Ukrainians Protest Oligarchic Rule that has Stripped the Country of its Wealth

  December 16, 2013

Ukrainians Protest Oligarchic Rule that has Stripped the Country of its Wealth

Economist Jeffrey Sommers says that although pro-EU Ukrainians have legitimate grievances, they have little to gain from trade agreements that would ultimately transfer ownership of industry to outside actors
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JEFFREY SOMMERS is an associate professor and Senior Fellow of the Institute of World Affairs at the University of Wisconsin-Milwaukee. He is also visiting faculty at the Stockholm School of Economics in Riga.  He is co-editor of the forthcoming book The Contradictions of Austerity. In addition to CounterPunch he also publishes in The Financial Times, The New York Times, The Guardian, TruthOut and regularly appears as an expert on global television.


Ukrainians Protest Oligarchic Rule that has Stripped the Country of its 
WealthJAISAL NOOR, TRNN PRODUCER: Welcome to The Real News Network. I'm Jaisal Noor in Baltimore.

Massive demonstrations are continuing in Ukraine over the government's push for closer economic ties to Russia versus the E.U. After U.S. Senator John McCain addressed demonstrators in Kiev Saturday, he told NBC News on Sunday the U.S. Congress could pass sanctions on Ukraine if it signs a trade agreement with Russia.

Now joining us to discuss this is Jeffrey Sommers. He's an associate professor and senior fellow of the Institute of World Affairs at the University of Wisconsin-Milwaukee. He's also visiting faculty at the Stockholm School of Economics in Riga.

Thank you so much for joining us.


NOOR: So can you talk about why John McCain traveled to the Ukraine, why he cares so much if the Ukraine signs a trade agreement with Russia or the E.U., and what elite U.S. interests are at stake here?

SOMMERS: Well, John McCain essentially has been fighting the Cold War even after the Cold War's been over for some 20 years. So for some four decades he has actually been engaged in this protracted struggle against the Soviet Union and now its post Soviet Union incarnation in Russia. Essentially, he's interested in making sure that a Russian state does not get reconstituted, which could include some of the other former Soviet republics.

Now, this has geopolitical implications for U.S. interests in terms of ensuring that there's not a very, very strong bloc in Eurasia that controls this vast store of energy and minerals and brings into its orbit the countries around its border.

McCain has been very active in terms of trying to break Belarus, trying to get Lukashenko out of power. Of course, he was very active in terms of supporting Saakashvili and the republic of Georgia, and had some part, really, in instigating the state of affairs in the Republic of Georgia which led to the disastrous little war that occurred there a couple of years ago.

So this is just all part of his ongoing efforts in the region.

NOOR: Now, talk about what's driving these protesters, which are focused mostly on Western Ukraine, to oppose the closer ties with Russia and why they want closer ties to the European Union. And the deal with Russia will be part of the Customs Union, which is the Eastern European equivalent to the E.U.

SOMMERS: Sure. Well, Ukraine is a deeply divided country. If you think about the economy of the United States prior to the Civil War you see something analogous to the Ukraine today, although it was even worse--or, I should say, it's even worse today in Ukraine than it is [incompr.] the situation that we had before the Civil War in the United States. It's a country which has half of its population more or less linked to the economic interests in terms of heavy industries supplying the economy of Russia with both raw materials, leather goods. And then, of course, you have Western Ukraine, which is really not linked into that Russian economy in the same way that the Eastern part of the country is. And ethnically it's different as well. So you have a very, very significant ethnic division.

Now, in terms of the protesters in West Ukraine, I actually have a lot of sympathy with them. They've been misruled by an oligarchy for the past two decades in post-Soviet Ukraine that's done nothing but just strip the country of its wealth and sent it off via offshore financial structures to banks in Latvia, Cyprus, London, etc. So the country has not been developed. Its wealth has been looted.

And so you have a young population that feels as if they have nowhere to turn to, as if they need some kind of external solution to their problems. And I very much sympathize with that. I just don't think that it's going to come through the E.U. as the trade agreement was constituted.

NOOR: And can you break down the role of energy and gas pipeline politics in the region? It's been widely reported now that the Ukrainian president is going to meet with Russian President Putin to discuss a possible deal with Gazprom, who currently supplies Ukraine with 60 percent of its gas supplies.

SOMMERS: Well, this, of course, has always been an important issue throughout Eurasia, and that is the transportation or the transshipment of energy, although becoming a little bit less significant as new energy drilling technologies are coming online. But still, nonetheless, quite important. It's over the course of the past couple of decades. Ukraine has served as one of the primary transshipment pipelines for natural gas from Russia, which goes through Ukraine, which then goes to Europe, the European Union. So they are very concerned about making sure that those supplies are safe and secure.

Ukraine has been more or less pilfering gas from these pipelines for a couple of decades, and the Russians have more or less just had to put up with this. But also they've been playing hardball with Ukrainians by charging them really, really quite high prices for gas, which Ukraine really cannot afford. So now Ukraine is carrying some significant debt, in part because of very, very high prices. Russia is now offering to bring those prices down, trying to [incompr.] break and perhaps, you know, create a more sustainable situation.

NOOR: Finally, I want to end with a question that isn't often discussed in the mainstream media: what would a economic deal or economic reform in Ukraine look like that would actually benefit the people of Ukraine?

SOMMERS: I'm so glad you asked that question. That's the important one that's never asked. There's nothing wrong intrinsically with an agreement with the E.U. or the Russian customs union, and there's no reason that one cannot have an agreement with both, but it has to be a very different agreement. It has to be one which delivers resources to Ukraine, which is still a relatively poor country. It has to develop its economy in the fashion of, say, China over the past 30 years or, say, Japan in much of the 20th century. You need an agreement which invites investors in to partner with Ukrainian enterprises, not to buy Ukrainian enterprises up, but to partner with the Ukrainian create enterprises and help them develop the country.

An E.U. agreement, if one was signed, it should deliver significant structural funds to develop the country's infrastructure. It should have an agricultural regime of supports that doesn't drive Ukrainian farmers out of business, nor that just merely turns them into only exporters of grain to markets in the West. So an agreement which really develops Ukraine. And as Ukraine develops and produces goods, it therefore would have something to trade, and all parties would benefit. Everyone would become more prosperous as a consequence.

But that's not how trade agreements are constructed today. So, essentially I'm talking about a post-World War II Marshall plan for Ukraine and the kinds of trade agreements that were signed at that time, not just in terms of the aid, but in terms of how the actual trade agreements are constructed.

NOOR: Jeffrey Sommers, thank you so much for joining us. And we'll certainly keep following this story.

SOMMERS: Thank you.

NOOR: You can follow us @therealnews on Twitter, Tweet me questions, comments, story ideas @jaisalnoor.

Thank you so much for joining us.


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