Memo From Moscow
Jude Wanniski
November 28, 2004


Memo To: Website Fans, Browsers, Clients
From: Jude Wanniski
Re: The Ukrainian Divide

What’s going on in the Ukraine? A presidential election last week with the candidate of the eastern region, closest to Russia, winning narrowly over the candidate of the western region, abutting Western Europe. The loser cried fraud and the politicians of the West, i.e., the Bush administration and the NATO countries, immediately announced that they agreed with the loser. I’m suspicious, having watched the neo-cons again and again promote ideas they knew would cause a fracturing of the old Soviet Union and the Yugoslav Federation. A decade ago, they sold Moscow and then Belgrade on the idea of “shock therapy” to convert from a command economy to a market economy, knowing full well it would cause serious economic problems for the USSR and Yugoslavia. It’s like a chess game, kind of. But I fought my old Cold War allies, knowing how much pain and suffering “shock therapy” would bring to the masses of ordinary people and of the political fragmentation that would cause more tensions.

I made several trips to Moscow warning the government to resist shock therapy, but was outnumbered by the neo-cons and the influence they had in the first Bush administration. While I lost, at the time I argued it would be largely a waste of time to purposely fragment the defeated communist empire. Once Moscow figured out what made economies grow, I believed, its natural cultural and economic ties to the fragmented provinces would invite reunification. That’s what’s going on in the Ukraine, but in this case the Eastern region is being pulled back toward integration while the West is coaxing Ukraine West to break free. It is in fact a remnant of the Cold War, along the lines of the pulling and tugging going on in the Korean peninsula and in the Middle East.

On Friday, I emailed Georgiy Markosov, a Russian friend of more than 20 years who I met when he worked as the chief political/economic counselor in the Soviet Embassy in Washington. We’ve remained in touch over all these years and he has been a reliable source of information on what’s going on in his part of the world. He had been a deputy minister in Putin’s transportation ministry, but is now in Moscow’s private sector, a consultant to the western business community. He responded to my query about the Ukraine situation with the following “Memo from Moscow,” and said it would be okay to use it and identify him by name.

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Jude, you are right. The European Union and Washington are unhappy about the results of the election in the Ukraine and actively intervene on behalf on one candidate against the other supported by President Putin. The Ukraine is the biggest country in Europe. Any political game in the middle of Europe can create a situation that neither Washington nor EU could handle. The Eastern part of the Ukraine with more than 50% of population of the country produces 75% of GDP and is fully integrated in the Russian economy. They have voted for Yanukovich and assured the majority needed for the victory. If the West steals the election victory the Eastern regions of the Ukraine can separate from the rest of the country and join the Russian Federation.

Neither Russia nor the West are ready for that, nor have they any meaningful plan for the de facto divided Ukraine. The people of Ukraine will have to make the best choice itself and stick to it while the rest of the world should live with it. However, this simple truth is not accepted by the West. It looks that Iraq is not enough and NATO needs another battlefield. At this point the outcome is very difficult to predict. However, nothing good will happen and Russia and the West will soon have another test of maturity of their relations and will have to prove to their respective peoples that they can peacefully live in the post cold war world.

The Parliament of the Ukrain took today a non-binding decision, that is nothing more but recommendation to the president. The fate of election will be decided on Monday by the Supreme Court. The position of President Putin is officially neutral, Russia will accept the decision of the Supreme of Ukraine. The current score is 49.7% for Yanukovich and 46.6% for Yushchenko. Yushchenko scored almost 90% in the West and more than 50% in central regions. Yanukovich scored 80% in Eastern and Southern regions, that account for more population. If elections take place in two weeks Yanukovich will win again, but so far there is no legal ground for new elections. My feeling is that chances of Yushchenko to become a president anytime soon are close to zero. If, however, by miracle he steals the election with a help of the West, the current division of the country can be formalized by referendum in the Eastern and Southern parts of the Ukraine.

Today the above parts of the country stopped sending tax money to Kiev until the moment when the current President Kuchma restores the constitutional order. The East and the South of the Ukraine are sick and tired of subsidizing Western regions of the country by contributing more than 70% of the budgetary income. All sea ports, mines, steel plants, machine building plants, aviation and space industries are in the East and in the South. All day today people in those regions (90% Russian speaking) rallied for autonomy and even for joining Russia. This scenario is totally spontaneous and is not welcome by President Putin. But things can really get out of control.

I have no particular sympathy for Mr. Yanukovich, nor for Mr. Yushchenko, the Ukraine really deserves better candidates. However, whatever choice Ukranians make in the coming days within their constitutional process must be respected. No foreign power can take sides in this election without paying the price it can not really afford. Can the civilized world afford another Cold War? That will make terrorists of the world very happy.