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Beyond Saber Rattling: Who Bails Out Ukraine?

Will Russia or the West bail out Ukraine’s economy?

Credit: artjazz -


  • #Ukraine cannot pay off and refinance its debts without large-scale aid: some $20 billion to $25 billion.
  • #Ukraine’s record as the world’s worst-performing industrial economy over the last 20 years created this crisis.
  • EU-US/IMF reforms should lead to better economic times down the road for #Ukraine.

The crisis over Ukraine is quickly becoming a geostrategic conflict. As Vladimir Putin maneuvers to restore Russia’s right to behave with a superpower’s impunity – particularly in its own backyard – the West pushes back.

But economic forces also have shaped this confrontation, especially Ukraine’s record as the world’s worst-performing industrial economy over the last 20 years.

It was popular discontent with this disastrous performance that drove the recent dissent. This, in turn, triggered a bloody response from Viktor Yanukovich. His response consolidated the opposition – and ultimately cost Yanukovich his job.

Beyond this week’s political and military maneuvers, the outstanding question is: Who will bail out the Ukrainian economy? Russia, or the EU and the United States? A bailout will be the price of drawing Ukraine into one of the two trading systems on offer.

Stated simply, Ukraine is the economic equivalent of a failed state. After gaining independence in 1991, the country moved briefly to liberalize its economy along the same lines as most of Eastern and Central Europe.

However, Ukraine soon jettisoned its reforms in favor of the state-oligarch model also evolving in Russia. Some twenty years later, Ukraine’s GDP has shrunk 30%.

Keeping poor company

Even Russia’s sorry economy is 20% bigger than it was in 1991. Meanwhile, Poland’s economy, which looked much like Ukraine’s in 1991, grew 130% over the same period.

Ukraine’s economic performance has been so terrible and for so long that its sovereign debt issues are now considered the equivalent of junk bonds.

Even before the crisis, Ukraine’s credit rating was worse than Greece’s — no small feat. And it was no better than that of Argentina, a global financial pariah for its mismanaged debt defaults and summary expropriations of foreign-owned companies.

Ukraine’s debts soon come due, with some $15 billion in sovereign bonds maturing this year and another $15 billion in 2015. With a current account deficit equal to 8% of its GDP, Ukraine cannot pay off and refinance those debts without large-scale aid — some $20 billion to $25 billion — and affiliating itself with a larger trading system.

Which way to turn?

An economic and trade alliance with Russia would deliver the bailout, but with little prospects of improving the underlying economy.

The EU and the United States (through the IMF) also are prepared to provide the bailout, if the Ukrainian government will accept far-reaching economic reforms. The EU-US/IMF reforms should lead to better economic times down the road.

But they also would mean more short-term hardships for ordinary Ukrainians. That’s why Yanukovich sided with Putin: He feared that he would lose his grip on power if times got even worse. Of course, he lost power anyway.

With a new, pro-Western government in charge in Kiev, Ukraine’s fate may well lie in the hands of Europe and the United States. Their choice is simple to state, if difficult to execute: Do they put sufficient economic and diplomatic pressure on Putin, to convince him to pocket his own bailout – and let the West pick up the pieces?

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About Robert J. Shapiro

Robert J. Shapiro is co-founder and chairman of Sonecon, LLC.

Responses to “Beyond Saber Rattling: Who Bails Out Ukraine?”

Archived Comments.

  1. On March 7, 2014 at 10:44 am arbeee responded with... #

    Of course it has come to light for those that might have thought otherwise, that it was the opposition forces that had sharp shooters shooting the protesters and the police officers alike. The hinge pin charge that Yanukovych was shooting his own people has been proven false and it further lends to the illegitimacy of the violent coup overthrowing the democratically elected president by force.

  2. On March 7, 2014 at 10:51 am arbeee responded with... #

    This is something I wrote as a counterpoint to some of the western spin referencing the cost and who pays.

    Don’t believe what you are hearing. The rosy western view of
    the inevitable outcome of the Ukrainian crisis is way off the mark, in my
    opinion. Let’s be clear. It was not the Russians who interfered in the internal
    affairs of the Ukraine. It was the west that fomented the overthrow of the legitimate government. The west created a sink hole and fell in by supporting a bunch of rabid extreme rightists in their violent overthrow of the democratically elected president of
    Ukraine; all of one year before there was to be a Presidential election. Remember hawkish Senator McCain and EU’s Catherine Nashton and our Foreign Affairs Minister John Baird standing shoulder to shoulder with known neo-Nazis opposition leaders, lending encouragement to the ugly protests that were ongoing attempting to
    overthrow the government – which they did.

    Yanukovych was democratically elected President of Ukraine
    in 2010 national elections which EU, Canadian and even Israelis election
    observers said were legitimate although not perfect. It’s hard to imagine that
    any constitutional lawyers in their right mind would declare the new Kiev regime legitimate.More importantly it is highly unlikely they have the support
    of the majority of the Ukrainian people despite western declarations otherwise.
    It’s hard to imagine that more than a fringe would support the coup regime when
    one of their first acts upon seizing power was to outlaw the Russian language
    which is spoken by more than half the country. It was quickly vetoed but not
    lost upon the Ukrainian people. Anti Jewish sentiments were expressed and they
    also talked of reinstalling nuclear weapons. Understandably the largely Russian
    speaking eastern and southern sections of Ukraine including Crimea are visibly showing their opposition by flying Russian flags; not that they want to become part of Russia but to express distaste for the Kiev regime. Even in the west it’s hard to imagine any kind of sizeable majority would support this insanity which has turned their fledgling democracy upside down.

    Putin has not invaded Ukraine but they are playing hardball not giving recognition to the new self imposed government, and declaring a readiness to act if necessary. Western threats like sanctions and expelling Russia from the G8 ring hollow with Europe dependent on Russian gas and oil. Besides, in today’s world, the G20 is of much greater importance. The west, in supporting the coup is backing a loser which requires up to $35 billions to avoid default. The Russians have withdrawn the $15 billion unconditional aid package arranged with Yanukovych. They are not bailing out an illegal regime that they do not recognize. Now it is, the financially troubled EU, the US and Canada left holding the bag. You broke it you fix it. The IMF may not even have the money necessary to keep Ukraine afloat. And if they do cough up the Ukrainians will not like the IMF conditions that will likely be imposed on the country. It sounds like a financial sinkhole.

    Western declarations on the Ukrainian crisis will sound increasingly
    delusional as the public gains greater awareness of the truth. It is time for
    our political elites to wake up to realities and cut the western geo political
    extremism in exchange for policies of international accommodation and support.

    Ron Brydges

  3. On March 9, 2014 at 2:12 am Dean Jackson responded with... #

    The caption asks, “Beyond Saber Rattling: Who Bails Out Ukraine?”

    Well, the Communists’ plan was the EU, but all bets are off now. What do I mean by, “…the Communists’ plan”? Read on, Comrade…

    Before December, the Kiev protests were manufactured by Moscow in union with the Ukrainian government to facilitate Kiev “giving in” to the protesters’ demand that the Ukraine join the European Union Association, the ultimate purpose for joining so that the Ukraine will be one of the first nations to leave the EU, after it formally joins the EU, resulting in its collapse. The Ukraine’s exit will have a more dramatic effect because the Ukraine put up such a fight to join the EU in the first place. Europe will then form a new union with Russia, from the ‘Atlantic to Vladivostok’, which will accomplish two goals for Communist Strategists, (1) the further isolation of the United States in the world; and (2) the end of NATO…

    Google: ‘from the atlantic to vladivostok russkiy mir’

    Now read these two revealing quotes from Soviet President Mikhail Gorbachev and former Soviet minister of foreign affairs Eduard Shevardnadze, and what they have in mind for you in the near future:

    “Editor’s Note: The phrases ‘From the Atlantic to the Urals’, ‘From the Atlantic to Vladivostok’ and ‘From Vancouver to Vladivostok’ are interchangeable in the strategists’ lexicon. In the course of his Nobel Peace Prize Lecture, delivered in Oslo in June 1992, Gorbachev said: ‘Our [sic] vision of the European space from the Atlantic to the Urals is not that of a closed system. Since it includes the Soviet Union [sic], which reaches to the shores of the Pacific, it goes beyond nominal geographical boundaries’. Note that Gorbachev, who had been out of office for six months, referred to the Soviet Union, not Russia. In an interview on Moscow Television on 19 November 1991, Eduard Shevardnadze continued speaking as though he was still Soviet Foreign Minister: ‘I think that the idea of a Common European Home, the building of a united Europe, and I would like to underline today, of great Europe, the building of Great Europe, great, united Europe, from the Atlantic to the Urals, from the Atlantic to Vladivostok, including all our territory, most probably a European-Asian space, this project is inevitable. I am sure that we will come to building a united military space as well. To say more precisely: we will build a united Europe, whose security will be based on the principles of collective security. Precisely, collective security’. These statements by key implementers of the strategy reflect the central strategic objective of asserting ‘irreversible’ Russian/Soviet hegemony over Eurasia, thus establishing the primary geographical component of the intended World Government.” — ‘The Perestroika Deception’, by KGB defector Major Anatoliy Golitsyn…

    Google:‘the perestroika deception pdf’

    Russia had to sacrifice 23-years of good PR, being the one accusing the United States of invading nations, violating international law. So why did Russia violate the sovereignty of the Ukraine, destroying its image abroad, and placing itself on the same rogue level with the United States, you ask? Because of the following…

    The Kiev protests, which were initially controlled by the government before December, went viral throughout the nation (while in Kiev, the protests were largely taken over by real protesters, though many government-controlled protesters remained, a good number being security forces pretending to be protesters), where dozens of statues of Lenin were toppled, statues that were supposed to have been toppled back in late 1991, after the fake collapse of the USSR.

    The spontaneous protests that broke out all over the Ukraine were so large that those Communist security forces in Kiev posing as demonstrators had to be quickly pressed back into security service to guard the government buildings!

    Google: ‘kiev demonstrators assist security forces guard government buildings pictures’

    The reason Russia had to intervene in the Ukraine is two-fold, (1) to assist in policing the eastern Ukraine; thereby (2) allowing the stretched-thin Ukrainian Communist security forces to secure the rest of the nation.

    For those unfamiliar with this subject, the “collapse” of the USSR in 1991 was a strategic ruse under the “Long-Range Policy” (LRP). What is the LRP, you ask? The LRP is the “new” strategy all Communist nations signed onto in 1960 to defeat the West with. The last major disinformation operation under the LRP was the “collapse” of the USSR in 1991.

    The next major disinformation operation under the LRP will be the fraudulent collapse of the Chinese Communist government. When that occurs, Taiwan will be stymied from not joining the mainland. This is why China is buying up gold all over the word. It is believed that China currently has 3,000 [metric] tonnes of gold. When China has 6,000 [metric] tonnes it will have the minimum gold reserves necessary for its currency, the yuan, to replace the United States’ dollar as the world’s reserve currency, that is after the fraudulent collapse of the Chinese Communist government (the United States gold reserves is approximately 8,133.5 [metric] tonnes).

    Take a look at the main paper of the Russian Ministry of Defense…

    Google: ‘Krasnaya Zvezda’

    “Krasnaya Zvezda” is Russian for “Red Star”, the official newspaper of Soviet and later Russian Ministry of Defense. The paper’s official designation is, “Central Organ of the Russian Ministry of Defense.” Note the four Soviet emblems next to the still existing Soviet era masthead, one of which pictures Lenin’s head, the man who removed the independent Russian nation from the map, supplanting it within the new nation called the USSR (the USSR being the nation that was to one day include all the nations of the Earth, incorporation taking place either by violent revolution or deception)! Those Soviet emblems and Lenin’s head can’t still be next to the masthead of the Russian Ministry of Defense’s newspaper due to their association with the Soviet Union and its ideals of world revolution.

    The fraudulent “collapse” of the USSR (and East Bloc) couldn’t have been pulled off until both political parties in the United States (and political parties elsewhere in the West) were co-opted by Moscow & Allies, which explains why verification of the “collapse” was never undertaken by the West, such verification being (1) a natural administrative procedure (since the USSR wasn’t occupied by Western military forces); and (2) necessary for the survival of the West. Recall President Reagan’s favorite phrase, “Trust, but verify”. Notice that not one political party in the West demanded verification, and the media failed to alert your attention to this fact, including the “alternative” media. When determining whether the “former” USSR is complying with arms control treaties, what does the United States do to confirm compliance? Right, the United States sends into the “former” USSR investigative teams to VERIFY compliance, yet when it’s the fate of the West that’s at stake should the collapse of the USSR be a ruse, what does the United States do to confirm the collapse? Nothing!

    For more on the “Long-Range Policy”, read KGB defector Major Anatoliy Golitsyn’s books, “New Lies for Old” and “The Perestroika Deception” , the only Soviet era defector to still be under protective custody in the West:

    Google:’new lies for old internet archive’

    Google:‘the perestroika deception pdf’

    The following is an excellent brief three-page introduction to Golitsyn and his significance in understanding Communist long-range strategy:

    Google: ‘Through the Looking Glass by Edward Jay Epstein’


    Yes, the above means that Russian troops outside their bases in the eastern Ukraine will return to their bases when the anti-Communist demonstrations are squashed, unless the Russian population too stages non-government approved demonstrations, leading to the eventual and true collapse of the USSR!