From Volume 8, Issue 14 of EIR Online, Published Apr. 7, 2009
Russia and the CIS News Digest

Russian Observer: London Summit Will Flop Like the One in 1933

March 31 (EIRNS)—Melor Sturua, longtime columnist for the newspaper Izvestia in the Soviet era, and still today, has contributed a burst of insight into the pending abysmal failure of the April 2 Group of 20 summit in London. Writing in the financial supplement Finansovyye Izvestia of March 31, Sturua observed: "It's worth starting with a bit of symbolism. London in 2009 is not the best place to hold an economic summit. The last time it hosted such a summit was in 1933. A crisis was raging in the world then, as well. And another Labour PM, Ramsay MacDonald, occupied 10 Downing Street, while the new, Democratic President Franklin Roosevelt had just moved into the White House. That summit ended in failure. Roosevelt, who did not come to London, blew it up by 'remote detonation,' with his 'bombshell' message."

It took a senior figure like Sturua (born 1928), to point out the 1933 precedent, which has otherwise been highlighted recently by leaders of the LaRouche movement in their March 16 call to remove the British Foreign Office's Lord Mark Malloch-Brown from the G20 summit proceedings. "In 1933," the statement noted, "Franklin Delano Roosevelt, who was fighting the disasters of a depression provoked by what he correctly perceived as British-style finance capital, boycotted the world conference in London, where the City's financiers were counting on U.S. dollars to bail out their banks. Leaders of the G20, determined to proceed with a real reform of the system, would be well advised to either 'go fishing,' as FDR did, or preferably to organize another summit where a real reform can be worked out."

Sturua also drew a contrast between this week's event, and the 1944 Bretton Woods conference. While Roosevelt, as well as Churchill, went to Bretton Woods "to the accompaniment of the victorious volleys of the Second World War," he wrote, "today's duet of Obama and Brown ... is discussing to the accompaniment of popping bubbles: banks going bankrupt on Wall Street and in the City, not to mention other world financial centers. This situation of necessity must be the main subject of the London summit." Sturua commented that neither those emphasizing "stimulus" nor those who want to stress "regulation" have put forward an effective agenda.

'Fire-Rider' Kudrin Forecasts Next Disaster His Policies Will Cause

March 31 (EIRNS)—"Der so oft den roten Hahn

Meilenweit von fern gerochen,

Mit des heilgen Kreuzes Span

Freventlich die Glut besprochen—


["You who so often smelled the red flames

From a mile away,

And with a fragment of the holy cross

Maliciously conjured the blaze—


Eduard Moerike's ballad about the mysterious "fire-rider" ("Der Feuerreiter") of folklore, who rides furiously to raise the alarm about a fire which he himself fans, was set to music by Hugo Wolf in 1888. Today it describes the behavior of Alexei Kudrin, the Russian Minister of Finance.

Even as Kudrin met today with CIS finance ministers, in advance of the London G20 summit which he will attend with President Dmitri Medvedev, Russian media were abuzz with Kudrin's warning that a "second wave" of the financial crisis is about to hit. Speaking last week at an expanded Presidium session of the Ministry of Economics, Kudrin told his fellow Russian government officials that "in the near future, there will be a new correction and a new drop in the stock markets; we can expect a deeper world recession." In Russia, "We are now expecting a second wave of problems in the financial system. We need to state the diagnosis bluntly: This will be a wave touched off by the real sector's failure to repay credits." In some industries, he noted, arrears are reaching six months to a year. The reason, said Kudrin, is that some companies believed there would be renewed demand, but that hasn't happened.

But the main pressure on Russian borrowers, making it impossible for them to repay bank loans, comes from the policies of Kudrin himself, at the Finance Ministry, and the equally monetarist Russian Central Bank under Sergei Ignatyev. Sticking to neo-liberal dogma that "fighting inflation" is priority number one, they have kept interest rates high, even as they pumped bailout money into the stock market and some banks. The daily Komsomolskaya Pravda, in a March 30 article, quoted Yelena Panina, deputy chairman of the State Duma Committee on Industry, about the results. "Banks are currently giving very short-term credits at 27-28%," she said. "And they are imposing unbelievable additional conditions regarding collateral. What's the result? The factories simply cannot repay the money. No real sector could hold up under such interest rates. How is anybody supposed to achieve that kind of profitability?"

Ukrainian Economy Contracted by 30% This Year

April 1 (EIRNS)—Ukrainian President Viktor Yushchenko had to announce yesterday that the nation's industrial and other economic output had collapsed by a full 30%, just in the first two months of 2009. In his state of the nation speech to the Rada, the parliament, Yushchenko said that export markets have vanished, wiping out industrial jobs and drying up foreign exchange.

Ukraine was "ill-prepared to confront the crisis, and its first blow was painful and difficult," Yushchenko told the Rada. The consequence of this was "a destructive fall of 25%-30% [in economic output—ed.], according to figures from January-February 2009. Before the crisis, growth rates in the Ukrainian economy stood at 6.5%-7%. We have lost our foreign markets and 60% of Ukrainian exports. All our foreign currency earnings depended on these markets, as did the jobs of nearly 2 million people in steel, chemicals, and related sectors."

Today, 401 of the 450 members of the Rada voted to hold the upcoming presidential elections on the traditional date, the last Sunday in October, rather than in January 2010, which would be the full five years after Yushchenko took power in 2005 after the Orange revolution ousted the then-first declared election winner, Viktor Yanukovych.

Yushchenko immediately called the Rada vote "unlawful, unconstitutional, and political," Itar-Tass reported. He would have to go to the Constitutional Court to change the decision, since the Parliament has the constitutional right to set election dates.

The parliament is holding up legislation being demanded for compliance with IMF diktats for the release of each small tranche of a $16.4 billion IMF loan. They have enacted some new taxes, but are refusing to even consider laws to balance the state pension fund and the financial status of Naftogaz, the state energy enterprise. Prime Minister Yulia Tymoshenko told the press today that if the measures are not enacted—for which she blamed allies of Yushchenko—Ukraine could not even be sure that the IMF mission will return to Ukraine.

Medvedev Expresses Optimism After Meeting with Obama

April 1 (EIRNS)—Presidents Barack Obama and Dmitri Medvedev spoke with reporters after their meeting today. Obama noted that the U.S.-Russia relationship had been allowed to "drift" in recent years and that he was committed to reestablishing a good working relationship with Russia. "My hope is, that, given the constructive conversations that we've had today, the joint statements that we will be issuing both on reductions of nuclear arsenals, as well as a range of other areas of interest, that what we're seeing today is the beginning of new progress in the U.S.-Russian relations," Obama said. "And I think that President Medvedev's leadership is—has been critical in allowing that progress to take place."

Medvedev was upbeat about the meeting with the American President. "After this meeting, I am far more optimistic about the successful development of our relations," he said. "It is important to note that there are many points on which we can work. And indeed there are far more points in which we can—where we can come closer, where we can work, rather than those points on which we have differences. Thus, by bringing our positions closer we can attain significant progress and, much more importantly, further our achievements."

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