UkraineAlert

The recent collapse in stock markets and the sudden flow of refugees into Europe led world headlines in August—in a convergence of phenomena that are closely linked. Unprecedented flows of hot, or illicit, money are damaging most economies, causing both investors and migrants to flee.

Ironically, China has outperformed all other economies, even though it has been looted more than most. Between 2003 and 2012, an estimated $1.25 trillion fled the country, bypassing currency controls. China’s most recent attempt to turn off the tap contributed to the collapse of the Shanghai Composite Index.

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The Russian annexation of Crimea in March 2014 is widely regarded as a tragedy for Crimean Tatars. But for Adile Namazova, it was also a professional catastrophe.

A recent university graduate with near flawless English, Namazova, 22, had been working as a language tutor before annexation. But once Crimea changed hands, travelers stopped coming, food prices shot up, and banks closed. The peninsula's tourism-dependent economy went into a tailspin. Soon Namazova's clients could no longer afford their English lessons, and she found herself out of a job.

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Eastern Ukraine’s Donbas region is strewn with remnants of Russian-made cartridges from AK-74U rifles, littered with the splintered, hollowed-out ruins of Russian-made BTR-80 armored personnel carriers, and scarred with the skeletons of Russian T-74B battle tanks. Yet the Kremlin’s incursion into Ukrainian territory is not isolated to the Donbas. Its influence has also permeated the information environment—especially since the “de-escalation” brought about by Minsk II.

Much has been written about Russia’s information operations against Ukraine and the West. In particular, US and European media outlets love to use the St. Petersburg-based Agency for Internet Studies as the ultimate example of Russia’s determination—and some would have you believe mastery—to win the hearts and minds of disillusioned audiences in Ukraine and in the West.

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Privatization has generated controversy in every post-communist country. Ministers of privatization are usually accused of heinous crimes, regardless of how impeccably they have performed their jobs. Yet privatization is vital for all such nations, not least for Ukraine. The goal must be to limit state-owned enterprises so that the private sector dominates. The aim isn’t to maximize state revenues but to transform both the state and the economy.

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The United States must expand the scope of its sanctions well beyond Russian President Vladimir Putin’s inner circle if this effort—a response to Russia’s annexation of Crimea and its support for separatists in eastern Ukraine—is to have any real impact, says a Russian lawmaker.

“The [US] government machine is doing what it can do, but it is doing … more harm than good,” Ilya Ponomarev, a member of the State Duma, Russia’s lower house of parliament, said in an August 26 interview with the New Atlanticist in Washington.

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The minority of Russians who have not been zombified by official propaganda and who still have any clue about what is really going on in the world—rather than just on television—already know Russia is hurtling toward full-blown catastrophe, though the details might be up for debate. Will the collapse come next month, or more like 2024? How will it happen? A coup d’état by radical fascists, or a provincial revolt whose instigators first see Russian President Vladimir Putin as their savior but later turn against him? Or perhaps year after year of economic stagnation, resulting in complete disintegration. History shows that authoritarian systems can change without bloodshed, but only if a regime’s key players help the forces seeking to replace that regime. This is a prerequisite for non-violent reform or the transfer of power to a reformer.

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Today Ukraine received great news. Private owners of $19 billion of Ukraine's Eurobonds have agreed to a substantial debt restructuring that will give Ukraine much-needed relief. The high bond yields have been sharply reduced, the bonds' maturities have been prolonged, and the face value of the bonds has been reduced by 20 percent.

According to the International Monetary Fund (IMF), this agreement has reduced Ukraine's financing needs for the next four years by no less than $15 billion. This is a huge achievement for Ukraine's government, and Kyiv managed to accomplish this without having to impose a moratorium on debt repayment.

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This month, Russia stepped up military pressure on Ukraine, concentrating about fifty thousand troops along its border with Ukraine, using its proxy militias to shell Ukrainian government positions in the Donbas, and threatening Kyiv with "a big war."

The current escalation indicates Russian discontent with Ukraine's refusal to make unilateral concessions such as allowing the creation of a demilitarized zone in Shyrokyne near the city of Mariupol without reliable guarantees that Russian-backed separatists won't take back this area after Ukrainian forces withdraw.

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In its August 12 editorial, "Shaky Ukraine: Economics and Corruption Complicate Its War," the Pittsburgh Post-Gazette calls Ukraine a “questionable partner” because of “resistance to economic reform and use of Islamist Chechen forces.” Too bad neither charge is true.

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It appears that Russian President Vladimir Putin is losing the war in Ukraine. Gone are the talks about seizing so-called Novorossiya—the strip of land from Kharkiv to Odesa—and establishing a land bridge to occupied Crimea. Even though recent developments suggest a possible offensive to expand the territory Russia and its proxies now hold, perhaps with a push to Mariupol, the Kremlin knows that such a move would trigger tougher sanctions against Russia's already failing economy.

Putin's main problem is that he needs to keep acting. He didn't invade Ukraine because he feared for the rights of its Russian-speakers. Rather, it was a diversion from problems at home. He expected a walk in the park when he returned as president in 2012. Instead, he encountered the largest anti-government demonstrations since the fall of the Soviet Union. Nothing terrifies Putin more than popular protests. As a KGB-agent in Dresden, he saw firsthand how East Germans toppled the oppressive system he had dedicated his life to preserve. What if Ukraine's Euromaidan had inspired Russians to do likewise?

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