Thread: Ukraine and the coming bankruptcy

"Likewise, he said that opposition leaders have been told that President Yanukovych will be traveling to Moscow next week to meet with Russian leaders, and conclude a CIS trade pact, which he had thus refused to consider, insisting that Ukraine must move closer towards the EU and distance itself from Russia. “The pact will likely be signed for a 30 percent reduction in the price of Russian gas in addition to giving his regime additional protection in the case of a popular uprising in Ukraine against the country’s detachment from the EU.” Sobolev explained that, “If such a pact is signed, it will mark a complete reversal of policy for Ukraine in terms of international relations. It will mark the end of all democratic development and place Ukraine firmly in the hands of Russia.”

Tymoshenko Will Not Be Acquitted, Ukraine Likely to Sign Trade Pact with Russia, Says Democratic Opposition Leader Serhiy Sobolev - Yahoo! News

I basically expect Ukraine to abrogate or ignore most of WTO rules and tarrif agrements in relation to trade that they agreed to, same goes for EU FTA agrements they agreed to that are in force. Most of those are one sided and PRE-expected benefit. The industrialists now in power will most likely use the CIS trade agrement entry to simply null and void all trade and tarriff obligations under WTO and EU FTA agreements of prior governments.

They will have less competition at home and in some way gain more bargaining power since before everything Ukraine agreed to did not bring it any benefit, either political, or economical (which is what the populous sought). It did bring a lot of accolades about democracy and development of freedom but didn't help the regular person get a job or a better standard of living.

The thing is, for Russia it is not about money, so much. Putin also does not care about Europe's gas issues. What he wants, what they have been pressuring the Ukrainian government to do is, let Russia's Gazprom absorb Ukraine's Naftogaz. This would then give Putin's cronies total control over Ukraine's gas and oil infrastructure. They already have that with Belarus. I undertsand Yanukovich's relactance to, essentially, give up his country's economic sovereignty.

Originally Posted by SA2003

The thing is, for Russia it is not about money, so much. Putin also does not care about Europe's gas issues. What he wants, what they have been pressuring the Ukrainian government to do is, let Russia's Gazprom absorb Ukraine's Naftogaz. This would then give Putin's cronies total control over Ukraine's gas and oil infrastructure. They already have that with Belarus. I undertsand Yanukovich's relactance to, essentially, give up his country's economic sovereignty.

Your looking at it from todays issues. Today gas is expensive tomorrow its cheap. The larger the critical mass of the Trade union market the more leverage for international negotiation.

The gas transport system being owned by Russia is a very small part of the picture.

The other part of the picture is the industrialists (party currently in power steelowners, coalmine owners etc, pipeproducers, engine, and others) cannot compete without gas at a certain price AND the dissatisfaction of the Russian market. Long term they would be out competed by Germany and other more efficient gas users. In addition the population realizes that Europe is lots of flare, trade concessions, but no real benefits for them other than immigration. This later part is far more important long term than the gas pipe.

There were a lot of things agreed to in prior years which were somewhat ignored after the gas price was secured.

I have been wondering about this for some time. I would agree that Ukraine is very likely to default in the next 2 years without support. While this is not particularly a 'big deal' by itself it will come at the wrong time for Ukraine as Europe will be in a crisis of it's own which will effect Russia (not even the God Putin can stop this).

Where, I think, Ukraine (and possibly even Russia) is more vulnerable than most of Europe is in its regional demographic and ethnic differences. Essentialy alot of Eastern Ukraine is Russian (see http://media.stratfor.com/files/mmf/...1c5949b1a3.jpg) while the majority of the population (and any population growth there is) is in the non Russian areas (see File:Ukraine census 2001 Ukrainians.svg - Wikipedia, the free encyclopedia). Add to this that Eastern Ukraine is least profitable (income by and large increases from East to West with Kiev being the only exception) and you have some very worrying problems in store.

The risk is a division of Ukraine with the eastern part joining Russia and the Central and Western regions gravitating toward a post Euro enlarged Visegrad Group.

There is some amelioration to the oil crash (which will come since economic activity fell long ago and only manipulations by goldman and others shifted the fall a bit later in oil prices then it should have occured).

As oil falls profitability of grain farming rises. Steelmakers also make higher margins since gas costs (if they fall for furnace users). Both are heavily represented in Ukraine/Russia. One thing that is happening right now is the possible grain "board-alliance" between Russia/Kazakhstan and if they could compel Ukraine to join it would create a fairly large ability to command even higher prices on global markets. The key is how large of a hit the economy takes if oil goes to 30-40 dollars for the next decade and gas follows. Can they adapt to that situation? that really is the question.

People do not realize (I mentioned this earlier how close Ukraine came to the split in 2003-2005). When the Severodonetsk provincial meeting of governors from eastern provinces occured. With a similar meeting in the western provinces to effectively secede if their candidate lost. They would block the road/rail between borders and station their resources where possible to effectively strip Kiev of juristinction and control. It didn't happen because the oligarchs whom control the parties more or less prevented it from occuring since their holdings span all of Ukraine and a split would strip them of some or all of their assets since there would be reprivitizations and other things.

The common man lately has been more and more pushed into the corner. If they rise up and de-facto scream that we are tired and aren't going to take it anymore it is possible. This has more to do with wages and lately taxes. The tax "Reform" in the beginning of the year is very unpopular, but was supported by almost every party. Also you ignore something that census and other things ignore. There is no language barrier (Ukranian and Russian up to the central provinces is extremely close all the way up to Zhitomer, my grandma was from there). She basically said that past Ostrog was the old border where the western Ukrainians live and their harder to understand (lots of loanwords from polish).

And the most important thing most people ignore. Russia during the Severodonetsk incident did not care, nor participate, they were approached but most likely were not interested. (I know you have a hard time believing this but its was essentially what happened.) Most people would have agreed to get re-incorporated into Russia at this point. Central regions would go with the Eastern regions the main reason is commerce/commodities flows from the Eastern regions through the center and them leaving would create a very poor Central+Western Ukraine. Basically most of the ports, grain, steel, and manufacturing capacity is in the eastern provinces. The ethnic / language similarity is there as well but less important.


http://archive.newsmax.com/archives/articles/2004/11/28/142630.shtml

http://news.bbc.co.uk/2/hi/europe/4049949.stm#map
Yanukovych's Party of Regions brought together 3,500 delegates from 17 eastern and southern Ukrainian regions for an urgent session Sunday in Severodonetsk to discuss autonomy for much of eastern Ukraine. Yanukovych and Moscow Mayor Yuri Luzhkov attended the session.

Yes the mayor came but on his own initiative and they did not get support from fed center.
17 out of 24 (vinnitsa/zhitomer border if you minus the 8 western "Historic Galichina(or Galicia if you prefer the westernised version)" regions.)

Industrialists are basically in control at this point, the attempts at EU FTA and WTO integration were extremely badly executed by previous administration. Yes they joined the WTO but they simply agreed to everything in the negotiations and were steamrolled. There is some movement to re-negotiate this but realistically speaking the only way is to nullify the agreements and start from scratch which would strop the benefits from western companies and lessen the competition for internal producers. The disagreements with Russia and bickering cost them a lot of money, example: millions of tons of pipe were sold to Russia for oil pipelines etc... when Ukraine scraped the agrement with Russia and put up tariffs on its pipe (which was very low volume in export compared to Ukrainian exports) Russia retaliated.
Tymoshenko started the re-privatization drive which sort of expropriated assets of a quiet a few industrialist (some post improvement mind you).

[thought]
They much rather remain independent from Russia especially since they are in power now, there is economic outcomes which could effectively shift their position. (catch 22 is that if they did join EU FTA it would force Russia to increase trade barriers to parity with the EU which is likely higher than now) If Europe heavily retaliates against Ukraine if the later does not follow WTO agrements. If the default occurs and there is no clearing of money for the regular population there will be a severe outcry against the government and any form of stability including joining Russia. (the corporations have offshore accounts and won't be as effected but the regular folk who get paid inside the country would have problems). A severe devaluation due to external debt default would do this. Between 2-5 million people work in Russia and remit money back home. The potential is there.
http://www.ukrexport.gov.ua/eng/econ.../ukr/5861.html
look at trade and add in the remitances + the cross border trade not going through the system(either people paying cash or transacting outside the country) and you can figure that probably 60% of it is with Russia. 60 bil total 26 with CIS ~45%
http://www.ukrexport.gov.ua/eng/econ.../ukr/5344.html

IF "oil goes to 30-40 dollars for the next decade and gas follows" it is doubtful that Russia would 'default' unless the major European economies (Germany, UK, France etc) also went into meltdown.

Originally Posted by cyppok

Central regions would go with the Eastern regions the main reason is commerce/commodities flows from the Eastern regions through the center and them leaving would create a very poor Central+Western Ukraine.

I agree, thus these regions are more likely to look toward a Visegrad free trade area.

Your ignoring certain facts the interconnection of rail/road and to some degree ship would create a captive commodities market for central regions with high barriers tarrif wise for profitable export. I am not even going to mention the amount of real estate most really rich people own in Kiev and other central region areas. They would go to where their export/import market is and it is not Visegrad area.

Basically most non-commodity goods go to Russia and other CIS states to a much lesser degree. Might get interesting when they default but doubt we are right on any issue.

Poland is around 4% export to Ukraine and the import is probably very negligeble. Doubt most other countries are higher except Germany/Netherlands which exports a lot of household goods and other stuff. But you can look it up on the link I posted in the last post for higher accuracy.

If they pass this Ukraine will become more stable, ergo making Russian a regional language by petition where at least 10% of people use it etc...
http://www.rferl.org/content/Ukrainians_Protest_Language_Bill/2194025.html

http://en.rian.ru/world/20100908/160513951.html
Currently there are curbs on language use on tv, radio, newspapers, cinema, and schools of course.

http://ukraineanalysis.wordpress.com...log-notes-111/

I respect your analysis and recognise the different guage rail problem via Poland and Ukraine, having taken the Krakow - Lwow 'express' several times myself (not always pleasent but has improved).

I am not sure however that different rail guages represent the whole situation. From my own experience I would very much doubt that Western Ukraine (Lwow, Ivano-Frankivs'k etc) would be willing to return to Russian rule. I know for a fact that Polish companies are investing quite heavily in W. Ukraine. I am not sure how language laws alter this situation but to my mind not at all.

Originally Posted by snapper

I respect your analysis and recognise the different guage rail problem via Poland and Ukraine, having taken the Krakow - Lwow 'express' several times myself (not always pleasent but has improved).

I am not sure however that different rail guages represent the whole situation. From my own experience I would very much doubt that Western Ukraine (Lwow, Ivano-Frankivs'k etc) would be willing to return to Russian rule. I know for a fact that Polish companies are investing quite heavily in W. Ukraine. I am not sure how language laws alter this situation but to my mind not at all.

Yes there was article on Polish investments in wbj.pl a while back but it really isn't as much as you think. Perhaps a billion. Kyiv Post. Independence. Community. Trust - Lifestyle - World in Ukraine - Polish representative:
The 9 billion number below is wrong, unless he is counting pass-through trade that goes to Germany and other places. Perhaps he is adding both exports/imports of both countries which doubles the amount, still doesn't get to 9, its around 4 perhaps 5 now which is still a lot.

Pawel Gebski: We have a history of long and high-level cooperation, both on the governmental level and in the private sector. Our trade reached $9 billion in 2008, which made Poland Ukraine’s third largest trade partner. Poland is also Ukraine’s 12th biggest investor, with $870 million already invested in the country.

There is a line from Poland into Ukraine without gauge change but that is not the problem. The problem is that cross-border commerce requires a lot of face to face links and partnership, and most importantly a willing market where your goods aren't pushed out by tariff or standards barriers that make them uncompetitive.

Oh that I know this as well, Western Ukraine will never want to be with anyone except independent. It liked the arrangement thus far with Eastern Ukraine because the later effectively subsidizes it since most gdp income and growth is there, in addition being very well represented in the power sphere of the political arena. This radically changed in the last 6-8 years due to encroachment onto the industrial oligarchs whom basically pay taxes for those subsidies.

Language laws effect the situation if they are passed thus far it hasn't been. Basically if they pass they stabilize Ukraine a great deal. There is a lot of resentment by half the population that they have to have their children be taught in a tongue that is not really central to their life or economic future, particularly in light of not having textbooks written in it or be factual. Daily life and government forms also play a great deal along with TV etc... In Crimea the situation a few years ago was thus the judge, lawyer, and prosecutor all needed translators after the mandatory change in the judicial system to Ukrainian, creates a lot of resentment/division of society on so many levels.

Would be interesting to see the dynamic within Western Ukraine if it actually did go independent by the other part of the country opting out. I doubt it happens but would be interesting.

Cyppok Sir, The questions over investments, and Polish/Ukrainian trade amounts to alot more than official figures due to the local 'black economy', depends on where the investments are made - this is NOT in the East. I know, for example, that Autosan (the Polish bus company) is starting a factory in Ivano Frankosk region, not in the East. Why? Simply because it's cheaper labour than Poland and because it's less travel costs back to the assembly plant in South East Poland (Sanok).

Have you visited Western Ukraine recently? I must admit I was last there in February, in Lwow and Dolina. My family this year re-bought what was rightfuly ours in the first place pre 1939 and yes we are Poles and proud. Our WW2 ended in 2011 when we got our home back. If you imagine that we shall become part of a 'greater Russia' again you are mistaken Sir. Nor, from my general understanding of the population, will Western Ukraine surrender without a fight to a new Russian domiation.

Which leaves two altermatives: Civil war or amicable secession. Evidently the latter is preferable though how this would be achieved is at present unclear.

Cyppok I realy respect your well argued views, in this case though I would suggest that the statistics are not the whole story. To understand the true situation in this case you need to be 'on the ground'. My Pater, who is in Lwow now, reports that he was asked to teach English in a Government school...

I believe that force alone would re-incorparate Western Ukraine into a 'Greater Russia'.

Originally Posted by snapper

Cyppok Sir, The questions over investments, and Polish/Ukrainian trade amounts to alot more than official figures due to the local 'black economy', depends on where the investments are made - this is NOT in the East. I know, for example, that Autosan (the Polish bus company) is starting a factory in Ivano Frankosk region, not in the East. Why? Simply because it's cheaper labour than Poland and because it's less travel costs back to the assembly plant in South East Poland (Sanok).

Have you visited Western Ukraine recently? I must admit I was last there in February, in Lwow and Dolina. My family this year re-bought what was rightfuly ours in the first place pre 1939 and yes we are Poles and proud. Our WW2 ended in 2011 when we got our home back. If you imagine that we shall become part of a 'greater Russia' again you are mistaken Sir. Nor, from my general understanding of the population, will Western Ukraine surrender without a fight to a new Russian domiation.

Which leaves two altermatives: Civil war or amicable secession. Evidently the latter is preferable though how this would be achieved is at present unclear.

Cyppok I realy respect your well argued views, in this case though I would suggest that the statistics are not the whole story. To understand the true situation in this case you need to be 'on the ground'. My Pater, who is in Lwow now, reports that he was asked to teach English in a Government school...

I believe that force alone would re-incorparate Western Ukraine into a 'Greater Russia'.

A lot of rightfully ours things are no longer ours. If the revolution didn't happen I wouldn't need to work or my family wouldn't have left for the states.

I agree there has been investment and the reasons are valid, cheaper labor, lower energy costs (at least there were for a while), easier to bribe officials (a j/k but sort of true), and cheaper raw materials... Just saying that comparatively its small and while its growing fast the material impact won't be apparent for a while, until full production and ancillary industry is formed.

Like I said Western Ukraine will never willingly become part of anything. Independent for sure though, they would never become a part of Poland either btw. Like I said earlier the willingness of Russia to incorporate even parts of south-eastern Ukraine which wanted to join it around 2004 was very much in question. I doubt it would even be by force, its not necessary. Amicable secession wouldn't happen but a rowdy split that is peaceful could have occurred in 2004.

My uncle is in Crimea on the ground he visits us here periodically. Tax reform did not give gov't popularity either the one that left or the one that came in.

Nope never been in the western part, haven't been to the eastern part either since the 90s. Wondering where you re-bought city wise? and what the general price per sq.m or per ha was. The language issue is a big deal in the Eastern part of Ukraine. Imagine you live in Switzerland and everyone in your city speaks French but every official building is using German wouldn't be fun right? most Ukranian is very understandable the problem is Western Ukranian has a lot of Polish loanwords so very hard for people to understand whom aren't used to it.

Ok.Simplest and dumbest of questions.Why would Russia refuse incorporating Eastern Ukraine?

There was an argument that it would necessitate sharing oil revenue due to increase in population. Pensions etc... also relations with Europe would suffer and there was a lot of investment being garnered.
Another problem is that it would set a fairly bad precedent and most likely whatever Ukraine that was left over would be very hostile.

The other part of this story is that it happened very quickly over a month time give or take and the reaction from Russia was either not fast enough or didn't take the situation seriously. Going independent as an Eastern Ukraine was probably discussed and shelved and then business interests took over and made sure the issue was "resolved".
http://www.jamestown.org/single/?no_cache=1&tx_ttnews[tt_news]=36200

On March 21, Ukrayinska Pravda reported the return of two individuals (Borys Kolesnikov and Viktor Tikhonov) involved in organizing the November 2004 separatist meeting in Severodonetsk (EDM, November 28, 2004). Criminal charges against separatists that were filed in 2005, as in other prominent cases involving Ukraine’s elites, were never completed (EDM, June 23, 2005).

Yevhen Kushnaryov - Wikipedia, the free encyclopedia
This guy was also very involved in 2004 but was "accidently shot" later on.

Right now the issue that draws Russia to provide support is the official language 'discrimination'. Also after Kosovo they might be willing to add parts back because the west broke on political agrements in relation to non-violation of borders. Also the most honest answer: I do not know.

"Accidentaly shot" speaks volumes about why a Greater Russia is unacceptable.