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Weissman writes: "Like government leaders everywhere, Russia's Vladimir Putin often lies. But when he tells an uncomfortable truth, few people in the US or Europe bother to listen. Take what he said about Ukraine back in 2007, when Time magazine interviewed him as their 'Person of the Year.'"

Ukrainian oligarch and leading candidate to become the new president, Petro Poroshenko. (photo: www.kmu.gov.ua)
Ukrainian oligarch and leading candidate to become the new president, Petro Poroshenko. (photo: www.kmu.gov.ua)


Ukraine: The IMF's Big Lie

By Steve Weissman, Reader Supported News

06 April 14

 

ike government leaders everywhere, Russia’s Vladimir Putin often lies. But when he tells an uncomfortable truth, few people in the US or Europe bother to listen. Take what he said about Ukraine back in 2007, when Time magazine interviewed him as their “Person of the Year.”

The Russians subsidize Ukraine, Putin explained. They sell it natural gas and other energy resources at $3 billion to $5 billion a year below international market prices. At the same time, the US “somehow decided that part of the political elite in Ukraine is pro-American and part is pro-Russian, and they decided to support the ones they consider pro-American, the so-called orange coalition.”

Why, Putin asked, should Russia continue to subsidize Ukraine? “If you want to support someone, you pay for it. Nobody wants to pay.”

Putin had it right. In their proposed economic agreement with Ukrainian president Viktor Yanukovych, the Europeans offered very little money. In their negotiations with him during the Euromaidan protests, they and their allies in Washington continued to offer far less than the estimated $20 billion to $35 billion that the country needed.

In February, about a week before Yanukovych ran away, the Christian Science Monitor summed up the situation. Ukraine’s international currency reserves were falling at a vertiginous rate. The national currency, the hryvnia, had lost value, and the international credit rating agency Fitch had downgraded the country’s sovereign debt. How would Ukraine pay what it owed – primarily to Western banks and Russia’s Gasprom? How would it pay salaries, pensions, and social benefits?

The EU agreement looked to a major infusion of capital from the International Monetary Fund. But that would come only after the Ukrainians agreed to what IMF managing director Christiane Lagarde later called a “profound transformation,” especially of its fiscal policy, monetary policy, and policies on energy.

“Nobody is willing to give economic support, from the United States or from the IMF or from Europe, to an unreformed Ukraine,” US State Department’s Victoria Nuland said in Kiev on February 7.

The Westerners had good reason for being tight-fisted. They knew that the incredibly corrupt Yanukovych and the Ukrainian oligarchs would take the money and stay put. That is how the country’s oligarchic system works, with or without Yanukovych. Most of the new billionaires – including the leading candidate to become the new president, Petro Poroshenko – made their first big money by “privatizing” formerly state-owned enterprises.

“Ukraine’s oligarchs got rich during the privatization sales of former Soviet-owned industries and factories shortly after independence in 1991,” explained the Monitor. “The country’s main industries of mining, metals, chemical production, and energy distribution were snatched up by individuals, who then reaped millions in profits.”

The Monitor did not mention one significant fact. Privatization only came about the way it did with what one academic study called “the support and cajoling of Western donors.” Will foreign meddlers never learn?

Nor did the Western-backed rip-off stop with the original sin. Several analysts tell the same story, none more succinctly than the Monitor. “Many of the oligarchs’ businesses – particularly in the mining, heavy industry, and energy distribution industries – operate in dilapidated, Soviet-era facilities that are extremely energy-inefficient, and heavily dependent on government subsidies.”

In other words, when would-be reformers talk about Ukraine’s corruption, they mean the oligarchic system. Not necessarily personal corruption, but a pervasive systemic corruption.

“Corruption and politics have always had a close relationship in Ukraine,” explains the Monitor. “The oligarchs have benefitted for two decades from close relations with government officials, who have at times turned a blind eye to the activities in exchange for support. At other times, politicians have enabled their oligarch supporters to get richer through key government appointments and a lack of transparency in government contracts.”

Systemic corruption also gobbled up foreign assistance. Ukraine has gotten far more aid than any county in the former Soviet Union, energy specialist Emily Holland told Bloomberg Businessweek. And where has it gone? “Into the pockets of an incredibly corrupt political elite and oligarchs.”

The Russians, with their own oligarchic system, continued to subsidize Ukraine’s energy imports. They also agreed in December to buy $15 billion in Ukrainian Eurobonds, and actually laid out the first $3 billion.

“The economy of Ukraine was going into the wall and was heading for disaster,” the IMF’s Lagarde told PBS Newshour. “Without the support that they were getting from this lifeline that Russian had extended a few months ago, Ukraine was heading nowhere.”

Mounting violence from the protesters, continuing refusal of Brussels and Washington to come up with serious money, and increasing loss of support from the oligarchs convinced Yanukovych to jump ship. Putin responded by stopping the subsidies, which meant raising the price Ukraine had to pay for its energy imports.

Brussels and Washington were left holding the bag, as Putin had suggested they should. So, at warp speed, the IMF and Ukraine’s Western-backed interim government came to terms. The Ukrainians would agree to “profound transformation.” The IMF would give them something between $14 billion and $18 billion over time.

Having worked as a private banker, central banker, and Minister of Economy, Prime Minister Yatsenyuk knew from the start what lay ahead. “To be in this government is to commit political suicide,” he predicted even before the Russians moved into Crimea.

The biggest challenge, he told an investor’s conference in Kiev last week, will be to sell Ukrainians on the need for “painful economic reforms.” Unpegging the hryvnia from the dollar will likely cause a 3% drop in GDP, he explained. Cutting the public sector by 10% will put a lot of people out of work. Losing the Russian subsidy on energy and simultaneously cutting domestic fuel subsidies will greatly increase the cost of living, though the government would provide “some sort of subsidy” to the poorest five to eight million households.

Yats understood how this would breed discontent, especially in the east and south, where people lean more toward Russia. He knew Moscow was telling them that they would enjoy higher living standards in Russia, with higher wages and better pensions and without the austerity that the Kiev government was now offering. “They’re saying: if you go to Russia, you’ll be happy, smiling, and not living in a Western hell.”

That is Russian propaganda, no doubt. But the message rings true, doesn’t it?

Yats has a much bigger problem. He and his Western-backed interim government have gone to great lengths to give the oligarchs even greater power – far more than to the Svoboda Party or followers of Stepan Bandera in Yatsenyuk’s Fatherland Party. In one of their first acts in office, they appointed oligarchs like Ihor Kolomoisky and Serhiy Taruta as governors in Eastern Ukraine, and are already working closely with the country’s likely new president, Petro Poroshenko.

Many in the West welcome “the Chocolate King’s” presence, especially since he was the highest-profile oligarch to support the Euromaidan protest. Western “deciders” have looked kindly on him for years, as journalist Andriy Skumin wrote in March 2012, just after Yanukovych appointed Poroshenko Minister of Trade and Economic Development.

“European circles, blindly searching for any adequate Western-thinking individuals within Ukraine’s establishment, have a favorable opinion of Poroshenko as a person who is reliable, can be charged with introducing changes in Ukraine and ending the deadlock in EU–Ukraine relations” Skumin wrote. But “the preservation of the monopolistic oligarchy will not allow for any European integration or even domestic transformations using European patterns. The only thing that could be done is perhaps only an outward European appearance.”

“Profound transformation” requires killing the oligarchic system, which no one in the game – least of all Poroshenko – has come close to suggesting. This is the IMF’s big lie. Lagarde talks of changing Ukraine, but the people she has entrusted to make those changes are the precisely the ones whose power the country most needs to curtail.

To crib from Vladimir Putin, Poroshenko and his fellow oligarchs are neither pro-American, pro-European, nor pro-Russian. They are not even necessarily pro-Ukrainian, though a bit of patriotic fervor may help them shove austerity down the throats of their underlings. Ukrainian oligarchs, like American plutocrats, are simply pro-themselves.



A veteran of the Berkeley Free Speech Movement and the New Left monthly Ramparts, Steve Weissman lived for many years in London, working as a magazine writer and television producer. He now lives and works in France, where he is researching a new book, "Big Money and the Corporate State: How Global Banks, Corporations, and Speculators Rule and How to Nonviolently Break Their Hold."

Reader Supported News is the Publication of Origin for this work. Permission to republish is freely granted with credit and a link back to Reader Supported News.

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+54 # Activista 2014-04-06 18:05
Just read the "Rahm Emanuel Cuts Public Pensions, Diverts Money to Benefit Campaign Donors"
readersupportednews.org/news-section2/318-66/22981-rahm-emanuel-cuts-public-pensions-diverts-money-to-benefit-campaign-donors
and concluded that Chicago and Kiev have a lot of common - indeed "Ukrainian oligarchs, ARE like American plutocrats" as Steve Weissman suggests at the end of "Ukraine: The IMF's Big Lie" article ..
The World is controlled by money/greed - in the East and West.
 
 
+12 # wrknight 2014-04-07 09:03
Quoting the author and the Monitor "The oligarchs have benefitted for two decades from close relations with government officials, who have at times turned a blind eye to the activities in exchange for support."

In what government and in what time have the oligarchs not benefited from close relations with government officials? They may not have been called oligarchs in other governments and times, but a rose by any other name is still a rose.
 
 
-21 # MidwesTom 2014-04-06 21:53
George Soros, the 28th wealthiest person on earth, worth $23 Billion operates from the Ukraine. He is a major player in American politics, and the major backer of the Democratic Party. He hast to be one of the wealthiest in Ukraine.
 
 
+19 # ericlipps 2014-04-07 04:46
Oh, come on, Tom. "The" major backer of the Democratic Party?

And we all know you'd have nothing bad to say about him if he supported the GOP instead.
 
 
+4 # Activista 2014-04-07 23:26
en.wikipedia.org/wiki/George_Soros
" Between 1979 and 2011, Soros gave away over $8 billion to causes related to human rights, public health, and education. He played a significant role in the peaceful transition from communism to capitalism in Hungary (1984–89)[9] and provided one of Europe's largest higher education endowments to Central European University in Budapest.[12] Soros is also the chairman of the Open Society Foundations."
Soros actions and philosophy - have my respect and admiration.
"In February 2009, Soros said the world financial system had effectively disintegrated, adding that there was no prospect of a near-term resolution to the crisis."We witnessed the collapse of the financial system ... It was placed on life support, and it's still on life support. There's no sign that we are anywhere near a bottom." still true in 2014
 
 
+1 # Activista 2014-04-07 23:29
"operates from the Ukraine?"
Soros live in New York ... critic of Netanyaho/Israe l present policies.
 
 
+61 # tigerlillie 2014-04-06 22:21
And what a disgrace Victoria Nuland is. Is she a diplomat or a CIA asset? Or is there any distinction anymore?
 
 
+46 # banichi 2014-04-06 23:16
The gloss that the western governments and media have tried to put on the Ukrainian situation is apparently wearing thin. While I don't particularly like Putin, this entire saga stinks worse every new article that comes out - and due to the actions of the US/European governments, not Russia's.

It was never a question whether Russia would allow the Crimean naval bases to get threatened by a corrupt oligarchy in the Ukraine (or the US's for that matter) when it has been clear to anyone who looks close enough that the US wanted to continue to 'encircle' Russia and cause it to lose what military basing they have in the area, and thus reduce its influence. As others have said, not going to happen. And all the sanctions and saber-rattling of the US government can't hide their real culpability in the situation.

I am reminded of the book "Confessions of an Economic Hit Man" by John Perkins, where he describes the close cooperation between the IMF and the US government and corporations in making worldwide loans. It has always been only an arm of policy of the US, for the benefit of the US and its corporations. That is the real bottom line. So you have to ask, how does the US government and the big money and US corporations benefit from this chaos?

When in doubt, follow the money. [There is no doubt.] Wonder what resources the Ukraine has that the big Corps want?
 
 
+4 # Helen Marshall 2014-04-07 14:49
IT's not Ukraine's resources so much as its position on the map, one more huge piece to put into place in the encirclement of Russia. Now watch the effort to bring Ukraine into NATO, allowing the neo-fascists there to invoke Article 5 and try to drag the west into war with Russia. No one seems to remember that Russia still has some nuclear warheads...
 
 
+38 # reiverpacific 2014-04-06 23:52
Same old shit.
It's OK whatever anybody says or does as long as he's "Our bad guy" (feminine context understood if you will).
The IMF has always been a patsy for dominant powers to impose their economic "Pax ----" on other nations already struggling under former Imperialist yokes. I've seen it up close and even some of the "official" (cooked to suit) clauses and figures in collusion with the equally manipulable World Bank (what an impressive -even intimidating- title for a rabid, short-sighted profiteering-fo r-elites global money laundering institution).
There is no such thing as unconditional aid in these power structures, the same that caused the problems on behalf of the ruler of whatever place and time they usurped and corrupted in the first place!
And there are no such things as humanity and compassion: just the jackboot of global domination by the blinkered grabbers and their lackeys.
 
 
+16 # caphillprof 2014-04-07 05:17
I'm with Activista. Doesn't the US with its
metastasizing plutocrats, end up just like the Ukraine?
 
 
+6 # wrknight 2014-04-07 08:53
If we're not already there, we're well on our way.
 
 
+24 # jdd 2014-04-07 06:06
I am befuddled as to why each some journalist feel the need to qualify each statement with some disavowal of Russia or Putin. Is the McCarthyite mentality still alive? The truth is that Putin is a Ruddian patriot and intellectually, morally, and in just about every way towers above Obama, as does Lavrov over Kerry in every respect. As for Crimea, it is not about Russian propaganda. Ukraine's per capita income, $4,000 vs. Russia's $8,000. tough decision. IMF is demanding 50% cut in meager Ukraine pensions, while the Crimeans will see their quadruple up to Russia's level.
 
 
+26 # RMDC 2014-04-07 06:24
The US has ALWAYS supported the oligarchs in their take over of nations. This was the case in the USSR when the US supported Boris Yeltsin and sent in the teams of experts for the economic shock therapy. The US has done this all over Latin America for more than a century.

The US is an oligarchy and wants to see its brother oligarchs rule in every nation on earth. This is really the essence of neo-conservativ ism and neo-liberalism -- empowering oligarchs and ruling elites.

It may be that the people of Ukraine will realize that they were swindled and stage another revolution to throw Yatsenyuk and his cronies out. Any elections will certainly be run on the US model -- totally rigged. Eastern Ukraine may vote to join Russia where at least Putin is an anti-oligarch. He's against the oligarchs who looted the USSR's economy under Yeltsin and the US economic advisors.
 
 
+3 # Kootenay Coyote 2014-04-07 09:39
& see today’s NY Times story,

http://www.nytimes.com/2014/04/07/world/europe/business-moguls-in-public-service-seek-to-ease-fears-in-east-ukraine.html
Business Titans Too Rich to Bribe Seek to Ease Fears in East Ukraine

in which Ukraine is urged to plunge yet more deeply into oligarchy.
 
 
+1 # jwb110 2014-04-07 10:48
Ukrainian Oligarchs, Russian Oligarchs, US Oligarchs...so what's the difference???
Maybe partitioning the Ukraine would be the easiest answer. Europe gets the western part and Russia gets the eastern part.
 
 
+9 # JackK 2014-04-07 12:21
Steve, as an old FSM buddy, I'm thanking you for this wonderful and deeply informative series of articles on the US and Ukraine, but most importantly a look at the complex systemic workings of US foreign policy.
 
 
+4 # Jack Radey 2014-04-07 18:11
As another old FSM buddy, let me echo Jack K's remarks. Not only the coverage of the Ukraine, but the articles you did on the Arab Spring and the outside forces involved in manipulating it, bear directly on the situation in the Ukraine. Putin is no prince charming, but he apparently has no intention of being rolled. And the arrogance of the neocons (Republican and Democrat) who think they are destined to rule the world... they will be in for some surprises me thinketh. Keep up the great work.
 
 
+5 # geraldom 2014-04-08 09:13
Continued hypocrisy and double-standard s by the United States and its puppet military partner in Europe, NATO.

Remember, prior to the overthrow of the democratically- elected Yanukovych government by the United States via a coup d'etat by the use of paid rioters in the streets, the United States warned the Yahukovych government not to treat the protesters harshly. The following article came out to day now that the shoe is on the other foot now that it's pro-Russian forces protesting in the streets and taking over government buildings:

http://news.yahoo.com/russia-warns-force-could-tip-ukraine-civil-war-055428164.html

There is also a rumor that the company that used to be Blackwater has forces stationed in Ukraine.

Watch the news highlights on Democracy Now being aired today, the first 15 minutes:

http://dncdn.dvlabs.com/ipod/dn2014-0408.mp4

Unlike Yanukovych, the new head of Ukraine used force to remove protesters from government buildings:

http://www.reuters.com/article/2014/04/08/us-ukraine-crisis-avakov-idUSBREA3709I20140408
 

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