The economy of the Ukraine

By Slava Tsukerman

Here are a couple of quotes:

Acting President of Ukraine Alexander Turchinov: “What was left to us by Yanukovych and Azarov (former Prime Minister), is difficult to call even a “ruin”. While the rest of the world economy is recovering Ukrainian economy is heading into abyss. The country is in pre-default state.”

A Ukrainian journalist Yuri Romanenko: “Today our state is bankrupt. In order to perform a mobilization of the army according to the existing plans, we must issue 5 million ‘Kalashnikovs’ . There are only 800 thousand ‘Kalashnikovs’ in our warehouses”.

The unprecedented corruption of the Yanukovych government is widely known today. But destruction of the Ukrainian economy started long before Yanukovych’s coming to power.

From 1990 to 2008 the share of machinery in the structure of industrial production in Ukraine has changed from 31% to 14%.

In 2009, Ukraine’s Gross Domestic Product fell by 14.8 %, which was one of the worst indicators of GDP growth in the world. In the same year, industrial production fell by 25.0 %!

In February 2010, Doctor of Economics Sergey Korablin said: “In the early ’90s, few would even imagine a risk of conversion of Ukraine from industry to extraction of raw materials. Today it is no longer a risk and not a threat but a fait accompli, not causing any discussions”.

The end of communism and birth of a new capitalistic economy in the former communist countries involved a lot of criminal elements. And many new capitalists, even those that had no connections with criminal structures, didn’t believe in the long life of the newborn capitalism and were concentrating, not on building economy in the former Soviet republics, but in fast looting and taking out of the countries as much as possible. It happened that in Ukraine that process was especially active.

I had a friend in New York, a fellow immigrant from USSR, a specialist in the cement production. He was invited by his friend, one of new Ukrainian ‘oligarchs’, to oversee national production of cement. My friend came to the meeting of the new oligarchs with his plan of the development of modern efficient production, which obviously needed some investment. To his great surprise new billionaires had met my friend’s plan with loud laughter: “Who cares about the future of this doomed country? Get as much as possible today, even if it means complete destruction of local infrastructure.” My friend flew back to New York.

Recently many of the oligarchs of the perestroika time were replaced with gangster friends of Yanukovytch. According to Ukrainian official statistics 40% of country’s economy is in fact a shadow economy.

And what is even more important: today more than 60% of Ukraine’s exports go to post-Soviet states, mostly to Russia, Belarus and Kazakhstan. Will Ukraine be capable to survive if it loses Russian markets?

Updated: March 17, 2014 — 4:37 pm © 2016