BNE: Without “Nominal Relations” with Russia, Ukraine is Doomed

(Business New Europe – bne.eu – March 26, 2014) One of the more sober accounts of Ukraine’s plight by Peter Boone and Simon Johnson (a former Chief Economist at the IMF).

Their key conclusion:: Without normal relations to Russia, the outlook for the country looks dire. “Russia controls many of the levers for Ukraine’s success. It is Ukraine’s largest trading partner. Ukraine is heavily in debt to Russia and relies on Russia for most of its energy imports. Russia has been selling Ukraine natural gas at well below world prices. Russia also has substantial ability to promote riots, political intrigues and general instability. In short, unless Ukraine can normalize relations with Russia, it has little hope for growth.”

They are skeptical on the West’s ability to help: ” the West’s ability to affect Ukraine’s success is highly limited. external financial assistance will not help much and may even make things worse. Given the financial state of Ukraine, such money could easily be wasted before Ukraine turns again, as it eventually must, toward better relations with Russia.”

They are also not very pleased by the approach of the West’s diplomats who “have created nothing short of a fiasco for Ukraine and some of its neighbors.”