The Coming Eastern Bailout And What Tensions In Ukraine Mean For You
February 28, 2014 by Jeff Berwick
The geopolitical stakes in Ukraine have brought us to a quasi Cold War redux, as Western powers the European Union and the United States have made it clear their intention to “support” (read: meddle in) Ukraine. In the meantime, Russia has sent troops to the border of Ukraine in what are being called exercises.
Turkey is experiencing protests and violence due to corruption by the government, and Venezuela is also experiencing protests and violence. The “global political awakening” has gone hot on multiple continents.
Although one week ago mainstream press worldwide spoke about Ukraine as if it were in the midst of a popular uprising, a different picture has become clearer, as communist and fascist sympathizers seem poised to gain the most out of the chaos. “Conspiracy” aside, it is a no-brainer that major powers can have the most influence in these sorts of situations, and we are seeing this develop. Already, European-style bank policies are being implemented in the unstable region.
Seven percent of deposits were drained from Ukrainian banks last week amid bloody clashes between diverse protesters and the state. Now, in a bid to “protect savings,” Ukraine is mulling restricting cash withdrawals as reports of pending default loom.
Withdrawals peaked at 30 billion hrynias ($3.1 billion) from Feb. 18-30 as police and anti-government demonstrators fought in the center of Kiev. The interim government has told the world Ukraine is bankrupt and seeks $35 billion in financial aid.
In other words, Ukraine is going to the highest bidder, and the European Union, United States and Russia will guarantee the funds. The EU won’t be able to match Russia’s standing offers, but an alliance between the United States and European Union could certainly bring Ukraine further under EU influence. On the year, the hryvnia is down 16 percent.
The International Monetary Fund is already ready to move in. Managing Director Christine LaGarde told Stanford University students in California: “We are ready to engage… We will probably shortly send some technical assistance support to the country because this is our duty to a member, if that member asks,” which is “clearly what is likely to happen.”
Ukraine remains on the brink of default without “significantly favorable changes” in its political crisis, according to Standard & Poor’s on Feb. 21. It cut the nation’s credit rating to CCC — eight levels short of investment grade.
As Ukraine picks its new government, Russia has apparently ordered tests of its combat readiness in the central and western parts of Russia. Protests in Ukraine ultimately led to the disposal of Russian-backed leader Viktor Yanukovych. Russia has pledged to protect “the health and life of [its] compatriots.” The Russia foreign minister has warned the United States and European Union to stay out of Ukrainian affairs, as media the world over highlights U.S. and EU interference in Ukraine and their potential support of far-right, neo-Nazi groups. “It is dangerous and counterproductive to try to force upon the Ukraine a choice on the principle ‘you are either with us or against us,” Lavrov told a Moscow news conference.
Moscow has already stopped a bailout package he reached with Yanukovych for refusing closer ties to Europe.
The United States and the European Union have been quick to pledge support. U.S. taxpayers are in the dark about what’s going on, so they won’t get the chance to approve or disapprove. Plus, they are used to funding brooding totalitarian states the world over. In fact, it might just be so that the hardworking people of Detroit, recently bankrupted, are chomping at the bit to send money to Russia’s borders and invest in infrastructure, education and science (read: bribe corrupt politicians).
On the ground in Ukraine, this will appear as a devaluation of the country’s currency and privatization by EU and U.S. interests of Ukrainian agricultural land. A push to bring Ukraine into the beleaguered EU will recommence, and Germans eventually will be the direct lifeline to Ukraine. As the second-largest nation on the continent, Ukraine will be tall order for Western nations to prop up. And with Russian troops amassing on the border, tensions akin to the Cold War have reared their ugly head. Talks have already swelled regarding Ukraine joining NATO, which would bring a U.S.-steered world organization to Russia’s border. What’s likely is Western nations will now prepare to aid Ukraine. Some combination of Americans, Europeans and Russians will pay for it.
If Ukraine moves closer to the European Union, this will result in a power shift in the EU, favoring nations like Poland and the Czech Republic. Partly for this reason, I am currently en route to the Czech Republic, looking into new opportunities during the turbulence. The events unfolding in Ukraine now just go to show the importance of having a second passport when the SHTF. If you want to stay up to date on global economic change, read The Dollar Vigilante.