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West’s promises to help Ukraine are idle talk - experts

March 26, 2014, 17:38 UTC+3 Zamyatina Tamara
© EPA/ROBERT GHEMENT

MOSCOW, March 26. /ITAR-TASS/. Unless the political crisis in Ukraine is resolved in the following months and the country gets financial aid from abroad, the national currency, the hryvnia, may lose up to 50% in value, states a report by the Center of the Development Institute at the National Research University Higher School of Economics (HSE). This will bring around galloping inflation and business default on repayments to external creditors, the experts believe.

Ukraine has already announced its need for a $35 billion bailout. In the meantime, as of the end of 2013, the country’s aggregate external debt amounted to about $146 billion, thus exceeding 80% of the national gross domestic product.

Several countries have declared readiness to help Ukraine with a total of $32-37 billion. The European Union promised a €11 billion package, with another €15-20 billion possibly coming from the International Monetary Fund (IMF). Japan is intending to allocate up to $1.5 billion, the USA could give another $1 billion. Yet all these are only promises so far.

Ukraine can also hope for Russian support, Russian Minister of Economic Development Alexei Ulyukaev said recently. Moscow, he said, was ready to discuss sovereign bond purchases for another $12 billion in addition to the already bought $3 billion with a legitimate government. At the same time, Russia does not fail to give Ukraine the bills. For instance, last week Russian Prime Minister Dmitry Medvedev said Ukraine was to repay $11 billion for the gas discount under the denounced agreements.

On Tuesday, the Ukrainian government froze social payments, which will help save up almost $1.2 billion in 2014.

Kiev says Ukraine’s only rescue is in the IMF’s huge loans, yet the IMF’s precondition is draconian austerity measures in Ukraine. Experts polled by the Itar-Tass political analysis center do not rule out these measures can kill not only the Ukrainian economy but the country as a whole.

“They will promise Ukraine much more than they will give in reality, though the country will get some aid. But nothing will change with another billion of dollars from a foreign player,” believes the head of the Center for European Studies at the Institute of World Economy and International Relations (IMEMO), Russian Academy of Sciences, Alexei Kuznetsov.

The economist believes a remedy for the Ukrainian economy does not rely on lending alone.

“The country should first of all overcome the political crisis, find a way of mutually acceptable interaction between the country’s West and East and launch a crusade against corruption and oligarchy,” says the expert.

“Irrevocable financing from the West will be minimal. It will mainly help with bailouts pegged to implementation of rigid structural reforms. For an economy in doldrums, they can be a trigger for even worse conditions. I cannot imagine how a patient already in such a dire state will be able to survive,” says Director of the Department of the International Capital Markets at the Institute of World Economy and International Relations at the Russian Academy of Sciences Yakov Mirkin.

“Amid the continuing global and European economic crisis, I do not think any of the European countries will sacrifice anything for Ukraine,” believes research director at the Russian Public Policy Center Fyodor Shelov-Kovedyaev. “Nobody will buy metal from Ukraine any more, there is plenty of it on the market. And nobody will squeeze up for Ukrainian goods on the European market.”

“The European Union is unable to help its own members - Greece, Italy, Portugal and so on - even less Ukraine,” Russian State Duma deputy Vyacheslav Nikonov says in an article to the Rossiyskaya Gazeta daily.

Europe could help Ukraine alleviate its dependence on Russian gas with the so-called reverse supplies of blue fuel. Yet the European Commission has so far failed to reach Slovakia’s accord. On Wednesday, Slovakia's Prime Minister Robert Fico said guaranteed Russian gas supplies would be his country’s priority, while there were no spare funds to help Kiev. The stumbling block, he said, was the absence of €20 million to arrange reverse and guarantee supplies.

“What Ukraine needs in the first place is not money but prospects. I mean prospects for industrial development and wider sales markets,” economist and former deputy head of the Russian Accounting Chamber Yury Boldyrev told Itar-Tass.

“The West can give Ukraine the lending it needs. It can simply print money. But the West is not opening its markets for Ukraine and is not giving it ways to earn foreign currency,” said the expert. “Only Russia can crack its markets open for a legitimate government of Ukraine and provide it with opportunities to cooperate and develop major economic sectors."

 

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