The real Zelensky: from celebrity populist to unpopular Pinochet-style neoliberal

Ukrainian president Volodymyr Zelensky

By Natylie Baldwin, The Grayzone, 4/28/22

Ukrainian academic Olga Baysha details Volodymyr Zelensky’s embrace of widely loathed neoliberal policies, his repression of rivals, and how his actions fueled the current war with Russia.

A comedic actor who rose to the country’s highest office in 2019, Volodymyr Zelensky was virtually unknown to the average American, except perhaps as a bit player in the Trump impeachment theater. But when Russia attacked Ukraine on February 24, 2022, Zelensky was suddenly transformed to an A-list celebrity in US media. American news consumers were bombarded with images of a man who appeared overcome by the tragic events, possibly in over his head, but ultimately sympathetic.  It didn’t take long for that image to evolve into the khaki-clad, tireless hero governing over a scrappy little democracy and single-handedly staving off the barbarians of autocracy from the east.

But beyond that carefully crafted Western media image is something much more complicated and less flattering. Zelensky was elected by 73 percent of the vote on a promise to pursue peace while the rest of his platform was vague. On the eve of the invasion, however, his approval rating had sunk to 31 percent due to the pursuit of deeply unpopular policies.

Ukrainian academic, Olga Baysha, author of Democracy, Populism, and Neoliberalism in Ukraine: On the Fringes of the Virtual and the Real, has studied Zelensky’s rise to power and how he has wielded that power since becoming president. In the interview below, Baysha discusses Zelensky’s embrace of neoliberalism and increasing authoritarianism, how his actions contributed to the current war; his counterproductive and self-absorbed leadership throughout the war, the complex cultural and political views and identities of Ukrainians, the partnership between neoliberals and the radical right during and after Maidan, and whether a Russian takeover of the entire Donbass region might be less popular among the local population than it would have been in 2014.

Tell us a bit about your background.  Where are you from and how did you become interested in your current area of study?

I am an ethnic Ukrainian born in Kharkov, a Ukrainian city on the borderline with Russia, where my dad and other relatives are still living. Before the current war, Kharkov was one of Ukraine’s leading educational and scientific centers.  The city’s residents pride themselves on living in the “intellectual capital” of Ukraine. In 1990, the first television company free from party control was established there; soon, its first news program went on air. By that time, I had already graduated from Kharkov University, and one day, I was invited to work as a journalist in this program by a university friend. Next day, without prior experience, I started reporting.  In a couple of months, I was a news presenter. My meteoric career was not an exception.

New uncontrolled media, the number of which was increasing at a huge rate daily, demanded more and more media workers. In the overwhelming majority of cases, they were young ambitious people without any journalistic education or life experience. What united us was the desire to westernize, a lack of understanding of societal contradictions characterizing the post-Soviet transition, and deafness to the concerns of working people who opposed reforms. In our eyes, the latter were “retrograde”: they did not understand what civilization was about. We saw [our]selves as a revolutionary vanguard and chosen progressive reformers. It is we—media workers—who created a favorable environment for Ukraine’s neoliberalization, presented as westernization and civilization, with all disastrous consequences for society they brought. Only years after, I realized this.

Later, while supervising the production of historical documentaries in a Kiev television company, I recognized that the mythology of unidirectional historical progress and inevitability of westernization for “barbarians” provided an ideological ground for neoliberal experiments not only in the former Soviet states but around the globe. It is this interest in the global hegemony of the ideology of westernization that led me first to the doctoral program in critical media studies at the University of Colorado at Boulder and then to the research I am doing now.

According to the academic work of some Ukrainian sociologists, polling showed in the recent past that most Ukrainians were not very interested in the issue of identity but were more concerned with issues like jobs, wages, and prices. Your work focuses a lot on the Neoliberal reforms that were enacted in Ukraine since 2019 – against the popular sentiment. Can you talk about what the view is on economic issues for most Ukrainians and why?

In the social milieus [in which] I lived — the east of Ukraine, Crimea, and Kiev — there were very few people concerned with the issue of ethnic identity. I do not in vain emphasize “my social milieus.” Ukraine is a complex and divided country with its far east and far west holding diametrically different views on all socially significant issues. Since the declaration of Ukraine’s independence in 1991, two ideas of national identity have been competing in Ukraine: “ethnic Ukrainian” versus “eastern Slavic.” The ethnic Ukrainian national idea, based on the notion that Ukrainian culture, language, and ethnicity-centered history should be the dominant integrating forces in the Ukrainian nation-state, has been much more popular in the west of Ukraine. The eastern Slavic idea, which envisages the Ukrainian nation as founded on two primary ethnic groups, languages, and cultures — Ukrainian and Russian — has been accepted as normal in the Ukrainian southeast. However, in general, I can agree that most Ukrainians are much more concerned with economic issues, which has always been the case.

As a matter of fact, Ukraine’s independence of 1991 was to a big extent also a matter of economic concerns. Many Ukrainians supported the idea of political divorce from Russia because of an expectation that Ukraine would be better off economically — this is what propagandistic leaflets promised us. This economic hope was not realized. In many ways, the collapse of the Soviet Union radically changed people’s lives for the worse because of Ukraine’s neoliberalization — the marketization of the social sphere and ruination of the Soviet welfare state.

What about neoliberal reforms initiated by Zelensky?  You can judge on their popularity by opinion polls – up to 72% of Ukrainians did not support his land reform, the flagship of Zelensky’s neoliberal program. After his party approved it despite people’s indignation, Zelensky’s rating fell from 73 percent in Spring 2019 to 23 percent in January 2022. The reason is simple: a deep sense of betrayal. In his unofficial election platform — the show “Servant of the People” — Zelesnky-Holoborodko [Holoborodko was Zelensky’s character in the television show – NB] promised that if he could rule the country for just one week, he would “make the teacher live as the president, and the president live as the teacher.” To put it mildly, this promise was not fulfilled. People realized that they were duped once again—the reforms have been carried out in the interests of not Ukrainians but global capital.

To what extent do you think that prioritizing of economic security versus identity issues has changed with the Russian invasion?  How do you think that will work out for the political fortunes of the nationalists/ultranationalists versus moderates or leftists?

That is an interesting question. On the one hand, people’s priority now is to survive, which makes security their primary concern. To save their lives, millions of Ukrainians, including my mom and my sister with children, have left Ukraine for Europe. Many of them are ready to stay there forever, to learn foreign languages, and to adopt to a foreign way of life—all these developments can hardly prioritize identity concerns. On the other hand, however, the intensification of ethnic sentiments and the consolidation of the nation in the face of the invasion is also evident. I can judge on this from public discussions in social media—some Kharkovites whom I know personally even started making posts in Ukrainian [language], which they had never used before, to highlight their national identity and signal that they are against any foreign invasion.

This is another tragic aspect of this war. The Maidan revolution of 2014, which many people in the southeast did not support, transformed these people into “slaves,” “sovki” and “vatniki”—derogatory terms to denote their backwardness and barbarism. This is how Maidan revolutionaries, who considered themselves the progressive force of history, saw anti-Maidan “others” because of their adherence to Russian language and culture. Never ever could this pro-Russian population imagine Russia to shell their cities and ruin their lives. The tragedy of these people is twofold: first, their world was ruined symbolically by the Maidan, now, it is being destroyed physically by Russia.

The outcomes of these developments are unclear so far as it is unclear how the war will end. If the southeastern regions remain in Ukraine, the ruination of everything resisting aggressive nationalism will most likely be completed. This will be probably the end of this unique borderline culture that has never wanted to be either completely Ukrainized or Russified. If Russia establishes control over these regions, as it boasts now, I can hardly predict how it will be dealing with mass resentment—at least, in the cities that are damaged significantly, as in Kharkov…

Read my full interview with Olga Baysha here.

Gilbert Doctorow: Russian Media, April 25 2022

By Gilbert Doctorow, 4/25/22

As I have noted previously, there is a firewall between what Western major media are reporting daily about the situation in the Russia-Ukraine War and more generally about Russia versus what one sees on Russian state television and reads in the Russian news agencies. On the advice of a colleague in Washington, I will now as occasion requires post news developments from Russia that Western audiences otherwise are not receiving despite their importance as indicators of where East-West relations are headed and whether we are all likely to survive the coming weeks.

The top such news item in Russia today is the successful capture by the Russian state intelligence agency FSB of a gang of would-be assassins based in Moscow and acting under orders from Kiev to kill the leading Russian talk show host Vladimir Solovyov, about whom I have written these past few weeks. And their ‘kill list’ went on to take in other leading personalities on Russian state television: Dmitry Kiselyov (director of all Russian television news programming), Yevgeny Popov, Olga Skabeyeva and Margarita Simonian (editor-in-chief of RT).

The gang, which appears to consist of White Power and other neo-Nazi elements, was interrogated before video cameras and the videos have been posted on the Russian internet by TASS and other state news agencies.

As might be expected, Russian media have been properly roiled by this news. I caught the discussion on Vyacheslav Nikonov’s afternoon edition of “The Great Game.” His panelists saw this ‘terrorism’ as a new phase in Ukraine’s hybrid war that is being stage managed from Washington. Panelists made the point that the West has been very lucky till now that Russia’s president, Vladimir Putin, has shown great forbearance by not responding in kind to the vicious war being waged by Washington, which always remains one step short of kinetic war in the mistaken belief that these kinds of aggression are water-tight and mutually exclusive. The panelists stressed that at a certain point Putin will indeed respond and the response will be kinetic. The message was addressed to Messrs. Blinken and Austin, who, following their meeting with Zelensky, said at a press conference at the Polish-Ukrainian border, that the goal of the U.S. in the whole matter of the Ukraine-Russian war is to so weaken Russia that it will be incapable of similar actions in the future. In simple English, what they are saying is that the U.S. ambition is to destroy Russia. The masks have been dropped.

Another item in Russian news yesterday and today has been the screening several times a day of videos taken in the United States during Joe Biden’s latest trips across the country to sell his narrative on the economic travails America is now experiencing. Two separate speeches end in Biden’s turning from the lectern and seeking to the shake someone’s hand when there is in fact no one around him. Biden then looks lost and makes a sad retreat from the stage.

Nikonov remarked that these videos have not been aired on major U.S. television, have not been reported on in mainstream print media. My friend in Washington confirms that this is so. Meanwhile, the fact of Biden’s blatant disorientation was denounced by Donald Trump a day ago – so at least he has seen the videos which the Russians take as indicative of the mental degeneration of the U.S. President and a token of the degeneration of the entire U.S. political class. Trump commented that Biden’s disorientation is something the country has never seen before and that the Biden administration has put the U.S. on a path to hell.

Where will all this end?  It is not headed in a good direction.

James Carden: US a ‘co-belligerent’ in Ukraine war, legal expert says

ukrainian flag waving in wind with clear sky in background
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by James Carden, Asia Times, 4/19/22

Conversations over the past week with current and former US officials about whether, to their knowledge, there is any real debate inside President Joe Biden’s administration over the approach it is taking in Ukraine has produced only slight variations of the same answer: “Not really.”

As of now, what the Biden policy amounts to is a replay along the lines of president Franklin D Roosevelt’s policy toward the war in Europe from 1939 to December 1941, during which the US was a co-belligerent all but in name.

In their public statements, Biden and his Defense Secretary Lloyd Austin seem intent on obfuscating the true extent of American involvement. A story in the defense-industry-sponsored Politico quoted unnamed US officials as saying “military options in Ukraine aren’t on the table – echoing Biden’s repeated position of not wanting to spark World War III.”

If taken at face value, Biden’s policy would seem to be at odds with itself. Not wanting to start a third World War is a prudent, appropriate policy objective, but if that’s the goal, the administration is taking the long way around, because whether they admit it or not, the US is, and has been for some time, a co-belligerent in the war.

“We have consistently been sharing intelligence that includes information the Ukrainians can use to inform and develop their military response to Russia’s invasion,” White House spokeswoman Jen Psaki told reporters in March.

On April 13, Biden authorized US$800 million in military assistance to Ukraine, bringing the total amount his administration has spent on aiding Ukraine to roughly $3 billion.

The open spigot of funding has naturally attracted the attention of the defense industry, and last week, the chief executives of Raytheon, Lockheed Martin, Boeing, Northrop Grumman, General Dynamics and L3Harris Technologies met at the Pentagon with Deputy Defense Secretary Kathleen Hicks.

But US involvement goes deeper than arms sales and intelligence sharing. A Pentagon official who requested anonymity told me it is “likely we have a limited footprint on the ground in Ukraine, but under Title 50, not Title 10,” meaning US intelligence operatives and paramilitaries – but not regular military.

Bruce Fein, a constitutional expert and former associate attorney general in the Ronald Reagan administration, told me this week that in his view, “the United States and several NATO members have become co-belligerents with Ukraine against Russia by systematic and massive assistance to its military forces to defeat Russia.”

According to Fein, the US and its NATO allies are now vulnerable to attack by “an enemy belligerent,” meaning Russia, because of their “systematic or substantial violations of a neutral’s duties of impartiality and non-participation in the conflict.”

“Neutrality,” continued Fein, “is violated by permitting a belligerent to violate its territorial integrity (as Belarus and Russia have done to Ukraine), or by supplying warships, arms, ammunition, military provisions or other war materials, directly or indirectly, or supplying military advisers to a belligerent,” as the US has done.

“Under the Declare War Clause of the constitution, co-belligerency, which displaces the status of the United States as neutral, requires a declaration of war by Congress,” said Fein. But instead of fulfilling its constitutional duties, Congress has been aggressively pushing the administration to deepen its involvement in what is clearly now a US-Russian proxy war.

On. March 2, the US House of Representatives voted 425-3 in favor of a non-binding resolution “Supporting the People of Ukraine.” The following week, on March 10, the House overwhelmingly voted to send $14 billion in military funding to Ukraine as part of an omnibus spending package.

And on April 7, the US Senate passed Republican Senator John Cornyn’s Ukraine Democracy Defense Lend-Lease Act of 2022, which “temporarily waives certain requirements related to the President’s authority to lend or lease defense articles if the defense articles are intended for Ukraine’s government and necessary to protect civilians in Ukraine from Russian military invasion.”

In the end, Congress and the Biden administration are wading into dangerous waters. Fein warns that the US has “employed the concept of co-belligerency to target for extermination any group or individual who provides material support to al-Qaeda or ISIS” – and there is a real risk that Russia may take a page out of America’s playbook.

MK Bhadrakumar: US narrative won’t survive defeat in Donbass

Bhadrakumar is a retired Indian diplomat.

By MK Bhadrakumar, Indian Punchline, 4/23/22

An extraordinary thing about British diplomacy is that it continually looks for ways to stay ahead of the curve and provide added value to its customer across the Atlantic, the United States. That makes the remarks on Ukraine conflict by the UK Prime Minister Boris Johnson at his press conference in New Delhi on Friday highly significant.

Johnson brought to mind the evocative lines of Matthew Arnold’s poem Dover Beach on the “melancholy, long, withdrawing roar” when faith is receding. He was completely at odds with the focus of the US president Joe Biden’s remarks at the White House just the previous day where he vowed

-“to hold Putin accountable for his brutal and bloody war”;

-“to further augment Ukraine’s ability to fight in the east — in the Donbas region”;

-to “repel Russia’s aggression in Ukraine, to beat back Putin’s savagery”;

-“sending an unmistakable message to Putin: He will never succeed in dominating and occupying all of Ukraine. He will not — that will not happen”;

-“to ratchet up the pressure on Putin and further isolate Russia on the world stage”;

-“further to deny Russia the benefits of the international economic system that they so enjoyed in the past”;

-“to continue to stand with the brave and proud people of Ukraine.”

Biden managed to pack all this vitriolic rhetoric in one single speech! In fact, he even rounded off exuding optimism that “There is no evidence yet that Mariupol has completely fallen”.

But Johnson, in sharp contrast, tended to go along with the forecast by British Military Intelligence that the Russians could win in Ukraine. Without any verbal acrobatics, he straight came to the point:

“I think the sad thing is that that (Russian victory) is a realistic possibility. Yeah, of course. Putin has a huge army, he has a very difficult political position … the only option he has now is to continue to try to use his appalling, grinding approach, driven, led by artillery, trying to grind the Ukrainians down. He’s very close to securing a land bridge in Mariupol now. The situation is, I’m afraid, unpredictable. We just have to be realistic about that.”

During his recent visit to Ukraine, Johnson had reportedly advised President Vladimir Zelensky to make a retreat from and form a new defence line but Zelensky had no option but to follow American advice.

For President Biden, of course, there is good enough reason why the war should continue as a forever war. The war rallies Europe behind the US’ weakening transatlantic leadership. Besides, Biden now has an alibi to explain away the high inflation in the US economy. He is placating the military-industrial complex in an election year. Biden announced on Thursday a new $800 million package in military aid for heavy artillery, 144,000 rounds of ammunition and drones, which will be sent “directly to the front lines of freedom” in Donbass.

However, the big question remains: How long will the Western unity behind American leadership hold if Biden seeks a protracted conflict with Russia? The successive defeats in Mariupol and Donbass would not only break the back of the Ukrainian army and seriously dent the credibility of the US but discredit the entire Western triumphalist narrative.

While the western sanctions have hurt the Russian economy, per current indications, Moscow is adjusting to a “new normal.” Contrary to Western expectations, the sanctions have not shifted Russian public opinion against the government. The successful testing last Wednesday of Russia’s next-generation intercontinental ballistic missile Sarmat — which “has no analogues in the world and will not have for a long time to come” (Putin’s words) — is no doubt a defiant assertion.

Meanwhile, Western attempts to “isolate” Russia have no success stories to tell. At the G20 finance ministers meeting in Washington, the “Russia boycott” plank had no takers other than the Western bloc. The US failed to persuade Saudi Arabia to disengage from its OPEC+ cartel with Russia. Above all, in the key area where it matters most — oil and gas — Europe is unable to agree to an embargo. Several EU countries threaten to veto any such move by the Commission.

European economies are in varying stages of meltdown, as the blowback from sanctions begins to hit them. Germany’s central bank warned Friday that a full embargo on Russian energy purchases could could cost 180 billion euros, take 5% off Germany’s expected GDP this year, and tip the economy back into a severe recession. It warned that even the need to find replacement sources of energy would put a rocket under inflation, adding over 1.5% percentage points to this year’s consumer price index and over 2% points to next year’s.

Chancellor Olaf Scholz told Spiegel on Friday that a gas embargo is ultimately about “avoiding a dramatic economic crisis, the loss of millions of jobs and of factories that would never open again.” He said that given such “huge consequences for our country, for the whole of Europe,.. it’s my responsibility to say: ‘We can’t allow that (embargo)’.”

Europeans are realising sooner rather than later that they are big losers. Aside disruptions in supply chains hampering industrial production, what with the burden of 5 million refugees (so far) and the big impact on food security due to the war in the “breadbasket of Europe” combining with the short supply of the fertilisers that are used to increase crop yields, Europe is feeling the brunt of price hikes.

Even before the war in Ukraine, fertiliser prices were rising rapidly due to the increasing cost of gas, with nitrogen fertiliser costing almost five times as much as it did this time last year. Experts warn that all this could lead to a food crisis. Agitated farmers have led protests calling for concessions.

The Gallup International polls have shown that the biggest concerns of EU citizens at the moment are rising prices, fear of a widening war in Ukraine and possible shortages in energy supply. More than half of EU citizens believe that Europe has already provided sufficient support to Ukraine.

This is where the defeat in Donbass turns into a climactic event calling into question the entire US narrative on Ukraine — NATO expansion, European security, and dialogue with Russia — and, of course, the fixation about Vladimir Putin’s leadership of Russia.

A poll published Thursday by The Associated Press-NORC Center for Public Affairs Research shows Americans’ desire to get involved has waned somewhat. Only 32% say the U.S. should have a major role in the conflict, down from 40% last month. An additional 49% say the US should have a minor role.

While speaking in Delhi, Johnson all but discarded Biden’s narrative. Instead, he called for “setting out a vision for the future of Ukraine in the security architecture of Europe. Where does Ukraine fit in now?”

Johnson said Ukraine needs to be able to answer that question eventually — “what the Ukrainians want eventually.” Interestingly, he didn’t use the word “Ukrainian government.” 

Johnson dilated on “a collection of security guarantees from like-minded countries — security commitments about what we can do to back them up with weaponry, with training, and with intelligence sharing.” But he quickly added that this cannot be “like an Article 5 (NATO) guarantee.” Instead, he said, Ukraine should have “deterrence by denial.” 

Per Johnson’s vision, Ukraine’s NATO membership is inconceivable. Britain anticipates new facts on the ground. Johnson appeared to recognise the emergent political realities as the Russian juggernaut relentlessly “grinds” Kiev’s war machine to dust.

The Bell: Economic Constraints on Russia’s “Special Military Operation”?

bullion gold gold bars golden
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The Bell is a non-establishment Russian media outlet.

The Bell, 4/25/22

In this week’s newsletter, we’ll review the economic impact of the first two months of fighting in Ukraine, and discuss two key questions: how long can the Kremlin continue to afford its ‘special military operation’ and can the Russian economy hold out? The Russian Ministry of Defense recently announced new military goals that suggest the so-called ‘special military operation’ could go on for much longer than many first thought.

Not just Donbas

The acting commander of Russia’s Central Military District Rustam Minnekayev laid out Friday the aims of the second stage of Russia’s ‘special military operation’. His words amounted to the first official confirmation that Russian forces are seeking to take direct control of land outside the eastern Ukrainian region of Donbas. The ‘new aims’ include:

  • Full control over Donbas;
  • A land corridor to Crimea;
  • A possible land bridge to Transnistria, a breakaway region of Moldova.

The second and third points from Minnekayev’s statement are significant. “This [control over Donbas] makes it possible to establish a land corridor to Crimea, and also to influence Ukraine’s vital [military] facilities and the Black Sea ports where agricultural and metallurgical products are delivered,” Minnekayev said, according to state-owned news agency ТАSS.

Up until Minnekayev, Russian officials have said nothing publicly about seeking a land corridor to Crimea – something that means taking permanent control over the city of Kherson and the southern part of Ukraine’s Zaporozhye region. During March peace talks in Istanbul, the question of a “land corridor” (as opposed to the status of Donbas) was not raised, a source close to the negotiations told The Bell at the time.

The third point is even more radical. “Control over southern Ukraine opens another route to Transnistria, where we are also aware of the oppression of the Russian-speaking population,” Minnkayev said. President Vladimir Putin’s press secretary Dmitry Peskov refused to comment on Minnkayev’s words, referring journalists to the Defense Ministry.

Russian control of a route to Transnistria would leave Ukraine completely cut off from the Black Sea. Economically, it would close Ukraine’s main export channel and cut off all maritime trade. From an operational point of view, it’s impossible for Russia to achieve this without taking Mykolaiv and Odesa (Ukraine’s biggest port city with 1 million inhabitants). It implies that Russia wants control of the entire Ukrainian coastline: from the Dnieper estuary in the East to the Dniester in the West (on the border with Moldova).

What do we know about the current situation?

Statements by officials and publicly available data means we can state the following:

Donbas. Currently, Russia’s most significant public goal is the “complete liberation of Donbas”. In pursuit of this, Russian troops are fighting alongside units from the separatist People’s Republics of Donetsk and Luhansk. Russia formally sees these areas as independent nations. In the open countryside around Luhansk, Russian forces have taken control of Izyum. However, in the more urban landscape of the Donetsk Region, which has been fortified by the Ukrainian military since 2014, progress is less clear: at present, barely 50 percent of the region is controlled by Russian forces. For the moment, the main hot spots appear to be Popasna, Severodonetsk and Lysychansk, which block Russia’s path to the Ukrainian strongholds of Kramatorsk and Slavyansk.

The thinking behind Russia’s current deployment is clearly informed by the major encirclements of the Second World War: Russian forces want to surround some of the largest and best-trained units of the Ukrainian army by striking from north and south. State-owned news agency Sputnik, for example, reported this plan with reference to Ministry of Defense information. The problem, of course, is that Ukraine (which is starting to take delivery of heavy weaponry) is well aware of Russian intentions.

At the start of this week, Ukrainian President Volodymyr Zelenskyy announced that the “battle for Donbas” was already underway. However, the operational reports from both sides suggest that a large-scale Russian offensive has yet to properly begin.

Southern Ukraine. At present there is a de facto land corridor linking the annexed Crimea peninsula with Russia’s southern Rostov region. Since the start of March, Russian forces have held the Ukrainian city of Kherson and strategic points in the lower Dnieper at Kakhovka (Kherson Region) and Enerhodar (Zaporozhye Region). The battle for control of the eastern part of this corridor led to the fierce fighting around Volnovakha in March, and there is on-going fighting at Polohy and Huliaipole. The corridor includes Mariupol, Ukraine’s largest port on the Azov Sea, which is almost entirely under Russian control.

There was growing discussion last week in Russia about the political future of these acquisitions. In particular, there was extensive coverage in Russian state-owned media of a “people’s gathering” calling for the small Rozovsky district of Ukraine’s Zaporozhye region to be added to the Donetsk People’s Republic. The deputy head of the Russian parliament’s committee on CIS affairs Konstantin Zatulin suggested Thursday the creation of a new “Tavriya province” and this idea – recreating Tavriya from Kherson region and parts of Zaporozhye and Crimea – was subsequently backed bySergei Tsekov, senator for Crimea and a member of the committee for international affairs. Ukrainian officials claim that plans are in place to stage a May referendum on the creation of a ‘People’s Republic of Kherson’.

Does Russia have the money to continue the ‘military operation’?

Yes. Under the current sanctions, Russia has the funds to continue the ‘special military operation’ for at least two years without any cuts to social spending, economists told The Bell. Speaking on condition of anonymity, an economic analyst at one foreign bank said: “We have plenty of direct financial resources to continue [the special military operation], the only question is how much people are willing to endure.”

Russia’s finances are being managed by capable officials, according to an oil and gas analyst from a major U.S. company. Problems, including for the military, are more likely to arise from difficulties in buying parts — rather than from a lack of money.

Oil and gas revenues. If you assume a base case scenario in which there is no Western energy embargo on Russia, then the average annual price of Russia’s Urals crude is expected to be $70-75 per barrel. This figure takes into account the ‘Urals discount’ (currently an enormous $40 per barrel as a result of a boycott of Russian crude), and a reduction in imports. That figure would enable the Kremlin to continue funding all its activities – including military activities in Ukraine and the indexation of social benefits – for at least two years without difficulty, a leading analyst at one of Russia’s biggest banks told The Bell.

Exports of oil and oil products will drop about 11 percent (to 1 million barrels a day) in 2022 and total Russian oil production will fall by up to 8 percent, according to the head of a Kremlin-connected think tank. However, the rising price of Urals crude – up at least 10 percent even allowing for the discount to Brent – means the money generated from energy exports will increase. Natural gas prices are expected to stay high for years to come, a source told The Bell, with average prices likely about double the level of 2021.

The budget. Prior to the ‘special military operation’, Russia’s finances were in good shape: there was a surplus of more than 500 billion rubles in 2021, the equivalent of about 0.4 percent of GDP. The 2022 budget is based on an extremely pessimistic average price of $44.2 for Urals crude, and an average exchange rate of 72.1 rubles to the dollar (as of April 22, the actual rate was 75.5 rubles to the dollar).

Russia can even cope with a small budget deficit – if it did occur, the Finance Ministry would likely dip into the National Wealth Fund (as it did during the pandemic). At the start of this month, the fund had liquid reserves worth 9.7 trillion rubles ($130 billion). The Central Bank has cautioned that it won’t “mirror” spending from the fund with the sale of foreign currency, but there would be little impact on inflation from this due to currency controls, a source told The Bell.

Russia’s ability to finance its military adventures in Ukraine is determined by revenue, the structure of expenditure and the ability to deal with any deficit. But there is room for maneuver. For example, it would be possible to avoid a sharp reduction in non-military spending by increasing the deficit. “Without borrowing, Russia’s reserves are worth 6-7 percent of its GDP, an amount quite sufficient to support increased military expenditure and cushion the fall in other spending for at least two years,” one economist told The Bell.

Under a more extreme scenario (for example, a European oil embargo or oil cartel OPEC increasing production), there could be a significant drop in oil and gas revenue. If this happens, the government could cut-back on social spending (like halting pay rises for civil servants or replacing index-linked pensions with one-off payments). Alternatively, it could cut-back on investment.

As long as Russia can sell its oil and gas, there will be sufficient resources to keep the economy afloat, according to an energy analyst at a U.S. company. Despite the restrictions imposed since February, Russia increased oil supplies by tanker to Europe in April to 1.6 million barrels a day, compared with 1.3 million barrels a day the previous month.

How is the economy faring?

Central Bank chief Elvia Nabiullina warned last week that the economy will enter a period of “structural transformation” (i.e. a real crisis) in the second or third quarter of this year.

For the moment, there is little indication of a coming storm. Nationwide indicators in March showed no sign of a decline in economic activity. This is largely because manufacturers have stocks of parts and raw materials, according to analysts at the Central Banks.

Businesses will start running into problems in May or June, said Natalya Zubarevich, a regional expert at Moscow State University. “All companies are desperately seeking alternatives in terms of [suppliers] of components and markets. It is unclear how quickly they will find them, but it’s unlikely to be done in a month. May-June is the time when the reserves run out,” she told The Bell.

Nor is the macroeconomic situation disastrous: huge inflows of foreign currency from exports go hand-in-hand with a sharp reduction in imports, so the balance of payments is positive, Zubarevich explained. “Sanctions are a long play. It won’t spark a collapse tomorrow. Degradation, and the emergence of shortages, will be gradual,” she said.

Meanwhile, household incomes have fallen due to inflation, Zubarevich added. In March, annual inflation jumped to 16.7 percent from 9.2 percent in February; as of April 15, it was at 17.6 percent, its highest for 20 years.

What happens next?

A recession is likely to be of “transformational, structural character” and it’s difficult to say when it could end, according to Central Bank analysts. “The persistence of supply shocks means this recession could be very deep and the timeframe to exit extended,” they wrote.

Anything requiring high-tech goods could be particularly badly affected. Not even localization will replace many unique components (this process was described by economist Oleg Itskhoki in a March interview with The Bell). The first threats are to car manufacture and the electronics industry, Central Bank analysts believe. Indeed, the reluctance of foreign businesses to operate in Russia might prove more damaging than formal Western sanctions.

Russia’s potential for economic growth will also decrease as efficiency falls because of a partial switch to less sophisticated, lower quality and more expensive imports.

The Central Bank analysts expect a “structural transformation” of the Russian economy will come in four phases: 1) adaptation; 2) adjustment to new conditions (by the end of the year) involving a the return of “shuttle” small businesses and an increased role for intermediaries in foreign trade; 3) “reverse industrialization” of the economy, i.e. industrialization based on the development of less advanced technologies; 4) the conclusion of the structural adjustment and a new economic balance based on less sophisticated technologies.

Yulia Starostina, Sergei Smirnov, Peter Mironenko

Translated by Andy Potts, edited by Howard Amos

The Bell is a weekly newsletter in English, twice-daily in Russian. We give you the essential insider view on Russian politics and business in a 5 minute read.

AMERICAN DISSENT ON UKRAINE IS DYING IN DARKNESS: Robert Scheer Interviews Professor Michael J. Brenner

Professor Michael Brenner

Popular Resistance, 4/16/22

As the death toll in Russia’s illegal invasion of Ukraine continues to rise, there have only been a handful of Westerners publicly questioning NATO and the West’s role in the conflict. These voices are becoming fewer and further between as a wave of feverish backlash engulfs any dissent on the subject. One of these voices belongs to Professor Michael J. Brenner, a lifelong academic, Professor Emeritus of International Affairs at the University of Pittsburgh and a Fellow of the Center for Transatlantic Relations at SAIS/Johns Hopkins, as well as former Director of the International Relations & Global Studies Program at the University of Texas. Brenner’s credentials also include having worked at the Foreign Service Institute, the U.S. Department of Defense and Westinghouse, and written several books on American foreign policy. From the vantage point of decades of experience and studies, the intellectual regularly shared his thoughts on topics of interest through a mailing list sent to thousands of readers—that is until the response to his Ukraine analysis made him question why he bothered in the first place.

In an email with the subject line “Quittin’ Time,” Brenner recently declared that, aside from having already said his piece on Ukraine, one of the main reasons he sees for giving up on expressing his opinions on the subject is that “it is manifestly obvious that our society is not capable of conducting an honest, logical, reasonably informed discourse on matters of consequence. Instead, we experience fantasy, fabrication, fatuousness and fulmination.” He goes on to decry President Joe Biden’s alarming comments in Poland when he all but revealed that the U.S. is—and perhaps has always been—interested in a Russian regime change.

On this week’s “Scheer Intelligence,” Brenner tells host Robert Scheer how the recent attacks he received—many of a personal, ad hominem nature—were some of the most vitriolic he’s ever experienced. The two discuss how many media narratives completely leave out that the eastward expansion of NATO, among other Western aggressions against Russia, played an important part in fueling the current humanitarian crisis. Corporate media’s “cartoonish” depiction of Russian president Vladimir Putin, adds Brenner, is not only misleading, but dangerous given the nuclear brinkmanship that has ensued. Listen to the full discussion between Brenner and Scheer as they continue to dissent despite living in an America that is seemingly increasingly hostile to any opinion that strays from the official line.