Political Economy of the Russia Ukraine Conflict

The Russia-Ukraine Conflict is now in its sixth month. Global media has been saturated with reports about this conflict. The high sounding claims of protecting democracy and respect for the rule-based international order has successfully pulled the wool over the eyes of the majority in the Western World.

"When all think alike, no one really thinks."

What has been intriguing is the mullish stubbornness of the United States and European leadership. Despite spending an estimated 8 Billion US Dollars, and counting, and driving the world to the nuclear cliff, the Combined West is unwilling to consider any dialogue or diplomatic solution.

Why? What is at stake?

Why is the Combined West so keen on an all-out, no holds barred approach and has resorted to retaliatory measures like theft of the sovereign assets, international reserves, and to massive illegal unilateral sanctions? The answer to this question needs articulations on economic dimensions.

For a long time now, Ukraine has been a precious partner ( possession?) for both, the United States of America and the European Union. During the Cold War, CIA records had ranked the Soviet-era Ukraine second only to Mother Russia as the 'most economically important component of the former Soviet Union'.

In an interview with CNN's interviewer Farid Zakaria, billionaire George Soros admitted to having established a foundation in Ukraine even before Ukraine became independent of Russia. This foundation has been functioning ever since, and has played an essential part in various 'events'. These include, Maidan event that overthrew the democratically elected Yanukovych Government in 2014 or the Odessa fire where right-wing mob burnt alive 31 inmates in the 'House of Trade Unions' building.

The 'f **CK the EU" fame US Assistant Secretary of State Ms Victoria Nuland, stated during her third trip in five weeks to Ukraine, "Since Ukraine's Independence in 1991, the United States has… invested over $5 billion to assist Ukraine in needs and other goals."

It will not be a bad throw at the dartboard to say that the 'other goals' may be Ukraine's integration with the US/EU-based International order.

Agriculture has been the most attractive sector of the Ukrainian Economy. Ukraine has 32 million hectares of arable land with rich fertile black soil (the "Chernozem' variety has a high organic matter content), a large variety of climatic zones, and favourable temperature and moisture regimes. With such a rare natural symphony, Ukraine has a comparative advantage in grain production. Its production costs are estimated to be about 50% lower than those of European producers.

Ukraine is capable of producing a range of crops, including cereals and oilseeds. Ukraine's annual production of 64 million tons of grain and seeds. Ukraine is the world's largest barley, wheat and sunflower oil producer. In addition, Ukraine's proximity to large and growing neighbouring markets –the European Union – and access to the deep sea ports at the Black Sea provide direct access to the world markets and the giant grain importers in the Middle East and North Africa.

No wonder, since the fall of the USSR, economic interests have been converging on Ukraine. The three Agri-Business giants Monsanto, Cargill and Dupont were the first to be present in this market.

Cargill initially started off with the sale of pesticides, seeds and fertilisers; fast expanding into making investments in grain storage and animal nutrition and buying stakes in the giant agribusiness in the country, the UkrLandFarming. Similarly, Monsanto and DuPont have recently invested in a new seed plant.

More Foreign Corporations are making a beeline for the Ukrainian agriculture sector. It is estimated that over 1.6 million hectares of Agri land has been signed over to the foreign companies for agricultural purposes in recent years.

As Frédéric Mousseau, Policy Director at the Oakland Institute has put it succinctly, "the manoeuvring for control over the country's [Ukraine's] agricultural system is a pivotal factor in the struggle that has been taking place over the last year in the greatest East-West confrontation since the Cold War."

The obstinate backing of the Ukrainian regime at the cost of the enormous loss due to death and destruction is out of this intense contention and competition by American and European Agri-Business Transnationals.

The United States and EU's political leadership know well that stealing Ukrainian agricultural wealth would need a pliable ruling class and favourable policy architecture. In its absence, it would remain only a pie in the sky.

Post Maidan massacre of 2014, after President Yanukovych fled, a new US sponsored Government was formed. Three of its most important ministries were granted to foreign-born individuals who received Ukrainian citizenship a few hours, yes, you read it right, only a few hours before their appointment. This kind of capitulation is unmatched in the history of International Relations.

The essential portfolio of the Ministry of Finance was given to Natalie Jaresko, a US-born and educated businesswoman who had been working in Ukraine since the mid-1990s, overseeing a private equity fund established by the US government to invest in the country.

Now, was the time for the Policy Reforms. The Washington Consensus provided the ready guide. Globalisation ensured a supportive trade and investment regime so that more transnational corporations (TNCs) could set up shops, take over ongoing businesses and integrate them vertically into their global empire. Then the TNCs could externalise part of their income without paying taxes through a transfer pricing mechanism.

The team crafted reforms to manoeuvre complete control over the country's agricultural system, to facilitate the acquisition of agricultural land by creating land markets, cutting food and plant regulations and management, and reducing corporate taxes and customs duties. In addition, a moratorium on selling land and creating land markets was put in place so that farmers could sell the land parcel and move to cities.

Financialisation ensured access to the banking services to average citizens. On the advice of an expert team, the Ukrainian Government set up Land Banks and laws on the Moratorium on selling land were relaxed. Now some 800,000 small farmers could sell their farmland and move into the city, where they needed services like housing for which the Banks planned mortgaging. The new City dwelling farmers required credit to buy furniture for the new houses and car purchases. In addition, Credit / Debit cards and electronic payment services were planned to create another source of income by way of card fees and interest on the credit.

This policy package is called the Washington Consensus, the recipe for the continued prosperity of the Western World by draining out resources from the Third World. Therefore, as with other political imperatives, drawing Ukraine into this network is an essential objective of the Combined West.

However, what was unexpected and unsettling for the Combined West was not just the likely loss of one market but the equally likely emergence of a competing international order which may be relatively a better deal for the non-western world. Having understood this possibility, many of the non-Western nations decided to play the wait and watch game.

Ruling Elite of the Combined West see this as an existential threat to their hegemony. Now any risk is worth be the security of their citizens or survival of the planet.

(The author wishes to express his gratitude for the party theme and details of this article to the Oakland Institute, the USA, who documented in 2015 the takeover of the agricultural sector as outlined in their two reports - 'The Corporate Takeover of Ukrainian Agriculture' and 'Walking on the West Side: The World Bank and the IMF in the Ukraine Conflict.)