Jon88

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UPDATE 2-Ukraine faces hard road to economic recovery with Moscow pushing back

Reuters
Fri Mar 28, 2014 6:35am EDT


* Russia accounts for 25 pct of Ukrainian exports

* Price Ukraine pays for Russian gas to rise 80 pct

* Trade issues with Russia could spark social unrest in east (Edits)

By Alessandra Prentice

KIEV, March 28 (Reuters) - Smarting from Ukraine's U-turn towards Europe, Russia is likely to employ every weapon in its economic arsenal to ensure its neighbour's road to financial recovery is as painful as possible, even when paved with billions of dollars in Western aid.

Russia has "the right to use selective protective measures against Ukraine if it creates a free trade zone with a third government, or for example with the European Union," a Russian economy ministry spokesman said in response to a question from Reuters, citing the terms of a 2011 agreement.

He gave no details of what the measures might entail.

After months of anti-government protests and the overthrow of a government blighted by corruption and economic mismanagement, Ukraine is on the brink of bankruptcy, running wide external deficits and a current account shortfall of over 9 percent of gross domestic product.

On Thursday, the International Monetary Fund threw a financial lifeline, agreeing to stump up $14-18 billion as part of a two-year bailout package in exchange for tough economic reforms.

The deal, combined with Kiev's signing of a cooperation pact linked to closer trade ties with the European Union, represents a serious blow to Russian President Vladimir Putin's dream of Ukraine joining a Eurasian Union of former Soviet states.

Moscow will not make it easy and Ukraine is already feeling some consequences from its break with Russia.

Prime Minister Arseny Yatseniuk said on Wednesday the price the country would pay for Russian gas, which accounts for over half of Ukrainian gas imports, would soar by almost 80 percent from April 1 as the seizure of Crimea had rendered a cheaper gas deal obsolete.

Russia's Gazprom has suggested a new conflict over gas payments and supplies - like disputes in 2006 and 2009 that halted supplies to Ukraine and onward to Europe - could break out, though it added it had no interest in a resumption of such disputes.

"The better off Ukraine is under the new government, the more likely it will integrate into the West," said Nicu Popescu, senior analyst at the EU Institute for Security Studies (EUISS).

"So disrupting the Ukrainian transition in political and economic terms is probably Russia's primary foreign policy goal in the foreseeable future."

Putin's annexation of Crimea, which Kiev and the West say is illegitimate, is likely to push Ukraine's gross domestic product (GDP) down by 5 percent in 2014, according to Simon Mandel, Vice President for Emerging Europe at New York-based brokerage Auerbach Grayson.

While the tens of thousands of Russian troops thought to be massed on the border show no immediate sign of entering other parts of Ukraine, Russia has already flexed its trade muscles to upset the Western-backed Ukrainian recovery plan.


BLOOD AND SWEAT

Last year Putin showed he was prepared to wield restrictions or bans on Ukrainian exports as punishment for attempts by the country of 46 million to move out of Moscow's orbit.

With exports to Russia accounting for nearly a quarter of Ukrainian external trade and contributing around 8 percent of GDP, further moves could significantly inhibit the country's bid for economic renaissance.

It would take a lot of "blood and sweat" for many Ukrainian companies to withstand any Russian trade ban, Vice President of the European Bank for Reconstruction and Development (EBRD) Andras Simor told Reuters.

"They will need to be flexible if circumstances create a need for adjustment," he said. "We will be there to try and help them as much as possible."

Cementing Kiev's historic shift away from Russia, a bilateral free-trade agreement between Ukraine and the European Union is due to come into force later this year, and Russian trade officials have expressed concerns over closer Ukrainian association with the European bloc.

Russia's milk union has asked for a ban on Ukrainian dairy products, and while no bans are in the works, imports from Ukraine are being monitored closely, according to the assistant to the head of Russia's veterinary oversight agency Rosselkhoznadzor.

"There are no plans to impose restrictions on trade, but we must be prepared for the fact that we will impose restrictions if ... Ukraine is not able to fulfil its obligations due to the political situation in the country," Rosselkhoznadzor's Alex Alexeenko told Reuters.

Dairy products account for only a fraction of Ukraine's sales to Russia, but all Ukrainian exporters will be anxiously eyeing Russia's trade stance, particularly industrial producers in the east.

Russia accounts for 13 percent of Ukraine's iron and steel exports, and the political crisis has already hit shipments from Ukrainian steelmakers this year.

Sales of rebar - a steel bar or mesh of steel wires used in reinforced concrete - to the Commonwealth of Independent States (CIS), a bloc of former Soviet states, fell 70 percent to 45,000 tonnes in January compared with the average monthly export figure in the first half of 2013.

Russian steelmakers have aggressively lobbied their government to implement measures to defend domestic producers from Ukrainian imports.

A spokesman for Ukraine's largest steelmaker, Metinvest , which controls about half of the country's steel industry, said expanding its sales markets was a priority.

However, the steel industry has been battling low prices ST-CRU-IDX and weaker demand for the past three years, complicating potential diversification efforts.

"Tough competition on the international steel market makes the chance of (steelmakers) expanding their export market presence very low," Eavex Capital metals analyst Ivan Dzvinka said in Kiev.


SOCIAL TENSIONS

The free-trade agreement (FTA) between Ukraine and the European Union, due to be signed after a presidential election on May 25, is unlikely to help many of Ukraine's industrial producers whose output is focused on the Russian market.

Manufacturers of train carts and turbo engines, which together account for 2.5 percent of Ukraine's total exports, will be hit particularly hard.

"Re-orienting these industries to Europe would be nearly impossible without very heavy investment, which means production and exports could be lost in the short term," Nomura analysts said in a note.

However, what Ukraine stands to gain from the EU trade agreement could become apparent in the longer term as it aims to help the country create new businesses and modern industries and become a destination for European manufacture.

"The point of the FTA is not to make it possible for Ukraine to export Soviet-era tractors to Europe. That's not going to happen. But it could eventually lead to Ukraine becoming a producer of Peugeots, Volkswagens, fridges or Nokia telephones," the EUISS's Popescu said.

With most of the country's heavy industry located in eastern Ukraine, recently the focus of violent pro-Russian rallies, any trade restrictions could also have political implications.

"Social tensions could rise if businesses are forced to cut output, leaving people without salaries," said Lydia Shynkaruk of Kiev's Institute of Economic Forecasting.

At the Red October factory in the eastern city of Kharkiv, marketing manager Dmitry Laptev said the facility, which sells 70 percent of the brick factory machinery it produces to Russia, was yet to experience any trouble with exports.

"The only issue would be if they completely shut the border to all Ukrainian products, then that would hit us, of course. It would hit everyone," he said, standing among rusting machinery overshadowed by a Soviet mural with the slogan 'My factory is my honour'. (Additional reporting by Natalia Zinets in Kiev and; Andrey Kuzmin in Moscow, Editing by Timothy Heritage, Will Waterman, Janet McBride)
 

ThoughtExperiment

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I'm not excusing Putin, and it's very hard to know what to believe and what not to believe in this whole situation.

But if we really did support and provide aid to the group(s) that overthrew Yanokovich, why? Why would we get involved like that?
 

JBond

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Good thing we have an experienced Commander and Chief that will know how to handle this situation.
 

JBond

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I'm not excusing Putin, and it's very hard to know what to believe and what not to believe in this whole situation.

But if we really did support and provide aid to the group(s) that overthrew Yanokovich, why? Why would we get involved like that?

Obama enjoys supporting National Socialist movements. It has worked out well everywhere else he has played king maker. Libya, Syria, Egypt, Iraq and Afghanistan are thriving after Obama "fixed" things.

You must remember Obama is the same guy that campaigned and fund raised for a terrorist warlord in his home country of Kenya. he can't help himself. It was programed into him decades ago.
 

ThoughtExperiment

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Dude... I don't like Obama or his politics, either. But do you ever think that you weaken your arguments when you blame him for every single thing? This question goes back a lot farther than him.
 

JBond

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I love me some Obama. Umm, umm, good.

Seriously, if Obama had made some better moves long before he manufactured this crisis, the people of Ukraine would be much better off. He is the president, as he so often likes to remind us. The buck stops with him.

By decimating our military, abandoning critical strategic weapons systems such as hellfire missiles, tomahawk cruise missiles, and the missile defense systems we promised our allies, he invited this to happen. Every leader in the world knows the guy is pussy. He is living out his leftist utopian theories, and failing in the process. It's not my fault the dude is an inept leader.

Remember who backed all the "revolutions" in counties around the world. Obama did. He is the one that supported the overthrow of the Ukrainian government. He is to blame for the middle east going up in flames and now he is exporting his brand of leftist classroom theory to Europe.
 

dbair1967

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Dude... I don't like Obama or his politics, either. But do you ever think that you weaken your arguments when you blame him for every single thing? This question goes back a lot farther than him.

Seems to be the strategy the dems employ with Bush
 

dbair1967

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Ah the old "but they did it to us" defense. Democrats looked stupid then, Republicans look stupid now. The whole birther thing may have been the stupidest of it all.

If Obama isn't to blame for things today, who is?

Dems blamed Bush and hated on him almost from day one, and 5 years into the Obama leadership they still blame Bush for things that happen today. Obama still whines about the economy and says its because of Bush.

Democrats had control of the Presidency, House and Senate for two full years. They did everything THEY wanted to do. They made it worse.
 
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You missed my point. I'm not here trying to assign blame (but if you could really pin things on a multitude of policies ranging back to the 1980's). The problem is instead of trying to find solutions or propose ideas, everyone is more willing to yell about their team being better.
 

JBond

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You missed my point. I'm not here trying to assign blame (but if you could really pin things on a multitude of policies ranging back to the 1980's). The problem is instead of trying to find solutions or propose ideas, everyone is more willing to yell about their team being better.

happy to discuss ideas.

- reinstate the tomahawk cruise missile system that was canceled
- reinstate the hellfire missile systems
- follow through on the missile defense shield we promised our allies
- correct the rules of engagement in battle
- develop every possible energy source so that the EU is not beholden to Russia
- reverse the massive cuts to the US navy. We are no longer capable of an amphibious assault.

That will do for starters. Any thoughts?
 
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glenn-beck-chalkboard-2.jpg
 

JBond

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happy to discuss ideas.

- reinstate the tomahawk cruise missile system that was canceled
- reinstate the hellfire missile systems
- follow through on the missile defense shield we promised our allies
- correct the rules of engagement in battle
- develop every possible energy source so that the EU is not beholden to Russia
- reverse the massive cuts to the US navy. We are no longer capable of an amphibious assault.

That will do for starters. Any thoughts?
 

Jon88

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How do you know more than the defense department about tomahawk cruise missles and hellfire missiles?
 

JBond

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How do you know more than the defense department about tomahawk cruise missles and hellfire missiles?

That was very snarky of you Jon. I am disappointed. But thanks for asking.

Obama to kill Navy’s Tomahawk, Hellfire missile programs in budget decimation

President Barack Obama is seeking to abolish two highly successful missile programs that experts say have helped the U.S. Navy maintain military superiority for the past several decades.

The Tomahawk missile program—known as “the world’s most advanced cruise missile”—is set to be cut by $128 million under Obama’s fiscal year 2015 budget proposal and completely eliminated by fiscal year 2016, according to budget documents released by the Navy.

In addition to the monetary cuts to the program, the number of actual Tomahawk missiles acquired by the United States would drop significantly—from 196 last year to just 100 in 2015. The number will then drop to zero in 2016.

The Navy will also be forced to cancel its acquisition of the well-regarded and highly effective Hellfire missiles in 2015, according to Obama’s proposal.

The proposed elimination of these missile programs came as a shock to lawmakers and military experts, who warned ending cutting these missiles would significantly erode America’s ability to deter enemy forces.

“The administration’s proposed budget dramatically under-resources our investments in munitions and leaves the Defense Department with dangerous gaps in key areas, like Tomahawk and Hellfire missiles,” said Rep. Randy Forbes (R., Va.), a member of House Armed Services Committee.

“Increasing our investment in munitions and retaining our technological edge in research and development should be a key component of any serious defense strategy,” he said.

The U.S. Navy relied heavily on them during the 2011 military incursion into Libya, where some 220 Tomahawks were used during the fight.

Nearly 100 of these missiles are used each year on average, meaning that the sharp cuts will cause the Tomahawk stock to be completely depleted by around 2018. This is particularly concerning to defense experts because the Pentagon does not have a replacement missile ready to take the Tomahawk’s place.

“It doesn’t make sense,” said Seth Cropsey, director of the Hudson Institute’s Center for American Seapower. “This really moves the U.S. away from a position of influence and military dominance.”

Cropsey said that if someone were trying to “reduce the U.S. ability to shape events” in the world, “they couldn’t find a better way than depriving the U.S. fleet of Tomahawks. It’s breathtaking.”

The Navy has used various incarnations of the Tomahawk with great success over the past 30 years, employing them during Desert Storm and its battle zones from Iraq and Afghanistan to the Balkans.

While the military as a whole is seeing its budgets reduced and equipment scaled back, the Tomahawk cuts do not appear to be due to a lack of funds.

The administration seems to be taking the millions typically spent on the Tomahawk program and investing it in an experimental missile program that experts say will not be battle ready for at least 10 years.

“It is definitely short-sighted given the value of the Tomahawk as a workhorse,” said Mackenzie Eaglen, a former Pentagon staffer who analyzes military readiness. “The opening days of the U.S. lead-from-behind, ‘no-fly zone’ operation over Libya showcased how important this inventory of weapons is still today.”

Overall, the Navy has essentially cut in half its weapons procurement plan, impacting a wide range of tactical weapons and missiles.

Navy experts and retired officials fear that the elimination of the Tomahawk and Hellfire systems—and the lack of a battle-ready replacement—will jeopardize the U.S. Navy’s supremacy as it faces increasingly advanced militaries from North Korea to the Middle East.

The cuts are “like running a white flag up on a very tall flag pole and saying, ‘We are ready to be walked on,’” Cropsey said.

Retired Army Lt. Col. Steve Russell called the cuts to the Tomahawk program devastating for multiple reasons.

“We run a huge risk because so much of our national policy for immediate response is contingent on our national security team threatening with Tomahawk missiles,” said Russell, who is currently running for Congress.

“The very instrument we will often use and cite, we’re now cutting the program,” Russell said. “There was a finite number [of Tomahawk’s] made and they’re not being replenished.”

“If our national policy is contingent on an immediate response with these missile and we’re not replacing them, then what are we going do?” Russell asked.

North Korea, for instance, has successfully tested multi-stage rockets and other ballistic missiles in recent months. Experts say this is a sign that the Navy’s defensive capabilities will become all the more important in the Pacific in the years to come.

Meanwhile, the experimental anti-ship cruise missile meant to replace the Tomahawk program will not be battle ready for at least 10 years, according to some experts.

The Long Range Anti Ship Missile has suffered from extremely expensive development costs and has underperformed when tested.

“You have to ask yourself: An anti-ship missile is not going to be something we can drive into a cave in Tora Bora,” Russell said. “To replace it with something not needed as badly, and invest in something not even capable of passing basic tests, that causes real concern.”

The Pentagon did not return requests for comment.

Read more: http://www.washingtontimes.com/news...ahawk-hellfire-missile-program/#ixzz2xZAoOPvW
 

Jon88

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Not going to worry about it. At $1 million a missile surely they can find somethign cheaper.

They do this shit every year. They announce cuts and then someone writes about how much this will weaken the miliary. We're still the #1 military in the world.
 
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