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Political Forecast for Ukraine and Belarus

by aquilon Sat Dec 24th, 2005 at 04:54:28 AM EST

From the front page (with title edit) ~ whataboutbob

"All Quiet on the Western Front, or Political Weather Forecast for Ukraine and Belarus"

The euphoria is over. The Orange revolution in Ukraine flushed away some unpopular figures from the political scene, but was unable to deliver on expectations. Everyday life has not changed much for most of the people. The economy is still in a poor shape, and is suffering from structural issues, obsolete technology, low energy efficiency, etc, inherited from the Soviet era. In an attempt to boost its approval rate, the government raised minimum pensions and paid off deferred salaries. That move further strained the budget. As usual, the choices are limited: to raise taxes, increase national debt, or money supply. Most governments opt for the second solution. But how much more debt the market can absorb? In March 2006, the administration will face parliamentary elections, and may need another populist move in support of its program.

When a presidential candidate, Mr. Yushchenko promised to push for Ukraine's integration with the European Union and NATO. Realistically though, Europe is not ready yet to accept Ukraine in the foreseeable future. There are a few reasons for that, both economic and political. First, Europe has already grown eastwards far enough, and now faces a daunting task of bringing a number of former communist nations up to speed. Another member the size of Poland with even more troubled economy may be too much for the EU for quite some time. Besides, the European Union does not want to end up in confrontation with Russia, which considers Ukraine a "zone of its strategic interests".

Having been a part of the soviet economy for a log time, Ukraine shares same structural features with Russia and other former republics of the USSR. Almost every factory was a monopoly, at least in its region. Duplication was something that had to be prevented as a waste of resources, unless serving a certain military program. All enterprises received everything they needed - development funds, equipment, parts, raw materials, etc - according to a plan, put together by the State Planning Committee every year. That system ensured artificially low prices on oil, natural gas, mineral resources. No wonder that the economy of the former USSR collapsed as soon as the government control over foreign trade was lifted. Manufacturers simply lost their suppliers and customers. In the environment of legal vacuum, that created lucrative opportunities for those who were able to get on top of the privatization process (read, property grab) that followed. On many occasions, proceeds from sales overseas never came back, left on accounts in foreign banks. Deprived of investments, unable to modernize, having limited market for their production, manufacturing enterprises struggle to survive. Hopefully, China has learned from its neighbor's mistakes.

Ukraine and Belarus, having almost no natural resources, hosts of mostly machinery, high-tech and defense industries, were hit the hardest. Russia remains the main market for their products and services, and their main oil and gas supplier. At present, "six oil refineries in Ukraine, four of them owned or controlled by Russian companies and all operating on Russian crude, hold an aggregate 90% share of Ukraine's oil product market." Natural gas accounts for 42% of the total energy consumption in Ukraine. More than 40% of it is imported from Russia. Most importantly, gas is widely used in central heating systems in major cities, as well as in almost every kitchen there. As a result, urban population is very sensitive to gas prices.

Basically, that makes Gazprom, the world's largest natural gas producer, controlled by the Russian government, an important instrument of foreign policy. This year, Ukraine pays Gazprom $50 per 1,000 cubic meters of gas. Starting from January 2006, the price should rise to $160. At the same time, the price for Belarus will stay at $50, after Belarusian President Alexander Lukashenko confirmed his commitment to his country re-unification with Russia.

Actually, for Mr. Lukashenko that may be the dream final of his political career. Nobody expects anything less than Belarus joining the Russian Federation. This will guarantee Mr. Lukashenko full amnesty for his crimes, abuse of power and misdeeds. He will end his days in a mansion somewhere at a Black Sea, enjoying the fortune he has been amassing since in office. Almost all Belarusians will welcome the re-unification. The nationalistic movement there can be visible at times, but has limited popular support. Most people consider Russian their native tongue. Economically, Belarus will also be better off as a part of Russia, bordering the EU. From my point of view, if there is any force in Belarus that can remove Mr. Lukashenko from power, most likely it will be the pro-russian, rather than pro-independence movement.

Even in Ukraine, I expect a shift in policy back towards closer cooperation with Russia. Mr. Yushchenko is a pragmatic leader who will have to find a balance between his European dreams, and political and economic reality.

Crossposted at Daily Kos.

Thanks for this diary, and welcome on eurotrib!

Ukraine is always a topic of interest to me, as I wrote my PhD dissertation in 1995 on the independence of Ukraine, and I have little to add on your description of the overall situation.

On the gas situation, I'll refer you to my recent front page stories on various pipelines, one of which was the Ukrainian gas situation: http://www.eurotrib.com/story/2005/12/16/72028/741. I don't think the Russians will manage to increase the price of gas shipped to Ukraine.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue Dec 20th, 2005 at 03:14:47 PM EST
Thank you for welcoming me to the European Tribune community and your comments.

I read your article, and absolutely agree that Ukraine does have certain bargaining power in its negotiations with Gazprom. Currently, over 110 billion cubic meters (BCM) of Russian gas exports to the EU are transported via Ukraine, compared with 30 BCM via Belarus. Even the second Yamal-Europe pipeline, which doubles its transit capacity, does not change much, until Gazprom and Poland resolve their differences as to the exact route of the European part of the pipeline.

Nevertheless, politically, it will be harder now for Ukraine to siphon off transit gas to meet its internal demand. Anyway, I am sure that some kind of compromise between Ukraine and Gazprom will be achieved.

by aquilon (albaruthenia at gmail dot com) on Wed Dec 21st, 2005 at 01:05:26 AM EST
[ Parent ]
The euphoria is over. The Orange revolution in Ukraine flushed away some unpopular figures from the political scene, but was unable to deliver on expectations. Everyday life has not changed much for most of the people. The economy is still in a poor shape, and is suffering from structural issues, obsolete technology, low energy efficiency, etc, inherited from the Soviet era.
Isn't the situation much the same in Georgia?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Tue Dec 20th, 2005 at 05:32:31 PM EST
Much worse, as far as economy is concerned ...
by aquilon (albaruthenia at gmail dot com) on Wed Dec 21st, 2005 at 01:17:26 AM EST
[ Parent ]
I second that motion: welcome to Euro Trib...and thank you very much for posting this! Please write another diary soon. I had written a diary about the sacking of the cabinet, but have not heard much since then. Any insights into possible future developments would be appreciated.

"Once in awhile we get shown the light, in the strangest of places, if we look at it right" - Hunter/Garcia
by whataboutbob on Wed Dec 21st, 2005 at 03:27:05 PM EST
[ Parent ]
I mean politically, with Saakashvili having said that there is no need for opposition parties to have a democracy.

What I mean is that the "revolutions" that the Western elites were so happy about have not delivered any substantial improvements for the people of the respective countries: neither economically nor politically nor in terms of civil liberties.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Carrie (migeru at eurotrib dot com) on Wed Dec 21st, 2005 at 08:02:30 PM EST
[ Parent ]
Following is my post at DC Message Boards, which is about a year old now:

"It is the policy of the United States to seek and support the growth of democratic movements and institutions in every nation and culture, with the ultimate goal of ending tyranny in our world," President George W. Bush said in his inaugural address. "The best hope for peace in our world is the expansion of freedom in all the world," Mr Bush told the gathering.

It may have impressed some naive believers in self-sufficiency of freedom as we know it. Unfortunately, people, who happened to be born somewhere else, can tell us a different story. For instance, between February and October 1917, Russia was one of the most democratic nations in the world. The Weimar Republic in Germany (1919-1933) had a very democratic constitution. We know how it all ended. Actually, Mr Lukashenko is the first democratically elected President of Belarus, and still has strong support there. And Mr Putin, who recently got on our watch list for extending presidential powers, is also seen as the best and only choice by the majority of the Russians.

What on Earth do they think? Why do they show so little appreciation for freedom? My guess is that people, who struggle to make ends meet, hardly feel free under the most democratic rule in the world. Viable democracy can only be built on stable economic ground. Until people have means to take care of themselves, they will trade their freedom for guaranteed income to meet their basic needs. It took the Marshall Plan to save Western Europe from becoming red.

Frankly speaking, "expansion of freedom" sounds a bit scary. Does it mean that we see it as our way to peace? I doubt that, say, removing Mr Lukashenko from power - even without dropping bombs on Minsk - would be widely welcome in Belarus, unless it improved the economic situation for most of the people there. If we want to help, our policy should rather stimulate economic development and make transition to market less painful. There are a number of ways to do that. Former Soviet republics need investment capital and new technologies to modernize their production capacities and become competitive on world markets. Privatization is a necessary component of this process. Growing unemployment makes people and leaders there look at small businesses more favorably. Let us help them with tailored programs of economic development, credits, trade agreements and training. People less dependent on the government economically, will be less willing to accept tyranny. Sure, this kind of approach is unlikely to make news headlines. So, what do we really want?


Sorry for the long response.

by aquilon (albaruthenia at gmail dot com) on Thu Dec 22nd, 2005 at 01:20:45 AM EST
[ Parent ]
Thank you so much for this diary.  I appreciate frequent reality checks from this part of the world.

Feeling pretty out of the loop.  Belarus will be absorbed into the RF?  Not surprising, but I didn't know it was such a done deal.

I dated a man from Belarus years ago, and I was always trying to be sensitive to the fact that he was of Belarus and not Russian descent.  To which he always replied that it was all the same to him.  I thought he was just being polite.  Guess not.

Too bad about The Ukraine, though.  Here's a place that truly does have a national identity and yet is destined to be a Russian "zone of its strategic interests" for eternity...

Those who can make you believe absurdities can make you commit atrocities. -Voltaire

by p------- on Thu Dec 22nd, 2005 at 02:17:59 PM EST
Apart from the gas crisis, let's not forget the reprivatisation fiasco, the corruption allegatons against government ministers not to mention Yushenko's son, the falling out with Timoshenko and her removal as prime minister and subsequent Yushenko deal with the opposition to get a new Prime Minister in. Then the anniversary party of the Orange Revolution was a lot smaller than expected. Times are not easy for George Bush's favorite ex Soviet Republic's leader.  
by observer393 on Tue Jan 3rd, 2006 at 01:46:37 AM EST

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