Democracy Gone Astray

Democracy, being a human construct, needs to be thought of as directionality rather than an object. As such, to understand it requires not so much a description of existing structures and/or other related phenomena but a declaration of intentionality.
This blog aims at creating labeled lists of published infringements of such intentionality, of points in time where democracy strays from its intended directionality. In addition to outright infringements, this blog also collects important contemporary information and/or discussions that impact our socio-political landscape.

All the posts here were published in the electronic media – main-stream as well as fringe, and maintain links to the original texts.

[NOTE: Due to changes I haven't caught on time in the blogging software, all of the 'Original Article' links were nullified between September 11, 2012 and December 11, 2012. My apologies.]

Wednesday, June 28, 2017

Russia’s latest victim in Ukraine — reform

Last month, activists and students barricaded the doors of the central Kiev branch of Sberbank, a Russian state-owned bank. The message: Stop the Kremlin from using profits made in Ukraine to fund its war against Ukraine.

The demonstration was a manifestation of growing popular fury over the perception that the primary beneficiaries of Ukraine’s economic policies are Moscow and local oligarchs with business interests in Russia.

The discontent had been bubbling under the surface for some time. When Russian President Vladimir Putin announced that state-funded banks in Ukraine would accept passports issued by separatist authorities of the Donbass republics, it finally boiled over.

Kiev responded to the latest outcry by issuing sanctions against Russian banks in the country and forbidding them from removing capital from Ukraine for a year, prompting most of the banks to start looking for a formal exit strategy from Ukraine.

This wasn’t the first time public pressure forced policy changes that are out of alignment with international efforts to accelerate economic reform.

In March, President Petro Poroshenko formalized an economic blockade of the Donbass region launched by activist groups and militia members in January. The government had previously kept some trade channels with occupied regions open, in part to avoid ruffling the feathers of oligarchs with business interests in the separatist-controlled areas. The move, like the recent imposition of sanctions against Russian banks, will likely be detrimental to Ukraine’s immediate economic growth — although activists see it as strengthening Ukraine in more meaningful ways.

Since 2014, almost 10,000 Ukrainians have died in a war with a country that remains its largest trading partner and investor. Kiev is awash in rumors of oligarchs profiteering from the war and stalling anti-corruption measures.

To Ukraine’s international backers, Kiev’s economic reforms project a sense of progress and stability. For most Ukrainians, however, they are seen as perpetuating a corrupt system at the expense of the country’s citizens. And if reforms are crafted to benefit the elite, they believe, Western-backed economic reforms are contributing to this landscape.

Ukrainians absorb the cost of reforms and debt restructuring on a daily basis in the form of pension cuts, a weakened currency and hikes in energy prices. Meanwhile, Ukraine’s oligarchy is doing just fine — partly because of their continued connection to Russian economic interests.

This misalignment, if left unaddressed, it could lead to unrest that would threaten not only the reforms themselves — but also the post-revolutionary order that the West is keen to keep in place.

Nowhere is the gulf between international backers’ perception of reforms and the reality on the ground as wide as on the issue of National Bank of Ukraine (NBU) and its governor, Valeria Gontareva, who resigned Monday.

Ukraine’s Western partners and international organizations such as the International Monetary Fund have praised the NBU’s reforms, arguing that the closure of banks labeled as insolvent helped to prevent the total collapse of the banking system and stabilize the hryvnia after a steep decline. Gontareva’s supporters see her as aggressive and capable, navigating a tough political environment and delivering on reform at a time when many of her peers have not.

She is far less popular with common Ukrainians. More than 1.5 million Ukrainian households lost their savings because of the NBU’s policies. About 163 billion hryvnia in individual and corporate deposits were lost as a result of bank closures, which disproportionately impacted small and medium (aka non-oligarch) businesses.

Gontareva has also faced heavy criticism as Ukraine’s anti-corruption bureau in January launched an investigation into allegations of corruption against her and NBU executives, who allegedly helped Russian state-owned banks evade sanctions. Just last week, the bureau conducted new raids on NBU, and claimed that billions of hryvnia may have been embezzled by its leadership during the banking reform. While no charges have been made against Gontareva yet, transactions were too large to have happened without NBU management involvement, according to the bureau.

The real influence of Russian banks in Ukraine is hard to measure, but as local banks were nationalized — the share of state-run banks now tops 50 percent — loans for small businesses and regular citizens grew scarcer, meaning Russian banks controlled a significant percentage of lending during the economic crisis.

The Kremlin’s banks may now leave Ukraine, but Russians will still own stakes in Ukrainian financial institutions. Sberbank Ukraine, for example, has already sold its assets to a consortium of investors headed by the son of a Russian oligarch. The National Corps has announced they will start a new blockade this week against all remaining Russian banks, accusing the NBU of taking “no real action” and accusing Gontareva and Poroshenko of protecting the banks. The NBU has asked law enforcement to prevent the blockade. The investigations against the NBU proceed, and this will be a complicated landscape for Western advisers to navigate: both the NBU and NABU are Western-backed projects.

Critics of the reforms argue that they have further consolidated the economy into the hands of a hidden few and ignored the impact on average Ukrainians. Gontareva’s international supporters have so far deflected criticisms as the complaints of oligarchs targeted by reforms, but the popular discomfort with Russia’s unchecked economic influence in Ukraine — and the ongoing footsie between the economic elite of warring nations — is unlikely to be quelled anytime soon. Gontareva’s resignation announcement — in which she cited IMF support as proof that corruption charges are baseless — will do little to change this.

The real fight against corruption has not yet begun. Previous Ukrainian “reforms” failed when they represented the interests of a narrow economic class, rather than a vision for national strength. Ukrainians now see this cycle repeating, and we shouldn’t be surprised by further protests and local initiatives.

This should be a warning to Ukraine’s international supporters that they must start paying attention to these internal pressures or risk the failure of another revolution.

Original Article
Source: politico.eu
Author: Molly K. McKew

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