Ukraine’s Economy Choking Under Russian Pressure, But Western Help Is Scarce

[Purveyor]

By Steven Mufson October 15

With its war-torn economy threatened by further Russian disruptions, Ukraine is in desperate need of a new international financial aid package, economists say, but none appears imminent.

The International Monetary Fund’s $17 billion package in May was not designed to compensate for the effects of months of fighting between Ukraine’s military and Russian-backed separatist forces. In addition to military costs, lost tax revenue and the dire need for infrastructure repair, Ukraine faces a crisis of confidence that is driving capital flight and a decline in its currency.

“I now fear systemic economic failure — unless there is a positive confidence shock,” said Timothy Ash, London-based head of emerging markets research at Standard Bank. He said Ukraine’s banks are fragile, the budget deficit is more than 10 percent of gross domestic product, and the economy could shrink by as much as 10 percent, greater than the current IMF estimates.

Ash said that there were “lots of warm words for Ukraine but not many greenbacks” from the United States or the European Union, which is mired in its own economic stagnation. Ash said in an e-mail that on an official visit to Washington recently, Ukrainian President Petro Poroshenko “gave the speech of his life and got $53 million, which is small change. That funds the cost of the war in the East for 9 days.”

That fighting has disrupted the entire eastern part of the country, crimping business and tax receipts. Mikhail Afendikov, chief executive of Cub Energy, an exploration company, said his firm is drilling only four gas wells in eastern Ukraine instead of 18 as planned. Two-thirds of Ukraine’s coal production comes from the strife-torn Donbas region, and output there has fallen by half. Bridges and railways have been damaged.

more...

http://www.washingtonpost.com/business/economy/ukraines-economy-choking-under-russian-pressure-but-western-help-is-scarce/2014/10/15/d983dbfc-4fc6-11e4-babe-e91da079cb8a_story.html

[MannyGoldstein]

1. The West's bailout of Ukraine

Was in return for promises of severe austerity.

I'm sure the Russian moves have made it that much worse.

[cprise]

2. What the West has proposed is absolutely insane

1. Sever all economic ties (incl. trade deals) between Ukraine and Russia
2. Demand that Russia continue supplying fuel at below-market rates anyway
3. Pretend the border between the two counties is hermitically sealed (the opposite of the reality)

Its stupid and arrogant to say the least.