Bullish on Ukraine

Kyiv, Ukraine. May 28, 2014, 8:15 PM

Do you want to know what I think? Or do you want to know the truth?

Well, I can't tell you the truth about what is going to happen here, As the Polish guy told me in Lviv, noone knows what's going to happen. But I can tell you what I think.

I had lunch with my son just before I left for Ukraine.  Watching developments closely, I planned to pull the plug on this trip, if I thought, as some of my friends thought, it wasn't such a good idea given the state of affairs with Russia.  I really wanted to come here and felt Western Ukraine would be OK.  And at our lunch I told my son "I think Putin just blinked".  So I'm going.

And just now, I read Thomas Friedman's column in the NY Times where he announced that he is the first one to say that Putin blinked.  Well, as you now know, he isn't. I said that three weeks ago.

The reason I made that pronouncement is that Putin had just announced that he was pulling his troops back from the border with Ukraine.  Of course he didn't do it.  But the fact that he felt it was in his interests to portray himself that way meant that he could be feeling the pressure and was not going go further with actions that would be even more disastrous for Russia.

He's done enough damage already to his country.  Short term he gets away with it. Playing the external enemy card always helps a leader by diverting the public from the real problems and improves his popularity.  But, in the long run, the country pays the price and the public wakes up.  Remember George Bush?  And walking around Maidan Square, I can see how the uprising here could be terrifying to him.  He could be next. I'm certainly not predicting that, but he could well be vulnerable in the long run.

The Russian economy is based on commodities, principally oil and gas. Countries that are so "blessed" (read cursed) tend to feel they don't have to develop their "people resources".  The elites running the country make fabulous fortunes while the people, who àre unnecessary for the elites to make fortunes, do not prosper,

In acquiring Crimea, Putin added to Russia's strength.  Crimea has vast offshore oil and gas reserves. But, it did nothing for Russia's weakness: its failure to develop its economy beyond natural resources. And Russia paid and will continue to pay an increasingly heavy price.

By losing Crimea the rest of Ukraine may have been strengthened in that it will avoid the lure of using the development of those resources as a substitute for developing its "people resources". Rest assured that I'm not saying that the loss of Crimea was desirable or should be acceptable to Ukraine, or that it's a good thing. It most certainly is not.

And as inflation has hit Crimea and life under the new ownership doesn't turn out so well, perhaps Putin's efforts to market a return of other Soviet countries to Russia's sphere won't go so well. And the high cost of absorbing Crimea and dealing with its problems will not be very appealing to the other Russian oligarchs or the Russian people who vote so favorably for Putin in the polls these days, as the Russian economy declines and people find they have to pay a price for this adventure, just as Americans did for Bush's.

Ukraine, "the breadbasket of Europe" has the most valuable natural resource of all: Agriculture.  And the most important resource of all, its people, have a high rate of literacy (97% or so) and education. Which is of great value in the "knowledge economy" of the 21st century. Combine this with a per capita income (GDP) of less than $4,000 (less than 1/10th of the UK or US).  Add to this the drive, energy, motivation and willingness to fight to better themselves as evidenced by recent events and you have the ingredients for great upside potential.

Sure, there are downside risks.  The country is weak financially and militarily and is riddled with corruption.  But, the people know this and they are working on these problems.  And they've shown they can make a difference and are committed to continuing to do so.  Also, I think it is the rest of the world's interests to see they succeed.  So, although they may not be helped as much as they should be, by the US and the EU, perhaps they will get just enough help for them to mostly do the job on their own. And my bet is that Putin and Russia will see thàt it is not in their interests (risking further sanctions and reduction in foreign investment into Russia etc.) to take the kind of actions that will derail Ukraine's survival and growth.

I'm not saying that Putin will change his stripes or not continue to cause mischief.  But I believe his trouble making will be contained enough to permit Ukraine to succeed.

Poroshenko, Ukraine's new President is committed to retake the Eastern oblasts where the separarists are in control.  According to the polls there, the people want to remain with Ukraine, not join with Russia. And the chaos and thuggery they have experienced will make them, I believe, supportive of the Ukrainian's now more determined efforts to regain control. Poroshenko, is from the area, speaks Russian and should be just the guy to assure them, as he is committed to doing,  that they will not be marginalized as Russian speakers, the fear that had given the separarists the most support within the populace.

So I'm bullish on Ukraine.  I'm betting on the people of Ukraine with whom I feel priveleged to have seen and spent time with.

As you saw in the first picture, night was falling as I wrote these words.

It's a new day now in Kiev. Sure, there are clouds in the sky, but I do believe brighter days lie ahead.

Let me quickly state that I say all this with great humility. I certainly could be wrong and I reserve the right to change my opinion.  As Yogi Berra said  "It's difficult to make predictions, especially about the future".  But this is the way I see things. Only time will tell whether my perception is the "truth".  But, for now, àt least, it is what I think and I'm glad to tell you.

Today, I return to the homeland. Eager to see family and friends after three weeks away.  But this is not my last post.  I've got some great pictures of the sights of Kyiv to share with you. I plan to do that in future posts.  And I will be continuing to follow events here and hope to return in the not too distant future.

I'd be delighted to hear what you think. Either in the comment section below or by email.

Thanks for reading!  And please tell me what you think if you are so inclined.