Motyl: What Russia Can Expect in Ukraine’s Rust Belt

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In their search to maintain control, Russians would quickly discover that they are in possession of economically unviable provinces that cannot survive without massive infusions of rubles. According to a detailed Ukrainian study of how much Ukraine’s provinces paid into and received from the central budget in the first half of 2013, Crimea, Donetsk, Kherson, Luhansk, Mykolaiv, and Zaporizhzhya represented an enormous drain on Kyiv’s resources: 22.82 billion hryvnia (around $2.5 billion, or 90 billion rubles). And that is only for the first six months of the year. Multiplied by two, the deficit amounts to 45.64 billion hryvnia (about $5 billion, or 180 billion rubles).

In 2014, Russia expects its budget revenues to be around 13.6 trillion rubles (around $375 billion); its expenditures are supposed to total 14 trillion rubles ($380 billion). That amounts to a deficit of 400 billion rubles ($11 billion). Even without extra development funds or the costs of an occupation, annexing Ukraine’s southeast will raise Russia’s deficit by 45 percent.

The bad news gets worse for Russia. Luhansk and Donetsk provinces are home to Ukraine’s loss-making coal industry. Kyiv spends between 12 and 14 billion hryvnia(around $1 billion–$1.5 billion, or 47 billion–55 billion rubles) annually to support these mines. Will Russia back these enterprises even as they compete with more economically produced coal from Russia’s Kuzbass? It will have to: As Kyiv knows from experience, firing thousands of coal miners could spark massive civil unrest. Moscow will also have to pay them their wages on time. In 2013, wage arrears reached a total of 135 million hryvnia (about $15 million, or 530 million rubles) in Donetsk and Luhansk.

Dr. Alexander Motyl is a professor of political science at Rutgers-Newark. A specialist on Ukraine, Russia, and the USSR

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5 thoughts on “Motyl: What Russia Can Expect in Ukraine’s Rust Belt”

  1. I think Putin will find employment for coal miners a new jobs. One of the Putin’s goals is defense/military/nuclear factories that located in Eastern Ukraine which he might want to expend and will need more work force.
    For example, Ukrainian Yuzhmash Missile Factory factory that was
    producing intercontinental ballistic missiles during Soviet Union. It is
    located in Dnepropetrovsk. Next to Dnipropetrovsk region located the largest nuclear power plant in Europe
    Zaporizhzhia Nuclear
    Power Plant, Eastern Ukraine. It has all capacity for in-reaching uranium for
    military proposes. Ukrainian production of uranium is in the Dnipropetrovsk
    Oblast as well.
    The Malyshev Factory located Kharkiv Eastern Ukraine is a
    state-owned manufacturer of heavy equipment in Kharkiv, Eastern Ukraine.
    is best known for its production of
    Soviet tanks, and now the T-84.
    There are more than 20 plants in Eastern Ukraine, plus pipeline and ports.

    1. Fair points. It’s undetermined if they would or could push as far west as Dnipropetrovsk, or as south as Zaporizhia. Motyl mostly focused on the ‘rust belt’ that is the Donbas (which of course does include the Malyshev factory)

      The economic report he and others cite does indicate that Kharkiv on its own is self sufficient, it’s the Donetsk and Luhansk regions that are moribund – and these would also be the first regions annexed in such a scenario.

  2. I am sure all the detailed dysfunctions of East Ukraine are quite accurate. YET, what makes anyone think Putin is unaware of this? The budget deficit is LOW as % GDP, most RF is equally challenged in any industrial employment. Sadly, East Ukraine is a natural fit for RF. Its workers can’t upgrade, & absent some catalyst, neither will their kids! Attacking Ukraine accomplishes for Putin what wars did for Napoleon… maintains his popularity in the face of a stagnant nation.
    Ukrainian nation shows some spirit, even entrepreneurs (besides the crooks, linked to Putin’s global crime families). This gives Ukraine a great potential. It may never overcome the corruption, but it is more likely than RF to do so!

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