With Ukraine still on track to bru­tal­ize itself in com­ing years with aus­ter­i­ty poli­cies, it will be inter­est­ing to see how long it takes before the same phe­nom­e­na spread­ing across Europe of the far right achiev­ing mass appeal by seiz­ing the man­tle of an anti-EU/an­ti-cor­rup­tion/an­ti-aus­ter­i­ty move­ment spreads to Ukraine. It seems kind of inevitable at this point:

Truth-out
Ukraine’s IMF Agree­ment Could Wors­en the Coun­try’s Prob­lems
Thurs­day, 05 June 2014 09:43 By Mark Weis­brot, Cen­ter for Eco­nom­ic Pol­i­cy and Research | Report

On Sun­day May 25, the “Choco­late King” hand­i­ly won the Ukrain­ian pres­i­den­tial elec­tions in the first round. Bil­lion­aire Petro O. Poroshenko is so named because he made his for­tune in the con­fec­tionary busi­ness. The defeat­ed run­ner-up, for­mer prime min­is­ter Yulia V. Tymoshenko is some­times referred to as “the Gas Princess,” since she struck it rich in the ener­gy sec­tor. It seems that Ukraine has not yet achieved the nom­i­nal sep­a­ra­tion of oli­garchy and state that we have in the Unit­ed States, and being extreme­ly rich is almost a con­sti­tu­tion­al require­ment to run for pres­i­dent – like being at least 35 years old and a nat­ur­al-born cit­i­zen is here.

The U.S. gov­ern­ment, which has invest­ed bil­lions of dol­lars over the past 20 years to bring Ukraine into its political/military alliance in the region, seems pleased with the result. It has become stan­dard oper­at­ing pro­ce­dure to get an elect­ed gov­ern­ment as soon as pos­si­ble after a coup such as the one that top­pled the pri­or elect­ed (also super-rich) Pres­i­dent Vik­tor Yanukovych in Feb­ru­ary with help from West­ern gov­ern­ments. Yanukovych, who tried to bal­ance his gov­ern­ment between the com­pet­ing inter­ests of the U.S./EU and Rus­sia, nev­er real­ly had a chance. If he had agreed to the IMF con­di­tions, his gov­ern­ment would prob­a­bly have become at least as unpop­u­lar as it did when he turned to Rus­sia for a des­per­ate­ly-need­ed $15 bil­lion dol­lar loan.

Which brings us to today: the new gov­ern­ment of the Choco­late King is com­mit­ted to those same con­di­tions, now spelled out in an IMF agree­ment released at the end of April. I would not want to be in his shoes. After two years of almost no eco­nom­ic growth, the IMF is now pro­ject­ing a steep reces­sion for this year, with the econ­o­my shrink­ing by 5 per­cent. This is large­ly because of bud­get tight­en­ing that the gov­ern­ment has com­mit­ted to, amount­ing to about 3 per­cent of GDP over the next two years. (For com­par­i­son, think of the U.S. gov­ern­ment cut­ting $500 bil­lion, rough­ly the equiv­a­lent of the Pentagon’s annu­al base allo­ca­tion, from its bud­get over two years.) The econ­o­my is sup­posed to recov­er next year, but we have heard that before – think of Greece, or Spain, or euro­zone aus­ter­i­ty gen­er­al­ly over the past four years.

...

Ukraine’s politi­cians are start­ing to hint at a plan for deal­ing with sep­a­ratists in the east: build a giant wall:

As Ukraine mulls secu­ri­ty, some say build a wall with Rus­sia

By Tim­o­thy Her­itage

KIEV Tue Jun 17, 2014 1:00pm EDT

(Reuters) — Ukraine’s lead­ers are puz­zling over how to cut off Russ­ian sup­port for a sep­a­ratist rebel­lion in the east of the coun­try but one of its rich­est men thinks he has the answer.

Bil­lion­aire busi­ness­man Ihor Kolo­moisky has sug­gest­ed build­ing a wall along the almost 2,000 km (1,200-mile) land bor­der with Rus­sia to pre­vent fight­ers and weapons flood­ing in.

The idea may sound absurd but Kolo­moisky has offered to stump up 100 mil­lion euros ($136 mil­lion) to fund the two-meter (two-feet) high, 25–30 cm (10–12 inch) thick wall of rein­forced steel, com­plete with elec­tron­ic alarms, trench­es and mine­fields.

What’s more, it’s been done before. Israel has con­struct­ed a bar­ri­er to keep out Pales­tin­ian mil­i­tants. Chi­na built the Great Wall to stop invaders. Sovi­et-led East Ger­many erect­ed the Berlin Wall, though more to keep peo­ple in than out.

“We can take on this project from start to fin­ish,” said Alex­ei Burik, deputy head of the Dnipropetro­vsk region where Kolo­moisky is the gov­er­nor, offer­ing to lead con­struc­tion work.

Pres­i­dent Petro Poroshenko may or may not be about to build such a wall but the grow­ing dis­cus­sion of the oli­garch’s idea high­lights deep secu­ri­ty con­cerns in Ukraine, three months after Rus­sia annexed the Black Sea penin­su­la of Crimea.

The Russ­ian inva­sion of east Ukraine expect­ed by many Ukraini­ans has not come. But in sev­er­al weeks of fight­ing, pro-Russ­ian sep­a­ratists have seized a num­ber of bor­der posts, enabling them to bring in weapons and oth­er sup­plies.

Secur­ing the long and wind­ing, and noto­ri­ous­ly porous, bor­der has become Poroshenko’s most press­ing prob­lem as he tries to put down the rebel­lion and hold Ukraine togeth­er.

PUBLICITY STUNT?

Kolo­moisky, a 51-year-old bank­ing, media, ener­gy and met­al­lur­gy mag­nate with a for­tune esti­mat­ed by Forbes mag­a­zine at $1.8 bil­lion, has pre­sent­ed his plan to Poroshenko and reck­ons the wall can be built in about six months.

Some ana­lysts dis­miss the idea as a stunt.

“In the short term, it can­not be done,” said Volodymyr Fes­enko of the Pen­ta think tank. Anoth­er ana­lyst, Mykhai­lo Pohre­bin­sky, said: “This is a pub­lic rela­tions cam­paign meant to con­sol­i­date Kolo­moisky’s image as a Ukrain­ian patri­ot.”

Despite such crit­i­cism, the pro­pos­al is not being dis­missed in par­lia­ment as a crack­pot idea.

“Whether or not it is Kolo­moisky’s project, a wall will be built to defend Ukraine from Rus­si­a’s aggres­sion,” said Ivan Sto­jko, a par­lia­men­tary deputy from the Batkyvshi­na par­ty led by for­mer prime min­is­ter Yulia Tymoshenko.

Pavlo Riza­nenko, a deputy from the Udar (Punch) par­ty of for­mer box­ing cham­pi­on Vitaly Klitschko, said: “I don’t think Poroshenko has a monop­oly on this idea. It’s some­thing that should have been done long ago.”

The sight of rebels dri­ving tanks in east Ukraine last Thurs­day increased the urgency of secur­ing con­trol of the bor­der. Two days lat­er, the rebels shot down a mil­i­tary plane with a mis­sile, killing 49 ser­vice­men.

Rus­sia says it is not pro­vid­ing mil­i­tary sup­port for the rebel­lion across much of the Don­bass min­ing region. But its denials were under­mined by satel­lite pic­tures released by NATO show­ing what it said were Russ­ian tanks at a stag­ing area close to the bor­der days before sim­i­lar tanks appeared in Ukraine.

The Unit­ed States has also accused Moscow of sup­ply­ing the rebels with T‑64 tanks, MB-21 “Grad” mul­ti­ple rock­et launch­ers and oth­er mil­i­tary vehi­cles.

SECURE BORDER BEFORE TRUCE

Poroshenko, who replaced a Moscow-lean­ing pres­i­dent top­pled in Feb­ru­ary after street protests, has ordered the armed forces to secure the fron­tier and says a 250-km (160-mile) stretch of the bor­der has already been tak­en back. Once the bor­der is secure, a truce can start and peace talks begin, he said.

His com­ments sig­naled a con­tin­u­a­tion of his dual pol­i­cy of talk­ing peace while press­ing a mil­i­tary cam­paign in the east.

He wants Ukraine to demar­cate the bor­der on its own side, and build unspec­i­fied infra­struc­ture there, which could mean erect­ing fences in vil­lages that strad­dle the bor­der.

Andriy Paru­biy, the sec­re­tary of Ukraine’s Secu­ri­ty Coun­cil, esti­mat­ed Rus­sia had 16,000 sol­diers on or near the bor­der with Ukraine and 22,000 in Crimea, plus 3,500 in Moldova’s break­away Trans­d­nies­tria region to the west.

...

With peo­ple from both Tymoshenko’s and Klitschko’s par­ties back­ing some vari­ant of the the wall, it’s look­ing like a giant wall with Rus­sia could be in Ukraine’s future. Aus­ter­i­ty and a giant wall. How uplift­ing.

And, yes, Andriy Paru­biy, co-founder of Svo­bo­da, is still sec­re­tary of Ukraine’s Secu­ri­ty Coun­cil.

Here’s a won­der­ful exam­ple of the log­ic of the aus­te­ri­ans from the direc­tor of the Cen­ter for Inter­na­tion­al Trade and Eco­nom­ics at the Her­itage Foun­da­tion: Ukraine needs to slash its sub­si­dies for the poor in order to fight cor­rup­tion. Specif­i­cal­ly, the cor­rup­tion of mar­ket dis­tor­tions caused by sub­si­dies for the poor:

The Cal­i­forn­ian
Aus­ter­i­ty help Ukraine? PRO: A chance to end cor­rup­tion

Ter­ry Miller 12:03 a.m. PDT May 31, 2014

WASHINGTON – The reforms demand­ed by the Inter­na­tion­al Mon­e­tary Fund and Euro­pean Union pro­vide the best chance for Ukraine to over­come the lega­cy of social­ism and cor­rup­tion that have left its peo­ple impov­er­ished and its econ­o­my the least free in Europe.

Like any coun­try pop­u­lat­ed with real peo­ple with diverse back­grounds, needs and skills, Ukraine’s polit­i­cal and eco­nom­ic prob­lems are com­plex. They won’t be solved with quick fix­es or mag­ic bul­lets.

Here’s the prob­lem in a nut­shell. Ukraine has nev­er had an open, mar­ket-based econ­o­my.
...

You have to love the sen­ti­ment expressed: Ukraine’s a coun­try with com­pli­cat­ed prob­lems that can’t be solved with quick fix­es or mag­ic bul­lets. What it needs is an “open, mar­ket-based econ­o­my”. Yeah, that should solve every­thing.

Con­tin­u­ing...

...
From the Sovi­et era on, the basic polit­i­cal and eco­nom­ic bar­gain has been this: A small group of elites and oli­garchs have used the pow­er of the state to enrich them­selves, main­tain­ing polit­i­cal con­trol by buy­ing off the low­er class­es with a vari­ety of wage and price sub­si­dies. Lost in the shuf­fle? The mid­dle class, and any oppor­tu­ni­ty for sus­tain­able growth or advance­ment.

Such regimes are all too typ­i­cal. We’ve seen them in East­ern Europe, Rus­sia, Chi­na, the Mid­dle East, Africa, Asia and Latin Amer­i­ca – any­where the fan­tasies of Marx­ist social­ism have held sway. They can sus­tain them­selves for a while, burn­ing up the eco­nom­ic and social cap­i­tal of the past, but the inter­nal con­tra­dic­tions lead inevitably to reduced pro­duc­tiv­i­ty, eco­nom­ic stag­na­tion and social upheaval. Ukraine is but the most vivid cur­rent exam­ple.

Enter the IMF and the EU, with demands to break with the cor­rup­tion of the past and inte­grate Ukraine’s econ­o­my with the mod­ern world. This in exchange for finan­cial assis­tance that may total $30 bil­lion or more.

Crit­ics see in such assis­tance a form of eco­nom­ic black­mail and forced aus­ter­i­ty that will hurt the poor. And yet they offer no alter­na­tive beyond per­pet­u­al depen­den­cy for Ukraine, con­sign­ing it to become a sort of ward of the West.

The IMF and EU at least offer a path to a more pros­per­ous and inde­pen­dent future. The reforms they advo­cate are aimed at cre­at­ing a free enter­prise-based econ­o­my that can inte­grate suc­cess­ful­ly in the mod­ern glob­al mar­ket.

Above all, this means get­ting the prices right. Ukraini­ans have been pay­ing $85 for one thou­sand cubic meters of nat­ur­al gas ver­sus the more typ­i­cal $400-$500 else­where in the region. Wage rates for the poor have been set by the gov­ern­ment to rise faster than pro­duc­tiv­i­ty. Exchange rates have been pegged arti­fi­cial­ly high, sub­si­diz­ing con­sump­tion at the expense of invest­ment and growth.

Undo­ing these dis­tor­tions will be hard. No doubt it hurts those who have been heav­i­ly sub­si­dized in the past to pay some­thing approach­ing a more typ­i­cal mar­ket price for vital com­modi­ties.

Pro­duc­tiv­i­ty increas­es require real changes to edu­ca­tion, train­ing and lifestyles that can be dif­fi­cult. Still, unless the arti­fi­cial con­di­tions cre­at­ed by gov­ern­ment poli­cies are removed, there will be no pos­si­bil­i­ty for Ukraini­ans to com­pete effec­tive­ly in Europe and attain a stan­dard of liv­ing more typ­i­cal of the region.

Ide­al­ly, the dif­fi­cult reforms required in a coun­try like Ukraine would be under­tak­en grad­u­al­ly over decades. For Ukraine, they should have start­ed in 1991. They did­n’t. Lead­er­ship mat­ters, and Ukraine’s post-inde­pen­dence lead­ers had nei­ther the skill nor the will to imple­ment the nec­es­sary reforms. Now the coun­try’s new lead­ers have to act in a cri­sis atmos­phere with Crimea lost, Sovi­et troops massed in the east and cred­i­tors knock­ing at the door. This com­pounds the dif­fi­cul­ty, but pro­vides no excuse for inac­tion.

...

Here’s a won­der­ful exam­ple of the log­ic of the aus­te­ri­ans from the direc­tor of the Cen­ter for Inter­na­tion­al Trade and Eco­nom­ics at the Her­itage Foun­da­tion: Ukraine needs to slash its sub­si­dies for the poor in order to fight cor­rup­tion. Specif­i­cal­ly, the cor­rup­tion of mar­ket dis­tor­tions caused by sub­si­dies for the poor:

http://www.algemeiner.com/2014/06/24/ukraine-jewish-billionaires-batallion-sent-to-fight-pro-russian-militias/

Ukraine: Batal­lion Backed by Jew­ish Bil­lion­aire Sent to Fight Pro-Russ­ian Mili­tias
June 24, 2014 4:45 pm 2 com­ments
Author: Dave Ben­der

Despite cease-fire dec­la­ra­tions, pro-Ukrain­ian and pro-Russ­ian mili­tias are still report­ed­ly clash­ing at sev­er­al loca­tions in south-east­ern Ukraine.

Among those going into bat­tle from the Ukrain­ian side are some 500 trained fight­ers in the self-declared Azov bat­tal­ion, backed by Jew­ish ener­gy mag­nate and Dnipropetro­vsk region gov­er­nor, Igor Kolo­moisky, accord­ing to Israel’s Ma’ariv dai­ly.

A Ukrain­ian mil­i­tary spokesman said pro-Russ­ian sep­a­ratists on Tues­day opened fire at Ukrain­ian army posi­tions in the Don­bass region and van­dals blew up rail­way tracks in Logan­sk in order to impede rail traf­fic in the area.

A source at Ukraine’s Nation­al Secu­ri­ty and Defense Coun­cil, cit­ed by Voice of Rus­sia, claimed that “Kolo­moisky is the most out­spo­ken oppo­nent of the plan on set­tling the sit­u­a­tion in the East of Ukraine.”

In April, Kolo­moisky placed a $10,000 boun­ty on the head of any Russ­ian “sabo­teur,” caught, accord­ing to the UK’s The Guardian, which added that turn­ing over a grenade launch­er to Kiev author­i­ties would net find­ers $2,000, and $1,500 for every heavy machine gun hand­ed in.

Mean­while, on June 21, Russia’s Inves­tiga­tive Com­mit­tee (IC) ruled to indict Kolo­moisky and par­lia­ment-appoint­ed Inte­ri­or Min­is­ter Arsen Avakov on war crimes charges, accord­ing to Russia’s Itar-Tass News Agency.

“In the near future the inves­ti­ga­tors will put Avakov and Kolo­moisky on the inter­na­tion­al want­ed list and request a court war­rant for their arrest,” accord­ing to IC spokesman Vladimir Markin

On Mon­day, Amer­i­can Pres­i­dent Barack Oba­ma spoke with Russ­ian coun­ter­part Pres­i­dent Vladimir Putin, call­ing on the lat­ter to sup­port efforts to defuse ten­sions in the area or face sanc­tions, the White House said, accord­ing to Voice of Amer­i­ca.

“Rus­sia will face addi­tion­al costs if we do not see con­crete actions to de-esca­late the sit­u­a­tion,” White House Spokesman Josh Earnest told reporters.

“The pres­i­dent called upon Pres­i­dent Putin to press the sep­a­ratists to rec­og­nize and abide by the cease­fire and to halt the flow of weapons and mate­r­i­al across its bor­der into Ukraine,” Earnest said.

“The pres­i­dent empha­sized that words must be accom­pa­nied by actions and that the Unit­ed States remains pre­pared to impose addi­tion­al sanc­tions should cir­cum­stances war­rant, in coor­di­na­tion with our allies and part­ners,” he said, accord­ing to a Reuters report.

Good luck with that:

UPDATE 2‑Ukraine appeals to IMF over cost of con­flict in east

Wed Jun 25, 2014 7:58am EDT

(Reuters) — Ukraine asked the IMF on Wednes­day to take into account the extra finan­cial bur­den of fight­ing an insur­gency in the east as it decides on fur­ther dis­burse­ment of aid under a $17 bil­lion bailout pro­gramme.

The ex-Sovi­et repub­lic received a first tranche of about $3.2 bil­lion from a two-year aid pack­age to shore up deplet­ed for­eign cur­ren­cy reserves and sup­port the state bud­get. An Inter­na­tion­al Mon­e­tary Fund mis­sion is now in Kiev to review eco­nom­ic per­for­mance before dis­burs­ing a sec­ond slice of aid.

Prime Min­is­ter Arse­ny Yat­se­niuk said on Wednes­day that he had “fair­ly pos­i­tive hopes” that Ukraine would receive the sec­ond tranche because the gov­ern­ment was ful­fill­ing all nec­es­sary cri­te­ria.

But he added that he hoped the Fund would take into account the strain on the state bud­get caused by unfore­seen defence expen­di­ture in the con­flict with pro-Russ­ian rebels in the east.

“At the start of talks with the IMF ... nobody was expect­ing such large expen­di­ture on defence and secu­ri­ty,” Yat­se­niuk told a gov­ern­ment meet­ing.

“Our part­ners from the IMF will take into account all the new chal­lenges and com­plex­i­ties that exist in Ukraine,” he said.

The two main regions of the rebel upris­ing, around Donet­sk and Luhan­sk, togeth­er account for near­ly 18 per­cent of Ukrain­ian gross domes­tic prod­uct (GDP).

To qual­i­fy for IMF aid, Ukraine agreed to abide by con­di­tions includ­ing meet­ing deficit-reduc­tion tar­gets, rais­ing the price of gas to house­holds and indus­try and allow­ing the nation­al cur­ren­cy, the hryv­nia, to float.

“I have fair­ly pos­i­tive hopes. We are ful­fill­ing all the cri­te­ria despite all the dif­fi­cul­ties,” Yat­se­niuk said.

...

Notice that Yat­se­niuk “fair­ly pos­i­tive hopes” were sim­ply the hopes that Ukraine would recieve the sec­ond tranche of the $17 bil­lion ‘bailout’/austerity pack­age under the exist­ing agree­ment. They weren’t hopes that the IMF would actu­al­ly let up on its aus­ter­i­ty treat­ment.

So how hope­full should Ukraini­ans be that the IMF will actu­al­ly ease up on the aus­ter­i­ty and make their lives bet­ter? That prob­a­bly depends quite a bit on the indi­vid­ual cit­i­zens. More specif­i­cal­ly, it prob­a­bly depends on their cur­rent socioe­co­nom­ic sta­tus:

One Ukrain­ian Oli­garch Is Lov­ing The IMF’s Emer­gency Liq­uid­i­ty Assis­tance
Dances With Bears

John Helmer, Dances With Bears

Jun. 25, 2014, 10:43 AM

The Ukrain­ian rev­o­lu­tion has been very bad for busi­ness in the coun­try. But for Igor Kolomoisky’s Pri­vat­bank there has been com­pen­sa­tion of almost a bil­lion dol­lars in state funds: pub­licly, rival Ukrain­ian com­mer­cial banks call that favoritism; pri­vate­ly, Ukrain­ian busi­ness as usu­al.

Pri­vat­bank is Ukraine’s largest com­mer­cial bank. Since the replace­ment of the Ukrain­ian Gov­ern­ment in Feb­ru­ary, and the start of the Inter­na­tion­al Mon­e­tary Fund’s (IMF) finan­cial aid pro­gramme in April, Pri­vat­bank has been the largest ben­e­fi­cia­ry of what the IMF and the Ukrain­ian Min­istry of Finance are call­ing Emer­gency Liq­uid­i­ty Assis­tance (ELA) to the country’s banks.

Pub­lished mea­sure­ments of Privatbank’s share of ELA range from 36% to more than 40% of the addi­tion­al financ­ing which has flowed out of Ukrain­ian state funds into the com­mer­cial banks. Just how much Kolo­moisky ben­e­fits, along with relat­ed com­pa­nies to which Pri­vat­bank lends much of its loan book, is one of the con­trol oper­a­tions being per­formed this week, as the IMF’s Ukraine mis­sion starts its first inspec­tion since the IMF trans­ferred $3.2 bil­lion to the Nation­al Bank of Ukraine on May 7.

...

@Vanfield: It’s worth not­ing that Igor Kolo­moisky, the oli­garch field­ing his own mili­tia, is the same oli­garch that owns the bank get­ting ~40% of the IMF’s “emer­gency liq­uid­i­ty funds”. Imag­ine that.