Sadly, but not surprisingly, the deal reached by the U.S. and Russia on Syria last week, appears to be faltering.  Russian media, quoting the Russian military, reports that the U.S. is still not following through on its promises to separate out the “moderate” opposition from Al-Nusra (which has recently changed its name).  RT reported the following on September 15th:

Russia says the U.S. is not keeping its end of the bargain on the Syrian ceasefire and has continued its calls for Washington to make public all documents relating to the deal. The Russian military says Damascus is the only party observing the agreement.

“On the third day of the ceasefire only the Syrian Army is observing it. Meanwhile, the U.S.-led ‘moderate rebels’ are intensifying the shelling of residential areas,” Russian Defense Ministry spokesman Igor Konashenkov said on Thursday.

The ministry said in a press briefing that “new conflict flashpoints are appearing” and that government forces and civilians had been shot at 45 times over the past 24 hours, without firing back.

The military added that the U.S. failed to deliver on its promise to separate truce-observing moderates and truce-violating terrorists and is now “apparently trying to use a smoke-screen to cover up the violations of their part of the deal.”

The ministry called on the Pentagon to hand over up-to-date and detailed information about the location of the various factions in the conflict.

….Earlier, the U.S. said that both Damascus and the rebels were reported as violating the ceasefire, which began on Monday. Washington acknowledges its responsibility to stop violations committed by the anti-government forces.

“We’ve always been clear, just as we have said that Russia’s responsibility is to exert influence or put pressure – however you want to put it – on the regime to abide by the cessation of hostilities, it is incumbent on us to persuade, convince the moderate opposition to also abide by the cessation of hostilities, and ultimately, that’s a decision they’re going to have to make,” U.S. State Department spokesman Mark Toner said Wednesday.

“We’re continuing our outreach to the Syrian moderate opposition – that’s been ongoing – and trying to explain the arrangement to them, answer their questions. And again, we’ve seen, as I said, sporadic reports of violence, but in large part we think [the ceasefire] is holding,” he added.

Alexander Mercouris writes over at The Duran:

Various Jihadi groups are refusing to dissociate themselves from Jabhat Al-Nusra.  Though there appears to have been a falling off in the fighting, some fighting is still taking place, and Russian troops on the Castello road have been caught on film coming under fire.  [Russia’s TASS news agency had reported on the 13th that Russian marines had taken up positions on Castello Road – the supply route used by the rebels/terrorists from the north – which had recently been taken by the Syrian army, in an effort to implement the apparent ceasefire terms requiring Damascus to pull back and allow the set up of humanitarian corridors enabling the exit of civilians and rebels willing to lay down their arms – NB]

The Russians are complaining that the US is still not providing information on Jabhat Al-Nusra that it promised, and has failed to force the Jihadi groups it sponsors to dissociate themselves from Jabhat Al-Nusra and to observe the ceasefire.

Meanwhile the air is thick with arguments about the provision of humanitarian aid to Jihadi controlled eastern Aleppo.  Jihadi groups are blocking the aid the UN is providing, complaining that it is not what they want, and because they say they reject the US – Russian agreement under which it is being provided, whilst the UN – entirely predictably – is blaming the Syrian government.  Needless to say there is no sign of any withdrawal of Jihadi fighters from eastern Aleppo by way of the Castello road.

In the midst of all these charges and counter charges the Russians are calling for the text of the agreement with the US to be published whilst the US is saying no – a fact which incidentally all but confirms that it was the US that made the major concessions in order to reach the agreement. 

Not only is Russia now requesting that the terms of the Syria deal be made public so as to subject it to better accountability, but Moscow is also moving to have it officially backed by a UN Security Council resolution, according to Reuters:

UNITED NATIONS- Russia is pushing for the United Nations Security Council to adopt a draft resolution next week endorsing a Syria ceasefire deal agreed by Moscow and Washington, Russia’s U.N. Ambassador Vitaly Churkin said on Thursday.

The deal reached on Saturday, September 10 aims to put Syria’s peace process back on track. It includes a nationwide truce that started at sundown on Monday, improved humanitarian aid access and joint military targeting of banned Islamist groups.

Russian Foreign Minister Sergei Lavrov and U.S. Secretary of State John Kerry agreed on five documents, which they said would not be publicly released. However, on Thursday, France called on Washington to share details of the deal.

Churkin said Russia was working on a draft Security Council resolution that would endorse the deal. When asked if the deal would need to be annexed to such a resolution, he said: “We don’t know yet.”

“We’re working on it … I think we need to adopt it on the 21st (of September), this would make sense,” Churkin told reporters.

The 15-member Security Council is due to hold a high-level meeting on Syria next Wednesday during the annual gathering of world leaders at the United Nations. Kerry and Lavrov are expected to attend, diplomats said.

Note that France has now joined in the call for the terms of the deal to be made public.   On that note, some more details have come out about the deal, including some of the concessions made by each side and what steps Washington has made to attempt to separate the “moderates” from Al-Nusra (whatever name the Al Qaeda backed organization is going by nowadays).  Gareth Porter, an independent journalist and expert on the Middle East, who has done some excellent reporting on both Syria and Iran over the past few years, has reported the following:

The new bargain is actually a variant of a provision in the Feb. 27 ceasefire agreement: in return for Russian and Syrian restraints on bombing operations, the United States would prevail on its clients to separate themselves from their erstwhile Al Qaeda allies.

But that never happened. Instead the U.S.-supported groups not only declared publicly that they would not honor a “partial ceasefire” that excluded areas controlled by Al Qaeda’s affiliate, then known as Nusra Front, but joined with Nusra Front and its close ally, Ahrar al Sham, in a major open violation of the ceasefire by seizing strategic terrain south of Aleppo in early April.

….As the Kerry-Lavrov negotiations on a ceasefire continued, Kerry’s State Department hinted that the U.S. was linking its willingness to pressure its Syrian military clients to separate themselves from Al Qaeda’s forces in the northwest to an unspecified Russian concession on the ceasefire that was still being negotiated.

It is now clear that what Kerry was pushing for was what the Obama administration characterized as the “grounding” of the Syrian air force in the current agreement.

Now that it has gotten that concession from the Russians, the crucial question is what the Obama administration intends to do about the ties between its own military clients and Al Qaeda in Aleppo and elsewhere in the northwest.

Thus far the primary evidence available for answering that question is two letters from U.S. envoy to the Syrian opposition Michael Ratney to opposition groups backed by the United States. The first letter, sent on Sept. 3, after most of the Kerry-Lavrov agreement had already been hammered out, appears to have been aimed primarily at reassuring those Syrian armed groups.

As translated by al-Monitor, it asserted, “Russia will prevent regime planes from flying, and this means there will not be bombing by the regime of areas controlled by the opposition, regardless of who is present in the area, including areas in which Jabhat Fateh al Sham [the new name adopted by Al Qaeda’s Nusra Front] has a presence alongside other opposition factions.”

Ratney confirmed that the U.S. would in return “offer Russia coordination from our side to weaken al Qaeda.” But he also assured U.S. clients that their interests would be protected under the new agreement.

“[W]e believe this ceasefire should be stronger,” he wrote, “because it should prevent Russia and the regime from bombing the opposition and civilians under the pretext that its striking Jabhat al Nusra.”

The Ratney letter makes no reference to any requirement for the armed opposition to move away from their Al Qaeda allies or even terminate their military relationships, and thus implied that they need not do so.

But in a follow-up letter, undated but apparently sent on Sept. 10, following the completion of the new Kerry-Lavrov agreement, Ratney wrote, “We urge the rebels to distance themselves and cut all ties with Fateh of Sham, formerly Nusra Front, or there will be severe consequences.”

The difference between the two messages is obviously dramatic. That suggests that one of the last concessions made by Kerry in the Sept. 9 meeting with Lavrov may have been that a message would be sent to U.S. military clients with precisely such language.

The totality of the two letters from Ratney underlines the reluctance of the United States to present an ultimatum to its Syrian clients, no matter how clearly they are implicated in Al Qaeda operations against the ceasefire. Last spring, the State Department never publicly commented on the participation by the U.S.-supported armed groups in the Nusra Front offensive in violation of the ceasefire agreement, effectively providing political cover for it.

***********

(Ousted Libyan leader Muammar Gaddafi shortly before he was murdered on Oct. 20, 2011.)

Robert Parry at Consortium News has written another critical piece, this time discussing a little-talked about report undertaken by Britain’s Foreign Affairs Committee, which exposes the lies and exaggerations about Qaddafi’s actions used to justify NATO’s regime change in Libya in 2011:

The report from the U.K.’s Foreign Affairs Committee confirms that the U.S. and other Western governments exaggerated the human rights threat posed by Libyan leader Muammar Gaddafi and then quickly morphed the “humanitarian” mission into a military invasion that overthrew and killed Gaddafi, leaving behind political and social chaos.

The report’s significance is that it shows how little was learned from the Iraq War fiasco in which George W. Bush’s administration hyped and falsified intelligence to justify invading Iraq and killing its leader, Saddam Hussein. In both cases, U.K. leaders tagged along and the West’s mainstream news media mostly served as unprofessional propaganda conduits, not as diligent watchdogs for the public.

….According to the new U.K. report on Libya, Britain’s military intervention – alongside the U.S. and France – was based on “erroneous assumptions and an incomplete understanding” of the reality inside Libya, which included a lack of appreciation about the role of Islamic extremists in spearheading the opposition to Gaddafi.

In other words, Gaddafi was telling the truth when he accused the rebels around Benghazi of being penetrated by Islamic terrorists. The West, including the U.S. news media, took Gaddafi’s vow to wipe out this element and distorted it into a claim that he intended to slaughter the region’s civilians, thus stampeding the United Nations Security Council into approving an operation to protect them.

That mandate was then twisted into an excuse to decimate Libya’s army and clear the way for anti-Gaddafi rebels to seize the capital of Tripoli and eventually hunt down, torture and murder Gaddafi.

Yet, there was evidence before this “regime change” occurred regarding the extremist nature of the anti-Gaddafi rebels as well as those seeking to overthrow Bashar al-Assad in Syria. As analysts Joseph Felter and Brian Fishman wrote in a pre-Libya-war report for West Point’s Combating Terrorism Center, “the Syrian and Libyan governments share the United States’ concerns about violent salafist/jihadi ideology and the violence perpetrated by its adherents.”

In the report entitled “Al-Qaeda’s Foreign Fighters in Iraq,” Felter and Fishman also analyzed Al Qaeda’s documents captured in 2007 showing personnel records of militants who flocked to Iraq for the war. The documents revealed that eastern Libya (the base of the anti-Gaddafi rebellion) was a hotbed for suicide bombers traveling to Iraq to kill American troops.

….This reality was known by U.S. officials prior to the West’s military intervention in Libya in 2011, yet opportunistic politicians, including Secretary of State Clinton, saw Libya as a stage to play out their desires to create muscular foreign policy legacies or achieve other aims.

Some of Clinton’s now-public emails show that France’s President Nicolas Sarkozy appeared to be more interested in protecting France’s financial dominance of its former African colonies as well as getting a bigger stake in Libya’s oil wealth than in the well-being of the Libyan people.

An April 2, 2011 email from Clinton’s personal adviser Sidney Blumenthal explained that Gaddafi had plans to use his stockpile of gold “to establish a pan-African currency” and thus “to provide the Francophone African Countries with an alternative to the French franc.”

Blumenthal added, “French intelligence officers discovered this plan shortly after the current rebellion began, and this was one of the factors that influenced President Nicolas Sarkozy’s decision to commit France to the attack on Libya.” Another key factor, according to the email, was Sarkozy’s “desire to gain a greater share of Libya oil production.”

For Clinton, a prime motive for pushing the Libyan “regime change” was to demonstrate her mastery of what she and her advisers called “smart power,” i.e., the use of U.S. aerial bombing and other coercive means, such as economic and legal sanctions, to impose U.S. dictates on other nations.

Parry goes on to explain how Washington policymakers have apparently learned nothing from the chaos and humanitarian disasters they have created with their regime change operations, continuing with a reckless propaganda campaign against Russian President Vladimir Putin – part of the pattern in the run-ups to regime change operations against foreign governments that do not bow to Washington’s dictates.   The fact that Russia represents the world’s other nuclear super-power is not serving as a deterrent in this regard.

For more on the lies and propaganda peddled by the western corporate media and certain mainstream human rights organizations, which enabled the war against Libya, please see the Harvard Belfer Center’s report, Lessons from Libya: How Not to Intervene.

http://belfercenter.ksg.harvard.edu/publication/23387/lessons_from_libya.html

Finally, military analyst and blogger, Moon of Alabama, has exposed the New York Times‘ pathetic lack of knowledge on a war and country they are tasked with informing Americans about when they wrote a piece attempting to mock Libertarian presidential candidate, Gary Johnson’s ignorance when asked about the siege of Aleppo in Syria (Johnson answered “What is Aleppo?”).  It took several corrections of the original piece before the Times gave an accurate characterization of the city of Aleppo.

Read it here.

It never fails to amaze me how intelligent people I talk to still give the NYT credibility and think they are well-informed if they read this outlet which has allowed itself to become a rag.

Although renowned political scientist John Mearsheimer does not consider himself to be an isolationist – a term which has acquired a negative connotation since WWII – his definition is illuminating as much for clarifying what the term does not mean as for what it does.

In America Unhinged, Mearsheimer writes: “Isolationism rests on the assumption that no region of the world outside of the Western Hemisphere is of vital strategic importance to the United States. Isolationists do not argue that America has no interests in the wider world, just that they are not important enough to justify deploying military force to defend them. They are fully in favor of engaging with the rest of the world economically as well as diplomatically, but they view all foreign wars as unnecessary.”

As Mearsheimer makes plain, isolationism does not constitute a lack of constructive engagement with the outside world, but a judicious engagement that eschews military action outside of defending the homeland.

At a time when Washington is experiencing the hubris of imperial overreach and the prospect of the eventual collapse that history shows is the inevitable endgame of all empires, it is time for concerned Americans across the political spectrum to begin to seriously consider what a new paradigm and policy platform representing sanity might look like.

It is in the U.S.’s long-term interests (as well as the rest of the world’s) to have stability. The bare minimum for stability is a lack of war.

As science writer John Horgan concluded in his book The End of War in which he undertook a scientific analysis of war via the study of history, anthropology, psychology and sociology, the old adage about justice being a prerequisite for peace is wrong. It is peace that is necessary for justice to take root. The violent, chaotic and wasteful conditions of modern war are not conducive to the pursuit of justice or human development.

Most Americans do not share the Neoliberal, Neoconservative, or Responsibility to Protect club’s messianic vision of an America that needs to recreate the world to fit some bastardized idea of imperial “democracy” that requires a Year Zero program to destroy the social, cultural and political foundations of target countries (see Iraq, Libya, and Syria).

The restoration of our democratic republic and the revitalization of our economy and society are intimately connected to pulling out of the militarist/imperialist projects that are killing our country, along with the casualties it is responsible for around the world. It was estimated last year by physicians’ groups that deaths in Iraq, Afghanistan and Pakistan from the U.S. “war on terror” (USWOT) are 1.3 million at the conservative end.

The predictable blowback from friends and family members of those decapitated and blown apart by drone strikes and indiscriminate bombings, as well as shootings by soldiers whose psyches have been warped by immersion in the hellhole of counter-insurgency wars that are unwinnable, should give all Americans serious pause in terms of rational problem-solving toward the goal of increasing the conditions for peace and stability.

The casualties from the physicians’ groups does not even count the thousands dead in the Libyan civil war, precipitated by the US/NATO toppling of the Gaddafi government – a stable, secular government that had attained the highest standard of living in all of Africa – or our attempts to similarly support nihilistic jihadists who want to topple the Assad regime in Syria and the killing frenzy that has resulted in that country.

Other historians and political scientists, going further back in the American Empire’s reign, have estimated 20 million to 30 million people have perished as a result of Washington’s covert operations and overt military interventions that have occurred almost continuously since 1945.

Take a moment to let that really sink in. Each of those 20 million to 30 million was a living, breathing person who – like you and me – had hopes, dreams, fears and other people who loved them. With this track record, is it any wonder that the world views the U.S. as the biggest threat to world peace by a wide margin?

Click here to continue reading this article.

Russian Foreign Minister Sergei Lavrov and U.S. Secretary of State John Kerry have finally hammered out a ceasefire agreement for Syria, but according to both Russian and Western media reports, many important details are not being made public.   RT reports the following:

Russia and the U.S. have agreed on a new ceasefire plan on Syria that includes a ban on government airstrikes in certain areas and cooperation on strikes against jihadists, Russian foreign minister Sergey Lavrov announced on September 9 after the marathon talks with the U.S.’s John Kerry.

Opening the much-awaited press conference after some 13 hours of talks, Kerry said that the two have agreed on a comprehensive approach to Syrian reconciliation. He called “on every Syrian stakeholder to support the plan that the United States and Russia have reached, to … bring this catastrophic conflict to the quickest possible end through a political process.”

According to Kerry, the plan is to ensure that Syrian government forces will not carry out combat missions where the so-called moderate opposition is present.

Speaking of fight against Al-Nusra and its efforts to blend with moderate rebels, Kerry stressed “going on Al-Nusra is not a concession to anybody” but “is profoundly in the interests of the U.S.”

Kerry also outlined an establishment of the Russian-U.S. Joint Implementation Centre (JIG) that would serve the purpose of “delineation of territories controlled by Al-Nusra and opposition groups in the area of active hostilities.”

Taking the floor, the Russian FM confirmed that Russia and U.S. had agreed to coordinate airstrikes in Syria, “provided there is a sustained period of reduced violence.” The first step toward the implementation of this clause will be a 48-hour ceasefire in Syria, Lavrov said.

Lavrov elaborated that the ceasefire comes into effect on September 12 and should last for at least seven days. “After the ceasefire regime will be in effect for seven days, we will establish an implementation centre, in which the military and the representatives of Russian and U.S. intelligence will handle practical issues, separating terrorists and opposition,” he added.

The Russian FM said that the diplomats have negotiated on five separate documents at the talks. “Despite the mistrust and attempt to disrupt what we have agreed upon, we managed to work out a package of documents, there are five of them. It allows us to set an effective coordination in the fight against terrorism, to expand the humanitarian access to distressed population, first and foremost in Aleppo,” Lavrov said.

Due to the sensitive nature of the information contained in the agreements, they will not be made available to general public, Lavrov said. “We cannot make these documents public. They contain rather serious, sensitive information. We don’t want it to fall into hands of those who would surely try to disrupt the implementation of the measures stipulated within in the framework of humanitarian delivery supplies and in other parts of our agreements.”

Analyst and international law expert, Alexander Mercouris, has speculated that keeping many of the details secret likely means that it was Washington that made significant concessions:

Essentially, on a preliminary and strictly provisional view, the new agreement is simply a reworking of the previous agreement the US and Russia agreed with each other in February, whilst taking into account the changes in the front lines that have taken place since then.

The February agreement failed to work, leading to more fighting, which resulted in the Syrian army gaining much more ground than it controlled in February, so that it is now in a much stronger position in Damascus and Aleppo than it was in February.

Presumably there is something in the new agreement which the US and the Russians think will make it succeed where the February agreement failed.  A reasonable guess is that it is this, whatever it is, which is so embarrassing to one side or the other that it is why the agreement cannot be made public.

At the risk of making a very big guess that may be completely wrong, if it is true as the Russians say that the Syrians and the Iranians have approved the agreement then the major concession – whatever it is – which is being kept secret has most probably been made by the US.

The fact that it took the US more than 9 hours (not 5 hours as some reports say) to agree to the plan after Kerry referred it to Washington for approval also suggests that it is the US which has made the major concessions, and that the terms of the agreement – whatever they are – ran into strong criticism and opposition in Washington from the hardliners.

Time will tell if the ceasefire is indeed successful.  Meanwhile, the U.S. Peace Council recently held a press conference in which they reported on the results of their fact-finding mission to Syria in which they spoke to a cross-section of Syrians as well as president Assad.

I encourage everyone to watch the 49 minute press conference here:

https://www.youtube.com/watch?v=Yc-RmAVK8Pg

For those who don’t have the time, I will sum up the main points of what the member of the delegation found out:

• Syrians are united and will not accept being divided up by religion or other criteria;

• The US has sanctions in place against Syria similar to the ones against Iraq in the 1990’s, which were responsible for much humanitarian suffering; consequently, Syrians are unable to obtain important medicines and parts to repair infrastructure;

• this is not a civil war, but a war of Syrians and the Syrian government against outside mercenaries and terrorist organizations supported by the U.S., Gulf states (e.g. Saudi Arabia, Qatar), Turkey and Israel;

• the delegation spoke to average Syrians, leaders of NGO’s, civil society, the non-violent opposition, business leaders, and president Assad, who granted a 2-hour meeting with members of the delegation;

• there exists a Ministry of Reconciliation – the ministry’s mission includes re-integration for those members of the violent opposition who are willing to lay down their arms;

• as far as the delegation members can ascertain, the motive for Washington’s actions in Syria appears to be to destroy the last independent secular government in the Middle East;

• there is a pernicious western MSM propaganda campaign – Assad is genuinely popular and has been elected in monitored elections, he is recognized by UN/international community as legitimate leader of Syria, there is a parliament with opposition parties

-members of the delegation included males and females and peace activists, including those with backgrounds in trade union movements and restorative justice

***************

Several dozen people in a Roma community in southern Ukraine were forced to flee their homes after a mob tore through their neighborhood over the weekend, breaking windows, tearing down fences and even setting a house on fire while the heavily outnumbered police stood by and watched.

The violence in the small town, Loshchynivka, was touched off after a local man was arrested on Saturday in connection with the rape and killing of a 9-year-old girl. A Ukrainian rights organization, the Kharkiv Human Rights Protection Group, noted that the man was not Roma.

Nicolai Petro, an academic expert on Russia and Eastern Europe, has written an article at The National Interest, detailing surveys among Ukrainians in which they express the sense of the country being “tense” and even “explosive.”

The survey, which was conducted in Odessa, Ukraine’s third-largest city, suggests that over half of Odessans describe their city as “tense,” while nearly ten percent say it is “explosive.” But even more interesting is that Odessans view the situation in Ukraine overall as much worse, with over ninety percent describing it as either “tense” or “explosive”!

Lest readers think that Odessa is an anomaly, I should point out that these results do not differ substantively from surveys conducted in February or June2016, which show a steady decline in public trust in government since the 2014 Maidan uprising.

How did things get so bad? Part of the fault certainly lies with the IMF’s austerity recommendations, which the vast majority of Ukrainians view as both harmful and pointless. But no downward spiral in public confidence could ever be so complete without the connivance of government officials. To put it bluntly, government policies have seemed, at times, almost intentionally designed to fuel public anger.

What’s that about being isolated and the economy being in tatters?

(http://russia-insider.com/en/putin-new-stalin/ri16240)

Putin has been a busy bee the past few weeks, finalizing an oil rig deal with Iran worth $1 billion, which will see Russian companies building 5 off-shore rigs to facilitate oil and gas exploration by Iran in the Persian Gulf, as well as signing 20 agreements worth approximately $1.3 billion with Japan at the Eastern Economic Forum.

And as Alexander Mercouris writes of the recent G20 summit in China, Putin was a man in demand:

It is the Russians who despite the odd setbacks are increasingly making the weather in the Middle East, with Putin at the G20 summit having intense and substantive talks with Erdogan, Egypt’s General Sisi, and the Saudis, even as Russia continues to develop its relations with Iran.

Even the Europeans are talking to the Russians.  Putin made it clear before the G20 summit that following the Crimean incident he would not meet with Merkel, Hollande and Poroshenko in the Normandy Four format in Hangzhou.  The result?  Merkel and Hollandestill met with him – though separately (as Putin probably wanted) – with Poroshenko nowhere to be seen.

Of the Europeans, it was not just Merkel and Hollande who met with Putin in Hangzhou.  Britain’s Theresa May met with him as well, in a somewhat stiff “get-to-know-you” meeting marking her first proper foray into international diplomacy.

Putin of course also met in Hangzhou with the leaders of Russia’s other BRICS partners apart from China: Modi of India, Zuma of South Africa and the new Brazilian President Michel Temer.  The meeting with Temer will have been particularly interesting, with Putin seeking – and apparently receiving – assurances that despite the recent change of government in Brazil the country remains committed to the BRICS.

Balancing the meeting with Brazil’s Temer, Putin however also met in Hangzhou with the other newly installed leader of the other Latin American giant: President Macri of Argentina.

Both Temer and Macri – unlike their predecessors – are conservative right wingers who will unquestionably tilt their two countries back towards their historically close relations with the US.  By continuing to talk with them and to engage with them Putin and the Russians however keep them engaged and keep the doors for future cooperation open.

Professor Stephen F. Cohen said the same in his most recent weekly interview with John Batchelor.

The Chinese even literally rolled out the red carpet for Putin’s arrival at the airport, while Obama was subjected to a decidedly different reception.

(Putin’s arrival in China for the G20; http://theduran.com/china-rolls-out-red-carpet-vladimir-putin-g20-obama-forced-exit-air-force-one-emergency-door/)

(Obama’s arrival in China at the G20; http://theduran.com/china-rolls-out-red-carpet-vladimir-putin-g20-obama-forced-exit-air-force-one-emergency-door/)

Bloomberg has reported that Igor Sechin, CEO of Russian oil company, Rosneft, has offered to buy the Russian state’s stake in the smaller Bashneft company worth $16 billion, which would provide a huge windfall for the Russian budget:

(Maidan square in Kiev before and after the coup d’etat in Ukraine; http://nosecret.info/maidan-confrontation-overview-february-2014-in-kiev-ukraine/)

According to a recently published paper in the Russian Politics journal (Volume 1, Issue 2, 2016) by Nicolai Petro – an American academic who was in Ukraine at the time of the coup and its aftermath – the western focus on corruption is misplaced when talking about Ukraine’s current economic woes.

Instead, he argues, the focus should be on the Maidan government’s “suicidal choice to cut the country off from its main investor – Russia.”

Petro gives a rundown on the pitiful state of Ukraine’s economy compared with pre-Maidan Ukraine:

Ukraine’s abysmal economic statistics since the transition of power in February 2014 are depressingly familiar. In the past 18 months living standards have fallen by half.1 Meanwhile inflation has risen to 43% annually, and public debt as a percentage of gdp has gone from 39.9% in 2013, to 79% by the end of 2015.2 An estimated 55% of all economic activity simply goes unreported.3 In the financial sector, the share of toxic assets in bank portfolios is estimated to exceed 50%, while deposit withdrawals by households in 2014 reached 30% of total deposits.4 In 2014 financial flows into Ukraine fell by 21%, then by another 35% in 2015.5

What does this mean in terms of family buying power? If annual incomes under former president Viktor Yanukovych were roughly $3500 dollars, they are now $2000 according to Ukraine’s first president, Leonid Kravchuk.6 The percentage of people who say that they do not have enough money for food, went from 9% in February 2014 to 19% in May 2015.7 New small car sales nationwide have plummeted from 213,444 in 2013, to just 46,546 in 2015.8

 ….For most of the past decade, 90% of the high value-added goods produced by Ukraine were sold to Russia. These include machinery, military technology, engines and motors. In 2014, sales to the Russian market accounted for 44% of all machinery and appliances sold abroad.9 That same year, however, the government decided to tear up its defense contracts with Russia. As a result, Ukraine’s defense and aviation industries lost more than 80% of their income, an estimated 2 billion hryvnia annually (at the time more than $200 million).10 Industrial giants like Yuzhmash, Motor Sich, Turboatom, and AvtoKrAZ have all had to sharply scale back production, while the pride of Ukrainian industry, airline manufacturer Antonov, was liquidated and it assets transferred to another state-owned conglomerate in January 2016.11

As revealed in a recent Business New Europe Intellinews report, much of Ukrainian industry having lost its significant Russian market is now reliant upon state orders to supply the war effort against the Donbass rebels.

Petro also points out the insulting level of chicanery employed by the Poroshenko government in trying to convince people that Ukraine is somehow successfully thumbing its nose at Russia.

In January 2016 Ukrainian president Petro Poroshenko congratulated his countrymen on having survived the winter without Russian gas. It had gotten by instead with European reverse gas which, he pointed out proudly, was 30% more expensive than the spot price for Russian gas.12

What [he] failed to mention, however, was that Ukraine’s major European supplier of natural gas last year was Slovakia, which receives 90% of its gas from Russia.14 In effect, therefore, Ukraine was purchasing the very same Russian gas at a premium merely for the privilege of not having to call it Russian.

In 2014 Ukraine decided to stop buying coal from the rebel-held territories of Donbas, the country’s traditional supplier. Such coal purchases were denominated in hryvnia and were thus far cheaper than coal that could be purchased from abroad.

To show its independence from the rebels, however, Kiev decided that it would import coal from South Africa instead.15 Alas, as with the case of the Slovakian gas that actually comes from Russia, an investigation by Ukrainska pravda revealed that much of the coal purported to be from South Africa was actually Donbas coal, repackaged as South African through a Hong Kong company, then resold to Ukraine.16 As a result, the government not only paid more for coal, but lost tax revenues from Donbas as well.

Now, if I saw this plot in a movie I’d toss my drink at the screen and walk out.  The Maidan government’s policies simply defy logic with respect to the long-term interests of Ukrainians.  What’s more, this folly was entirely predictable.

As was underscored in a May 2014 article by Barry Ickes and Clifford Gaddy for the Brookings Institution – an establishment think tank that is largely hostile toward Russia and provided a platform for cheer-leading the Maidan coup – Russia was providing $5-10 billion worth of support to the Ukrainian economy pre-Maidan:

When we talk about subsidies, we usually think of Russia’s ability to offer Ukraine cheap gas — which it does when it wants to. But there are many more ways Russia supports Ukraine, only they are hidden. The main support comes in form of Russian orders to Ukrainian heavy manufacturing enterprises. This part of Ukrainian industry depends almost entirely on demand from Russia. They wouldn’t be able to sell to anyone else. The southern and eastern provinces of Ukraine are dominated by Soviet-era dinosaur enterprises similar to Russia’s. They were all built in Soviet times as part of a single, integrated energy-abundant economy. They could be sustained only thanks to the rents from Soviet (overwhelmingly Russian) oil and gas. Russian subsidies have continued to maintain the structure in the post-Soviet era. Because most of these subsidies are informal, they do not appear in official statistics.

But what about the Deep and Comprehensive Free Trade Agreement (dcfta) with the European Union (eu), the issue that inspired so many to support the Euromaidan? Sadly, the reality has fallen far short of Ukrainian expectations. The eu currently maintains tariff rate quotas (trqs) on 36 groups of products, most notably in agriculture, which include some of Ukraine’s main exports to the eu. In 2014-2015 Ukrainian exporters were able to fully utilize only six of these quotas. Inability to meet eu certification requirements is one reason. Another is that demand in Europe for Ukrainian products is simply too low.28 As a result, in 2015, when Ukrainian exports to the eu benefited from the temporary suspension of quotas from April through the end of the year, Ukrainian exports to the eu actually fell by 23%.29 In other words, the new Ukrainian government severed ties with its traditional market without gaining comparable access to new markets!

Yet, at the height of the Euromaidan, pursuing business-as-usual with Russia was often portrayed as no different than making a pact with the devil, while the benefits of eu association were wildly oversold. With two years of eu integration in practice to look back upon, we can now make some real world comparisons.

Studies favoring eu association typically acknowledge some short term economic decline, as the country transitions to eu standards, but insist that over the long term the economic benefits of far outweigh those of joining the eeu [the Russian-led Eurasian Economic Union].30

But even on this point there is considerable disagreement. Some studies estimated that no more than 15% of Ukrainian exports originally destined for the Eurasian Economic Union (eeu) before 2014 could be redirected elsewhere.31 According to a study done in 2011, preferential energy pricing for Ukraine (at the rate being offered to Belarus) would have saved Ukraine $3-6 billion a year in Russian energy imports, while increasing exports by $5-9 billion a year.32 Other economists insisted that the benefits of maintaining Ukraine’s existing technological integration within the eeu, and of keeping trade in one’s national currency, significantly increases long term projected gdp growth. Most importantly, however, nearly all studies favoring eu association assume that trade ties with Russia and the eeu would remain unchanged after the dcfta enters into effect when, in fact, the suspension of Ukraine’s trade privileges have cost the country an estimated $3 billion a year.33

This is money that the limited trade preferences afforded Ukraine under the dcfta could not hope to make up, nor was it ever intended to. At best, it can only partially compensate for lost markets, though that impact will be within a much longer timeframe.

As foretold in the article by Ickes and Gaddy, of all the possible scenarios that could have played out in the aftermath of the Maidan upheaval, a cut-off of economic relations with Russia in favor of an exclusive relationship with the West was the least feasible.

If the West were somehow able to wrest full control of Ukraine from Russia, could the United States, the other NATO nations, and the EU replace Russia’s role in eastern Ukraine? The IMF, of course, would never countenance supporting these dinosaurs the way the Russians have. So the support would have to come in the way of cash transfers to compensate for lost jobs. How much are we talking about? The only known parallel for the amount of transfer needed is the case of German reunification. The transfer amounted to 2 trillion euros, or $2.76 trillion, over 20 years. If Ukraine has per capita income equal to one-tenth of Germany’s, then a minimum estimate is $276 billion to buy off the east. (In fact, since the population size of eastern Ukraine is larger than East Germany’s, this is an underestimate.) It is unthinkable that the West would pay this amount.

Notice that Russia, by contrast, could survive the cutoff of Ukrainian industry…Russia could just implement more import substitution (as Putin announced in the quote above). This is economically inefficient, but it is what every country does for national survival.

….The key point here is that there can be no viable Ukraine without serious contributions from both Russia and the West. Of all the options for Ukraine’s future, a Ukraine exclusively in the West is the least feasible. A Ukraine fully under Russian control and with severed links to the West is, unfortunately, possible. But it is in no one’s interest — not Russia’s, not the West’s and certainly not Ukraine’s.

The best option for the Ukrainian people’s stability and economic well-being is to embrace its potential as buffer and bridge between Europe and Russia, engaging in economic relations with both and eschewing entangling military alliances with either.