Ukrainian Chess

By Peter Boone and Simon Johnson

U.S. Secretary of State John Kerry arrived in Kiev on Tuesday.  The Obama administration is feeling real pressure from across the political spectrum to “do something”, but the US has no military options and little by way of meaningful financial assistance it can offer to Ukraine.  The $1 billion in loan guarantees offered today by Mr. Kerry means very little.

Millions of people have a great deal to lose if the situation gets out of control, and the Russian leadership is behaving in an unpredictable manner.  The sharp drop in the Russian stock market index on Monday morning, alongside an emergency hike in interest rates by the Central Bank, demonstrates that Russia’s financial elite was also caught completely off guard.

Mr. Kerry can and has made threats, but it would be better to join the Europeans in helping to calm the situation.  There is a completely reasonable and peaceful path to a solution available, but only if everyone wants to avoid a major conflict.

The alternative to peace will be ugly.  Many Russians believe that the Maidan uprising will negatively the rights of ethnic Russians in Ukraine.  The fact that the new authorities in Kiev quickly sought to repeal Russian as an official second language inflamed these fears (the interim president, Oleksandr Turchynov, vetoed the proposed law on Sunday). Russian President Vladimir Putin will not stand by quietly if ethnic Russians protest and such protests lead to violence.  The borders of Ukraine may be redrawn, and the ensuing conflict would be painful for all involved.

Russia will pay a high cost for its unilateral intervention in Crimea.  Many in western Ukraine have been further alienated, while some Russian-speaking Ukrainians and ethnic Russians in Eastern Ukraine will not like the bullying tactics.  But the big Russian choice lies ahead: Putin can heed “calls” to bring his military further into Eastern Ukraine (a threat articulated in public by one of his aides in September), or he can work with the EU, the US, and all Ukrainians to seek out a more democratic outcome.

Which way this situation develops will depend on three factors.

First, Ukraine’s established politicians have spent the last two decades playing off the US and Russia, and extracting resources from both sides.  Corruption among this group is pervasive; in no sense have they managed Ukraine for its people.

The genuine Ukrainian street revolution is against the political elite most closely aligned with Yanukovych.  But do not get too starry eyed about new democrats already taking over – the people now holding the reins of power have been prominent before.

Second, the Russians have what they see as legitimate security concerns.  They are Ukraine’s largest trading partner, they transport a lot of natural gas across Ukraine through soviet-built pipelines, and their Black Sea Fleet – based in Crimea – is seen as a major strategic asset.  The Russians sell their gas cheaply to Ukraine.  They have repeatedly forgiven large arrears on payments and ignored gas gone missing in transit.  It is naïve to think Russian interests can now be ignored in a “winner take all” victory for the opposition.

Third, with the ouster of President Viktor Yanukovych, pro-Russian forces lost a big round.  But the current pro-western forces are unlikely to remain strong and undivided.  The pro-Western 2004 “Orange Revolution” rapidly collapsed with accusations of corruption and betrayal amongst partners – leading ultimately to Yanukovych’s election in 2010.

The appointment in recent days of three rich Ukrainian businessmen to the Ministry of the Interior and to key gubernatorial positions suggests the fight against corruption will be uphill.

Mr. Kerry should push for more representative government in Ukraine.  There need to be elections, including for the presidency (currently scheduled for May) and for parliament.  And there needs to be a negotiation – involving Europe, the U.S., and Russia, as well as Ukrainians – over how these elections will be managed so they are fair and can ensure all ethnic groups in Ukraine are represented in future government.  This could involve constitutional reform, to be approved by a national referendum.

Some Europeans and Ukrainian officials are suggesting the EU association agreement (EUAA) should be signed immediately.  Rapid accession prior to establishing a more representative political process would be a mistake.  Implementing the EUAA demands years of legislative work that will bring Ukraine’s laws closer to Europe’s legal framework.  Such long-term reforms can’t be managed or promised by a government lacking a broad mandate, and one that only recently toppled an elected President.

Mr. Kerry is not in a position to provide generous loans, and money will not be forthcoming from Europe, but large funds are not needed.  The International Monetary Fund can lend the amounts needed to refinance its own debts and to build some foreign exchange reserves as a way to build confidence.  Domestic bonds are largely held by domestic banks, and those can be rolled over and refinanced if the authorities work with the banks on a plan.

Most importantly, the Ukrainians should end their dependence on cheap Russian gas by agreeing to pay market prices going forward.  They need to pass these prices on to local customers, effectively ending subsidies and reducing the budget deficit. Ukraine needs to stop running budget deficits that can’t be safely financed at home. For now, that means balancing the budget.

All this is not enough to create a more dynamic and prosperous Ukraine, but at least the benefits to corrupt Ukrainian politicians from playing off East and West will have been reduced, and a new representative, elected regime will be in place.

28 thoughts on “Ukrainian Chess”

  1. Thank you for the article, however. It would have been a much better article if the authors had researched their subject matter a bit more thoroughly. As an example, while it’s debatable whether it’d be wise to sign the UE association agreement before the upcoming elections, all the prerequisite legal work was already at the end of last year.
    By November, when Yanukovich suddenly backed away from signing the association agreement, the only outstanding issue was the ongoing incarceration of Ms Timoshenko, who has now been released.
    And the mention of “cheap Russian gas” seems puzzling, since for most of the past 5 years they’ve been paying for it far more than the Germans. It’s also worth noting that most of the gas delivered to Germany from Russia is delivered through Ukrainian pipelines.

  3. Long term, the Russian actions are highly detrimental to their own economic future. Economic relationships between developed nations and Russia depend on investors having confidence that Russia is entering the modern era and that outsiders can depend on having their interests respected. No confidence means very little investment and very little credit. In the short term, Putin seems to have the upper hand. In the long term, anyone with money will say, “I’m not sure I can rely on you. I’ll take my business elsewhere.” No one wants to do business with someone when they have a pretty good idea that they will get screwed somewhere along the road.

  4. Well, under a 1994 agreement (signed by Bill Clinton) we’re bound to guarantee Ukraine’s territorial integrity. Anyone want to bet against Sarah Palin’s prediction that Obama wouldn’t be up to it?

  5. http://rt.com/op-edge/democracy-on-retreat-europe-ukraine-608/

    Blackwater mercs bit off more than they can chew – it’s WEIRD that buttoning down nuclear subs so that mercs can’t steal them is being met with psychobabble such as “Putin is in another world”. Yeah, so he wasn’t properly distracted with gay rights and noticed the mercs coming through Ukraine – that IS how mercs pay themselves these days – it’s how Prince Blackwater of Detroit rolls – take it ALL….

    Back to “rule of law”, it kinda makes you question why the RECENT elections in the Ukraine could not be secured by hooliganists to get their person in office…..oh, that’s right, never mind – the banksters turned on the trickle down to buy the vote…

    What CULTURE have global banksters released?

  8. “to join the Europeans in helping to calm the situation”
    Europe, i.e. Germany, is not at all helping to calm the situation. Angela Merkel’s party provided “political training” and funded some of the opposition right-wing parties, namely the former boxer Vitali Klitschko spent a period in Germany under Merkel’s party supervision.
    Germany has been in the last years throwing stones at a sleeping bear (some kind of Merkelian WW2 complex?). Debt is the “new” domination tool in Europe and the Ukraine is another perfect victim for the German bank-finance ruling elite. The probable potential outcomes are great for Germany: a new divided and highly indebted country, ready to receive a usurious bailout by German banks and opened to German exports; civil war and the German industry makes a fortune out of it.

  10. @A.Alm – the new “capitalism”, bankster style, is based on psychobabble and sanctions, perfected over 40 years in wiping out the “middle class” in USA and is now exported around the world. Blathering pundit sycophants presenting 24/7 propaganda on all communication channels, especially the internet where links to certain historic “facts” have disappeared from google searches in the last couple of days, openly admit that they want to ruin the Russian economy.

    Well, at least they stopped wearing the high moral ground mask. Psychobabble works much better. Wanting to deliver maximum hurt on others is NOT a psychological complex. Any reaction of defending against hurt is dismissed as “the person has gone insane”.

    Love the whiplash to “retirement”. Scroll down to read the posting about how every household in USA lost, on average, 50K of their wealth through long term unemployment….poof, a fact not taken into account now!

    Crap data when 40 million 50+ year olds are slated for overdose/suicide on heroin from Afghanistan…which is why they are not counted in any other “economic data”…

    Iniquity. Pure iniquity.

  11. Justice Integrity Project http://www.justice-integrity.org/

    New Ukrainian Official Urges Chechen Terrorist To Act Against Russia
    Posted: 02 Mar 2014 04:56 AM PST
    [Quoted excerpt]
    “The Ukraine’s new deputy national security director urged March 1 that Russia’s most feared terrorist take action against their mutual opponent.
    Doku UmarovIn a shocking statement largely ignored by the Western media, Dmitry Yarosh asked the fugitive Chechen Doku Umarov to take advantage of the “unique chance to win” arising from disturbances in the Ukraine. Yarosh was appointed to the Ukraine’s new government after leading the Right Sector group of ultra-rightists, perhaps the best organized and otherwise most effective of the street fighters who topped the Ukraine’s government last week.
    Umarow, described as Russia’s equivalent to Osama bin Laden, has not been reported seen or heard since last summer, when he urged terror attacks to prevent the 2014 Winter Olympics in Sochi”

  15. By Anna Mulrine, Staff writer / March 4, 2014 at 4:41 pm EST
    Washington
    [excerpt]
    “While calls mount on Capitol Hill to robustly punish Russia for its incursion into Crimea, some officials in the back halls of the Pentagon are privately pushing for restraint.
    That’s because senior US military officials are well aware that a key supply line in and out of Afghanistan runs through Russia.
    That supply line, known as the Northern Distribution Network, or NDN, brings food, water, and building materials that keep US troops in Afghanistan fed and America’s longest war going.
    Negotiating the NDN was a labor-intensive endeavor, and the Pentagon does not want to lose it, particularly as the spring fighting season in Afghanistan is set to begin soon.”

    read more:The Christian Science Monitor – CSMonitor.com
    Punish Russia? Why some Pentagon officials would prefer restraint
    The crisis in Ukraine has elicited tough talk from Capitol Hill, but in the back halls of the Pentagon, some officials are focused on a key supply line to Afghanistan that runs through Russia.

  16. http://search.aol.com/aol/image?q=russian+gas+pipelines+through+the+Ukraine&v_t=webmail-searchbox
    Pick a map!
    Russian gas pipelines through the Ukraine to Europe, the western extension of the Trans Siberian network
    ===============================
    http://www.theguardian.com/world/2014/mar/03/europes-gas-supply-ukraine-crisis-russsia-pipelines
    The Guardian: Ukraine Jon Henley
    “Is Europe’s gas supply threatened by the Ukraine crisis?
    Russia supplies about 30% of Europe’s gas – should we be worried? John Henley reports….

  17. http://www.thirteen.org/programs/pbs-newshour/#how-should-us-respond-to-moscows-military-move-in-crimea

    How should U.S. respond to Moscow’s military move in Crimea?
    How damaging is Russia’s recent activity in Crimea to Russia’s long-term relationship with the West? Is the current tension adding momentum toward “a new Cold War divide”? Gwen Ifill gets two views from Stephen Cohen of New York University and Michael McFaul, former U.S. ambassador to Russia on the build up to Russia sending troops into Ukraine and how the U.S. should react.
    ======================================================================
    (1) The ambassador that propagates the cover story of distraction over the political reality.

    Michael McFaul, former U.S. ambassador to Russia was also on Charlie Rose where 3 official versions plotted a uncontested version of official narrative that has been pushed over the country with mass media sound bites.

    (Later from PBS, on the late night Charlie Rose show it is interesting that Mr. McFaul now makes sure to include Georgia in his roundup of “cirminal interventions” that he associates with Putin’s violent obsessions rather than border security interests. All to frame the Ukrainian situation as purely an obsessive act by a desperate Putin. McCain actually initiates and leads the way for the Charlie Rose war drum and it is not even worth reviewing the stupidity he put on the table for the audience. The appeals to irrational power politics that he advocates depend entirely upon a 1950 world view and extreme ignorance of current global interdependence. Stephen cohen, apparently, was not invited to the Rose interviews and it is presented literally like a strategic think tank war room officiated by Charlie Rose’s leading demeanor).

    More important, and the reason for this e-mail:
    (2) A neutral (NYU & Princeton: Stephen Cohen) summary overview based on objective reality. It is worth watching and is the only counterpoint put against the PBS presentation of main stream media’s official dumb down version.

  18. What do American’s know about the Ukraine? Nothing. Did you know that the interest in their resources was at the heart of this fiasco? Were you aware that the so called will of the Ukraine was actually established by elections that are now dismissed and ignored in favor of an illegitimate government? That this government now called for terrorism against the Olympics Justice Integrity Project http://www.justice-integrity.org/
    New Ukrainian Official Urges Chechen Terrorist To Act Against Russia
    Posted: 02 Mar 2014 04:56 AM PST
    That International Financial Elites Change Governments to Implement Austerity http://www.counterpunch.org/2014/02/28/how-international-financial-elites-change-governments-to-implement-austerity/ Feb 28-Mar 02, 2014 Global War on the 99%. Or that ultra-right fascist political groups were brought from outside the Ukraine to orchestrate unrest and destabilize the elected government: http://library.fes.de/pdf-files/id-moe/09407.pdf INTERNATIONAL POLICY ANALYSIS
    MRIDULA GHOSH October 2012; all evaluated from neurtal sectors that are not looking to support Putin or even Russia but are simply reporting real time events in the Ukraine.
    I don’t call that Un-American or unpatriotic and we are not living in the 1950s., I call informed and morally engaged truth seeking a professionally ethical necesity when lives are seriously on the line and the shadow of a cold war tension has been revived by greedy interests on this planet that have been ripping people off for the past decade right under our noses. We have managed to make a devil like Putin look like a saint!
    Mar 4th 2014 7:15AM

  20. From the UK:http://www.channel4.com/news/ukraine-catherine-ashton-phone-shoot-maidan-bugged-leaked

    Wednesday 05 March 2014 Ukraine , World
    British EU chief hears Ukraine shooting claim in bugged call

    “In a leaked phone call, believed to be between EU foreign policy chief Cathy Ashton and Estonia’s foreign minister, it is claimed Ukraine protesters were shot on the orders of their own leaders.”
    [and]
    “Western media, it has been argued, has turned a blind eye to the extreme right wing elements in Kiev’s protests.”
    (read the full report: http://www.channel4.com/news/ukraine-catherine-ashton-phone-shoot-maidan-bugged-leaked)

  22. Thanks for the links, Bruce.

    As this latest weapon of mass distraction goes on – notice the Wall Street rally today because the non-counted long term unemployed has finally reached the target of – what 40-50 million born and bred USA citizens? – because there are fewer people applying for first time unemployment benefits….? Good news! Hiring slowed down!

    More misery for others = More $$$$ for ME ME ME

    Trying to “martha stewart” Putin with puerile Koch-sucker media schticks (psychobabble and sanctions) and with USA War Lords firmly supporting the Opium Drug Lords who wanted to steal a nuke or two from Crimea – well, that’s the banksters-in-charge NWO, right?

    Wait until your average “slav” is on the receiving end of the bankster “sanctions” (“STEAL IT ALL!”), Putin won’t need any “military actions”, they’re already refugee-ing east to get away from the hooligan Nihilists

    Iniquity. Pure iniquity.

    This will turn out to be so revealing of THEIR NWO plans, that only good will come out of it….stay tuned….

    Never bending my knee to global war/drug/slave lords – they’re NOT COUNTING how many people have vowed that, are they?

  23. @Annie: Thanks! history is ignored in all this macho breast beating to distract the blunders now being turned over to high tension wire acts. Political theater is masking the extreme danger of what is essentially a border war without armies (yet). Your article link above was right http://rt.com/op-edge/democracy-on-retreat-europe-ukraine-608/. It is a kind of de-mockery of democracy where controlled mob rules and the media is meant for hoodwinking us fools. It is amazing how it is all contained, even while it is running absolutely out of control. Neither side really wants the entire cat out of the bag! That…THAT!…would be much too dangerous. Imagine if the citizens of the world knew the real truth of the Big Game?

    Since we are on the subject, perhaps the greatest chapter in this “great game” scenario goes back, not to eastern Europe, but to Asia and the events from Indonesia: Shall we review?

    Look particularly at the coverage from the 1960s Indonesia starting @15:20 to 25:30 minutes. There is more on the aftermath and subsequent history, but the early days are critical to current history.
    This is the time Obama was there, and his father in law worked with Suharto’s government.
    John Pilger – The New Rulers Of The World [2001]
    [Excerpt from summary text on youtube:
    ” He also recounts the previously untold story of how globalisation in Asia had begun in Indonesia and how Western politicians and businessmen sponsored the dictator General Suharto, who brutally seized power in the mid-1960s. “The great sweatshops and banks and luxury hotels in Indonesia were built on the mass murder of as many as one million people, an episode the West would prefer to forget,” he reveals. “Within a year of the bloodbath, Indonesia’s economy was effectively redesigned in America, giving the West access to vast mineral wealth, markets and cheap labour – what President Nixon called the greatest prize in Asia.”

    THE NEW RULES OF THE WORLD (10 minutes)
    (basically an excerpt from the larger history given above).
    ————————
    and a little background followup:
    Indonesia, the nation under President Sukarno in 1955
    by MichaelRogge
    2 years ago 259,331 views
    … ” class=”yt-ui-ellipsis-wrapper”
    Some ten years after president Sukarno declared its independence life in all parts of Indonesia is taking its normal course. Alas, his …
    Mass Grave in Indonesia 1-2

    Meidi Hartono Meidi Hartono·10 videos
    Soeharto: The Untold Story
    by Antan Azzameen 9:59
    Mass Grave in Indonesia 1-29:18
    Mass Grave in Indonesia 2-2
    View full playlist (19 videos)
    ========================================
    search pages: complete listing youtube:
    http://www.youtube.com/results?search_query=suharto%20documentary&sm=1

  24. History doesn’t just repeat itself,…it is a path dependent recapitulation \…guaranteed power succession that mocks history under the guise of realism.

  26. oh, cry me a river, Anonymouse – “Arab” leaders have clean hands and no megalomaniac ambitions????

    “…..In addition, just as in the Afghan war against the Soviet Union in the previous decade, the ISI looked to Saudi intelligence to provide the funding for the Taliban, and the ties between the ISI and Saudi intelligence grew much closer.[10] The Taliban’s rise to power in Afghanistan was also aided by the CIA, which worked with the Pakistani ISI.[11]…..”

    http://www.geopoliticalmonitor.com/afghan-heroin-the-cia

    Blackwater-like mercenary business models D E P E N D on perpetual war…and since “austerity” is on the table for them, too, – no more TRILLION $$$$ wars since 480 USA citizens are worth 2.08 TRILLION (they got theirs) and the 7 billion global work force (slaves) is in the 70-100 IQ range, the only way to get the nuke stuff is to steal it….

    Closer to home, the LARGEST Koch-sucker – Governor Christie – is NEVER going to get out from under the mountain of civil suits being filed against him for the way he and his Gen X HOOLIGANS infiltrated REAL 501c’s in NJ to “privatize” them….finally got the name I needed, the “boss”…the self-proclaimed “chosen ones” have been busy little bees in the northeast since WWII immigration days….

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