This article was first published on the left-wing Ukrainian website Liva.com.ua and translated by a comrade of the IMT. Following the truce in Donbass it offers some important insights into the cost of the war in the Ukraine from an economic, social and political perspective.
There has been a truce in Donbass for over a month, which has finally resolved a long-standing status quo here. Weapons are gradually withdrawn from the front line, and despite the recurrent attacks, it is obvious that the conflict has moved toward a reduction in intensity.
In Ukraine they talk about peace. Nationalist politicians, who consider calls to end war a betrayal, speak of that with anger. But the vast majority of citizens already realize that the cessation of hostilities is a necessary condition to end systemic crisis, into which our country is sinking deeper. Journalist and blogger Ruslan Kotsaba is still in prison, but the anti-war statements and critical remarks against the authorities, for which he was put in prison, are gradually becoming a common topic of conversation during office smoking breaks and on internet forums.
The fog of war is lifted
When the guns fall silent, the murmur of the people becomes audible. With stronger voice they complain about their situation and see no prospects for themselves in the future. The “Fog of War” about which Carl von Clausewitz once wrote, is lifted. Ukrainians now see the ugly reality which was hidden behind the media’s militaristic hysteria and patriotic propaganda.
This ruined state has firmly cemented its status as the poorest country in Europe. A collapsed economy; a people impoverished by inflation, unemployment, rising prices and tariffs; the total corruption and ineffectiveness of the new government (who have long surpassed by the previous regime in these categories); paints a shocking picture, even to the foreign patrons of the Kiev government.
“Left without the much-used cover of a war, the internal divisions and dysfunctional core of the Ukrainian political elite didn't take long to reveal itself. Rather than the democratic hope it might have become after last year's ‘Revolution of Dignity’, Ukraine now looks like just another incompetent and corrupt post-Soviet regime. No wonder cracks are appearing in Kiev's all-important relationship with the West”, comments an influential writer for Bloomberg, in an article under the characteristic title: “Ukraine Is in Danger of Becoming a Failed State”. For reasons of diplomatic tact,“in danger” has been likely added.
As it turns out, the main enemy of the Ukrainian authorities is peace. Because it prevents them making profits on war, while attributing to it all of the catastrophic problems in the economy, blaming the aggressors as terrorists, silencing the disgruntled with political persecution and censorship. Now the Ukrainian politicians are finding it much more difficult to justify the crisis with the “complex situation of war”. Most importantly, society is starting to ask about their unrealistic past promises, as well as asking what was this war for, and who will be responsible for its consequences?
The price of the conflict in Ukraine
Ukrainians have yet to understand the magnitude of the losses from the war in Donbass - the more so because, despite the shaky truce, these losses continue to grow. More time is needed to properly assess them. However, it is already clear that the losses are huge. Huge too are the profits for those who earned, and continue to earn, money from the conflict.
“Every day of the war in the Donbass costs us about five million US dollars we could have invested in sustainable development”, said Petro Poroshenko recently at the UN Summit on Sustainable Development in New York. At the same time, the profits of the “International Investment Bank” controlled by Poroshenko, increased by 52.5% over the past year of war, while revenues of the flagship factory of the presidential corporation, Roshen, grew by a record nine times.
Meanwhile, in the second quarter of 2015, the real income of the population of Ukraine decreased 34% compared to the same period in 2014. Businessmen close to government; politicians and officials from the ruling coalition; experts and journalists paid through foreign grants; marauding “military volunteers” and swindlers, volunteers “helping the army”; all made the slaughter of war a profitable business.
Millions of Ukrainians have to pay for that from their own pockets. In accordance with the decisions of the cabinet all workers continue to have 1.5% of their salary deducted for the war effort. In total, this amounts to $124m monthly. Public money pours into the bottomless pit of the “Anti-Terrorist Operation”, allowing government official cronies, including the President, to make massive profits on governmental military spending.
The government treasury is practically empty as a result of the collapse of industrial production, which fell 18.1 to 21.7% this year, compared with a 10.7% fall in 2014. Industrial decline leads to decreases in exports, which then in turn also has a negative impact on production.
According to Deputy Minister of Economy of Ukraine Natalia Nikolskaya, the main causes of the export downturn are the fighting in the east of the country and the exclusion from the economy of Donbass. As a result, the country lost $5.7 billion dollars in revenue in 2015. The halt of production in the conflict zone from the beginning of the war costed over a billion US dollars alone.
The loss of the Russian market, and through that the inability of Ukrainian exports to access the Eurasian Economic Union, was another important factor in the crisis. Exports to the customs union countries decreased by $4.63 billion in 2015, compared with the previous year. This completely paralysed the work of the engineering companies working for this market in the country. Most of them suspended their work, including the world famous “Pivdenmash”, which is now formally working only one day a week, just so the government does not have to hang the locks on its doors.
Not surprisingly, in late October, the International Monetary Fund downgraded the forecast again for Ukraine's economy in 2015, lowering it to 11% from the 9% predicted in July. For 2014, the fall of the country's GDP was 6.7%. Ukraine finished 2015 with disastrous social-economic indicators that could have come from a war, coupled with the anti-social policy of overtly predatory “reforms”.
According to forecasts by the Ministry of Economic Development and the National Bank, inflation will be at 44-45% by the end of 2015. However, IMF experts predict a rise in inflation to 50%. This level of inflation will be the highest recorded in the twenty years after the crisis period of 1992-1995. Real wages have decreased by 17.3%, although the majority of enterprises and firms pay wages in unreported cash. Taking this in to consideration, experts believe that the overall level of real wages could have fallen by 25% compared to the post-Maidan year of 2014.,
Social policy and the cost of living
However, even those who have much smaller wages have reasons to be happy if the wages are paid on time. Mass lay-offs and the transfer of workers to part-time contracts is taking place all over the country. According to forecasts by the Ministry of Social Policy, the growth in unemployment for 2015 will be officially around 11%. Considering the “hidden” unemployment, this can be considered very low. According to Deputy Minister Valeriy Yaroshenko, 23% of young people are unemployed.
“The situation in the east had led to an enormous loss of jobs - 800 000 jobs were lost only in the Donetsk region. Overall, employment in industry has decreased by 18% in 2014”, says experts at the Ministry of Social Policy. Obviously these figures will only deteriorate over the year, not to mention the fact that the right-wing “Maidan” coalition is pushing through parliament an anti-worker Labour Code, which will severely restrict the labour rights of Ukrainians in favour of the employers.
Life in the country is getting more expensive. The price of natural gas has increased by 453% since the start of the 2015 and the increase in the cost of electricity for the first 9 months of this year amounted to nearly 70%, while consumer prices for goods and services increased in the first nine months of 2015 by 41.4%. In particular, the price of bread has risen by 40.3%, meat products by 23.5%, fish - 43.9%, sunflower oil - 60.5%, pasta products - 43.2%, sugar - 38.1%. The cost of fruits increased during the year by 50%, vegetables, alcohol and tobacco products by more than a quarter, clothes and shoes are 30% more expensive than last year. Fuel increased in price by 14.4%, medicines by 32.3%, transportation tariffs increased by 20.6%, payment for water supply by almost 30%, education has increased by 32%.
Even optimistic experts cannot say how pensioners and low-income citizens will survive with such prices and tariffs. Especially given the fact that pensions are indexed only symbolically, and social benefits to all categories of the population have been actively reduced by the neoliberal cabinet - which believes that the fast and hard introduction of austerity policies is its main task, and does not even attempt hide this from the robbed population.
But it gets worse. Incomes are still falling, and the losses will increase many times in the next year. For example, even if the war ends, the reconstruction of destroyed housing and repair of damaged infrastructure will add to the budget astronomical sums. According to Vladimir Groisman, 35 cities in 21 districts are completely destroyed in the Donetsk and Lugansk regions.
The UN Office for the Coordination of Humanitarian Affairs reports that “during the conflict at least 1,969 sites were damaged, including 659 public buildings, 1,230 private houses and 178 offices, causing damage of 440 million dollars.” The restoration of roads in the Donetsk region alone will cost over a billion dollars, and will take at least ten years to complete. The cost of housing reconstruction, along with schools, kindergartens and hospitals is estimated at $28 million, and the repair of the power supply system will cost $40 million. In addition, the war stopped 600 enterprises operating, approximately 75% of all industrial capacity in Donbass, which was in the past considered the main industrial centrer of the country.
We can talk about the damages of the war for a very long time. Its negative impact deeply affected all aspects of social, economic and public life in Ukraine. In the field of education, healthcare, culture - literally everywhere. Even the termination of the flights between Russia and Ukraine will cost our economy $35 million annually.
But the main damage from the conflict is much worse, because it cannot always be measured in concrete figures and expressed in statistical indicators. This damage consists of thousands of people dead and tens of thousands wounded, more than a million refugees from the conflict zone, young people and skilled professionals who are leaving Ukraine in search of salvation from the forced mobilization, hopelessness and poverty.
It also includes a loss of national sovereignty, hopeless debt slavery to the international financial institutions and the transition of the country under external management. “Americans are highly visible in the Ukrainian political process. The U.S. embassy in Kiev is a centrer of power, and Ukrainian politicians openly talk of appointments and dismissals being vetted by U.S. Ambassador Geoffrey Pyatt and even U.S. Vice President Joe Biden. ‘Pyatt and the U.S. administration have more influence than ever in the history of independent Ukraine’ Leschenko wrote”, says the same Bloomberg article.
This elimination of free speech, the harassment of the opposition and the government policy of militant anti-communism are attempts to completely “cleanse” Ukraine of the left, so that no one could offer Ukraine an alternative to the current course.
Unprecedented anywhere in post-war Europe is the rise of the nationalist and Nazi movement. After tasting blood in this war, it has grown as a vampire, and has now massively infiltrated the parliament and the executive power: the army, police, security services, business and the media.
This is combined with a drop in the level of education and culture, which are now the most shamefully used to foment hatred and war. This mass madness that engulfed our society, manifesting itself through the domination of xenophobia, racism and social medieval obscurantism and attacks on dissidents, goes with the destruction of monuments, patriotic colouring of fences and worship of the “Holy Face of Christ”, “mysteriously emerged” on a window.
So, is the price of the war in Donbass too high? When answering this question, we need to ask ourselves: what can we do now to stop this devastating conflict? In order not to pay even more.