12 April 2014 — Michael Hudson
Hundreds of pro-Russian protesters have seized public buildings in Eastern Ukrainian cities. They’re demanding referendums to secede from Ukraine in order to become a part of Russia. Ukrainian officials have blamed Putin for this continued unrest, but it should be noted that Ukraine is a major transit route for natural gas exports to Europe from Russia, and now Russia is warning Ukrainian officials that they need to pay back the $2.2 billion debt owed to the Russian natural gas company Gazprom. German and French officials are also working towards a quick implementation of a $14-18 billion International Monetary Fund loan package to the Ukraine.
Welcome to The Real News Network. I’m Jessica Desvarieux in Baltimore.
Now joining us to discuss all of this is our guest, Michael Hudson. Michael is a distinguished research professor of economics at the University of Missouri-Kansas City. He also taught in Latvia at the Riga Graduate School of Law. And his two newest books are The Bubble and Beyond and Finance Capitalism and Its Discontents.
MICHAEL HUDSON, ECONOMICS PROF., UMKC: Thank you very much, Jessica.
DESVARIEUX: So, Michael, in our previous interviews with you, you’ve been extremely critical of the IMF deal, and also now that we know what’s happening to Ukraine. What’s your assessment of what’s really taking place in Ukraine?
HUDSON: Well, on the surface it’s a financial war. And finance really is war by other means, the way it’s being conducted today, because the objective of finance in Western Europe is the same as that of war. It wants to appropriate land. It wants to appropriate basic infrastructure, all the monopolies. And it wants to extract tribute, and this usually in the case of debt service. So what Europe wants is all of the property that the Ukrainian kleptocrats, the people who rule the country and have appointed themselves the leaders, have basically stolen when they registered the steel mills, the land, the factories, everything in their own name, and they’ve kept Ukraine one of the poorest countries in Europe, very low labor. And now the Western Europeans say, wait a minute, we want you in Ukraine to do what the Russians did. The Russians, like the Chinese, protected themselves against the West by making a deal with Western investors. They let Western investors come in and buy part of the raw materials, the land, the monopolies that they had. And that’s given Western investors a stake in arguing against any move against Russia or China.
The Ukrainian leaders were not that way. They wanted everything for themselves. They’re in the most vicious war in Europe. And now Western Europe has come to them and said, okay, now we’re going to make a deal. We’re going to let you keep what you have, but you have to sell us part of what you have, and we want you now to–we’re going to encircle Russia. We want you to make a very anti-Russian move. We want you to do–essentially ban the Russian language from use in Latvia.
Now, imagine Canada banning the use of French. You’d have Montreal and Quebec seceding and joining the United States. Imagine New York City and America banning the use of Spanish.
What people don’t realize in the press is that this banning of Russian has already been promoted in the Baltics. When I taught in Latvia, for instance, I wanted to invite a Russian economist to lecture at the Riga Graduate School of Law, where I taught, and at the Stockholm School of Law in Riga. I was told by the rector that there was a law in Latvia making it illegal to give any class or a lecture in Russian in any public university and that he and I can be put under arrest for even speaking Russian there. So the result is I had to go to one of the Russian non-public universities to have my friend come.
So you’ve already had this anti-Russian move in other post-Soviet countries. And the Russian population there sort of accommodated themselves to it. They’re not allowed to vote. There’s–they’re apartheid states. The Ukrainian leaders have been told by Europe, we want another apartheid state. We want you to make such a social war on the Russian speakers that’s large in your population that Russia is going to do something intemperate. And what we’re going–and the first thing Russia has done, of course, is to say wait a minute. If you’ve overthrown democratic leaders, we’re going to do what you mentioned at the beginning of this task: they’re going to stop giving the special subsidies of gas prices that they’ve been giving.
Russia had been selling Ukraine gas far below the market rate in order to sort of carry Ukraine. Ukraine has always been sort of an economic burden for Russia. The Western press said that Russia has been raising its gas prices. But it hasn’t really been raising them; it’s been just returning to the normal removing the subsidy. Well, the IMF has already said that the first condition of the bailout loan to prevent Ukrainian currency from falling more is going to be to reduce the subsidy that the government has already been giving the people on gas prices. So this is what the IMF usually does in Third World countries when it removes a subsidy for bread or for other things. It’s removing the gas price. This is going to force Ukraine into a foreign exchange problem, quite apart from the debt problem.
And earlier this week, George Soros wrote an article in The New York Review of Books where he outlines what he thinks should be done for the Ukraine. And what he says–and I’ll quote what he says at the end of the article. He says Ukraine would “encourage its companies by finding European partners”. In other words, Ukrainian kleptocrats should sell out their companies or part ownership to the West. That’s what Western Europe wants right now.
This is a resource grab in the Ukraine, and it’s a resource grab that goes hand-in-hand with a blame-the-Russians. As a result of the riots in the Western Ukraine, there’s already a paralysis of the country. They’re trying to blame the Ukraine’s problems, the austerity that the West is basically imposing on Ukraine, they’re trying to blame it on Russia and fan anti-Russian feelings not only in the Ukraine, but also in the Baltics.
In Latvia, for instance, there’s an election coming this fall. There’s a whole argument between the Russian-speaking party, which is the largest party, the Harmony Centre, and the neoliberal austerity parties trying to free the Latvians from being tied to all of the bad debts from the real estate bubble that was created. There was a danger about a month ago, according to the pro-Westerners, that, wait a minute, the Latvians themselves are agreeing with the Russian-speaking party. They’re agreeing that austerity is bad. They’re agreeing that they should tax the landowners and tax the monopolists instead of taxing labor.
And this frightened Russia, because if you have just one country pushing for a progressive income tax, pushing for a progressive policy, it can spread. So what they did was step up their Cold War in the Ukraine in order to frighten all of Central Europe about the Russian threat. And already you can see, in Latvia, Lithuania, and Estonia, worry that Russia’s going to invade. There’s no need whatsoever for the Russians to invade. There is no tension at all. And yet the Western press is making it appear as if there are Russians massing on the Baltic borders. Well, that’s like America saying there are Canadians massing on our northern borders. Of course they’re massing there, because they live there. Same thing with Mexico. The Mexicans aren’t massing on our southern border; that’s where they live. There’s an amazing anti-Russian hypocrisy in the American press making Russia appear as if somehow it’s the aggressor in all this case, when what it’s going to do is prevent this apartheid state that’s being created on the part of the Western Ukraine against the Russian speakers, against Sevastopol, against Donets Basin and the agricultural lands. These are the lands, essentially, that the Western Europeans decide that they want to take over and they want to appropriate to make the Ukrainian kleptocrats behave the same way kleptocrats in other countries have done: sell part ownership to the West and make a partnership for the West to come in and then tighten the screws in the kind of class war that austerity has become in Central Europe.
DESVARIEUX: Alright. Michael Hudson, very interesting analysis. Thank you for joining us.
HUDSON: Thank you.
DESVARIEUX: And thank you for joining us on The Real News Network.