May 22, 2015
A Few Thoughts About Tomorrow
By Aleksandr Rodzhers
Translated from Russian by J.Hawk
I don’t intend to convince the terminal Maidan cases or
dyed-in-the-wool Russophobes. This text is not for them, only for the those who
think and understand that Ukraine’s affairs are going very badly indeed.
Let’s start with a few numbers. Ukraine’s debt as of April
1, 2015 (no data available for May yet) is officially $65 billion, including
$42.6 billion of foreign and $22.4 internal debt. Gold and currency reserves as
of May 1 are officially $9.6 billion (in reality it’s less than that but we’ll
let that stand). In June, the government must pay IMF about $5 billion on its
current obligations. As a reminder, IMF has categorically refused to
restructure or write off those debts. Moreover, Ukraine’s reserves will also
shrink during May. Therefore Ukraine will have only about $4 billion left (plus
minus the statistical error).
We’re not going to consider the internal debt,
optimistically assuming it can be restructured. This leaves $42 billion of
foreign debt—and $4 billion with which to pay it. In other words, Ukraine can
cover only 10% of its foreign debt.
By comparison, Russia’s national debt as of May 1 is $52.5
billion, while its foreign reserves are $356 billion, including $48.3 billion worth of gold. In other words, Russia
could cover its foreign debt seven times over (strictly speaking, 6.8 times).
In addition, in contrast to Ukraine. Russia’s trade balance
consistently runs surpluses which ensures a permanent influx of foreign
currency (even in spite of sanctions and other US and US allies’ dirty tricks).
Thus we can say that Ukraine’s financial condition is 58
times worse than Russia’s.
At the same time, the total hryvnia mass exceeds 930
billion. Therefore if Ukraine’s reserves are down to $4 billion, the default
ration between the total hryvnia amount and foreign currency reserves would be
230 to 1 (which is what the hryvnia-dollar exchange rate would be in the event
of default). Even if one can avoid paying $5 billion to the IMF, the ratio is
still 103 to 1.
In other to avert a default and hryvnia collapse, Ukraine
somehow has to obtain $40 billion in order to maintain the convertibility of
the current hryvnia supply and another $40 to pay its debts. And even that does
not take into consideration bank, corporate, and municipal defaults, or the
huge national budget deficit.
For example, de-facto insolvent entities include Ukraine’s
Pension Fund, Ukrainian Railroads, the city of Kiev, Oshchadbank, Ukrainian
Export-Import Bank, and so forth.
In order to avoid boring you with calculations, I’ll sum up
by saying that Ukrainian economy’s stabilization requires something on order of
$180-200 billion. That’s just to keep the economy afloat in its current state.
No way would it be sufficient to promote growth.
What is to be done, then? There are three variants.
Variant 1. Revolution in Ukraine
A real revolution, not a Maidan-style profanation. A change
of the system of government with a complete break with the past and “rebranding”
the state in another form, with a revamped Constitution and, more likely than
not, under a new name. In any event, as long as Ukraine is being governed by
complete failures and criminals of the puppet occupation administration under
full control of the US, nothing will change.
Variant 2. The last one is a rotten egg.
Please keep in mind that Crimea owes nobody nothing,
likewise DPR and LPR owe nobody nothing. Only the remnants of Ukraine owe. Draw
your own conclusions.
Variant 3. There’s nothing left to do except await the
Well, then 15-20 years of poverty are guaranteed. Guys, the
junta and its supporters are not up to their jobs! The country is in default, there are millions of unemployed, while those still working receive
miserly wages (I won’t even mention the retirees, once there’s a default they’ll
get nothing at all). Officially the crime rate grew by a factor of 6-8. The
banking system is collapsing. Production is collapsing and export is dropping
by a factor of 2-3. Ukraine imports 42% of its food and moreover the planting
season is an outright failure, which implies the threat of starvation. And then
one still has to find fuel to heat homes during next winter (gas storage
facilities should be pumped full right now, but where are you going to get the
money?). Ukrainian Railroads insolvency threatens to disrupt cargo shipments,
which will damage industry and economy even more.
But what is the “president” and the “government” concerned
with right now? They are babbling about the visa-free regime, joining the EU,
Yatsenyuk is breaking off military-technical cooperation with Russia (which
automatically means the loss of tens of thousands of jobs and additional drop
in the GDP), and are preparing to launch another round of fighting on the
Donbass (which will end like all the previous ones, with encirclements and
thousands of dead).
This is not the behavior of a generous master, but rather of
a dying mad dog—“we’ll perish, but make things worse for the Donbass and Crimea”.
It’s hatred-based schizophrenia.
Think about it. You have elderly parents who will not
survive the default. Apart from high communal payments and the threat of
eviction, the default will lead to rapid disappearance of foreign medicines.
You need hard currency to buy them, but there won’t be any, so retirees, the
disabled, diabetics, and other vulnerable categories will simply die off. You want
Think about it hard. You have children who need a future. A
future not in an impoverished “not-quite-Third-Reich” which forbids you to
think and forcing everyone to wear embroidered shirts, jump, and write
assignments on the topic of “how I hate the Moskals” (I’ve seen tens, if not
hundreds, of such masterpieces in the social media). The junta is closing
hundreds of institutions of higher learning, and the rest will require high
tuition payments which will render them inaccessible to the majority of
Think about it very hard. Do you want your family to live in
a country where “heroes” can beat, kidnap, torture, and kill anyone they
consider “insufficiently patriotic”? Do you want to live in a country in which
not only the state but also the so-called “activists” will control every aspect
of your life and tell you what to wear, what to read, how to speak, and
regiment every other aspect of your life? Do you want to live in a country
where more than half the population wants to leave forever (all the while waving
yellow-blue rags?). And, finally, do you want to live the greater part of your
lives in poverty so that a bunch of fat scumbags could tell you how to
correctly love the Motherland?
Ukraine is gone. Not one out of eight fundamental functions of
the state is still being discharged. One should not revive a corpse, it will
only be a parasite consuming its Soviet inheritance, incapable of creating
anything new. It’s time to create something new, on a new foundation.
How can that be accomplished? I think that the second variant is the
optimal one. In any event, given what the Maidan junta has wrought in a single
year, it’s not going to be easy, and we have understand that right now.