The Ukrainian Divide

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Memo
To: Website Fans, Browsers, Clients
From: Jude Wanniski
Re: The Ukrainian Divide

What’s
going on in the Ukraine? A presidential election last week with
the candidate of the eastern region, closest to Russia, winning
narrowly over the candidate of the western region, abutting Western
Europe. The loser cried fraud and the politicians of the West, i.e.,
the Bush administration and the NATO countries, immediately announced
that they agreed with the loser. I’m suspicious, having watched
the neo-cons again and again promote ideas they knew would cause
a fracturing of the old Soviet Union and the Yugoslav Federation.
A decade ago, they sold Moscow and then Belgrade on the idea of
“shock therapy” to convert from a command economy to a
market economy, knowing full well it would cause serious economic
problems for the USSR and Yugoslavia. It’s like a chess game,
kind of. But I fought my old Cold War allies, knowing how much pain
and suffering “shock therapy” would bring to the masses
of ordinary people of the political fragmentation that would cause
more tensions.

I
made several trips to Moscow warning the government to resist shock
therapy, but was outnumbered by the neo-cons and the influence they
had in the first Bush administration. While I lost, at the time
I argued it would be largely a waste of time to purposely fragment
the defeated communist empire. Once Moscow figured out what made
economies grow, I believed, its natural cultural and economic ties
to the fragmented provinces would invite reunification. That’s
what’s going on in the Ukraine, but in this case the Eastern
region is being pulled back toward integration while the West is
coaxing Ukraine West to break free. It is in fact a remnant of the
Cold War, along the lines of the pulling and tugging going on in
the Korean peninsula and in the Middle East.

On
Friday, I emailed Georgiy Markosov, a Russian friend of more than
20 years who I met when he worked as the chief political/economic
counselor in the Soviet Embassy in Washington. We’ve remained
in touch over all these years and he has been a reliable source
of information on what’s going on in his part of the world.
He had been a deputy minister in Putin’s transportation ministry,
but is now in Moscow’s private sector, a consultant to the
western business community. He responded to my query about the Ukraine
situation with the following “Memo from Moscow,” and said
it would be okay to use it and identify him by name.

Jude,
you are right. The European Union and Washington are unhappy about
the results of the election in the Ukraine and actively intervene
on behalf on one candidate against the other supported by President
Putin. The Ukraine is the biggest country in Europe. Any political
game in the middle of Europe can create a situation that neither
Washington nor EU could handle. The Eastern part of the Ukraine
with more than 50% of population of the country produces 75% of
GDP and is fully integrated in the Russian economy. They have voted
for Yanukovich and assured the majority needed for the victory.
If the West steals the election victory the Eastern regions of the
Ukraine can separate from the rest of the country and join the Russian
Federation.

Neither
Russia nor the West are ready for that, nor have they any meaningful
plan for the de facto divided Ukraine. The people of Ukraine will
have to make the best choice itself and stick to it while the rest
of the world should live with it. However, this simple truth is
not accepted by the West. It looks that Iraq is not enough and NATO
needs another battlefield. At this point the outcome is very difficult
to predict. However, nothing good will happen and Russia and the
West will soon have another test of maturity of their relations
and will have to prove to their respective peoples that they can
peacefully live in the post cold war world.

The
Parliament of the Ukraine took today a non-binding decision, that
is nothing more but recommendation to the president. The fate of
election will be decided on Monday by the Supreme Court. The position
of President Putin is officially neutral, Russia will accept the
decision of the Supreme of Ukraine. The current score is 49.7% for
Yanukovich and 46.6% for Yushchenko. Yushchenko scored almost 90%
in the West and more than 50% in central regions. Yanukovich scored
80% in Eastern and Southern regions, that account for more population.
If elections take place in two weeks Yanukovich will win again,
but so far there is no legal ground for new elections. My feeling
is that chances of Yushchenko to become a president anytime soon
are close to zero. If, however, by miracle he steals the election
with a help of the West, the current division of the country can
be formalized by referendum in the Eastern and Southern parts of
the Ukraine.

Today
the above parts of the country stopped sending tax money to Kiev
until the moment when the current President Kuchma restores the
constitutional order. The East and the South of the Ukraine are
sick and tired of subsidizing Western regions of the country by
contributing more than 70% of the budgetary income. All sea ports,
mines, steel plants, machine building plants, aviation and space
industries are in the East and in the South. All day today people
in those regions (90% Russian speaking) rallied for autonomy and
even for joining Russia. This scenario is totally spontaneous and
is not welcome by President Putin. But things can really get out
of control.

I
have no particular sympathy for Mr. Yanukovich, nor for Mr. Yushchenko,
the Ukraine really deserves better candidates. However, whatever
choice Ukrainians make in the coming days within their constitutional
process must be respected. No foreign power can take sides in this
election without paying the price it can not really afford. Can
the civilized world afford another Cold War? That will make terrorists
of the world very happy.

~
Georgiy

November
30, 2004

Jude
Wanniski [send him mail]
runs the financial/political advisory service Wanniski.com.
(If you subscribe,
and check LewRockwell.com
in the referring website pull-down,
LRC gets 10%.)

Jude
Wanniski Archives

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