Kiev counts the cost of acting as catspaw for imperialism

The expiry of Ukraine’s free-trade treaty with Russia is further undermining the economic viability of the coup regime.

Proletarian writers

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Russian President Vladimir Putin

Proletarian writers

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The Kiev regime continues to stall over implementation of the Minsk agreement, neither taking the political measures necessary to arrive at a form of autonomy for the south-eastern Donbass region nor halting its low-level but deadly violations of the agreed ceasefire with anti-fascist fighters there.

But economic events are rapidly overtaking Poroshenko’s junta. In the new year, the Russian finance ministry announced that it is filing a lawsuit against Ukraine for failing to pay off a $3bn debt to Russia by the 31 December deadline. The lawsuit will be filed in the London Court of International Arbitration, something of an embarrassment to British imperialism, which has so much staked on keeping Ukraine financially afloat in its proxy aggression against Russia.

Finance minister Anton Siluanov has stressed that Russia “has always been willing to consider options to assist Ukraine in line with the IMF programme. Russia intends to carefully examine any significant offer from Ukraine, but also believes that the court proceedings do not preclude a constructive dialogue in order to reach an acceptable settlement of the debt.”

This constructive approach has not been reciprocated. Back in August 2015, a committee representing western creditors (and doubtless acting on strong inducement from above) agreed to let Kiev off some of its debt. The committee, headed by the Franklin Templeton group, negotiated a 20 percent ‘haircut’ on about $28bn worth of Eurobonds.

Russia declined to participate in this deal, pointing out that its bond purchase was a state loan, not a commercial one. IMF official policy permits default on commercial debt, but not sovereign.

Kiev, cocksure after this kid-glove treatment, threatened Moscow with dire consequences if it did not tuck in behind the restructuring package. Clearly primed by his imperialist sponsors, Prime Minister Arseniy Yatsenyuk, in a somewhat original tone for a debtor to adopt towards his creditor, warned: “we are ready for judicial proceedings”.

He added: “On 29 October, we again asked Russia to decide whether they are ready to accept Ukraine’s conditions,” and urged Russia to “join normal countries that made the decision to restructure [Kiev’s debt]. As expected, only one country did not participate in the [restructuring] vote – there is an interesting country called the Russian Federation. And the $3bn that Russia should restructure and partially write off remains unresolved.”

In a move that threatened to tip matters into outright farce, Kiev issued a counter-claim against Russia, demanding that Moscow pay reparations of one trillion hryvnia (about $46bn) to compensate for the loss of Crimea and Russia’s supposed activities in the Donbass. President Putin’s press secretary was bemused: “Crimea is the territory of the Russian Federation. Donbass is the territory of Ukraine. How did they get that one trillion? It is not clear.” (Ukraine’s $1tn demand from Russia shrinks to $46bn, RT, 15 October 2015)

In November, in an effort to cut through all this grandstanding nonsense, Putin offered a three-year restructuring plan under which Kiev could skip payment for 2015, instead paying off the debt at $1bn a year for three years. The only proviso was that the US, EU and IMF should put their money where their mouth is and stand guarantor for the debt. They declined, leaving Moscow no option than to pursue the matter in the courts.

Be careful what you wish for

Another bad piece of news the new year brought to the Poroshenko clique was the expiry on 1 January of Ukraine’s free-trade treaty with Russia, which had been based on provisions agreed among the members of the Commonwealth of Independent States (CIS) – a body comprised of former Soviet countries which in some measure continues the traditions of economic integration and fraternal relations previously obtaining within the USSR.

Under these arrangements, there are no import taxes to be paid on products from fellow member countries. This has, until now, been most advantageous to Ukraine, which has benefited from exporting into Russia’s comparatively vast market. Whilst successive Ukrainian governments have courted nationalist sympathies by toying with severing such CIS links, the obvious economic benefits had always stayed their hand.

The EU association deal, hesitated over by the ousted Yanukovych government and embraced by the usurping Poroshenko junta, set Ukraine on a path that was inconsistent with such agreements, and hence, according to a decree signed by President Putin on 16 December, to defend the Russian market from being undermined by the EU via its Ukrainian back door, the new year marks the end of Ukraine’s privileged relations with the CIS. (See Putin signs decree suspending free trade treaty with Ukraine, RT, 16 December 2016)

Clearly, it would be economic suicide for Russia to continue importing tax-free everything Ukraine wanted to export, especially when the West would be dumping its overproduction surpluses on Ukraine. Ukraine no longer has any right to expect preferential treatment from its former privileged trade partners. It has been estimated that Ukrainian industry could in consequence lose between $140m and $205m per annum in export earnings.

These obvious facts of life, the unavoidable consequence of the junta’s own policies, are being greeted with squawks of outrage by the EU, which is shouting about a Russian ‘embargo’ of Ukrainian food products. Yet it was the West which began the foolish and destructive game of sanctions, not Russia, and, in any case, what is at immediate issue here is simply customs tariffs, not an embargo.

Ukrainian workers, already reeling from the suffering and economic dislocation of the war, and from the austerity measures imposed by the IMF as the quid pro quo for their massive and unrepayable loans, will now have to suffer the full consequences of the innocuous-sounding ‘association agreement’ with the European Union.

Even before the full agreement kicks in, Ukrainians are registering their disillusion with the course the country has been taking under the junta’s leadership. A recent Gallup poll reported that 88 percent think that the government is corrupt, and only 8 percent have confidence in it. Only 17 percent approve of Poroshenko’s performance, lower than even the lowest ratings ever scored by his lacklustre (but democratically elected) predecessor, Yanukovych. (Ukrainians disillusioned with leadership by Julie Ray, Gallup, 23 December 2015)

The reality is that imperialism does not give a damn about the rights or welfare of any section of Ukraine’s population. It is solely concerned with enslaving Ukraine to monopoly capital and using the country as a catspaw to attack Russia.

The enemy is not Russia but the fascistic junta in Kiev, and right behind it, Nato fascism itself.

Down with the Kiev junta; down with Nato fascism!
Victory to the Donbass resistance!