Ukraine & the Geopolitics of Rent-seeking

The Ukraine crisis is just the first of what will become a series of territorial interventions by Russia. Understanding why NATO’s members failed to anticipate Russia’s intervention enables us to visualise one stream in the coming global military conflicts.

There is an economic logic to President Putin’s strategy. This is exposed by examining the trading relationship with Germany.

German exports €35bn to Russia every year in the form of machinery, equipment, cars and chemicals. Russia pays for the imports by exporting oil, gas and raw materials.

Translation: German prosperity rest on value-adding activity. Russia’s prosperity relies on extracting resource rents from other nations.

Russia is a classic case of a predator economy.

When the Iron Curtain fell, the West did its best to inhibit Boris Yeltsin from creating a value-adding economy. Western corporations purchased Soviet-era factories and closed them down (to prevent competition on global markets). The West was content with extracting the raw materials for its factories.

Russia’s would-be oligarchs obliged, and the vodka-guzzling president went along with the scam. Result: Russia is now locked into a culture of cheating. The only way to sustain its model of economics is the classic colonial syndrome – capturing other people’s territories, to extract their rents. Slicing off a piece of Ukraine is just the start of that Kremlin project.

The West protests that the creature which it helped to create is acting true to form!

As for the West, which is locked into a 1930s-style depression – President Putin’s intervention was timely. NATO is now recommending that more should be spent on re-arming the “free world”. That will pump up production, and employment, so the growth figures will be greeted with glee. But, one day, those weapons will have to be put to the use for which they were intended.

2 Responses to Ukraine & the Geopolitics of Rent-seeking

  1. jake 16 May 2014 at 2:58 pm #

    What about the predatory activities of the west:EU and US.the Coup took place so the US could install a IMF compliant government which has imposed austerity and encouraged the state to sell off it’s remaining assets to private interests.

    The Former government turned away from the EU association agreement as it unfairly excluded ukrainian agricultural produce from european exports whilst simultaneously keeping ukrainian markets open to western european non agricultural products.The European association agreement only offered a high interest loans whilst russia offered zero interest loans. (typical rent extraction behaviour, though burdening the goverment with onereous interest charges)

    Even the current Ukrainian prime minister,an IMF shill, Turned down the economic part of the EU association.However the Ukraine is now an IMF Client state imposing auterity on it’s own people to finance high interest loan payments to foriegn bankers.Pensions have been cut in half,Public salaries have also been reduced and government service reduced and public assets sold off.

    The IMF agreement also stipulates that the country’s entire gas pipeline system will be handed over for free to Chevron the moment the basic agreement is signed, while the owners of the Mariupol, Zaporizhzhya and Dnipropetrovsk steel mills will be obliged to surrender their 50% stakes to Germany’s Ruhr.

    -Gas prices for municipal companies will have to be increased by 50% and for private will double.

    -Electricity tariffs will be raised by 40%, housing utility tariffs will be raised, too, gasoline excises will go up 60% and transportation tariffs 50%, while state support for childbirth will be cancelled, the free distribution of textbooks will be annulled at schools and the VAT relief will be scrapped in rural regions, she said.

    -Concurrently, VAT will be introduced on medications

    -the currency will have to be freely floated.

    -A planned annulment of the moratorium on the sale of farmland looks appalling. The selloff of Ukraine’s black soil zone, including to foreign countries.

    This is typical neoliberal rent seeking behaviour,all the way to the appropiation of land rents through land purchases.The Beneficiaries will be the western financial class and the incumbent oligarchs of wesrtern Ukraine

    the russian speaking Ukrainians of eastern ukraine have some legitimate concerns,the crimean referendum was declared free and fair by a selection of EU observers ,(Germnan MEP’s).Russia’s behaviour seems legitimate.

    fellow LVTer Michael Hudson has written a lot on this issue,aswell as Paul craig roberts.

    • Fred Harrison 18 May 2014 at 3:56 pm #

      Jake’s observations are largely appropriate; the West is culpable in the ways that he suggests. But my point is that, precisely because of that fact, western institutions like NATO are not able to think through the logic of what is unfolding. Mistakes will therefore be made (such as the original one, in this case, of failing to anticipate Putin’s reaction to the original Kiev uprising).

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