Saturday, February 8, 2014

Ukraine's Perilous Path Between Merkel and Putin

A Geo-Political Scylla and Charybdis
Everyone has a cheery smile, far-away eyes and a check book.

MeanMesa: Ukarines Perilous Path between Mrkel and Putin
Rough Water: the EU and the RF's Customs Union [image]
With opportunities the Argo's Jason might have envied, Ukraine still faces a seemingly exclusive choice between two aggressively competitive courses -- and allies.  Interestingly,  in this awkward mix the Ukraine's attraction to neither enjoys much advantage from either closer geographical proximity or greater cultural similtudes.

Yet, there is history.

However, at this point the compelling attraction derived from that history depends on "how historical" the scope of its consideration will be.  Looking back through the annals of the place, there was, after all, a time when Ukraine was "more Russian" than even Russia is today.  Glimpsing at another second in the long story, Ukraine had to battle for its autonomous life amid the rapacious, colonial kingdoms in Balkan Europe when that place was inhabited by players such as the Hapsburgs, Poland and others.

When the various "pieces" of modern Ukraine were assembled 95 years ago, the Soviets had been violently in and out of Kiev and the Germans' post war capacity to "keep promises for assistance" were vaporizing in the ruins of the European economy.  In the ensuing century, those "pieces" were tediously and painfully consolidated by the typical factors -- ambition, greed, exhaustion, Xenophobic Soviet geopolitical colonialism and, perhaps most irritating among them all, inertia, isolation and neglect.

All of this history manifests itself in the present moment for Ukraine, but the action in the streets of Kiev today has far more to do with determining the future than with reconciling the chaotic past.

Ukraine Journey to Colchis - East or West - EU or Customs Union
For ancient Jason and his Argonauts, the obsession was the distant city of Colchis where he hoped to find -- and probably steal -- the "Golden Fleece."  The tale became famous thanks to the almost relentless string of supernatural hardships placed as obstacles for his journey -- all emotion drenched vagaries imposed at the whimsy of the deific residents of Olympus.

Almost ironically, the location ancient kingdom of Colchis happens to be only a
[Map source}
couple of day's voyage across the Black Sea from Yalta. Jason was not fortunate enough to have disembarked from a port in near-by Crimea and, consequently, kept having supernatural "tentacle problems" all along the way.

Too much mythology?  Here's a recap and some links.

MeanMesa: Ukraine's Perilous Path Between Merkel and Putin
Jason's ARGO [painting source]
In some versions of the story, the sirens or sea monsters, Scylla and Charybdis, represented an alternate route which could be chosen by a captain wishing to avoid "The Clashing Rocks."

"While Scylla was bathing in the sea, the jealous Circe poured a potion into the sea water which caused Scylla to transform into a monster with four eyes, six long necks equipped with grisly heads, each of which contained three rows of sharp teeth. Her body consisted of twelve tentacle-like legs and a cat's tail while four to six dog-heads ringed her waist. In this form she attacked the ships of passing sailors, seizing one of the crew with each of her heads." [Read more.]

"The sea monster Charybdis lives under a small rock on one side of a narrow channel.Three times a day, Charybdis swallows a huge amount of water, before belching it back out again, creating large whirlpools capable of dragging a ship underwater." [Read more.]

All this mythology sets the stage for the point of this post.  Ukraine is currently "making its own journey," and its route seems chillingly similar to the tale of Jason and the Argonauts.  Standing firmly on this overly poetic, flimsy platform, perhaps MeanMesa can modernize Ukraine's epic course by suggesting clear eyes and a strong hand on the rudder -- even while being hypnotized by the sirens' call which seems to come from both sides.

Putin's Gambit
 For the Ukrainian Chess Match
Creating a "Game of Thrones" from a "Game of Pawns"

We can hardly fool ourselves at this point.  Ukraine faces the avarice of the same rapacious economic forces that are now ever present here in the US, the European Union and the Russian Federation.


As the Russian Federation emerged from the dismal grey of Soviet Communism, there was the predictable "unleashing of long constrained free market" which had been so passionately proselytized by propagandists and other half blind ideological dreamers west of the Warsaw Pact.  In other words, from their dank, shadowy, Soviet hiding places, the Russian oligarchs timidly traced their first uncertain foot steps into the light  By midnight of that first day they had established a saleable sort of an obedient, hybrid democracy which was already in their death grip at the moment of its joyous birth.

These ambitious corporatists did everything possible to gain control of the Russian Federation's new government, making significant headway even after a few "bumps in the road," but events now have left the ultimate oligarch, Vladimir Putin, in the undeniable seat of "decider."  [Those of us here in the US know this position quite well from our own experience with autocrat Bush II.]

Ukraine watched as this new Russian power structure flexed its muscles during a recent, violent, corrective denouement as the "decider," irritated with a billionaire's constant complaining, quietly transformed oil magnate Khodorkovsky from the richest man in Russia to inmate on a "judicial assembly line."

At issue here is the unavoidable fact that the Russian Federation today hosts an entire cloud of surviving "Khodorkovsky's."  They have private lines to the Kremlin, plenty of Rubles and sociopathic ambitions for all sorts of things -- including Ukraine's future.  They are attracted by all reservoirs of potential opportunity no matter who might otherwise be the legitimate inheritor.

This is the way they see Ukraine.  Putin's offer of Russian billions for a devious concoction of "economic development" and "debt relief" was approved by them, the design of that assistance was engineered by them [They not only intend to benefit from Ukraine's resurrected economy but also, they already hold plenty of Ukraine's debt.] and the outcome of Ukraine's acceptance of the plan will inevitably appear on the books of their asset accounts.

This innocent, compassionate "infusion" of cash will not look like Russian Federation colonialism on the day the agreement is finalized, but five years later, it will.

"In statements that seemed aimed at avoiding further antagonism of the thousands of protesters who remain camped on the streets here, officials in Kiev and Moscow emphasized that the possibility of Ukraine joining Russia’s customs union with Belarus and Kazakhstan would not be discussed at the meeting. 

At the same time, the increasing likelihood that Russia, not the West, would bolster Ukraine, which is facing a severe economic crisis, was being viewed as a potentially significant turning point in the now more than three-week-old civil uprising here." [Read the NYT article here.]

"Ukrainian President Viktor Yanukovych proposed Friday the creation of an advisory council with representatives from Ukraine, the European Union, and the Russia-led Customs Union, Itar-Tass reported.

Yanukovych’s comments came on the heels of a meeting with President Vladimir Putin in Minsk on Thursday evening. 

'We are mutually troubled regarding trade relations with Ukraine after the creation of a free trade zone with the EU,' Yanukovych said. 'Therefore we have proposed forming a standing advisory body with Ukraine, the EU and the Customs Union.'”  [Read the Moscow Times article here.]
While it might be attractive to imagine Vladimir Putin deep in thought, exploring the subtle mechanisms of Ukraine's successful future, this would be over generous and imprudent. Vlad is currently occupied with fabricating a labyrinthine scheme to neutralize the pro-EU protesters, resuscitate the daily more lack lustre Yanukovich and patiently, quietly and, importantly, "unofficially" add Ukraine's future to the already impressive holdings of The Russian Federation's oligarchs.

The EU's Promise

The European Unions' last few decades of deceptive gentrification has imaged those corresponding to Russia's oligarchs as "bond holders."  Beyond the modified title, and a lack of attraction to Samovars,  the dangerous psychology is almost a precise duplicate.  Perhaps the most notable discrepancy is in the measure of experience.  The European "bond holders" have been "practising their trade" for centuries.

The EU's "pitch" to Ukraine is dismally similar to the destructive "economic assistance" model of the IMF in its own recent expeditions.  While discussions of the general theme of the EU's offer are manifold in current "news" releases," MeanMesa finds this article from The Economist a remarkably frank, fresh, exception amid the horde. Original links remain enabled. [Read the original Economist article here.]




Keep the door open

How Europe nearly lost Ukraine—but may yet regain it

“WE ARE not in a bidding war with Russia” is the refrain of senior Europeans whenever they talk about the turmoil in Ukraine. In fact, they sometimes are. Now events in Kiev, particularly back-handed attempts to suppress its protests by force, have given the European Union an unexpected chance to try again with the offer that went spectacularly wrong two months ago. Indeed, the EU could yet help to pull Ukraine back from civil strife and salvage its battered European ideals. 

November’s Vilnius summit with the EU’s eastern neighbours was meant to be crowned by the signing of an association agreement and all-encompassing trade deal with Ukraine. It would have extended to it most of the EU’s single-market rules. But President Viktor Yanukovych unexpectedly rejected the deal and turned instead to Russia, which had threatened to squeeze out imports and also offered a $15 billion loan and cheaper gas—all in hopes of luring Ukraine into its own Eurasian customs union.

Outraged Ukrainians took over Kiev’s Independence Square (Maidan), rather as in the Orange revolution in 2004 (also directed at Mr Yanukovych). The president’s attempts to deal with the challenge with violence only made things worse. In January Mr Yanukovych pushed through repressive legislation, copied from Russian laws, and tried to clear the streets by force. This led to bigger protests, the death of several demonstrators, concerted pressure (rather more effectively from America than from the EU) and a semi-revolt by oligarchs. Taken aback, Mr Yanukovych sacked his prime minister, offered a conditional amnesty and is now seeking a deal with his foes.

Thanks to this, the EU is back in the game. Its foreign-policy chief, Catherine Ashton, went to Kiev this week to encourage a deal between Mr Yanukovych and the opposition. So did Victoria Nuland, America’s assistant secretary of state for European affairs. The two weeks of the Sochi Olympics hosted by Russia’s president, Vladimir Putin, may offer a window for diplomacy to pull Ukraine back from what Leonid Kravchuk, a former president, has called “the brink of civil war”. Thereafter, Mr Yanukovych may feel less restrained from more violent tactics.

The Europeans disagree over what went wrong. To some, Mr Yanukovych played them as fools, using the EU deal to improve Russia’s offer. To others, the EU was wrong to insist on the release of Yulia Tymoshenko, a former prime minister jailed by Mr Yanukovych. A third theory holds that the EU offer lacked a crucial element: the promise of eventual EU membership. A fourth says the very notion of an “eastern partnership” was misconceived. It was born out of the failure in 2008 to put Ukraine and Georgia on the road to NATO membership. Extending the EU’s economic border, as opposed to NATO’s military one, was seen as less provocative. But Russia came to treat it as equally objectionable.

All these debates have now been overtaken by events. The brutishness of Mr Yanukovych and the feistiness of the protesters (despite less savoury radicals in their midst) means the key question is no longer the terms of any deal with the EU but the nature of government in Ukraine. Is Mr Yanukovych a man the EU can do business with? Little matter. Lady Ashton is focusing on a constitutional settlement to reduce the president’s authority, and possibly early elections. Was it a mistake to stake all on the flawed Mrs Tymoshenko? She is now a sideshow. The immediate issue is the proposed amnesty for jailed protesters. Did the EU make the right offer? Irrelevant for now. The association agreement has been set on one side.

Attention is now on a new economic package from the EU and the IMF. This is not necessarily dependent on the association agreement, but rather on a new government undertaking economic reform. “Our offer is easier,” says one European minister. “Our condition is that Ukraine should start fixing its economy. Russia’s condition is that Ukraine should become a vassal.

Europe’s task

None of this offers certainty that Ukraine can resolve its conflict or become a modern European democracy. Russia cares more about losing Ukraine than the EU cares about winning it. Still, the sight of protesters flying the EU’s blue flag with gold stars over the snow-covered barricades with a fervour unseen in the drizzle of Brussels should give Europeans pause for thought. If the cause of Europe has any meaning, it is surely the idea of promoting liberty and democracy, and overcoming divisions, across the continent.

It must ultimately be for Ukrainians to decide where they stand between east and west. But beyond immediate crisis management, the EU can do two things. Right now it should make clear, like the Americans, that it will impose sanctions on those who use force to steal the country’s wealth, and on oligarchs who support a rotten system. Even without Belarus-style visa bans and asset seizures, much can already be done: Schengen countries can blacklist individuals, and money-laundering rules require banks to watch out for suspicious activity in the accounts of “politically exposed persons”. In the medium term, Europe needs fully integrated energy markets and grids, including Ukraine’s, to reduce the scope for Russian blackmail.

In the longer term, Europe can give Ukrainians new hope by keeping the door open to Ukraine’s membership of the EU. True, enlargement is not a popular cause in times of crisis. But Ukraine will not become a candidate in the near future. The EU needs only to reaffirm article 49 of its own treaty: any European state that abides by European values is eligible to join. The “perspective” of membership will not solve everything. But it helps reform-minded countries to undergo wrenching economic and political change. Europe is not omnipotent. But it still offers a potent symbol to its neighbours.

After the EU's finance ministers correctly diagnosed out of control -- and economically ineffective -- government spending among its member states such as Greece, Portugal, Spain and Italy, the "ever present" bond holders were attracted to austerity like night flying mosquitoes to a bug zapper.

According to their values, any pain which could enable -- and compel -- these debtor states to maintain their interest payments were on the table.  Unhappily, the brutal, largely German, imposed form of this EU austerity remained in place long enough to mortally wound these "debt ridden economies targeted for assistance" before the first thoughts about a "different path" emerged. [After the continuing collapse of these national economies under austerity measures, we heard the first few words about "maybe considering focusing on growth."]

Let's just say that these patients were removed from the ICU, separated from their IV's and relocated to rolling gurneys in the hall way.

The "different path" idea is an important one, that is, important to Europe, but also especially important to Ukraine.

Strangely, it seems that all oligarchs, bond holders and their ilk remain tragically hypnotized by some of the very worst ideas of the thirty year old "supply side" Reagan-nomics.  This same complaint can be extended generally to the individuals and policies in those countries which, in turn, borrowed and spent all this money which now comprises the debt of these debtor nations.

All the national economies mentioned -- now including the Ukraine -- are not suffering from a "supply side" crisis.  They are suffering from a "demand side" crisis.  Their economies are facing the current dilemma due to a lack of demand.

The EU's idea of assistance for Ukraine is firmly rooted in improving "opportunities" for increased trade.  "Improving opportunities" means enhancing "supply side" possibilities.  Ironically, in The Economist article the Europeans quoted characterized the Russian offer with the term: "vassals."

They should know.
Ukraine's Third Course
Yanukovich is no Jason

Amid the passion of those in the streets of Kiev the temptation to slide into a false dualism can grow overwhelming, but history is littered with tragedies derived from absolutist type "either/or" thinking.  When the future seems to hold forth only two choices, all sorts of alternate opportunities can be too easily dispatched in the process.
This is not to say that Ukrainians have that "third option" at this moment,  but it is to say that everyone there should start thinking about what that kind of an option might be.  Further, that "everyone" means "everyone."

Ukrainians in the streets, the state police confronting them, Ukrainians who supported Yanukovich, religious Ukrainians, modern Ukrainians and even Ukranians who still sentimentally reminisce about the old Soviet times all have a "dog in this fight."  Every Ukrainian will pay a high price for not getting this right, and every Ukrainian will benefit greatly from getting this right.

MeanMesa would be callous indeed to make a shallow, prefunctory division of the players in the present conflict, but for sake of establishing "generalized interests" for a convenient reference let's say that Ukraine is divided along the lines of East and West.  This is important because any long term resolution for the interests manifest in the passion on the streets of Kiev will, of necessity, need to embrace the respective interests of both sides.

The answer required will be a blend of the corresponding advantages and disadvantages offered by both Merkel and Putin.  From what is lurking in the shadowy details of what has already been proposed one can, given sufficient motivation and effort, piece together a Ukrainian solution which might be acceptable to all parties.

Let's look at what might be "on the plate" for a new government of reconciliation -- including a reasonable bit of austerity.  Ukrainian austerity.

The whole country needs investment, but the agreeable part of that prospect pretty much ends right there.  Both "ends" of Ukraine need markets and demand.  Putin's offer includes access to a Russian demand for the products of the industrial East, while Merkel's offer centers on a European demand for products of a mercantile West.

The "rub" comes from EU's implied offer to embrace the West's as-of-yet unrealized production capacity.  The promise is that, once austerity has been imposed, the EU will open its rather deep pockets to provide the capital to develop West Ukraine into this "European style" industrialized economy.

The obvious problem is revealed in example.  "Industrialized economies" within the EU are hardly dangling the bait as attractive, successful role models.  Almost without exception, they are -- today -- still staggering forward with depressed markets, high unemployment and the stubborn investment "cash vacuum" lingering after the last attack on the global economy by the oligarchs, autocrats, bond holders and bankers.

Ukraine really doesn't need to go here.

Whether Ukraine does, in fact, "go there" will depend almost entirely on the government which emerges from the opposing forces we see in the "news."  While MeanMesa would never suggest a policy endorsing isolationism, it would be a good time to direct all development resources to domestic targets and domestic opportunities.

It is not a fact that a successful, future Ukrainian economy must be supported primarily by the export of manufactured production, yet this quiet implication seems permanently embedded in what's being proposed from both the East and the West.

If money is to be borrowed to reinforce the economy, borrow it for infrastructure.  If jobs must be created to reinforce the economy, hire Ukrainians to build infrastructure.  If there must be incentives for industrial development, target those incentives on the manufacture of goods which can be consumed by Ukrainians.

Stifle corruption -- both domestic and foreign.  Place a high priority on establishing a government that is trustworthy.  Sell reconstruction bonds to the domestic population.  Create a Ukrainian stock market and a national bank.  Done well, these can become the bulwarks of economic nationalism.  Economic nationalism, once functioning in a credible manner, will inspire Ukrainians to participate in their government, not a minor accomplishment.  [For anyone questioning the priority of that last idea, just take a hard look at what has happened to the United States.]

Finally, be aware that climate change is impacting the global food production. Next, have a look at Ukraine's flag.  That golden band represents wheat fields.  It may be the "Golden Fleece" after all. Economic theories always seem to be infatuated with industry, but that may well be a thing of the past.  The whole world is awash with industry producing products with no market.

There is nothing -- absolutely nothing -- more foundational for a demand economy than food.

God speed, Ukraine.

Скорость бог Украине

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