New Russia will win economy
The collapse of Ukraine will lead to the competition of two economic models. The industrial alternative of the South-East looks more profitable than the neoliberal dreams of Kiev
Cancellation of the mandate for the introduction of troops into Ukraine, issued by the Federation Council to President Putin, the conditional truce announced by Poroshenko, the semblance of negotiations between Kiev, Moscow and the Southeast — all of these events raised the debate about the future of the proclaimed republics of the New Russia and the degree of Russian support for Ukrainian militias . A tactical pause, a prologue to a big war, or an attempt to balance the geopolitical map - whatever versions are built today, the fact remains obvious: Russia, in any case, will have to build individual economic, political and cultural relations with Donetsk and Lugansk, rendering comprehensive diplomatic and financial assistance to the new republics .
Thus, there remains the relevance of the dialogue on the programs for the development and formation of the statehood of Novorossia, which continues to be an Expert holding in the pages of the journal and in the form of a broad discussion with the Russian intellectual circles. The next round table on this topic was held on Thursday at the MIA “Russia Today”.
How much has the agenda of the Ukrainian crisis changed in connection with the “peace stream” that has emerged recently? The panelists felt that the lack of confidence in Kiev’s promises is already a common place, which, however, is very well recognized in the South-East. Militiamen wash with blood every new truce announced. Disagreements in the Ukrainian oligarchs, who seized power in the country, do not even hide the local media. The collapse of the country in fact has come to pass, the question is how the new configuration of relations between the parties to the conflict will be built.
In conditions when the Ukrainian punitive operation in the South-East has virtually stalled, Moscow in the short term had the opportunity for maneuver. “The withdrawal of the mandate put an end to the hysteria among the part of Russian society that demanded the introduction of troops into Ukraine,” said Alexander Prokhanov, editor-in-chief of Zavtra newspaper. - But the mandate itself played a role: under the umbrella of the mandate, Crimea was annexed, this mandate, in fact, contributed to the formation of Novorossia, as well as the start of peace talks. Putin’s decisions ensured the preservation of all Western European gas, economic, philosophical architecture. At the same time, if negotiations nevertheless take place, they will resemble the Palestinian-Israeli dialogue, which lasts for an infinitely long time, fraught with ruptures, attacks, and blood. Both parties use a pause for the accumulation of forces. And in case of the slightest breakdown of the negotiations, a new conflict will begin. ”
“The abolition of the mandate to use force is a threat to the peace process,” said Mikhail Remizov, president of the National Strategy Institute. - Because the mandate - was a figure of political pressure on Kiev. Today, the issue of recognizing the Lugansk and Donetsk people's republics may be a new lever of pressure. Russia must go on the path of unilateral recognition, otherwise Kiev lacks incentives to negotiate. Poroshenko is under severe external and internal pressure. His electorate will not accept the surrender of positions in the Donbas. The repressive apparatus, which was formed on the basis of the National Guard, will not accept delivery either. If Poroshenko’s position is considered defeatist, he will inevitably face enormous pressure. In addition, he will not be able to win the elections to the Verkhovna Rada, which is important for him. He can only win through the conqueror of Donbass. "
“Today, the military issue remains the key issue,” rector Yevgeny Kozhokin of the Academy of Labor and Social Relations said. - The fact that representatives of Kiev and the South-East turned out to be at the same negotiating table is a tiny light at the end of the tunnel. But politicians in Kiev do not want a radical victory, it will undermine their position. The National Guard is not only an armed formation, it is a very serious political factor. Personnel soldiers do not want to shoot. And the National Guard is ready to fight both militia and civilians. ”
Armed confrontation in Lugansk and Donbas is likely to continue regardless of the pace and composition of the participants in the negotiation process. Too different and irreconcilable demands of the parties. At the same time sluggish clashes are beneficial to almost everyone, as they strengthen the bargaining position. Except, of course, civilians. But in the medium and long term, the loss of loyalty of the population can be sentenced by the Southeast militia movement.
“In this war, the decisive factor is the support of the population. And the newly-formed republics should take this into account in the context of the state-building process, ”Vitaly Leibyn, the chief editor of Russian Reporter magazine, is convinced. “Today, most of the locals are set rather not for the militia, but against the Kiev authorities. Moreover, in small towns this support is enormous, unlike the big ones, where the middle class and business suffer from both the Ukrainian military and the actions of the militia. ”
Southeast Alternative
The Ukrainian Maidan was a naive, but understandable and popular project: the rejection of the Soviet past and the construction of a new national state from scratch with a focus on the European Union. Southeast people need an equally clear and understandable alternative to this project. “You can fight against neo-Nazism, you can fight under the flag of Russia, you can fight against the Kiev authorities. But it is difficult to fight for the region, even if we call it Novorossia. It is necessary to formulate a renewed civilization project, - continues Vitaly Leibin. - People in the South-East are fighting today for Russia. And the majority of the population there are sure that they are upholding the idea of a civilization that goes back to the Soviet Union. In the sense that the USSR was a productive force, launched ships into space, built factories. Therefore, it is so important to create a technical competition in the project of Novorossia. In the programs of both the Lugansk and Donetsk republics, the idea of immediately entering into industrialization runs like a thread. This and the refusal to increase tariffs, the modernization of factories and the opening of new industries. Such plans are in conflict with the policies of Western Ukraine, in view of the fact that they will have to implement the recommendations of the IMF. ”
Interestingly, within the framework of a divided Ukraine, in the distant future, a model of competition between two economic systems, industrial and post-industrial, can be drawn. Today, with all the paucity of development programs in the Kiev government, the neoliberal “brain power” prevails. In this context, it seems right for economists in Western Ukraine to completely abandon the “unprofitable” industrial Donbass and reduce the industrial sector across the country. Actually, a radical increase in tariffs in accordance with the recommendations of the IMF, as well as the points of the agreement on European integration, does not provide any other choice to the country's economy. The powerful IT-cluster, the cluster of nuclear energy, military-technical products, as well as the development of agriculture with the creation of a full-fledged processing of raw materials for the agro-industrial complex are called upon to be the locomotive of the economy. In the dreams of the Kiev authorities the rapid growth of the middle class and the influx of highly professional specialists. The resources for the formation of a new type of economy are rooted in reducing corruption, nationalizing the property of disloyal oligarchs and loans from Western allies.
The damage of the neoliberal model has long been evident to most countries of the world. Such plans can bury the Ukrainian economy already at the stage of model formation. And in such conditions, the success of a competing industrial project in the South-East may become an attractive alternative for the regions neighboring Dnepropetrovsk, Dnipropetrovsk, Zaporizhia, Kherson, Mykolaiv, Odessa and others, which opens up a wide window of opportunities for long-term geopolitical solutions. The main question is whether Donbass can, in principle, show a positive development dynamic.
The materialization of New Russia
“The leaders of the Donetsk and Luhansk People’s Republics have come up with very ambitious development programs. They suggest raising the standard of living of the population to the level of the neighboring Russian regions, set the task of increasing production at high rates of 25-30%. How realistic is this? - ponders the adviser to the president of Russia Sergey Glazyev. - It is important to understand why today the standard of living in the Donbas in 2-3 times lower than, for example, in the Rostov region.
It seems to be a prosperous region in terms of economic specialization. But it is a “cash cow” for the rest of Ukraine with a positive trade balance of 8,5 billion dollars. Kiev simply pumps out both income and currency from the Donbass. Donbass is losing even more due to the offshoring of the corporations that work there. For many years, purposefully, the oligarchic structures have been plundering the revenue base. The third reason is the absence of mechanisms for the extraction of natural rent in Ukrainian legislation. In Russia, about two thirds of the natural rent is taken to the state’s treasury through MET and export duties. In Ukraine, the source of the wealth of many oligarchs is just natural rent. Another source of super profits is the low wages of Donbass workers.
That is why Donbass oligarchs are the richest people in Europe. At the same time, they also force the state to subsidize local industry. If we succeed in removing this oligarchic parasitism, all the goals of the leaders of the Donbass and Luhansk people's republics are absolutely real.
What is needed for the economic success of the New Russia? Need a world. We need integration with Russia, with our market. Return of the tax base - for this it is necessary to create a mechanism for registering property rights in the republics. All entrepreneurs who want to work honestly and pay taxes must re-register their businesses. With full preservation and respect for the rights of private property. If you want to work, come back from offshore companies, from Kiev, to your employees, to your enterprises.
In the Donetsk and Luhansk People's Republics there is a chance to build a simple and clear tax model. I would recommend to refuse VAT and replace it with a small sales tax. Make a roll on the natural rent, environmental payments ".
It is obvious that Russia in the near future may take a number of measures to increase the competitiveness of the republics of New Russia. The signing by Kiev of an agreement with the European Union is forcing Moscow to protect its trade interests by means of protective duties on Ukrainian goods. Donetsk and Lugansk should be an exception in this economic battle. Strengthen the industrial power of the republics can special prices for energy resources at the domestic Russian tariffs. It is necessary to consider measures for the in-depth integration of the industry of the Southeast with the Russian market. Plans of point crediting of certain industrial sectors of the republics will be useful.
“We are witnessing the materialization of Novorossia,” says Oleg Bondarenko, director of the Russian-Ukrainian Information Center. - The Prime Minister of the Donetsk People's Republic, Alexander Boroday, announced the commencement of the payment of compensation to the families of the victims as part of the punitive operation. The program of supplements to pensions, scholarships, public sector wages has been started. Since July 1 Kiev announced another increase in utility tariffs, in general, already up to 200%. In turn, the DPR government fixes tariffs at the level of 2013 of the year.
We see how the de-oligarchization of Donbass takes place when the oligarchs are left with assets, but they are barred from making political decisions. Recall that the Maidan began with calls to stop the family of Yanukovich, as the main oligarchs of Ukraine. Now, in practice, the policy of deoligarchization is the responsibility of the leadership of the LC and the DPR, which cannot but arouse the sympathy of the people of Ukraine.
The other day the constitution of the Donetsk and Luhansk People's Republics was declared. This union is consolidated as a confederation. As such, this project is attractive for neighboring regions against the background of the unitary policy of Kiev. It gives a certain freedom of action, both economic and political. In confederal status, the Novorossia project is undoubtedly open for the subsequent accession of other regions of Ukraine, if they wish. "
Cancellation of the mandate for the introduction of troops into Ukraine, issued by the Federation Council to President Putin, the conditional truce announced by Poroshenko, the semblance of negotiations between Kiev, Moscow and the Southeast — all of these events raised the debate about the future of the proclaimed republics of the New Russia and the degree of Russian support for Ukrainian militias . A tactical pause, a prologue to a big war, or an attempt to balance the geopolitical map - whatever versions are built today, the fact remains obvious: Russia, in any case, will have to build individual economic, political and cultural relations with Donetsk and Lugansk, rendering comprehensive diplomatic and financial assistance to the new republics .
Thus, there remains the relevance of the dialogue on the programs for the development and formation of the statehood of Novorossia, which continues to be an Expert holding in the pages of the journal and in the form of a broad discussion with the Russian intellectual circles. The next round table on this topic was held on Thursday at the MIA “Russia Today”.
How much has the agenda of the Ukrainian crisis changed in connection with the “peace stream” that has emerged recently? The panelists felt that the lack of confidence in Kiev’s promises is already a common place, which, however, is very well recognized in the South-East. Militiamen wash with blood every new truce announced. Disagreements in the Ukrainian oligarchs, who seized power in the country, do not even hide the local media. The collapse of the country in fact has come to pass, the question is how the new configuration of relations between the parties to the conflict will be built.
In conditions when the Ukrainian punitive operation in the South-East has virtually stalled, Moscow in the short term had the opportunity for maneuver. “The withdrawal of the mandate put an end to the hysteria among the part of Russian society that demanded the introduction of troops into Ukraine,” said Alexander Prokhanov, editor-in-chief of Zavtra newspaper. - But the mandate itself played a role: under the umbrella of the mandate, Crimea was annexed, this mandate, in fact, contributed to the formation of Novorossia, as well as the start of peace talks. Putin’s decisions ensured the preservation of all Western European gas, economic, philosophical architecture. At the same time, if negotiations nevertheless take place, they will resemble the Palestinian-Israeli dialogue, which lasts for an infinitely long time, fraught with ruptures, attacks, and blood. Both parties use a pause for the accumulation of forces. And in case of the slightest breakdown of the negotiations, a new conflict will begin. ”
“The abolition of the mandate to use force is a threat to the peace process,” said Mikhail Remizov, president of the National Strategy Institute. - Because the mandate - was a figure of political pressure on Kiev. Today, the issue of recognizing the Lugansk and Donetsk people's republics may be a new lever of pressure. Russia must go on the path of unilateral recognition, otherwise Kiev lacks incentives to negotiate. Poroshenko is under severe external and internal pressure. His electorate will not accept the surrender of positions in the Donbas. The repressive apparatus, which was formed on the basis of the National Guard, will not accept delivery either. If Poroshenko’s position is considered defeatist, he will inevitably face enormous pressure. In addition, he will not be able to win the elections to the Verkhovna Rada, which is important for him. He can only win through the conqueror of Donbass. "
“Today, the military issue remains the key issue,” rector Yevgeny Kozhokin of the Academy of Labor and Social Relations said. - The fact that representatives of Kiev and the South-East turned out to be at the same negotiating table is a tiny light at the end of the tunnel. But politicians in Kiev do not want a radical victory, it will undermine their position. The National Guard is not only an armed formation, it is a very serious political factor. Personnel soldiers do not want to shoot. And the National Guard is ready to fight both militia and civilians. ”
Armed confrontation in Lugansk and Donbas is likely to continue regardless of the pace and composition of the participants in the negotiation process. Too different and irreconcilable demands of the parties. At the same time sluggish clashes are beneficial to almost everyone, as they strengthen the bargaining position. Except, of course, civilians. But in the medium and long term, the loss of loyalty of the population can be sentenced by the Southeast militia movement.
“In this war, the decisive factor is the support of the population. And the newly-formed republics should take this into account in the context of the state-building process, ”Vitaly Leibyn, the chief editor of Russian Reporter magazine, is convinced. “Today, most of the locals are set rather not for the militia, but against the Kiev authorities. Moreover, in small towns this support is enormous, unlike the big ones, where the middle class and business suffer from both the Ukrainian military and the actions of the militia. ”
Southeast Alternative
The Ukrainian Maidan was a naive, but understandable and popular project: the rejection of the Soviet past and the construction of a new national state from scratch with a focus on the European Union. Southeast people need an equally clear and understandable alternative to this project. “You can fight against neo-Nazism, you can fight under the flag of Russia, you can fight against the Kiev authorities. But it is difficult to fight for the region, even if we call it Novorossia. It is necessary to formulate a renewed civilization project, - continues Vitaly Leibin. - People in the South-East are fighting today for Russia. And the majority of the population there are sure that they are upholding the idea of a civilization that goes back to the Soviet Union. In the sense that the USSR was a productive force, launched ships into space, built factories. Therefore, it is so important to create a technical competition in the project of Novorossia. In the programs of both the Lugansk and Donetsk republics, the idea of immediately entering into industrialization runs like a thread. This and the refusal to increase tariffs, the modernization of factories and the opening of new industries. Such plans are in conflict with the policies of Western Ukraine, in view of the fact that they will have to implement the recommendations of the IMF. ”
Interestingly, within the framework of a divided Ukraine, in the distant future, a model of competition between two economic systems, industrial and post-industrial, can be drawn. Today, with all the paucity of development programs in the Kiev government, the neoliberal “brain power” prevails. In this context, it seems right for economists in Western Ukraine to completely abandon the “unprofitable” industrial Donbass and reduce the industrial sector across the country. Actually, a radical increase in tariffs in accordance with the recommendations of the IMF, as well as the points of the agreement on European integration, does not provide any other choice to the country's economy. The powerful IT-cluster, the cluster of nuclear energy, military-technical products, as well as the development of agriculture with the creation of a full-fledged processing of raw materials for the agro-industrial complex are called upon to be the locomotive of the economy. In the dreams of the Kiev authorities the rapid growth of the middle class and the influx of highly professional specialists. The resources for the formation of a new type of economy are rooted in reducing corruption, nationalizing the property of disloyal oligarchs and loans from Western allies.
The damage of the neoliberal model has long been evident to most countries of the world. Such plans can bury the Ukrainian economy already at the stage of model formation. And in such conditions, the success of a competing industrial project in the South-East may become an attractive alternative for the regions neighboring Dnepropetrovsk, Dnipropetrovsk, Zaporizhia, Kherson, Mykolaiv, Odessa and others, which opens up a wide window of opportunities for long-term geopolitical solutions. The main question is whether Donbass can, in principle, show a positive development dynamic.
The materialization of New Russia
“The leaders of the Donetsk and Luhansk People’s Republics have come up with very ambitious development programs. They suggest raising the standard of living of the population to the level of the neighboring Russian regions, set the task of increasing production at high rates of 25-30%. How realistic is this? - ponders the adviser to the president of Russia Sergey Glazyev. - It is important to understand why today the standard of living in the Donbas in 2-3 times lower than, for example, in the Rostov region.
It seems to be a prosperous region in terms of economic specialization. But it is a “cash cow” for the rest of Ukraine with a positive trade balance of 8,5 billion dollars. Kiev simply pumps out both income and currency from the Donbass. Donbass is losing even more due to the offshoring of the corporations that work there. For many years, purposefully, the oligarchic structures have been plundering the revenue base. The third reason is the absence of mechanisms for the extraction of natural rent in Ukrainian legislation. In Russia, about two thirds of the natural rent is taken to the state’s treasury through MET and export duties. In Ukraine, the source of the wealth of many oligarchs is just natural rent. Another source of super profits is the low wages of Donbass workers.
That is why Donbass oligarchs are the richest people in Europe. At the same time, they also force the state to subsidize local industry. If we succeed in removing this oligarchic parasitism, all the goals of the leaders of the Donbass and Luhansk people's republics are absolutely real.
What is needed for the economic success of the New Russia? Need a world. We need integration with Russia, with our market. Return of the tax base - for this it is necessary to create a mechanism for registering property rights in the republics. All entrepreneurs who want to work honestly and pay taxes must re-register their businesses. With full preservation and respect for the rights of private property. If you want to work, come back from offshore companies, from Kiev, to your employees, to your enterprises.
In the Donetsk and Luhansk People's Republics there is a chance to build a simple and clear tax model. I would recommend to refuse VAT and replace it with a small sales tax. Make a roll on the natural rent, environmental payments ".
It is obvious that Russia in the near future may take a number of measures to increase the competitiveness of the republics of New Russia. The signing by Kiev of an agreement with the European Union is forcing Moscow to protect its trade interests by means of protective duties on Ukrainian goods. Donetsk and Lugansk should be an exception in this economic battle. Strengthen the industrial power of the republics can special prices for energy resources at the domestic Russian tariffs. It is necessary to consider measures for the in-depth integration of the industry of the Southeast with the Russian market. Plans of point crediting of certain industrial sectors of the republics will be useful.
“We are witnessing the materialization of Novorossia,” says Oleg Bondarenko, director of the Russian-Ukrainian Information Center. - The Prime Minister of the Donetsk People's Republic, Alexander Boroday, announced the commencement of the payment of compensation to the families of the victims as part of the punitive operation. The program of supplements to pensions, scholarships, public sector wages has been started. Since July 1 Kiev announced another increase in utility tariffs, in general, already up to 200%. In turn, the DPR government fixes tariffs at the level of 2013 of the year.
We see how the de-oligarchization of Donbass takes place when the oligarchs are left with assets, but they are barred from making political decisions. Recall that the Maidan began with calls to stop the family of Yanukovich, as the main oligarchs of Ukraine. Now, in practice, the policy of deoligarchization is the responsibility of the leadership of the LC and the DPR, which cannot but arouse the sympathy of the people of Ukraine.
The other day the constitution of the Donetsk and Luhansk People's Republics was declared. This union is consolidated as a confederation. As such, this project is attractive for neighboring regions against the background of the unitary policy of Kiev. It gives a certain freedom of action, both economic and political. In confederal status, the Novorossia project is undoubtedly open for the subsequent accession of other regions of Ukraine, if they wish. "
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