The hidden hands behind East-West tug of war in Ukraine
Is it in Ukraine's best interest to negotiate liberalisation with the IMF and the World Bank?
Last updated: 01 Aug 2014 10:52
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Martin Kirk is the Global Campaigns Director for /The Rules, a new a new global campaign fighting against inequality and poverty, with a specific aim of highlighting the systemic damage caused by tax havens around the world.
Frederic Mousseau is Policy Directory of the Oakland Institute and co-author of the report Walking on the West Side: the World Bank and the IMF in the Ukraine Conflict.
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The World Bank and the IMF's primary interest in Ukraine is the agricultural sector. Sometimes referred to as the breadbasket of Europe, Ukraine's ample fields of rich black soil allow for such high production volumes of cereals and grain that it is the world's third-largest exporter of corn and fifth of wheat.
It is a very big prize for whoever ends up with control. The IMF and World Bank are clear they are on the side of the West, a club that includes western agricultural corporations. The Bank and the IMF have a long history of pressuring economies the world over to make themselves into more profitable environments for large corporations; it is essentially their one-size-fits-all model for development. Ukraine is just their latest target, and their fingerprints are all over this crisis.
Resisting the IMF
One of the sparks behind current events was the ousting of former Ukrainian President Viktor Yanukovych in February. This followed his rejection of an EU Association agreement designed to integrate the Ukraine with the EU. Less well-known, however, is the fact that the EU agreement was tied to a $17bn loan from the IMF. Instead of the EU and IMF deal, Yanukovych chose a Russian aid package worth $15bn plus a 33 percent discount on Russian natural gas.
This was not the first time Yanukovych had rejected loans from the IMF. He objected repeatedly to the type of economic conditions they routinely attach to loans. In 2010, he vetoed tax reform that was part of austerity measures demanded as a condition on an aid package.
In 2011, the IMF put the deal on hold again because the government failed to pass a very unpopular pension reform bill, which was aimed at cutting public spending through raising the age of retirement for women and increasing the time of workers' salary contribution to their retirement funds by ten years. Yanukovych's decision to set a different economic policy than the neoliberal package designed by technocrats in Washington helped destroy his presidency.
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Paving the way for corporations
Meanwhile, the people of Ukraine are being treated as most public around the world are treated in these circumstances; by being left out of the decision-making almost entirely. Ukrainians have suffered much in recent years, and so it is especially galling to see the IMF and World Bank use all their economic and political might to ensure that ordinary citizens bear the costs of reorienting their economy so that it can be more welcoming to western multinational businesses. Social services must be cut and retirement ages must be increased, so that corporate taxes can be lowered and pesky labour and environmental regulations removed or bypassed.
For example, the EU agreement now in place has a little clause that seems to have snuck by environmental watchdogs. Ukraine does not allow the use of genetically modified organisms (GMOs) in agriculture, but article 404 of the EU agreement commits both parties to cooperate to "extend the use of biotechnologies"....
