what Nuland and her bosses wanted including the implosion of the Ukrainian economy.

    1. Doug Terpstra

      IOW, not at all an unforseeable “mistake”? The pattern itself is unmistakable, but most of us simply can’t stomach the truth.

      1. Banger

        It is this very lack of “stomach” that is the chief problem we face collectively. Whether it is the economic, environmental or geo-political situation all cannot and will not be solved if we remain in denial. This is the great fault of the American left–it accepts, more or less, the main thrust of the mainstream media’s Narrative which consist, in the main, of “mistakes were made” and “stuff happens” and “history is just one damn thing after another” (more or less attributed to Churchill who knew better).

  13. Michael Hudson

    Obama said that Russia doesn’t attract immigrants. His coup leaders have just sent nearly a million Ukrainian refugees into Russia.
    Obama said that Russia has no industry or agriculture. So he is helping Putin protect domestic Russian agriculture and industry by imposing sanctions to force it to re-develop domestic self-sufficiency in basic needs.
    As a good follower of MMT, Obama is obliging Russia and the BRICS to create their own money to fuel their economies, rather than relying on US dollars.
    So you may think of the coup in Ukraine as Obama’s helpful Russian ReDevelopment Plan.

    1. Banger

      The deep intellectual position of the mainstream economists and political leaders is that no country can prosper outside the Global System which Putin and his supporters want to be part of. The Administration believes that the Russians will eventually suffer, like Iran and Cuba, from sanctions and their power and international influence will decline. They have made the calculation that for every potential benefit of Russia being removed from “the world community” there will be two penalties. I guess we’ll see.

      There is an ongoing argument here as to whether the policies of Washington are mainly a result of various blunders or whether they are, mainly, part of a grand strategy.

      1. vidimi

        the good thing, if you are the administration or tptb, is that they don’t necessarily have to suffer for real. you just have to make everyone think that they do.

    2. Christopher Dale Rogers

      Michael Sir,

      Yes your analysis is correct, however for Russia to protect its national interests from the neoliberal vultures and US aggression will require Russia to divert much needed resources from its civilian sector into its arms and military sector, for you can bet your bottom dollar, had Russia not possessed a nuclear capability, our neoconservative and neoliberal friends would be all over the Russian carcass picking off the meat and fat and leaving nothing but bones for the actual inhabitants.

      So good to invoke MMT principles, which evidently the wizard in the Whitehouse certainly does not comprehend, but the fact remains the last thing we desire is another nuclear standoff – what ever happened to tanks into ploughshares, simple, just look at Ferguson that’s what.

    3. susan the other

      MH, you sound facetious; but I think it is the truth. I think the things that have happened so lightning-fast to set up the BRICS settlement mechanism and pushing China and Russia together as serious trading partners and including India, etc. is mind boggling. I think it couldn’t have happened without us intentionally making it happen. The part I confuse over is how they think they are going to divvy up Middle East oil resources.

  14. Jackrabbit

    Yves, your questions indicate a faulty POV. I don’t think one can look at Ukraine in isolation. The same might be said of Syria and Iraq, and other ‘hot spots’.

    For example, you say that “war is bad for economies”. Well that’s not entirely true. Its very good for MIC in US/EU. In general, if you think of Ukraine as US/EU client state then the analysis has to include how Ukraine affects the West.

    In addition some have noted that Israel’s operation against Gaza began on the day that MH17 was downed and that the horrors of ISIS turned attention away from what was happening in Ukraine and Gaza. So there is suspicion of some global coordination of what some call the “chaos” (Note: a terrible way to characterize what is happening that is meant to disarm potential critics as each crisis has winners/losers and goals).

    The next issue I have about your questions is the focus on “costs” (which was also raised in a posting about a week ago, IIRC) It makes one feel exasperated as these ‘costs’ seem so high. That the US/Ukraine knew the risks and the potential costs but went ahead and continue to do move ahead with their project means that they see benefits that outweigh the ‘costs’. To me, the nature of these benefits is whole lot more interesting.

    Also, why the love for oil price? These oil price articles that you cite almost always have a US-centric POV that can border on, or repeat, propaganda.

    H O P

    1. Jackrabbit

      “That’s not the way the world works anymore,” he continued “we’re an empire now, and when we act, we create our own reality. And while you’re studying that reality — judiciously, as you will — we’ll act again, creating new realities … we’re history’s actors … and you, all of you, will be left to just study what we do.”
      – – Bush Administration official quoted from book by Ron Suskin, a former NYT reporter.

    2. hunkerdown

      Are you claiming that what US-centric commodities traders are being fed has absolutely no effect on the world? That muppets are paying money and lifting fingers to read and print this stuff would seem to contradict such a claim.

      You know approximately what USian culture is about. You know approximately what MBA culture is about. There is information to be had in the fact of the existence of the propaganda which serves to coordinate the forces of “reality” creation, wouldn’t you think?

    3. Tsigantes

      I agree! One ‘distraction’ after another….and multiple agendas within one sad framework. ISIS ShmISIS, all we are seeing is the Peters plan coming into being. There’s a lot more to come too. Dividing Pakistan etc…

  15. east

    OIFVet, your opinions are very well informed and many times I would just want to write a +100 message under yours.
    I may add that Romania wants to enter EuroZone in 2019, at least this is what the so-called left wing government declares, here is the National Bank Governor about this subject:

    This will be practical suicide for the poor of that country, which is almost 40% of the population.
    In fact the country is under an IMF treaty since 2009, which blocked any serious govt. investment in the economy, hiring in science (budgetary jobs) is forbidden, the birthrate is very low because of the poverty, 20% of the population has left after 1990 to work worldwide – just like in Latvia Prof.Hudson was talking about.

    Left wing economists call R. a colony of the EU-US economic imperialism. The last idiocy of the IMF, Troika and govt. is their blueprint to destroy(privatize) next year the national postal service and the national train service, which were always public property since their inception, taking as a model the disastruos privatizations in the UK. More looting to do, as OIFVet already said. Of course, the local elite will pocket something big from the privatizations, as lackeys of the foreign capital. The poor citizens will find out many years probably never what bribes have been given.
    I wonder why Prof.Hudson never refer to R. in his talks, it’s a textbook example of neoliberal looting in the Eastern Europe led by foreigners.

    1. OIFVet

      East, Romania and Bulgaria underwent much the same processes. In BG, it was the “socialist” party that instituted the flat tax, individual employment contracts, privatization of the pension system, privatization of the energy distribution, etc. It is a neoliberal wet dream, and a nightmare for the majority of the population. Curiously, while this resulted in tidy profits for certain companies and individuals, the investor-friendly policies did not bring any additional investments. They actually declined as the profits were off-shored and the newly-privatised entities stripped of all assets and then bankrupted. The largest source of “investment” is the remittances from immigrants. The demographic crisis is as critical as the one in Romania and in the Baltics. The EU, whatever it may say, does not care since the profits are tidy, and the cheap labor is abundant. For all the talk of integration, let us remember that the French kicked out thousands of Romanian and Bulgarian Roma while loudly insisting that these countries need to end discrimination of the Roma and integrate them in society. Well, so much for that. If there’s one saving grace for BG versus Romania, it is that BG placed moratorium on fracking while Romania allowed Chevron to frack next door in North Dobrudja, the fertile bread basket of BG and Romania. Also, talk of joining the Eurozone is quickly shot down by all of the main parties. A little ray of sunshine in an otherwise bleak economic landscape.

      Now, not all of that is the EU’s fault, our corrupt elites should be viewed as the main culprits. However, the EU did approve and in many instances insist on these policies being instituted. And for all their hand wringing about corruption, it is for the benefit of their domestic electorates. In reality the EU welcomes it and encourages it, as it is necessary component for instituting unpopular neoliberal policies. Ukraine will fit right in, it is tailor made for EU exploitation. As bad as it is there for regular Ukrainians, it will only get worse. They may not even be given the right to travel to the EU freely, but the looting will proceed one way or another.

      As for Prof. Hudson, my theory is that he talks about the Baltics because so many neoliberals cite them as neoliberal success stories. They are not, and Prof. Hudson is rightfully trying to debunk that propaganda. Bulgarian and Romania, OTOH, are such basket cases that not even neoliberals try to portray them as success stories, preferring instead to blame “corruption” as though that is not part and parcel of neoliberalism.

      1. hunkerdown

        Yet, the act of voting for motivational posters will somehow make all that better, say the creative class that designs the posters and sends them off to non-union print shops.

        People are all too easily convinced that they *need* to be led, and it’s a multi-generational slog to get them to want out of it.

  16. Michael Hudson

    EVERY post-Soviet country is a “textbook example.” I focus on Latvia because it seems to be the worst, and because I’ve spent some time there with its students, professors and leaders, so I try to talk about what I know best.
    In every post-Soviet country neoliberals endowed a kleptocratic class, usually drawn from existing insiders eager to Westernize their wealth and send it abroad (along with their children).

    1. OIFVet

      I wrote a longuish comment that is stuck in purgatory for the time being, but in essence I argued that the Baltics are often cited as neoliberal success stories (“Baltic Tigers!”) while not even neoliberals would argue that BG and Romania are success stories, hence your focus on debunking the myth of the Baltics’ “success”.

      1. Christopher Dale Rogers

        Our neoliberal friends in all their fiendishness would hold up Ireland in the 1840’s as a poster-child for the wonders of neoliberal economic orthodoxy, never mind that fact that upto a million staved to death and of the remainder 50% emigrated the world over – an absolutely wonderful result, very much reminiscent of what’s been happening in Latvia and the other two Baltic states – as I keep saying, with friends like this, who really requires enemies.

    2. OIFVet

      PS. I will quibble about Latvia seeming to be the the worst. I was born in BG so I will not pretend to be bias-free, but by all objective measures BG and Romania are the two poorest states in the EU. This poverty wasn’t always there. Growing up, we made fun of Albania being so poor; now they are better off than Bulgaria is. A common joke was, ” Why does Enver Hodja hold on to the train window and doesn’t wave to the delegation assembled to greet his arrival? Because he is still used to only riding donkeys”.

      1. Tsigantes

        And Albania couldn’t even afford electricity. Travelling north by ship from the Ionian, the shoreline suddenly disappeared into blackness.

    3. fds

      I read a quote in Michael Parenti’s book about this process. There was one Reagan Wallstreet guy, including the queefed hair doe, that what kept the market ‘ticking’ is a group of wealthy investors and cheap prices. I guess he had a point, the market formed from accumulation of captial at others’ expense–but the part of productive employment, a population able to create demand, rule of law, low corruption with transparency, etc. was completely missing.

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