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    May 22, 2015

    A Few Thoughts About Tomorrow

    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 default.

    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 that?

    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 population.

    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.

    Aleksandr Rodzhers  

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