And if it’s
not about the money, most probably it’s about the power (unless also a woman is
at stake) and in such context we should consider the recent events in Ukraine
and in Russia.
The latter,
as the fellow blogger Michael notices, is a hollow country. Its economic
prosperity, reliant on ample, but finite resources of natural gas and crude
oil, lacks sustainable foundations for economic growth and thus is fragile.
Unfortunately, Western Europe is largely dependent on supplies of commodities
from Russia, which drives its indulgent stance towards less and less civilised
regime of Russia. Economic misery is though not what the nation of Russia
fears. Over centuries of suppression by autocratic or totalitarian rulers, they
persevered many periods of privation and are capable of withstanding another
one. If supplies of gas and oil to Western Europe are cut off, they would wait
it out, while the Western Europe would give in. More than bread, Russians need
circuses. And more than circuses, they hanker after the great empire. They hark
back to times of Soviet Union, leader of two meaningful political and military
blocs in the world. They want their empire back, this is one of the reasons,
why Mr Putin’s recent actions are popular with 80% of the Russians. Propaganda
in the media does its bit, but even without it, many Russians perceive their
president as the one with a historical mission to restore the might of the
Soviet empire. By attempting to take over Crimea in a manner kind of similar to
what was being done by Hitler in 1939 with the part of Czechoslovakia, he wants
to make the history, as the one who would bring back to Russia the territory
which over the centuries was a part of different realms and actually long could
you quarrel who it belongs.
Regarding
the Crimea issue, the uttermost question is “why now?”. The Russian majority
have inhabited the peninsula for over 20 years since Ukraine regained
independence and they would get on with the Ukrainians, enjoyed autonomy, no
one heard of any meaningful clashes between Russians and Ukrainians. Being
mindful of Russian propaganda machine, I would ask whether Crimea residents
(true or recently resettled from Russia) are seizing opportunity to break free.
If so, the most likely explanation is that they are grabbing opportunity of
weakness of the Ukrainian state, for which they should not be condemned, if we
bear in mind Poland gained independence in 1918 thanks for weakness of other
countries. If so, they should break away with their own hands and establish a
separate country, without any help from Russia.
Let’s face
the truth, the Ukraine is weaker than ever over last two decades. When I look
at the make-up of the new government, I’m not particularly fond of those
people. When names of new ministers were read out in Maidan, the crowd booed
some of them, little support was given to Yulia Tymoshenko who declared she
would run for presidency in oncoming elections. The key problem of the country
is that the heritage of the Orange Revolution has been squandered. The
disillusioned nation chose, in democratic elections, Mr Yanukovych for
president. Swapping a pro-Russian cabal for a pro-European cabal might change
the direction in which Ukraine drifts, but will not move the country forward. I
lean towards the opinion that none of the 100 richest Ukrainians should run the
country, if it is to take a turn for the better. The wealth distribution in the
Ukraine indicates the country is close towards the third world than to Western
Europe. The small upper crust, hundreds of tycoons are holding billions of
dollars in assets, while more than ninety percent of citizens every month
struggle to make ends meet. There’s no, even fledging, as in Poland, middle
class there and little prospects for such to emerge.
As an economist,
I remain very sceptical about bright future for the Ukraine. The country lacks
elite that could run the country and lacks sound institutional framework (rule
of law, property rights protection, transparent legal system, etc.) that could
spur economic growth. Politically unstable and, let’s face it, uncivilised
countries need to offer high rate of return to attract to foreign investor, to
compensate for higher risk; the risk which in worst case might materialise if
foreign investors’ assets are confiscated in Russia.
Poland, to
support Ukraine, is to grant development loans to its Eastern neighbour. As a
guy who deals with creditworthiness evaluation, I would prefer a more
straightforward move, i.e. giving them money, as we should not expect to recover
it, or we should lend it and beforehand estimate what percentage of debt will
be relieved. Ukraine lacks capacity to repay the debt. Of course, the foreign
loans could be granted for pre-defined purpose of building institutional
framework, but in free credit markets, lenders have right to control whether
borrowers use loan proceeds for the stated purpose, and if not, call back
loans.
We also
should note money was what pushed Ukraine into the arms of Russia. The European
Union gave little financial support to the Ukraine, while Russia offered this
poor country a huge relief in form of much cheaper natural gas and financing
public debt, not disinterestedly, but to expand its sphere of influence. With
this all in mind, it should not come as a surprise Ukraine drifted towards
Russia.
I hope the
Crimea blustery does not develop into a full-blown military conflict. I consider
this option unlikely, because it does not pay off for anyone. Mr Putin, using
his soldiers “wearing uniforms that can be bought at any shop” will carry on
with his muscle-flexing campaign, weak Ukraine will do nothing and EU leader
will keep on expressing their deep concern over inconsiderate misconduct of the
Russian president, fearing overstepping boundaries could spoil economic
relations between their countries and Russia.
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