To Nationalize or Not? #Ukraine’s Breakaway Donetsk and Lugansk Republics Face Lenin’s Dilemma
We are firmly in the 21st century, yet the newly formed Donetsk and Lugansk People’s Republics (together forming the Donbass region) once again face the old Lenin’s dilemma: to nationalize the Ukraine oligarchs’ assets, or not. The primary backers of the euro-maidan and the present junta in Kiev, possessing significant assets in Donetsk and Lugansk, include Renat Akhmetov, Igor Kolomoyskiy (the same guy who finances his own private army and who treats nearby Dnepropetrovsk as his fiefdom) and a few others. It appears the main wrath of the people is directed currently at Renat Akhmetov, who is a Donetsk native.
The dilemma, to nationalize or not, is the old one. Lenin agonized over the same after the 1917 Bolshevik Revolution and in the first years of the young Soviet Republic. After the referendum of May 11, 2014, during which 90%+ of the Donetsk and Lugansk citizens combined voted to form a broad autonomy with subsequent secession from Kiev, both young Republics started experiencing financial problems. Kiev turned off financial sources and threatened to stop paying pensions and salaries. Meanwhile, taxes were still being collected in Donetsk and Lugansk to be sent to Kiev.
Both Republics decreed to stop paying taxes to Kiev. All businesses on the territory of Donbass have been mandated to start paying taxes to the Republics. However, this proposition immediately met with the oligarchs’ resistance. This is understandable of course – not only the oligarchs in question were the supporters of the Kiev maidan, but any oligarch paying taxes to Donetsk and Lugansk instead of Kiev, would be labeled a traitor and separatist and his assets in other regions of Ukraine, as well as any assets in the US and EU (and all oligarchs have lots of those), would be under threat of confiscation.
This is a classic stalemate, or as Lenin branded it: “the situation when the lower classes cannot and the upper classes will not.” In other words, the upper classes won’t listen to the lower classes, refusing to meet their demands. This, according to Lenin, is how revolutions happen. And we all know what happens after any revolution: redistribution of wealth and expropriation of capital.
Note: the goal of this piece is to examine the mechanics of how and why nationalizations happen. It is well-known that the 1917 Revolution “was helped” greatly by the British, and in smaller degree, by Germans (who actually were also played by the Brits). The truth is even uglier than many imagine as both sides of the Russian 1918 Civil War were played against each other by the same forces from abroad. This topic deserves a separate discussion. However, this particular article is not about the merits of the Bolshevik Revolution, and not so much about the dirty underbelly of the West’s clandestine actions; it is about what the next actions of the newly formed Republics should be in order to avoid the mistakes of the past.
As financial consultant and analyst, I will admit that it is a difficult dilemma. Albeit on a substantially smaller scale, this situation may be almost as difficult to resolve as was the situation in Russia circa 1917-1924. Lenin, and later Stalin, pulled it off, but at a huge cost. I’ll say right away that compared to the horrific humanitarian disaster that the 1917 Bolshevik Revolution and subsequent civil war was for Russia (I write about it in my spy thriller novel Gold Train), this will not be nearly as devastating. Hunger cannot be expected. Plus, there is one tremendous advantage: back then, Russia couldn’t rely on anyone for help but itself. Today, Donetsk and Lugansk can rely on… Russia. By that I don’t mean Russia sending troops of course. I stated many times that Russia simply won’t do it. However, just having Russia by their side will help tremendously.
Russia and Putin have signaled that they are working with the EU to negotiate cessation of hostilities, broad federalization, and more favorable terms for the Donetsk and Lugansk Republics, including that Kiev continues paying salaries and pensions until further arrangements can be made; so that water, electricity and other necessities are still on; that Kiev doesn’t cut off the gas supply to homes – same gas provided by Russia, for which Kiev conveniently forgets to pay.
Let’s remember that Kiev is still in control of all vital switches for the territory it used to control. As an example, here is what Kiev has done by way of blackmailing Russia into continuing to provide Ukraine with free gas. As we know, Kiev hasn’t settled its gas bill since the beginning of 2014. So, to blackmail Russia, Kiev blockaded the flow of water to the entire Crimean Peninsula by shutting off the North Crimean Canal, which originates in Ukraine. This canal, built by Russians during Soviet industrialization, feeds the Crimean robust agriculture and provides potable water for the Crimean population. The crops may suffer tremendously as a result, not to mention ordinary citizens.
I don’t think in the end Kiev will gain much by doing so, other than convincing Russia once again that it cannot be trusted. But Kiev’s short-sighted goal is to do everything to sabotage all those who disagree with them. Long-term goals apparently are not considered. This is a typical behavior of foreign agents and stooges. Those, who are presently pretending to be Ukraine’s leadership don’t even act as politicians. Politicians, however sleazy, are still concerned about their legacy. These are only concerned with fulfilling orders of their masters on both sides of the Atlantic, and in getting paid for doing so.
Prediction: As a result of Kiev’s actions, Russia will further expedite its disengagement from everything to do with Ukraine. See my upcoming articles for more on this.
So, what should Lugansk and Donetsk do in this particular situation?
The workers of large companies in Donetsk and Lugansk belonging to oligarchs were told not to dare join the protesters on the streets, otherwise they would be fired. People are keeping their heads down as some have already been fired to illustrate the point. Since most people live from paycheck to paycheck, they can’t afford to join the protests against oligarchs.
Meanwhile, the new Lugansk and Donetsk Republics are desperate for money. One way or the other they must resolve their problems with budget financing. They can’t issue bonds, or get international loans, as so far they are not recognized. Therefore, it has been announced that those businesses that fail to pay taxes to the Republics, will be nationalized.
However, the local governments are reluctant to go this route. Why? Because these people still remember certain Soviet experiences and they may not be willing to repeat the old mistakes. Nationalization means that the state has to manage and supervise industry, which requires a huge bureaucratic apparatus. This is a vicious cycle.
It takes time to organize such apparatus. While it’s being organized and before it starts bearing fruit, how will they pay these people? How do they quickly find sufficient number of well-qualified and loyal specialists, to both manage companies and to supervise them? At this time, there are no structures in existence that would allow to organize all this huge apparatus quickly. In fact, it is all but impossible when Donbass is still in the state of hot war with Kiev and when so many other pressing issues require attention all at once. The talent they can draw on is also limited as we are talking 7million population.
Besides, nationalization will mean immediate financial and industrial sabotage and blockade on the side of Kiev, US and EU. It will certainly mean the escalation of war with Kiev as oligarchs will want to return what they consider theirs. Perhaps, USA would love this scenario as the perma-conflict in Ukraine is one of their goals. Please note, whenever I say USA, I certainly don’t mean American people – I mean the US government. Certainly, there is a certain percentage of crazy maniacs among the US population, who want wars and confrontation. But the majority of the American people are sick and tired of their government’s actions around the world and all they want is for the US to stop interfering in other countries’ affairs.
In the case of Ukraine, it was a direct interference in order to subvert Ukraine and hurt Russia. This was first directly admitted by Victoria #Nuland in December 2013, when she announced proudly to the Press Club that US State Department spent $5bln to subvert #Ukraine. Recently, Nuland gave testimony to Congress, in which she reported of the NEW hundreds of millions of dollars spent on Ukraine since the beginning of 2014. Rest assured that many of these millions went to pay off #Yatsenyuk, #Tuchinov, #Klitchko, #Liashko and other stooges installed by the US in Kiev, as well as all those who have been burning alive and shooting people in Odessa and Donbass. During Nuland’s testimony, US Congressmen lamented that they would never get their money back – and THIS was their only concern!
Also note: these are only the sums spent OFFICIALLY by the State Dept alone. We will never know how much the CIA and MI6 spent on Ukraine; we’ll never know how much US/UK/Poland/EU funneled into Kiev’s anti-Russian NGOs, western Ukraine nazi training camps, and Ukraine’s “free and democratic” media.
So, nationalization is a sticky issue for Donbass. This was once done by Lenin. As a result of the 1917 Revolution, the young Soviet Republic was at a crossroads. Industrial sabotage and empty coffers, coupled with raging civil war, left very few choices. Terrorism and sabotage of the Russian industry by the Whites were followed in return by the “red Bolshevik terror” against saboteurs and terrorists, who did everything to strangle the young Soviet Republic in the period between 1918 and 1924. Lenin had no choice by nationalize the Russian industry. This was accompanied by a lot of mistakes and devastating bouts of hunger that swept the country.
Not a pretty picture. But let’s put the whole thing in perspective. At the same time that Russia experienced the Bolshevik Revolution, civil war, sabotage and famine, we have to remember that the rest of the world fared no better. There was hyperinflation in post-war Germany with subsequent financial disaster and hunger, resulting in Hitler’s rise to power. This in turn resulted in World War II, when the entire Europe was destroyed and 100 million people lost (from the intelligence perspective, some of this is discussed in Gold Train). British Empire was quickly disintegrating, but its worst times would come later. As a result of World War I the Western world was swept by the deadly flu epidemic with millions dead in countries like USA, UK, Italy and others. Fascist Mussolini came to power in Italy; later fascist Franko came to power in Spain with resulting Spanish civil war and humanitarian catastrophe, which nearly plunged the country back into Dark Ages. USA entered the Great Depression in the end of the 1920s, resulting in wide-spread suffering and hunger. The Great Depression would last until WWII, and only the global war would save the US.
During and after World War II, the dumb chance of the US geography, separating it by an ocean from the horrors of the Great War, would allow it to claim the status of the last man standing of the capitalist world, with subsequent assignment of the god-like status to everything American. But let’s just say times have changed and geographical separation doesn’t mean as much in today’s world. The world works in cycles and what was an advantage in the 20th century, may become a major handicap in the 21st.
I also want to note two very important things.
One: notice that in a crisis of global proportions USA and UK have delayed reactions. The fact that today USA is still fairing relatively well, so far managing to postpone its collapse, is a typical delayed reaction. (Read more about my USA, Russia and world predictions). In addition to my general Predictions Page, I also plan special reports about the future of the USA, Russia and more, as part of the upcoming subscription option on my site. Stay tuned for that!
Two: could many of the 20th century disasters, including both World Wars, fascism in power, and the Russian revolution, have been averted or softened? Absolutely! They would have been averted IF British Empire and USA, as its biggest ally, didn’t do everything to create and escalate them. There is a lot of material about how and why the UK and US created, and continue to create, wars and crises. If you are new to this blog and this topic, I recommend you read my other articles, as well as search for relevant analysis elsewhere on the web.
So, Lenin and the Bolsheviks had to resort to very tough, often violent, measures; they had to nationalize the entire Russian industry and they had to expropriate agricultural produce in order for the country to survive, at the same time facing fierce resistance from just about everyone: the West, upper and middle classes, the Whites, the army, and of course the owners. The violence resulting from such actions was unspeakable. Again, putting all this in perspective: Britain, as well as various other Western interests, did absolutely everything to create, and escalate, the impossible situation in Russia. The ultimate goal was Russia’s destruction as the sole rival the global Anglo-Saxon interests always dreaded.
Here is how the nationalization was done in the extreme conditions of the Russian civil war and sabotage. Once the armed Red Guards (Krasnogvardeitsi) arrived to a factory to take it over, the proper peaceful production cycle had to be restored. While workers were pretty much on the side of the Bolsheviks, the need arose to make sure management did what was necessary. Therefore, every factory and company was appointed a “commissar,” who would usually be a hardened in combat communist but who would know nothing about management, yet would supervise the management. This supervision would sometimes be done in a heavy-handed manner, thus creating an atmosphere of “perceived oppression.” It wasn’t always the case, and in many instances someone from the local workers could be found for the position of the commissar. However, a simple worker or a soldier supervising the management was bound to create tension and resentment.
Lenin and Stalin really had no choice at the time as most management simply could not be trusted. After the new generation of Soviet managers had been groomed, the institution of the Commissars was abolished. However, for a number of years the entire population of the huge country had to go hungry before the situation in the country stabilized sufficiently.
Are the people of Donetsk and Lugansk ready for confrontation at their workspace? Are they ready to go hungry? To have no means of supporting their families until the situation stabilizes? Are they ready for the prolonged blockade and sabotage? I don’t think so. We know these people wanted to secede to live better – not worse.
Conclusion: the 1917-style revolution and 1918-1924 civil war, terror and nationalization are not the best solution. This situation needs to be handled gently and carefully. The world has changed and in the 21st century it is possible to avoid confrontation.
The best solution for Donetsk and Lugansk is to organize workers and to make them true owners of factories, mines and companies of those oligarchs who have betrayed their interests. This way, the workers will feel included and will be more willing to participate in the management of their companies. Sure, the workers are afraid to lose their jobs, and therefore are reluctant to act. This scenario will take longer and it is a more complex process – but it’s worth it.
Because Russia is quietly helping the new Republics by negotiating with the EU, there will be no extreme situation that Lenin and the Bolsheviks faced in 1917-1924. However, the parallels are striking. The events of the 20th century are a stark warning and lesson to the present and future generations. They are not only a warning for Ukraine, but also for those who keep trying to manipulate the world into devastating wars.
It is easy to destroy – it is much harder to preserve and rebuild. By preserving what is worth preserving, a lot of future headaches and problems can be prevented. Let’s always remember: what goes around, comes around.
To understand Lada’s message deeper, read her books! Below are Lada Ray’s books about Russia (sold on all international Amazon and Barnes&Noble sites). Click on covers for Amazon, or see Books for more.
Posted on May 24, 2014, in Books, Economy & Investment, Ukraine and tagged 1917 Bolshevik Revolution, Books by Lada Ray, Donetsk Republic, Gold Train (Accidental Spy Russia Adventure), Klitchko, Lenin, Liashko, Lugansk Republic, nationalization of oligarchs assets, Nuland scandal, Oligarch Kolomoyskiy, Oligarch Renat Akhmetov, predictions by Lada Ray, Russia, Russian Civil War, The Earth Shifter, Turchinov, UK, Ukraine, Ukraine oligarchs, USA aims in Ukraine, Yatsenyuk. Bookmark the permalink. 9 Comments.