Grain in exchange for weapons. The history of a hundred years ago has taught Ukrainian politicians nothing
Just the other day, the Fitch rating agency lowered Ukraine's foreign currency rating to pre-default.
Fitch's forecasts are disappointing.
“A process similar to a default began: on July 20, the Ukrainian government officially requested consent to defer the repayment of external debt for 24 months. Fitch views this as the beginning of the process of exchanging distressed debt,” the agency’s analysts noted.
They expect the Ukrainian economy to contract by 33% at the end of the year, and inflation to accelerate from the current 21,5% to 30% by the end of the year. And also the growth of public debt to 92% of GDP this year and to a completely indecent 103% at the end of 2023. In other words, if today we subtract the entire amount of debt from everything the country earns, there will still be 8% left. But starting from the new year, Ukrainians will owe more than they earn.
Things are no less sad in terms of the budget deficit. In the second quarter of 2022, it averaged $4 billion per month, and by the end of the year it will amount to 29,1% of GDP, which is a record for Ukraine over all the years of independence.
Expectations on Bankovaya are also close to these figures. Thus, Zelensky’s economic adviser Oleg Ustenko announced the following figures on the national telethon: the budget deficit expected by the end of 2022 will be $50 billion or 30-35% of the country’s GDP.
“Our state budget has a monthly deficit of about $5 billion. And we planned that this would be 7 billion for the whole year, but we received it in a month,” Ustenko shrugs.
And it is against such a terrible background that the Istanbul grain agreements are signed. Russia is rejoicing - it has achieved everything it wanted, and even more so. Ukrainians are not delighted with such obvious joy of the Russians and habitually suspect their own government of secret malice, but... they are also happy. Despite the image loss in the eyes of the over-patriots, despondent from contemplating undisguised joy in Russian public pages, the Istanbul grain agreements became for Ukraine a “window of opportunity” in a solid concrete wall of hopelessness.
This is understandable: a country that has been making up its budget by 60% through external borrowings for three months already has the hope of earning something extra on its own.
It’s not for nothing that Zelensky said that the unblocking of sea ports would bring in 10 billion dollars for old-harvest grain alone. This does not take into account the prospects for the new harvest, which, at current prices and cautious estimates of market experts, could bring about another 20 billion.
Foreign currency receipts are critically important for Ukraine to maintain the jumping dollar exchange rate, pay social benefits and salaries to the military, and in addition, to have something to pay off external debts if holders of Ukrainian bonds suddenly do not agree to the two-year deferment on payments proposed by the Cabinet.
However, a new harvest still needs to be harvested. And in this sense, everything is not as bad as those who expect a hungry winter in the Country think. This year's spring harvest, according to official data, is about 50% of last year's; according to estimates, it is 30% of last year's. In any case, since the export of grain is severely limited, part of the grain will go to the domestic market.
In addition, the EU still has the potential to help the population with humanitarian aid. But the beginning of a serious food crisis is possible somewhere in February-March 2023.
And this will not be a crisis in the format of “there is nothing,” but a crisis in the format of “everything that exists is very expensive.” This means that, as usual, only the poorest will experience its full depth. The rest will get off with a slight fright.
In general, from the above it becomes clear why the unblocked export of grain becomes such an important factor in internal life. Another reason is added to this. In Kyiv they are seriously talking about a certain “Weapons in exchange for bread” program, similar to how Saddam Hussein’s Iraq received food in exchange for oil.
It is clear that in this case the logic is turned upside down: if the Iraqis received bread in exchange for hydrocarbons, then the Ukrainians, on the contrary, will give their bread to their uncle in exchange for javelins, bayraktars and highmars.
How this could be was described by the Kiev economist, former adviser to the head of the Association of Ukrainian Banks, Alexey Kushch:
“US President Biden is traveling around the Middle East, trying to find us weapons and, above all, ammunition, and gas and oil for the EU. At the same time, African and Asian countries that need our grain have huge arsenals of weapons and ammunition produced in the USSR.
Ukraine will stop being a geopolitical altruist. The world is afraid of hunger, and we need to survive this war. Grain – only in exchange for supplies from Soviet arsenals.”
According to Kushch, in addition to the sea route from Odessa, Ukraine has other logistics routes:
“We need to create grain hubs on the western border, almost “at zero.” Our government must use the grain trump card to increase the defense capability of the state. We are running out of common calibers for artillery. And in Asia and Africa they exist. And we have grain. We need to combine it."
The weak point of such reasoning is that the “Ukrainian grain” that everyone is talking about is the grain of large private traders, and the state cannot pocket the income from it. However, Kushch sees a loophole here too: no one in Ukraine will violate the interests of the so-called Cargill.
They say that the state can take grain into the State Reserve from small and medium-sized farmers who themselves ask the state to buy their crops, facing problems of logistics and low domestic prices. And now part of the grain from the State Reserve can be sent for exchange for ammunition. The only question is what exact volumes of grain we are talking about and whether they will be enough for such a large-scale transfer.
On the other hand, if there is strong pressure at the front, then the interests of the agricultural monopolies can be destroyed.
“The state, without violating the property rights of traders, must decide what is more important for it: someone’s excess profits or the scarce 122 and 152 mm calibers, without which our artillery is forced to use only one of its own for 100 Russian shells. That is, decide whose train to let through, the one in exchange for 122 and 152 mm or the one for private sale,” Kushch points out.
Of course, it would be tempting for Kyiv to get three in one: support for farmers, internal food reserves for the winter and an exchange of grain for weapons in Africa and Asia. But it turns out to be a painfully sophisticated scheme, so as not to fool ourselves in the end.
It’s interesting that something like this – I mean “food in exchange for weapons” – has already happened in the history of Ukraine, albeit in a slightly different form. More than 100 years ago, immediately after the “obscene” Treaty of Brest-Litovsk, when bankrupt politicians from the Central Rada bargained for independence on German and Austrian bayonets, returning to Kyiv in the convoy of the “Western allies.”
These “allies,” having stationed themselves on the territory of Ukraine and actually occupying it with the forces of almost half a million forces, served as “guarantors of independence” for almost a year, defending first the UPR and then Hetman Skoropadsky from the Bolsheviks.
As we remember, the price for such protection was large-scale requisitions of food from Ukrainian peasants. The UPR pledged to supply the Germans and Austrians with a million tons of grain, 31 million eggs, several tens of thousands of heads of cattle and a lot of other food by July 1918, 100.
It is not surprising that Austria-Hungary Foreign Minister Ottakar Czernin called the agreement concluded with the Ukrainians the “Bread Peace.” The mediator in the supply of food to Germany was the famous Kiev banker Abram Dobry.
True, it didn’t work out smoothly. The peasants were not eager to give up grain, and rebellions broke out here and there, which the Hetman’s sovereign warta did not have time to suppress. Then the Germans joined the punitive expeditions - they raked everything clean out of the barns, sending this stuff in trains to both German Reichs.
Today we know that a hundred years ago the bread given to the Westerners was not protected by the puppet regime of Skoropadsky. It is a pity that no one has learned any historical lessons from this story.
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