The economic policies described below should do wonders for the Russian economy.  Sarcasm aside, Putin’s well intentioned (whatever one thinks of Putin, he believes he is a Russian patriot) restrictions-like all protectionist policies designed to help domestic industry-will backfire as the productivity that technology provides will not be available. That will be the effect of tariffs.

It is no surprise that xenophobic Russia employs protectionism. This fits into a historical pattern of encouraging development periodically, and then squashing it just as it bears fruit. A vast nation like Russia with an incredible array of resources should be the richest nation in the World, but protectionist and other anti-growth policies keep it underdeveloped. The excuse of protecting domestic companies and jobs is always used, though an examination of nations that allow competition shows that it increases wealth, tax revenues, and creates a greater numbers of jobs.

Our hope is that Ukraine does not adopt these restrictions. Given the cultural similarities between Russia and Ukraine, as well as the shared oligarchic influences in both governments, we would not be at all surprised if Ukraine went down the same road. It would be even more damaging to Ukraine since it does not have the same resources of Russia and must rely more on the industrial, service and consumer sectors of the economy.

 Restrictions and tariffs on farm equipment and machinery in a nation sitting on an under-utilized agricultural sector with the best farm land in the World, would damage a nation that has already suffered through ill conceived socialist collectivization decades ago.

Putin’s Tariffs Stall Russian Growth for Caterpillar

By Melita Marie Garza and Paul Abelsky

April 20 (Bloomberg) — Prime Minister Vladimir Putin’s trade measures are starting to keep Deere & Co. combines and Caterpillar Inc. trucks out of Russian wheat fields and coal mines, dimming the companies’ prospects for expansion abroad.

Deere and Caterpillar, reeling from the longest U.S. recession in a quarter century, were the companies most affected by loan restrictions and tariffs of as much as 25 percent that Putin imposed this year, according to a U.S. Chamber of Commerce survey of the top 50 American businesses operating in Russia.

Putin is trying to boost Russian industries with tariffs on everything from drugs to farm equipment as declining oil revenue saps the nation’s economy. The policies are hurting sales by Caterpillar, Deere and Agco Corp. in a market where revenue was forecast to rise as much as sixfold in the next decade.

“The new tariffs kicked these guys in the knees when they were down,” Larry De Maria, a New York-based analyst with Sterne, Agee & Leach Inc., said in a telephone interview. “Russia was supposed to be a $3 billion market in 2008 with potential to grow to $20 billion, possibly in as little as a decade.”

Emerging-market sales likely fell so far this year for Deere and Caterpillar, which reports first-quarter earnings tomorrow, De Maria said. Caterpillar is expected to report profit excluding certain items of 5 cents a share, the average estimate of 20 analysts surveyed by Bloomberg. The company earned $1.45 a share a year earlier.

“We are really going to struggle this year in Russia,” Ken Harding, Caterpillar’s regional execution manager for the Commonwealth of Independent States, said in a telephone interview.

‘Low’ Expectations

Caterpillar’s “expectation is low” that it will sell any of its 60-ton trucks, used for quarry and construction work, in Russia this year after selling eight last year, Harding said.

Starting in January, Peoria, Illinois-based Caterpillar and other foreign makers of off-highway trucks faced duties of 25 percent, an increase from 5 percent last year. BelAZ, a Belarusian equipment producer that dominates the region’s truck industry, isn’t subject to the tariff and will benefit, Harding said.

Caterpillar declined 59 percent on the New York Stock Exchange in the 12 months through April 17. Deere fell 56 percent, and Agco dropped 64 percent.

Deere, the world’s largest maker of agricultural equipment, and Duluth, Georgia-based Agco are being hurt by a program that gives Russian farmers a 20 percent discount on loans from Russia’s Central Bank if they buy domestic machines.

Loan Program

The deal is for loans made through OAO Sberbank, Russia’s largest lender, and Rosselkhozbank, the Russian Agricultural Bank, which both have local offices that farmers rely on for financing, Michael Considine, director of EurAsia issues for the Washington-based Chamber of Commerce, said in an interview.

“If a Russian farmer had the cash to buy a Deere combine, it would cost substantially more because of the tariff increase,” Considine said. “And if you didn’t have the money, you could just forget about it because you’d only be able to get the money to buy something made in Russia.”

Putin undertook the measures after a December visit to Rostov, Russia-based Rostselmash, the country’s leading combine maker.

Putin’s press secretary Dmitry Peskov wasn’t available for comment. Valeriy Khromthenkov, a Russian official in Washington with oversight of agricultural issues, declined to comment. A spokesman for Finance Minister Alexei Kudrin, who also is deputy prime minister, wasn’t available to comment.

‘Dramatically Reduced’

Agco’s sales are “dramatically reduced” in the region, because borrowing for a foreign tractor is now almost impossible, Greg Peterson, Agco’s head of investor relations, said in a telephone interview.

In its first-quarter earnings announcement in February, Moline, Illinois-based Deere said sales will decline in Central Europe and the Commonwealth of Independent States for the year. Ken Golden, a spokesman for Deere, declined to comment.

“Our main problems have been the lack of state subsidies on loans combined with insufficient operating cash and the general economic downturn, not the import tariffs,” Alexander Altynov, the general director of AgroSnab, an official John Deere dealer in Russia, said in a telephone interview.

Market Decline

Altynov predicted the foreign machinery market in Russia will decline as much as 75 percent this year.

Deere was expected to post second-quarter profit excluding certain items of $1.08 a share, the average estimate of 17 analysts in a Bloomberg survey.

The U.S. Trade Representative has worked with the U.S. combine harvester industry and at a meeting in Moscow in March expressed concern about the tariff, Nefeterius McPherson, a spokeswoman for the trade representative, said in an e-mail.

The tariff runs counter to Russia’s G20 pledge to avoid protectionist measures and is contrary to a November 2006 bilateral agreement that Russia will maintain a 5 percent tariff on combines until it joins the World Trade Organization, McPherson said.

The ruble’s 31 percent decline against the dollar since July also has made foreign products more expensive. Russia’s Economy Ministry estimates that imports have tumbled more than 30 percent in the first quarter of this year.

Last month, Russia allocated 25 billion rubles ($746.7 million) to OAO Rosagroleasing, the nation’s largest farm- equipment leasing company, and 45 billion rubles to state-run Rosselkhozbank as part of a 3 trillion-ruble stimulus package.

Rosagroleasing spent the money on Russian-made equipment, including 5 billion rubles on OAO KamAZ trucks, Agriculture Minister Yelena Skrynnik told Putin during a meeting on April 17, according to a transcript on the government’s Web site.

Farm Equipment

Russia’s Union of Farm-Equipment Producers, known as Soyuzagromash, asked the government last week to extend the 15 percent import duty on combines to all farm equipment. The tariffs may boost domestic market share for farm machines to 60 percent, the union said.

“The government wants both to help the domestic producers and keep the state funds allocated to the agricultural sector inside Russia,” said Mikhail Pak, an analyst with IFC Metropol in Moscow.

Putin’s efforts may hurt U.S. companies’ operations in the rest of the world, said De Maria, of Sterne Agee.

“There is a worry that these measures could spread to China and other emerging-market countries,” De Maria said. That “would be a blow to the Deere brand and others, stifling their growth strategy as local companies build share.”

(from www.bloomberg.com)

“Best kept secret in Europe!”  That is the cornerstone behind the founding of MBS Ltd.  Our philosophy is that we can help companies navigate and mitigate the pitfalls and obstacles of doing business here, to take advantage of the many opportunities. This requires vision, and a LONG TERM perspective. For those individuals and companies that have that, the rewards will be great as Ukraine is a “virgin” market, untapped and ready to be reshaped.

We believe Ukraine will at some point, break free from current restraints and “leap frog” over many of its more developed neighbors like Poland. With MBS Ltd. and very soon BOZONGO.COM, investors and entrepreneurs will have the tools they need to realize their goals here.

Hard-Core Investors Staying Put Despite Endless Crises

KIEV, Ukraine — Weak competition, high profits still make nation a promised land for some businesses. No matter what Ukraine throws at them, a small, hard-core group of foreign investors – from giant multinational corporations to lone expatriates – weathers the turbulence.

A conveyor line at the Trostyanets chocolate factory in Sumy Oblast, the biggest Kraft Foods factory in Ukraine.

They stay through crisis and boom times, “blue” and “orange” politicians, a hryvnia worth 4.6 to the dollar and a national currency that trades closer to 10.

They stay put when other foreigners get scared away by headlines of rampant corruption, a sea of bureaucratic red tape and political chaos. Who are these determined businesspeople? Do they make a lot of money here? If so, how do they manage to swim in Ukraine’s muddy waters?

“Ukraine is the best kept secret in Europe,” insisted George Logush, vice president of Kraft Foods International and area director for Ukraine, Eastern Europe and Central Asia. “The European media did a wonderful job, focusing on negative things and rarely showing positive aspects. [To them, I say]: ‘Thank you for sheltering this market for us from the competitors.”

Kraft Foods Ukraine is part of Kraft Foods, the world’s second-largest food and beverage company. It is one of the most successful investors in Ukraine, known by Ukrainians for Korona and Milka chocolate, Jacobs coffee, Lux potato chips, holding a leading position in all three categories. In 14 years, Kraft invested more than $150 million into Ukraine’s economy and increased its business by 100 percent, Logush said, a feat that “would not be possible in very many countries.” Today, the Kraft group boasts annual revenue in Ukraine of about $400 million on domestically-produced products, and more on imports, such as coffee.

The company arrived in 1995, when the economy was still reeling from the collapse of the Soviet Union four years earlier. The hryvnia, the new national currency, had not yet arrived. In its place, until 1996, Ukrainians used the karbovanets, a coupon-like form of payments.

One of the keys to Kraft’s success, Logush said, has been the company’s ability to take advantage of hard times to introduce new product lines. “Now we launch biscuits,” Logush said. “Crisis is the time when you can shake up the established order, because it’s being shaken anyway.”

Yet Kraft remains one of a relatively small number of multinational corporations and foreign investors who have ventured into Ukraine, a vast and largely untapped market of 46 million citizens.

The nation has attracted a mere $35 billion in foreign investment since independence. By comparison, nearly $200 billion has poured into neighboring Poland, a European Union member with eight million fewer citizens than Ukraine, since the Soviet Union’s collapse.

Many investors have stayed out because of corruption, red tape and political squabbles between ex-Prime Minister Victor Yanukovych’s “blue” forces and the “orange” ones led by the now-dissolved alliance of President Victor Yushchenko and Prime Minister Yulia Tymoshenko.

Jorge Zukoski, president of the American Chamber of Commerce, said Kraft’s success is shared by many foreign investors brave enough to tiptoe into the market. They stay, Zukoski said, because they’re generating higher profits than they might in other nations. By establishing themselves first, companies such as Kraft grew fast, faced limited competition and can look forward to high growth rates ahead.

Zukoski said it helps to be in a place for the long run.

“At the end of the day, the large strategic and institutional investors that we represent see the current global financial crisis as a short-term blip on the radar screen. They look at Ukraine as a 50- to 75-year play and understand that there are very few countries left in the world that have the potential to drive future growth for their companies.” Despite the challenges and difficulties, chamber members keep striving for a Ukraine that is “competitive and well-positioned when global growth resumes,” Zukoski said.

But for some investors, the headaches of doing business in Ukraine are simply too much. And, while normal economic cycles are manageable, sometimes Ukraine’s off-the-charts corruption is not.

“The crisis did not affect our business in Ukraine as much as the corruption,” said Hanan Mor, owner of an investment company, in an interview with Israel’s Calcalist newspaper. “That is why we are stopping any business initiatives in this country.”

But the cheerleading and individual success stories cannot hide the fact that, by many measures, Ukraine’s business climate remains unfavorable. The list of grievances is long: unstable legislation, corruption, red tape, non-transparent taxation system, raider attacks, abuse of intellectual property and auctioneer rights.

Politicians are aware of the problems, even if they seem unwilling or unable to improve the situation. As parliamentarian Nataliya Korolevska told an investors’ conference in February: “As the world investment capital reaches $1.5 trillion, Ukraine has to do everything to participate in the process under competitive terms.”

Hard-core investors say instability is part of the game.

“I’ve been here for 15 years and this country has never been stable. I wouldn’t advise anybody to stay out of Ukraine, just because they want to wait for the next election,” said Glen Willard, a 15-year business veteran in Ukraine and founder of Willard, an advertising and public relations company.

Willard admitted that the worst part of doing business in Ukraine is its unpredictability. “Other than that, business is not easy anytime, anywhere,” Willard said: “So just get over it.”

Kraft’s Logush also said Ukraine is not for the squeamish.

“If you need to find an excuse to leave the country, you’ll find it,” Logush said. “Particularly, in terms of political instability, I think people are just extremely shortsighted and purposely blind. How long has democracy been in Ukraine?”

American businessman Paul Waters is one of hundreds of expatriates who have thrived on the Ukrainian market. Since arriving 17 years ago, Waters appears to have done a little bit of everything in Ukraine and he has no intention of leaving. From steel trading to the construction business, software and solar panel systems development, Waters said that “Ukraine has been very kind to me. I could be sitting on my boat in California fishing. But in Ukraine, I am enjoying everything. It’s not a Disneyland, it is real,” Waters said.

Waters did, however, confess that it took him awhile to get accepted. He also was cheated several times by Ukrainian partners.

“When I arrived, there were all these Soviet bosses, running businesses and, certainly, they were not as open to our ideas,” Waters said. Ukrainian companies still lack efficient administrators, but they have plenty of highly educated people, computer wizards and other professional standouts to choose from, according to Waters.

Seasoned foreign investors have had success in the financial, insurance and telecommunication sectors, as well as food production and construction, according to Konstantin Stepanov, chief analyst at Sokrat investment group.

The leading individual foreign direct investment in Ukraine’s all-important metal sector came from the $4.8 billion re-sale of the former Kryvorizhstal steel mill in Kryviy Rih, the nation’s largest steelmaker, to ArcelorMittal Steel in 2005. The sale followed a scandalous purchase by a group led by Ukrainian billionaires Rinat Akhmetov and Victor Pinchuk, who bought the steel mill for six times less than what ArcelorMittal, the world’s largest steel company, paid in an open auction.

So, 18 years after independence, Ukraine still represents a big gamble with big potential payoffs – and terrible downsides. It’s a high-risk, high-reward game, Logush admitted. But many are betting that emerging economies will get out of the crisis more quickly than developed ones.

“Which of them will [foreign investors] gamble on first? The ones with the greatest multiplier effect, the largest scales, like China and Brazil. But they always want to spread the risks,” Logush said. “I think those who’ll go into the Ukrainian economy will do very well.”

(from the Kyiv Post)

“We must be a non-aligned state. We have to learn to live independently,” he said at a meeting with citizens of the town of Hadiach in Poltava region on Tuesday.

According to the head of the parliament, the question of whether Ukraine should join NATO or not NATO could be a source of conflict in the country.

The position of the people must be taken into account, and most of them oppose Ukraine’s joining NATO, Lytvyn added.

At the same time, he noted that the question on Ukraine’s joining the North Atlantic alliance is not a primary issue now.

(from Interfax)

The World Bank has also revised their economic outlook for Ukraine…and it is not very positive.

“Ukraine’s faltering economy will plunge into a deep recession and shrink by 9 percent this year, far worse than previously expected, according to the World Bank”

After nearly a decade of robust growth, the economy is being hit hard by the deterioration of the global economy and the national government’s failure to implement anti-crisis measures, the Bank said in a statement.

Inflation will hit 16.4 percent this year, better than last year’s 22.3 percent but still very high.

In December, the Bank had forecast that Ukraine’s economy would shrink by 4 percent and projected inflation at 13.6 percent. The International Monetary Fund expects the economy to contract by at least 6 percent this year.

Those estimates contradict sharply with government expectations of 0.4 percent growth and 9.5 inflation this year, which many analysts dismiss as unrealistic.

Ukraine’s economic crisis is one of the worst in Europe. Industrial output slumped by 32 percent in January and February compared with a year ago, and output in the construction industry dropped by 57 percent during that period, according to the World Bank.

The national currency, the hryvna, has lost about 40 percent of its value to the dollar since the crisis hit last fall.

Furthermore, constant political turmoil has worsened the effect of the global crisis on Ukraine by stalling the implementation of key anti-crisis policies.

The IMF withheld the second tranche of an emergency $16.4 billion loan this year after the government failed to trim spending and adopt other stabilization measures.

(from AP)

The tension between Europe and Ukraine is increasing on another front. This article at www.unian.net seems to confirm some of the rumours swirling about; Ukraine is threatening to end the visa free regime that Europeans enjoyed over the last several years.  No word on how or if this will affect citizens of the United States or the U.K.

Several years ago, Ukraine broke with the cumbersome and expensive Soviet visa scheme still practiced in Russia. This has brought a small but measurable wave of investment, new business and tourism into Ukraine.

It has certainly made it easier for entrepreneurs to work and develop new businesses here. The continuation would certainly go a long way towards increasing further investment when the global economic crisis eases, and will facilitate an even greater transfer of wealth from West to East.

Many companies in Europe will relocate their manufacturing in the next decade. A positive atmosphere as evidenced by a visa free regime, would help with this process just as a streamlined visa process did in China during the 1990s. This does not take into account the agricultural sector which will see a flood of Euro investment when laws regarding the sale and leasing of land change.

As expats who look towards the future with optimism and hope for even more business and opportunities, let’s hope that this latest threat is merely a negotiation ploy designed to get the attention of bureaucrats in Brussels.

The Ukrainian government is certainly correct about the lack of reciprocity from the EU in terms of visa issues as well as immigration. The EU continues to treat Ukraine more as a threat than as an asset and until this mentality changes within the councils of Europe, Ukraine will have to swallow some pride, be tough and creative with regards to policy, and walk the “tightrope” between the EU and Ukraine’s powerful neighbor to the East.

Ukraine considers re-introducing visas for Europeans soon - official

Kiev, Apr 04, 2009 (BBC Monitoring via COMTEX) – 

Visa-free travels between Ukraine and Europe will be cancelled soon, maybe even before 7 May, the deputy head of the presidential secretariat, representative of the president [Viktor Yushchenko] in the Supreme Council [parliament], Ihor Popov, said in an interview with the Radio Liberty on Saturday [4 April].

“We will cancel visa-free regime with Europe soon and we will benefit from this. This will happen very soon, maybe even before the summit in Prague on 7 May 2009,” Popov said.

He said that “law-enforcement agencies complain that since Europeans come to Ukraine without visas, every three months police catch some kind of a ‘paedophile’ or a ‘maniac’”.

“Entering Ukraine, a foreigner shows a passport on the border, 10 seconds and off he goes. Later it appears that the man should not have been let in. As a result, he is put on the national wanted list since he entered without a visa and is not registered in the database,” Popov said.

Popov also said that this action can “push Europeans to cancellation of visas for us”.

Source: UNIAN news agency, Kiev, in Ukrainian 1843 gmt 4 Apr 09

There is a mad scramble for capital now. People are looking for loans from banks. The banks are looking for loans from governments. Governments are looking for loans from each other and eventually governments will have to get the money from their citizens…

Eastern Europe has been especially hard hit. It will interesting to see if nations in the European Union-who have the largest share of foreign investment in Eastern European emerging markets-will come to the rescue. With limited resources, and their own credit and banking problems, European nations are going to have a bit of trouble loaning to Eastern Europeans, especially when their own populations are also suffering.

If the situation in Eastern and Central Europe worsens however-and that is the expectation at this point-then Western Europe could be forced to help since the geo-political repercussions would be quite negative.

this from the Associated Press:

Ukraine seeks euro500 mln from EBRD

Ukrainian President Viktor Yushchenko on Wednesday met with the chief of the European Bank for Reconstruction and Development amid efforts to secure a euro500 million investment package to rescue this ex-Soviet republic`s devastated economy, AP reported.

The bank is considering investing the money into recapitalizing some Ukrainian banks, shaken by the global credit crunch and a confidence crisis. Three Ukrainian banks have been put in receivership and another one has been sold to a Russian institution after being taken over by the central bank.

The economy is struggling to stay afloat after the International Monetary Fund withheld a key second tranche of a $16.4 loan over a failure to meet loan obligations earlier this month, prompting Kiev to turn to G-7 members and Russia for aid.

The loan problems led the international rating agency Fitch to downgrade Ukraine`s ratings, while another agency, Standard and Poor`s, threatened a similar move.

The IMF said Ukraine had failed to cut government spending and reconsidering this year`s budget, as had been agreed on. Finance Minister Viktor Pynzenyk resigned last week in a row with Prime Minister Yulia Tymoshenko over the same concerns.

Yushchenko told EBRD President Thomas Mirow that a failure to receive the expected $12 bln in aid from the IMF this year could severely hurt the economy and that is why Ukraine was turning to the EBRD for help.

“The situation is complicated,” Yushchenko told Mirow, according to the Interfax news agency.

Industrial output slumped by a staggering 34.1 percent in January, year-over-year, in what officials said was the biggest fall in the country`s history.

The national currency, the hryvna, has lost 40 percent of its value since last fall, due to a drastic fall in exports.

The crisis, coupled with a higher gas bill from Russia has also led to gas shortages in the eastern city of Dnipropetrovsk and the southern Crimea peninsula. Officials said, however, that hot water and heating supplies had been restored in most households in those regions by Wednesday morning.

Technorati Tags: capital, loans, Europe, Ukraine, Russia, Anton Olff, MBS Ltd., Eastern Europe, Central Europe, Associated Press, President Viktor Yushchenko, European Bank for Reconstruction and Development, EBRD, Soviet Union, recapitalization, global credit crunch, International Monetary Fund, Kiev, G-7, Fitch, Standard & Poors, Yulia Tymoshenko, Viktor Pynzenyk, Thomas Mirow, industrial ouput, hryvna, exports, gas shortages, Dnipropetrovsk, Crimea

I don’t agree entirely with this article from russiaprofile.org, though I think the author does make some very valid points applicable to both Russia and Ukraine.

The current economic crisis has caused a great deal of hardship and uncertainly for which the respective governments of Russia and Ukraine seem ill equiped to deal with.  The real question will be how people cope? What will they do in the absence of effective actions by their governments?

Revolution is no stranger in Russian history, nor for Ukrainians. However, apathy is also ingrained to a fair degree in the culture as well. Without a fully developed political structure or the means to redress problems, it may only be a matter of how bad things get before apathy is replaced by outrage.

The same could also apply to Europe as the protests in orderly, peaceful Iceland indicate. Indeed the United States may not be immune to radical change if the political process fails to bring about relief.

The soaring rhetoric of newly elected President Obama is already at odds with some of his actions…as the words spoken by Ukrainian leaders during the Orange Revolution days were not matched by deeds.  Apathy may wither rather quickly and replaced with a fervor that will be difficult to supress.

Technorati Tags: apathy, Russia, Ukraine, MBS Ltd., Anton Olff, economic crisis, revolution, protest, culture, Europe, President Obama, Orange Revolution, Shaun Walker, russiaprofile.org, Russian industry, Magnet Mountain, Stephen Kotkin, Magnitogorsk, Soviet Union, monogorod, Urals, Uralasbest, Asbest, asbestos, Vladimir Putin, President Medvedev, Gary Kasparov, The Independent

Standard & Poors has joined Fitch in lowering Ukraine’s rating. The news here is not the new rating. The real story is that the continuing political stalemate in Kyiv. At some point the government will have to change course to respond to the crisis. Options are running out.

This from www.reuters.com:

S&P may cut Ukraine’s ratings on refinancing worries

Standard & Poor`s Ratings Services warned on Monday it could cut the foreign and local sovereign ratings of Ukraine in the next 90 days as it doubts the country`s ability to implement the IMF`s loan agreement, Reuters reported.

S&P said it could cut Ukraine`s B foreign currency rating and B-plus local currency rating by one or more notches. For a full text of the agency`s statement please double-click on [ID:nHKG238893].

“Ukraine`s political commitment to implementing the IMF loan`s conditions, including structural fiscal tightening and banking-system consolidation, is wavering against a backdrop of sharply contracting growth, weakened terms of trade, and approaching presidential elections,” the agency said in a statement.

S&P said it was awaiting the government`s clarification on the IMF programme before deciding on the rating and warned the economy faced refinancing risk because both the government and private sector suffered from a lack of funding sources.

“The near total closure of the external borrowing channel has contributed to a loss of confidence of domestic economic agents in the stability of the exchange rate and the banking system,” S&P said.

It said that as of end-January, Ukraine`s external reserves covered just over 100 percent of this year`s banking sector repayments leaving nothing for corporate obligations, estimated at $9.5 billion. The figure excludes trade financing.

Technorati Tags: www.reuters.com, Standard & Poors, Anton Olff, MBS Ltd., Fitch, Kyiv, Ukraine, IMF,

Whom do you think is more accurate in predicting the future: economists OR astrologists? If I were a betting man, I would go with the astrologists. OK…I know that sounds a bit crazy, but answer this question: have economists been any better about predicting the future?

At least we can laugh a bit when astrologists put on their pointy hats and pontificate. We assume…perhaps correctly so, that there is no real science behind their rants. Why trust economists? If we measured the predictions of many economists and astrologists, we would probably find them about equal in their forecasting abilities.

 At least the prognostications of astrologists can have a comforting effect, since we can realistically believe that stellar, solar and lunar movements control events to a great extent. Economists tend to fixate on their own version of stars as well as theories based upon arcane data that only they know how to decipher.

Shakespeare did point us in the right direction: the fault is not in the stars, but in our selves.

from www.unian.net

Crisis in Ukraine may last for five years – astrologists

Astrologist Olena Kalantarova forecasts that Ukraine will see a year of ordeal, and the crisis in the country will last for not less than five years.

O.Kalantarova disclosed her forecast to “Segodnya” daily (#26 dated February 10, 2009).

“The situation will stabilize more or less late in March-early in April. And May will bring a financial vortex. A critical situation will loom in October, when we may be drawn into an international conflict. A scandal, connected with the President of Ukraine, will happen in this period. Many riots will take place in 2009”, the astrologist unveiled.

Another astrologist, Ihor Syvak, also forecasts a peak of social protests in September and October.

According to Ihor Nikishyn, head of the Ukrainian Astrologic Institute, February and March will be the most critical period for the national currency – hryvnia. “Hryvnia’s value will begin to stabilize in April, but it will again fluctuate in August and early in October”, I.Nikishyn forecasted.

In his opinion, the national currency may finally stabilize by end of year.

“Since end of April, we may also expect for a growth of demand for steel, on which our economics depends. But the growth will take place very slowly”, the astrologist forecasted.

Although there may be gloating on the part of some Russians regarding the fate of their neighbors in Ukraine, this article from Russia Today (ww.russiatoday.com) does reflect the reality here.

As the Ukrainian government goes begging for loans around the World with the IMF holding  back on the next tranche of a promised loan, the hryvnia experiencing new lows daily, and workers being laid off throughout Ukraine, the “crisis” is certainly getting worse. The political stalemate is adding to the pain.

Workers suffer under deepening economic crisis in Ukraine

The economic crisis in Ukraine is escalating, and while the government is pointing fingers at each other, social unrest is growing as people lose their jobs or remain unpaid for months.

The crisis is most visible in the Ukrainian city of Kherson, where more than a thousand workers at a combine harvester factory have not received any wages since September.

“They were forcing us to retire. But I didn’t. Where else do we have to go? It’s the same thing everywhere,” said one disgruntled factory worker.

The average salary here is around $US 200, which is barely enough to make ends meet as prices in Ukraine are growing rapidly.

Aleksandra Tkachenko works at the factory and says that she lives in the fear that tomorrow she’ll have nothing left to be able to feed her family. Her entire family now lives off the pension of Aleksandra’s husband, which is less than $US 100 a month.

Recently, her husband suffered a brain hemorrhage and the strain is taking its toll.

“You can’t imagine what a life we life. I’ve spent half of the pension on medicine for my husband, but that won’t even last till the end of the month,” says Tkachenko.

The owners of the factory say they can’t pay the salaries because the combine harvesters are not being sold. The situation in Kherson is one of the first explosions of public rage in Ukraine over the current economic crisis. Experts claim work at almost all factories and mines in the country is either suspended or under threat.
 
By spring, unemployment is expected to grow by four times, topping almost four million people. The public outcry to the consequences of the economic crisis that is gripping Ukraine is getting louder, as more workers put down their tools to protest. 

Unemployment in Ukraine is soon expected to hit levels not seen since the fall of the Soviet Union. Public opinion indicates that what people want is for the government to stop the infighting and to give them the helping hand they desperately need. The crisis of trust among the country’s political elite isn’t helping the situation either.

The president and the opposition blame the government of Yulia Timoshenko for failing to tackle the crisis, or find the right ways to spend the billions of dollars loaned from the International Monetary fund.

Timoshenko says the government needs more money and fewer obstacles from both the parliament and the president. Her latest move – a request for more loans, including five billion dollars from Russia – has yet again provoked the wrath of the president.

“President Yushchenko says the step undertaken by the government without his knowledge is unacceptable and has obvious signs of corruption,” says Irina Vannikova from the Ukrainian Presidential Administration.

With the president and his government failing to agree upon ways out of the crisis, the country plunges ever deeper into a recession, leaving millions of people without work, and in the fear that they will soon have nothing to put on the table.

OK…it is one thing for Ukraine to send letters begging for money to the USA, the EU, even China…but Russia? What are they thinking in Kyiv? Sure…Russia will loan you the money. They may be running a bit short due to propping up rubles and oligarchs, but they will find some spare cash as they know they will gain considerably from any arrangement.

After all, they promised the Kyrgyz Republic some money too. However, the conditions-regardless of what is officially denied-is that a U.S. base be closed. Imagine what they will demand of Ukraine?

From www.ft.com:

Ukraine pushes for loans to meet shortfall

By Roman Olearchyk in Kiev

Ukraine has appealed for emergency loans from the world’s richest countries to help support its economy, which has been battered by the global financial crisis.

Yulia Tymoshenko, prime minister of Ukraine, said her government had sent letters to the US, Russia, China, Japan and the European Union asking for loans to fill a shortfall in budget revenues for this year.

 “We have already received a positive response from some countries, including Russia,” Ms Tymoshenko said at the Munich Security Conference at the weekend. “Russia is ready to sign such loan agreements.” She did not clarify how much Kiev was seeking to borrow but reports in Ukraine suggested Russia could lend $5bn (€3.9bn, £3.4bn).

Ms Tymoshenko said Ukraine was keen to harmonise relations with Moscow, soured after last month’s gas prices dispute. She insisted Kiev would stick to a western integration agenda that included efforts to join the European Union and Nato.

News that Ukraine was seeking emergency loans amid frozen credit markets comes days after a senior International Monetary Fund delegation warned of “serious problems” brewing in Ukraine’s economy.

The fund delegation ended its one-week visit to Kiev last week but provided no clear signal on whether it would grant further disbursements from a $16.5bn standby facility agreed last year.

Ukraine received a first tranche of $4.5bn last November. Future disbursements depend on the implementation of tough conditions and are needed to keep Ukraine’s currency, the hryvnia, stable. It lost nearly 40 per cent of its value in 2008.

The IMF’s concerns centre on Kiev’s 2009 budget, which has a 3 per cent deficit in spite of a fund stipulation it be deficit-free. It also seeks a freeze on social spending at a time when more than 1m out of a population of 46m have lost their jobs.

Ukraine’s gross domestic product is expected to contract by around 5 per cent this , thus curbing budget revenues, complicating the state’s ability to rescueshaky banks and to provide unemployment benefits.

Ukraine is struggling to tame annual inflation of more than 20 per cent and toadjust to a fourth stiff price rise on natural gas imports from Russia in as manyyears.

The US and other western nations are keen to stabilise Ukraine for geopolitical as well as economic purposes, given its important position in Eastern Europe as a neighbour of Russia.

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