Like government leaders everywhere, Russia’s Vladimir Putin often lies. But when he tells an uncomfortable truth, few people in the US or Europe bother to listen. Take what he said about Ukraine back in 2007, when Time magazine interviewed him as their “Person of the Year.”
The Russians subsidize Ukraine, Putin explained. They sell it natural gas and other energy resources at $3 billion to $5 billion a year below international market prices. At the same time, the US “somehow decided that part of the political elite in Ukraine is pro-American and part is pro-Russian, and they decided to support the ones they consider pro-American, the so-called orange coalition.”
Why, Putin asked, should Russia continue to subsidize Ukraine? “If you want to support someone, you pay for it. Nobody wants to pay.”
Putin had it right. In their proposed economic agreement with Ukrainian president Viktor Yanukovych, the Europeans offered very little money. In their negotiations with him during the Euromaidan protests, they and their allies in Washington continued to offer far less than the estimated $20 billion to $35 billion that the country needed.
In February, about a week before Yanukovych ran away, the Christian Science Monitor summed up the situation. Ukraine’s international currency reserves were falling at a vertiginous rate. The national currency, the hryvnia, had lost value, and the international credit rating agency Fitch had downgraded the country’s sovereign debt. How would Ukraine pay what it owed – primarily to Western banks and Russia’s Gasprom? How would it pay salaries, pensions, and social benefits?
The EU agreement looked to a major infusion of capital from the International Monetary Fund. But that would come only after the Ukrainians agreed to what IMF managing director Christiane Lagarde later called a “profound transformation,” especially of its fiscal policy, monetary policy, and policies on energy.
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