Kiev's 'Peremoga' Over Creditors Can't Hide Catastrophic Economic Collapse

After weeks of intensifying fights along the front lines in the Donbass, Ukrainian military shelling has slackened in recent days. It looks like the offensive Ukrainian President Petro Poroshenko threatened by declaring the 'times of pacifism' 'over' petered out. If Washington plans to fight Novorossiya and Russia to the last Ukrainian, it needs another plan. The Ukrainian word for victory is 'peremoga'. This is to distinguish it from the Russian word 'pobedy'.

Ukraine's Chicago-born State Department carpetbagger Finance Minister Natalie Jaresko declared a great victory this weekend, with the agreement of San Francisco-based Templeton Global group and other private holders of Kiev's debt to a bond 'haircut'. In fact, it doesn't appear as if the private creditors, contrary to the analyses that was translated at Ft. Russ, had much of a choice in the matter.


When heavy pressure is being applied from George Soros, the Obama Administration, and the alternative could be getting pennies on the dollar after years of litigation in London courts, it's fairly difficult to say 'no' to a '20% haircut' and suspension of payments for several years that is probably going to add up to the cancellation of a third or more of Kiev's multi-billion debt owed to international bondholders. As the FT reports:

A group of the country’s largest creditors, including the US asset manager Franklin Templeton, has accepted an immediate 20 per cent write-off on $18bn of the embattled country’s bonds, at a time when market turmoil triggered by fears for China’s economy has already wiped billions of dollars from emerging markets funds.

The deal, hammered out after five months of intense negotiations, includes a freeze on debt repayments for four years.

Natalie Jaresko, Ukraine’s finance minister, said she was delighted with the terms, adding that the country had endured a “long and difficult road” to reach the accord with creditors.

For Kiev, restructuring private creditor debt is a vital condition for the International Monetary Fund to press ahead with a four-year financial support programme, totaling about $40bn.

The agreement comes at a crucial time, with tentative signs that the economy could be starting to stabilise.

Although output is still falling, the national currency, the hryvnia, has stopped its steep decline, while inflation — which spiralled above 60 per cent earlier this year due largely to utility price rises demanded by the IMF — is moderating.


The FT is of course, cheer leading for U.S./UK policy here rather than reporting the truth -- that the real Ukrainian economy remains in free fall, and the hyrvnia's collapse has only been halted temporarily by severe capital and currency controls. Kiev's economy remains among the worst performing on the planet year over year. The utility rate increases the FT shrugs off as one time inflationary adjustments are likely to force many hundreds of thousands of Ukrainians to choose between food or heat this winter. That in turn, will either drive a wave of home evictions over unpaid utility arrears by spring, or the utilities themselves will have to demand a bailout from Kiev in order to remain solvent and pay for gas and coal. Kiev is also asking the Mongoloid Moskal Russian aggressor occupiers hellbent on crushing Ukrainian democracy Russian government and Gazprom for a discount on winter gas prices. Never in the history of warfare it seems has any nation been so utterly dependent on its alleged sworn enemy for energy...


#Winning, Kiev style

Meanwhile, Russia isn't budging on the $3 billion loan the Yanukovych government took out prior to the Maidan coup d'etat of February 2014, and unsurprisingly for anyone who knows how corrupt Ukraine is some of the IMF money has disappeared. Ukrainian newspaper's investigation (and in Kiev these days the oligarch infighting continues, despite the U.S. trying to get Dnepropetrovsk crime boss Ihor Kolomoisky to play nice with its State Dept. puppet Poroshenko) has uncovered $1.8 billion in misappropriated (read: stolen) IMF funds in banks or accounts controlled by Ihor K:


But let's not pick on Ihor K., just because he's a dual if not triple passport holder. There are clearly many other minigarchs or oligarchs with their pig snouts in the trough.

Carrying water in a sieve: European [Union] loan vanishes without a trace in Kiev

Then there's the other ongoing fiscal drain that Ukraine cannot afford -- the war in Donbass. Just in case The Wall Street Journal had any illusions about what the Franklin Templeton bondholders and IMF-funding taxpayers got for their money, the WSJ reports that Jaresko received a nice memento to commemorate her 'peremoga' in the debt negotiations -- a painted artillery round. The Russia Analyst could not make this stuff up if he tried:

Although Greece is not at war (excuse me: 'Anti-Terror Operation' or ATO), it is one of the few economies that since 2008 can compete with Kiev's for the sheer amount of collapse. Yet the owners of Greek bonds did not receive any additional 'haircuts', nor is Athens off the hook for multi-hundred million euro payments each year that barely service its crushing debt burden. The priorities of the Western central banksters are clear: billions in debt relief to fund  war in Ukraine, but not a penny in tribute to those lazy, Russia-friendly Greeks:


Contrary to some of her previous statements, the strange, giraffe necked occult numerology obsessed woman Christine Lagarde is always down for tearing up IMF rules to give Kiev more money

As we said, while the FT tries to spray some cologne on the putrefying corpse of Ukrainian economics, even Kiev's own numbers are terrifying --

According to an August 11 article in the Ukrainian news outlet, real GDP in Ukraine fell by 16.3% during January-June 2015, compared to the same period of 2014. The report is based on reporting by Ukraine’s Ministry of Economic Development and Trade.

If the government is admitting that the economy has crashed over 16%, the real figure is probably closer to a 25% GDP crush, which along with the real unemployment rate puts Ukraine solidly in  Great Depression equivalent-territory. We expect Ukraine to bottom out after losing a third of its GDP, but who knows? If they decide to continue the war for years or adopt Monsanto GMO agriculture (which we expect Ukrainian farmers to fight) that costs them the Russian and Chinese export markets, they could lose half of their economy before a recovery starts.

The government says better times are just around the corner, thanks to Washington and Madame Giraffe-Necked's IMF largesse:

“In recent months, the economic situation has stabilized and positive trends are expected to revive economic activity in the second half of 2015,” report the ministry. “As a result, the decline in GDP for the year will slow to 8.9 per cent, while inflation is expected to reach 45.8 per cent (December to December).”

The 2015 state budget of Ukraine optimistically predicted a fall in GDP of 5.5 per cent with inflation of 26.7 per cent. These were the projections assumed in the $17.5 loan agreement (Extended Fund Facility) signed in March of this year with International Monetary Fund. But in the government’s first review of the agreement, last month, it increases the expected fall in GDP this year to nine per cent and says inflation will be 45.8 per cent. (See July 21, 2015 letter, 53 pages, to the IMF by the Ukrainian government, signed by President Petro Poroshenko, Prime Minister Arseniy Yatsenyuk, Finance Minister Natalie Jaresko and National Bank of Ukraine Governor Valeria Gontareva.)

Ukraine’s National Bank predicts a GDP decline of 9.5 per cent and inflation of 48 per cent.

Ukraine’s economy contracted in 2014 by 6.8 per cent while prices rose by 24.9 per cent. In the first quarter of 2015, the GDP decline was greater than that of the last quarter of 2014, 17.2 per cent compared to 14.8 per cent.

Prof. Steve H. Hanke of Johns Hopkins University believes Kiev is still probably cooking the books to make its situation look slightly less desperate to the IMF. Prof. Hanke tweeted last week that the real annual Ukrainian inflation rate measured in dollars is almost 93%!


In fairness, not everyone in Kiev is drinking the koolaid. As reports, Ukraine's economic decline since it declared independence from the dying Soviet Union in August 1991 is the worst in the world, outpacing fellow ex-Soviet republics Georgia and Moldova. So great has been independence for Ukraine's economy, that it has even outperformed the world champions Zimbabwe and the Central African Republic when it comes to GDP collapse:

Ukraine’s GDP performance is worst in the world from 1991-2015

According to data of the World Bank, Ukraine’s real GDP performance for the last 24 years has been the worst in the world, writes Sergey Korablin, a doctor of economics in Kyiv, in an August 22 article in

Korablin writes that of 166 countries in the world whose GDP statistics are available to researchers, GDP growth for the period 1991-2014 declined in only five countries. Ukraine’s decline was 35 per cent. The other four, negative growth countries were Moldova (-29%), Georgia (-15.4%), Zimbabwe (-2.3%) and the Central African Republic (-0.9%).

During the first nine years of independence, in 1991,  Ukraine lost nearly 60% of GDP. Korablin says the domestic economy never recovered from that shock. “Neither quantitatively nor qualitatively.”

“The beginning of the current crisis is usually associated with last year’s change of political power in Kiev. But that just added to the slide to the bottom of the economic hole in which the country landed nearly a quarter of a century ago.”

In 14 years, from 2000 to 2013, domestic GDP in Ukraine increased by 69.8%. That is the worst result among all republics of the former Soviet Union. After Ukraine, the minimum gains of GDP were shown in Estonia, at 75.7%. The maximum gains were Tajikistan (GDP grew by 2.9 times), Turkmenistan (3.1 times) and Azerbaijan (4.8 times).

Keep in mind, that when Ukraine became independent its per capita GDP was roughly comparable to that of its ex-Communist neighbor Poland, and its population was 52 million. During the Brezhnev years many Ukrainians lived better than Poles, in terms of frequent getaways to the Black Sea, more spacious apartments, and better industrial wages (particularly when comparing the Donbass to Poland's coal fields).

As Russian nationalists never tire of pointing out, at least two if not three among the last five Soviet premiers (Khrushchev, Brezhnev, and Chernenko) were ethnic Ukrainians or married to a Ukrainian. Simply put, the Ukraine was the most economically and agriculturally productive region of the Soviet Union, with only Muscovites and Leningraders living better than Kievans and Odessans during the 1970s era of higher oil prices and good times under 'papa Brezhnev'.


Today tens of thousands from Ukraine enter Poland either legally or illegally every month in order to find work, often janitorial or housecleaning, in the middle-class EU country. While Poland's population has modestly grown since independence, leveling off with the large scale Polish emigration to the United Kingdom and Germany since the late 1990s, Ukraine has lost eight million souls. And that's including two million people living in the now-Russian Crimea and parts of Donbass not under Kiev's military control in the tally.

As the numbers compiled above dating back to 1991 prove, Ukraine desperately needs peace, but its socio-economic problems run much deeper than 'separatism' and the war allegedly caused by 'Putin's aggression'. Ukraine's economy and Soviet-built infrastructure have been rotting for a very long time, not only due to the universally acknowledged bugaboo of corruption but also Western neo-liberal ideology. Quite simply, the country inherited huge heavy industries from the USSR, which lacked any markets other than the former Soviet countries, but rather than re-industrialize with cleaner and more energy efficient technologies the country's industry (not unlike in Russia) has been deliberately dismantled. What was left of the Soviet inheritance, in the form of the steel industry and military industrial complex, is being finished off under Poroshenko by the four horsemen of:

1) global economic decline (who needs Ukrainian steel when China's is cheaper and can be supplied faster and more reliably)

2) the end of cheap energy inputs from Russia and Donbass, as well as Russian military and civilian equipment orders

3) Ukrainian artillery and rocket fire destroying the physical infrastructure, as well as driving out the workers in Donbass

and the fourth horseman rides on the darkest horse of all --

4) the IMF's 'shock doctrine'.

A map of Ukraine showing the country's principal coal fields, many of which are now in 'rebel' Novorossiya hands or destroyed by the fighting.
A map of Ukraine showing the country's principal coal fields, many of which are now in 'rebel' Novorossiya hands or destroyed by the fighting.

Look at this tweet by Harvard graduate student and Carnegie Endowment NGOer Matthew Kupfer, laughably claiming that Ukrainian IT and other sunrise industries (prostitution, marijuana cultivation?) can replace those icky Soviet legacy rust belt mines and factories that nobody allegedly needs anymore.

De-industrialization by design-- who needs coal mines or steel mills when you have endless war, bridal tours, and GMO crops instead?

In case anyone doubts that the de-industrialization of Ukraine under western tutelage was deliberate, or had nothing to do with the fact that the most industrialized part of the country (Donbass) also happened to be the most pro-Russian, take a look at this quote:

In a March 2014 article, writer Slava Tsukerman with the Lancaster Country, California, wrote:

From 1990 to 2008 the share of machinery in the structure of industrial production in Ukraine has changed from 31% to 14%.

In 2009, Ukraine’s Gross Domestic Product fell by 14.8 per cent, which was one of the worst indicators of GDP growth in the world. In the same year, industrial production fell by 25. per cent.

In February 2010, Doctor of Economics Sergey Korablin wrote: “In the early 1990s, few would even imagine a risk of conversion of Ukraine from a country of industry to one of extraction of raw materials. Today, it is no longer a risk or threat but a fait accompli, and hardly causing any discussions.”

[embed][/embed] Another industry of course, that is expected to soak up the pool of Ukrainian manpower idled by de-industrialization and the collapse of legitimate businesses is war-making. There's clearly no shortage of military age males out of work that could give Kiev enough men to build a huge army -- if enough Ukrainians could be convinced that military service would pay them decently:

KIEV, August 25. /TASS/. The level of real and shadow unemployment in Ukraine is growing and by winter may encompass half the population of the country.

This was stated at a press conference by the director of the Ukrainian Institute for the Analysis of Policy and Management, Ruslan Bortnik.

"Unemployment can reach the level of 50%  by winter - real and shadow," - said Bortnik. Speaking of shadow unemployment, the expert explained that "some people will just have delayed paychecks, which is constantly growing, some people will work for one day, although employed on the books".

He noted that currently in Ukraine "the fall in the labour market is at least 20%, however, by estimates of specialized business associations, this figure is up to 50%".



Welcome home war hero, Ukrainian style-- an 'ATO warrior' receives his monetary reward from his bankrupt government, which is being out three months of already pathetic ($200 a month equivalent in hyrvnia) combat pay


Ukrainian volunteer battalion members (note the red occult-ish pinwheel patch on one) complain in this video about not being paid for months


Being hated by both Ukrainian ultra-nationalists and Novorossiya sympathizers -- what a feat for PM Arseniy 'Yats is the guy' Yatsenyuk!

Unfortunately for those in the Pentagon or in the neocon set who fantasize about building a half million or more manned Ukrainian army capable of marching on Crimea if not conquering the pro-Russian exclave of Transnistria before pushing the accursed Moskals out of Donetsk and Lugansk all the way to Krasnodar or the Volga ("reclaiming" in the minds of Ukrainian nationalists all of the Cossack marches they regard as historically 'Ukrainian') it seems Kiev is too broke to pay its soldiers consistently, much less a living wage.


Ukrainian President Petro Poroshenko poses next to an allegedly modernized, upgraded T-64 Bulat tank. Ukraine's war industries have proven to be completely inadequate to the task of supplying enough armor for the regime to hope for an offensive breakthrough in Donbass.
Ukrainian President Petro Poroshenko poses next to an allegedly modernized, upgraded T-64 Bulat tank. Ukraine's war industries have proven to be completely inadequate to the task of supplying enough armor for the regime to hope for an offensive breakthrough in Donbass.

The Ukrainian army which has been in combat for over fourteen months now also cannot seem to issue its soldiers adequate amounts of underwear, socks, or medical supplies for when they get wounded. The Pentagon is training Ukrainian soldiers at the military firing range in Yavoriv in far western Ukraine, but can't seem to supply its charges with an adequate amount of Hanes or Fruit of the Loom wear the U.S. Army could order in bulk from Wal-Mart or its own PX stores. The cheery stories about volunteers supplying the needs of Ukrainian soldiers at the front while their government doesn't give a s--t about them can only be recycled for so long as WesternMSM struggles to make lemonade out of rotting Kiev lemons:




Drunken Ukrainian soldiers vow to fight 'Russian terrorists' Is it any surprise then, given the widespread publication and circulation of these facts, that the last wave of mobilization for the Ukrainian army only achieved half of its conscription goal? Apparently for original Cold Warrior Walter Russel Mead the reluctance of most healthy Ukrainian males between the ages of 17 and 50 to fight 'Russian aggression' in Donbass is quite distressing:



A witness tells Ukrainian media about how soldiers and militarized police refused Kiev orders to relieve encircled members of his unit trapped inside the Ilovaisk cauldron a year ago So much for retired Gen. Wesley (Clinton Arkansas crony) Clark's claim that the Ukrainian armed forces can, with sufficient U.S. re-arming and training, hope to replicate the success of Croatia's 1995 'Operation Storm' against the pro-Russian breakaway republics in Donbass. So much for Poroshenko's build up for the offensive the Novorossiya Armed Forces (NAF) and pro-Russian sources predicted would coincide with Ukrainian Independence Day on August 24.

Given these depressing realities -- if you are a Ukrainian nationalist or even just a human being who remembers the families of dead or wounded Ukrainian soldiers exploited as US/NATO cannon fodder -- it's no surprise Center for Syncretic Studies analyst Joaquin Flores concludes:

Between now and September 1st, the belligerents in the Donetsk region of will attempt to finish their operations which resumed some weeks ago.
One significant factor in this result was the UAF's failures in recent weeks to gain traction.  The UAF amassing upwards of 90k soldiers along the contact line, and the OSCE documented a buildup of long-range weapons banned by Minsk II.  Nevertheless, several attempts to develop momentum on the Kiev side ended in failure.
Various skirmishes and attempts to probe the NAF lines revealed a very well prepared Novorossiyan force.  Each major skirmish ended in a UAF defeat. These events are placed in the background of a lack of morale among most UAF soldiers.
The regular UAF is generally ill equipped and have reported shortages.  Moreover there is a general consensus that the Kiev government is either incapable or unconcerned with adequately resolving the present crisis.
This has led on the one hand to increased support among UAF soldiers for the far-right extremist 'volunteer battalions' often associated with the Pravy Sektor, and on the other hand  has led to defections over to the NAF forces.
One of the biggest crises facing the UAF is the inability to meet its conscription goals.  Those who are conscripted are often told they will not see any fighting.
In connection with this are numerous reports that international mercenaries, primarily from NATO countries, have been engaged in most of the UAF operations.  Analysts say these were meant to provoke a stronger NAF reaction.
These may explain the smaller scale of the operations in recent weeks, and may also mean that UAF conscripts are being kept away from fighting.
The renewed commitment of Merkel and Hollande to Minsk II is widely viewed as a diplomatic and strategic victory for Putin.