From our new favorite Marxist economist (sorry Michael Hudson, that was just a summer fling), Michael Roberts at his The Next Recession blog, August 13:
Ukraine: the invasion of capital
Last week, Ukraine’s foreign private creditors agreed to the country’s request for a two-year freeze on payments on about $20bn of foreign debt. This would enable Ukraine to avoid defaulting on its overseas borrowings. Unlike other ‘emerging economies’ in debt distress, it seems that foreign bondholders are happy to help Ukraine out – if only for two years. The move will save Ukraine $6bn over the period, helping to reduce pressure on central bank reserves, which slid by 28 per cent year-to-date, despite significant foreign aid.
Ukraine’s economy is, not surprisingly, in a desperate state. Real GDP is projected to decline by more than 30% in 2022 and the unemployment rate is at 35% (Constantinescu et al. 2022, Blinov and Djankov 2022, National Bank of Ukraine 2022). “We are grateful for the private sector support of our proposal in such terrible times for our country,” responded Yuriy Butsa, Ukraine’s deputy finance minister, “I’d like to emphasise that the support we’ve received during this transaction is hard to underestimate . . . We will stay fully engaged with the investment community further on and hope for their involvement in the financing of the rebuilding of our country after we win the war,” Butsa said.
Here Butsa reveals the price to pay for this limited largesse by foreign creditors.: the accelerating demand of foreign multi-nationals and governments to take control of Ukraine resources and bring them under the control of foreign capital without any restrictions and limitations.
In a past post, I had outlined the plan to privatise and hand over the vast agricultural resources of Ukraine to foreign multi-nationals. And for several years now, a series of reports by the Oakland Institute economic observatory has documented the takeover of foreign capital. Much of what is below comes from Oakland.
Post-Soviet Ukraine, with its 32 million arable hectares of rich and fertile black soil (known as “cernozëm”), has the equivalent of one-third of all existing agricultural land in the European Union. The “breadbasket of Europe,” as it is called, had an annual production of 64 million tons of grain and seeds, among the world’s largest producers of barley, wheat and sunflower oil (for the latter, Ukraine produces about 30 percent of the world total).
As I explained in my previous post, the planned takeover of Ukraine’s resources partly provoked the conflict: the semi-civil war, the Maidan revolt and the annexation of Crimea by Russia. As the Oakland Institute has outlined, to limit unrestrained privatization, a moratorium on the sale of land to foreigners had been imposed in 2001. Since then, the repeal of this rule has been a main goal of Western institutions. As early as 2013, for instance, the World Bank provided an $89 million loan for the development of a deed and land title program needed for the commercialization of state-owned and cooperative land. In the words of a 2019 World Bank paper the aim was an “accelerating of private investment in agriculture.” That agreement, denounced at the time by Russia as a backdoor to facilitating the entry of Western multinationals, includes the promotion of “modern agricultural production … including the use of biotechnologies,” an apparent opening towards GMO crops on Ukrainian fields.
Despite the moratorium on land sales to foreigners, by 2016, ten multinational agricultural corporations had already come to control 2.8 million hectares of land. Today, some estimates speak of 3.4 million hectares in the hands of foreign companies and Ukrainian companies with foreign funds as shareholders. Other estimates are as high as 6 million hectares. The moratorium on sales, which the US State Department, IMF and World Bank had repeatedly called to be removed, was finally repealed by the Zelensky government in 2020, ahead of a final referendum on the issue scheduled for 2024.
Now with war grinding on, Western governments and corporations are stepping up their plans to incorporate Ukraine and its resources into the capitalist economies of the West.On July 4 and 5, 2022, top officials from the US, EU, Britain, Japan, and South Korea met in Switzerland for a so-called “Ukraine Recovery Conference.”
The URC’s agenda was explicitly focused on imposing political changes on the country – namely, “strengthening the market economy“, “decentralization, privatization, reform of state-owned enterprises, land reform, state administration reform,” and “Euro-Atlantic integration.” The agenda was really a follow-up to the 2018 Ukraine Reform Conference which had emphasized the importance of privatizing most of Ukraine’s remaining public sector, stating that the “ultimate goal of the reform is to sell state-owned enterprises to private investors”, along with calls for more “privatization, deregulation, energy reform, tax and customs reform.” Lamenting that the “government is Ukraine’s largest asset holder,” the report stated, “Reform in privatization and SOEs has been long awaited, as this sector of the Ukrainian economy has remained largely unchanged since 1991.”
The irony is that the 2018 URC plans were opposed by most Ukrainians. A public opinion poll found that just 12.4% supported privatization of state-owned enterprises (SOE), whereas 49.9% opposed it. (An additional 12% were indifferent, whereas 25.7% had no answer.)
However, war can make all the difference. In June 2020, the IMF approved an 18-month, $5 billion loan program with Ukraine. In return, the Ukraine government lift[ed] the 19-year moratorium on the sale of state-owned agricultural lands, after sustained pressure from international finance institutions.. Olena Borodina with the Ukrainian Rural Development Network commented that, “the agribusiness interests and oligarchs will be the primary beneficiaries of such reform…[This] will only further marginalize smallholder farmers and risks severing them from their most valuable resource.”
And now July’s URC has re-emphasised its plans to take over the Ukraine economy for capital, with the full endorsement of Zelensky government. At the conclusion of the meeting, all governments and institutions present endorsed a joint statement called the Lugano Declaration. This declaration was supplemented by a “National Recovery Plan,” which was in turn prepared by a “National Recovery Council” established by the Ukrainian government......
.....MUCH MORE
The similarities to our post, Sovereign Debt: "Ukraine in default according to Fitch and S&P", written the same fricken' day, are uncanny.
However, it is only with ours that you get a gif of vultures.
