What Could’ve Happened to Russia: An Illustrative Example

Many frankly do not understand the difference between the “holy” 90s and the present day. However, there is a difference and it is huge – especially for those who survived the 90s at a conscious age.

Let’s imagine for a moment that the same people who were in power in Russia at the time of Yeltsin are still in power – it seems to me that exactly the same as what is happening now with Ukraine would happen to Russia. I do not mean a war of all against all, although who knows – maybe this would be the most logical way out of the situation of a hopeless descent downwards that we felt in the 90s.

Everything is learned through comparison, therefore I suggest to look at Ukraine as on an effective example for the entire post-Soviet space. Yes, under the partition Ukrainians received a powerful industry, a huge merchant marine fleet, a magnificent transit location, fertile lands – and in addition, Ukraine has always had a very mild climate – live and rejoice.

Today from all of this only the climate is left – the country is under external governance and is an uncomplaining tool in the hands of those who use it at their own discretion. People are fleeing to neighbouring countries, the economy is collapsing, and there is an outright humanitarian war in society that is much more terrible than civil war.

The most serious marker of this collapse is the country’s external debt. It allows international financial institutions to dictate the agenda to Ukraine – otherwise the country can expect a default and the total impoverishment of the population.

On May 29th an IMF Memorandum was published, which the Ukrainian government is obliged to fulfil – while the first demands, which included the law on the sale of land and Western control of the banking system, have already been met. Despite this, the IMF puts forward newer and newer demands to Kiev, otherwise there will be no money.

So, I suggest to look at what the Ukrainians have to now implement in order to obtain a $5 billion loan:

1. In the memorandum this is beautifully called “the continuation of a reasonable tax-budgetary policy for ensuring debt servicing”. In other words, the fiscal policy of Ukraine has to aim to at first minimise the consequences of the pandemic and the forced shutdown of the economy, and then to ensure fiscal sustainability. In the memorandum it is directly said: “We will gradually toughen the tax-budgetary policy” – to put it briefly, taxes and levies will increase – at the end of April there was a 12-13% hole in the revenue part of Ukraine’s budget, and a similar result is expected at the end of May.

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If levies cannot be increased, lower-priority programs will be sequestered. For example, expenses for education – and Ukraine has no right to soften the tax policy, as well as to introduce tax incentives and preferences on customs payments and charges, before the end of action of the program of crediting.

Note: actually it puts an end to Ukrainian businesses, especially small ones – the Ukrainian authorities have no right to introduce tax breaks in order to stimulate new enterprises. In other words, state companies and the big businesses that grew together with the authorities – the oligarch Akhmetov, for example – will feel rather good.

2. By September 2020, under the supervision of the IMF, the Ukrainian government is required to put into operation a system for declaring income in order to combat money laundering. In practice, the IMF takes under its control all cash flows in the country – declaring of income will become obligatory for all citizens, and in addition the system will establish control of all payments made by Ukrainians.

Note: this will especially “please” gastarbeiters, bringing and transferring to Ukraine their hard-earned rubles, zloties and euros – this system will without ceremony force them to pay taxes in order to patch holes in the budget.

3. This IMF loan is supposed to be a coronavirus-related one – and the Ukrainian authorities in March created a fund through which this loan will go. The treasury of Ukraine, under the strict guidance of the IMF, will control expenses.

At the same time, a full audit of all operations of the fund will be conducted within 12 months, and by external (non-Ukrainian) auditors. It is clear that formally this is done to “prevent theft”, but in fact the audit will reveal all the fund’s counterparties, up to the final beneficiaries of the companies that work with it.

And in case of any suspicion of embezzlement, it will be possible to densely grab these beneficiaries by the balls – and there will surely be such suspicions, no need to consult Baba Vanga – officials and Ukrainian businesses associated with them simply do not know how to work in another way

4. The memorandum insists on continuing the pension reform that was started in 2017 – in particular, the introduction of “incentives for longer work” is supposed.

Here it is a good time to remind that in Ukraine the retirement age starts of 60, for everyone – both for men and women. However, it is possible to retire at this age only if seniority is 26 years or more; if one’s working experience is from 16 to 25 years, then the retirement age is 63; and with a working experience of 15 years and less – 65.

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And now the retirement age for Ukrainians will be raised no matter what – judging by the Memorandum, the Ukrainian authorities undertake not to introduce social privileges for any categories of pensioners. In addition, the authorities will not be able to make such changes to the legislation that lead to a reduction of the retirement age.

5. The continuation of the medical reform of Ulyana Suprun – in fact this means that the medicine of Ukraine is being rebuilt according to the American model – and the whole world has seen how “effective” American medicine is during the pandemic. It sees and quietly puts its hands on its head, remembering the world rankings with the United States claiming first place in terms of medical care quality.

But it is not all – it is proposed to “control demand by means of financial incentives for service providers, at the same time giving an opportunity to introduce surcharges for patients”.

In other words, farewell free medicine in Ukraine – everything will be like it is in America: the basic part of the services will be provided under mandatory medical insurance, and if the cases go beyond the ordinary seasonal diseases, they will have to pay for them.

However, Ukrainians don’t need to get used to it – they have long been paying for medicine, up to the purchase of medicines in hospitals for their personal funds – it will just be legalised now

6. Optimisation of the school network. In fact, this is the closure of some schools and the dismissal of superfluous teachers.

Naturally, the detrimental effect of such “optimisation” will be the most severe for the quality of education – although, after looking at online lessons, especially history ones, it would be better to have no education at all than this.

You can count up to 100? You can sign a piece of paper? Then that’s all, you are ready for life, go to the fields!

7. Control of the banking system. This is in general a separate thing – according to the Memorandum, the entire banking system of Ukraine falls under the control of the International Finance Corporation (IFC) of the World Bank Group – it will determine the stability of the entire system, recover bad loans and debts, and hold former owners of failed banks accountable.

This is a very curious bullet point – for example, it allows to arrest all the assets of Igor Kolomoisky, both in Ukraine and in any other country.

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It is clear that it’s not the IFC itself that will do all this – it will be transferred to the control of NABU (National Anti-corruption Bureau of Ukraine), which, along with the Prosecutor-General’s office, will stifle insufficiently savvy people.

8. Control of the judicial system. This is also an incredibly “great” thing – it is supposed to create a certain commission that will select candidates for judges according to certain “criteria of integrity”. What these criteria are is not specified, but it is known that the commission will include representatives recommended by Western countries and international financial institutions.

This is only some of the demands of the IMF, there is a whole list of them – increasing tariffs for gas and utilities, actively extorting the latest debtors for housing and utilities, NABU will allow the unauthorised wiretapping of any citizen of Ukraine, the privatisation of energy companies, the transition of Naftogaz to full external governance, and many other interesting things.

This is what a country that has come under external control looks like – and this is what Russia might look like if it had remained under the rule of Yeltsin and his associates.

Yes, I remember that Putin was brought to power by Yelstin. I know that Putin defiantly pays respect to the memory of Yeltsin and his wife – but my tongue will not allow me to call Putin an adherent of the eternally drunk and tongue-tied Yelstin.

Here are the differences in a nutshell: on one side of the scales is a state that conducts its own independent policy, even under the pressure of sanctions. On the other side of the scales it is no longer possible to call it a state, although all the attributes are present – a trident instead of a coat of arms, a yellow-blue flag, and a funeral march instead of an anthem.

I know only one country with similar dependence on external governance – it is Puerto Rico. Now there are two of them, along with Ukraine – and it seems to me that Ukraine will soon “overtake” the Puerto Ricans in terms of living standards.

It is possible to be dissatisfied with the authorities, the economic system, the police – but it is impossible to be dissatisfied with logic.

And logic suggests that Russia could well have been in the place of Ukraine -however, for this we had to ensure that we definitively triumph.

The West did not succeed to do this, and now it will never be possible.

Oleg Adolfovich

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