09 March 2009

Ukraine...default anyone?

I guess some countries are doomed for failure at the end. No matter how much enthusiasm is pumped into Ukraine and regardless of the ever growng numbers of German SUVs on Kievan alleys, Ukraine has simply lost half of what it is worth in a couple of months. This is the bitter truth...

One can blame the global economic crisis that has been ravaging from the US of A to the post-Soviet Union with a harsh scorched earth policy, but the very essence of this hard blow to the fragile Ukrainian economy lies beneath the governmental politics of Ukraine that has already become a textbook definiton of corruption by itself. The new "Orange" elite has done a good job to get rid of the soviet "old guards" from the office and chease them off to Russia where they and their generations of relatives can live off their siphoned money from Ukrainian treasury.

The battered public who really couldn't adapt to a life without state subsidized and increasingly long queued for dairy products, welcomed them as saviours and cheered when euros flowed like the river Rhein when British pilots busted the dams in 1945. The banks, most of whom had already been swallowed by "Yevropeyskiys" were lending like crazy and people with triple digit incomes would be dreaming about the last time they would polish industrial dust from their old Zaporozhets. The rest is history in the making: The orange elite were actually the last generation of entrepreneurs who would start the day with Komsomol hymns and sleep off with McDonalds commercials in their best dreams. The old allies fell into a public vendetta and politics became (one again) an arena where power games would open more doors and loads of money to steal without shame.

The effect of the economic crisis is, of course, undeniably like a major Japanese earthquake to the Ukraine, a mere shabby old brick and mortar building. The local currency, the mighty Hrivna, which was pegged to USD until May 2008 was suddenly let go and reached record highs. intantly. This inevitably damaged the export-dependent economy but the worst was to come when the prime output of Ukraine, "the steel of Donbass" was no longer the eyecandy of the construction contractors around the world. Hrivna was almost halved in a month and massive layoffs left almost a million unemployed in the Russian speaking industrial heartland of East Ukraine where a deep resentment to pro-Ukrainian policies of the capital has already been growing with a vengeance.

So today, there seems no united political will in Ukraine and not a single voice about the increasingly necessary precautions against the economic crisis. The orange elite is experiencing its lowest popularity levels but there are sporadic-to-none demonstrations in Kiev contradicting the Soros-fueled coloured revolution years ago.

Although Ukraine is recently graded as "not safe for investment" by a couple of institutions, in my opinion, it will hardly be a case where all foreign direct investment that has deep dug in the country will simply fly out. The reason is the importance of where Ukraine is situated: a vanguard (or frontier) of Europe and one of the last beeding wounds of the Mother Russia with which the West can mess with. Russia will never let go of Ukraine (at least the Eastern half) without a good fight and keeping a united, strong but controllable and seemingly anti-Russian Ukraine will be a better weapon than Nato ever was and ever will be for the West. Station nuclear missiles in Poland and Russia will be answering with double of that in Belarus; but entitle some money-laundering and brainwashed fool in Ukrainian politics and he/she will be a headache for Kremlin for consecutive nights.

As a summary, it is painfully clear that Ukraine will suffer heavy blows by the crisis and lose most of its hard earned bucks but how it will end up when the dust setlles down is still unclear since it is getting hard to read between the lines of European and American attitudes to Eastern European powergames and a direct confrontation with Russia when they are already bogged down in their own financial turmoils.

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