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To Aid or Not to Aid
Ukraine's Biggest Problem: No Money

The biggest problem for the new Ukrainian government isn’t die-hard Yanukovych supporters or the threat of Russian involvement, but the fact that it is running out of money:

 In Kiev, the political focus turned to formation of a government capable of dealing with what acting president Oleksandr Turchynov called “catastrophic” economic challenges.

“Yanukovich’s regime brought the economy to catastrophe. State coffers are empty,” he said, calling for a national unity government to be formed by Tuesday.

Like the Yanukovych government before it, the new Ukranian government is likely looking for an aid package from outside the country. This is even more complicated than it looks. Ukraine is an extremely corrupt country, and the opposition’s reputation is no better than that of the former government. Neither the United States nor the EU will be eager to toss money down this rat hole. Why give aid that the oligarchs will immediately steal and send to Switzerland?

It’s going to be very hard to get Ukraine to sign up and enforce the conditions under which big new aid packages would make sense. Putin hoped that the offer of unconditional bailouts would buy a critical mass of oligarchs, but they fear getting eaten up by even bigger Russian oligarchs (backed by the Kremlin) as much as they fear having a bunch of Western accountants and lawyers landing in Kiev and slowly throttling all the fun out of stealing public money.

The best thing that could happen would be a serious aid package from the United States and the EU, including the kind of trade relief and support that would underwrite the painful shift to a Western-focused economy in the east of the country, and a serious deal where the oligarchs agree to go straight in the future in return for letting them keep what they already have. Combine this with a serious reform effort, and something could happen.

But the West doesn’t really want to make this kind of investment, and the oligarchs don’t really want to give up control, so we shouldn’t expect any tidy and quick solutions to this mess.

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  • Mark Michael

    I think this analysis hits the nail on the head. It raises the question,”Is there any hope those corrupt oligarchs will ‘straighten up and fly right’?” Maybe paraphrase Churchill about us Americans, “They’ll do the right thing – after they’ve tried everything else!” How many things can those corrupt oligarchs try?

    Actually, the fear in the back of one’s mind is Putin: How will he take this – now that the Sochi Winter Olympics are over? Will he decide to use force like he did in Georgia? Send in the military in some form or other? Maybe not tank columns streaming over the border, but “fifth” columns of some special forces to put pressure on the Ukrainians. I hope not.

  • Pete

    “The best thing that could happen would be a serious aid package from the United States and the EU, ..”

    Oh sure. Throw more U.S. taxpayer money down the drain in an asinine attempt to ‘save the world.’ from itself. Let thew EU and Russia deal with the Ukraine, not us.

    Kiddies, America is in debt up to its eyeballs. It is time to be fiscally prudent. The squandering of taxpayer money must to stop.

  • Andrew Allison

    This analysis demonstrates a surprising lack of understanding of the geopolitical realities. Ukraine’s biggest problem is not money but Crimea, which is not just a locus of pro-Russian feeling, but home of a major Russian naval base. The smartest thing Kiev could do would be to return the former USSR’s 1954 gift of the Crimea to the then SS Republic of Ukraine. This would, at a stroke, appease Russian and relieve Ukraine of threats of Russian intervention and pro-Russian unrest.

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