Shock therapy: How the West prepares to plunder post-war Ukraine
West prepares to plunder post-war Ukraine with neoliberal shock therapy: privatization, deregulation, slashing worker protections
Western governments and corporations met in Switzerland to plan harsh neoliberal economic policies to impose on post-war Ukraine, calling to cut labor laws, “open markets,” drop tariffs, deregulate industries, and “sell state-owned enterprises to private investors.”
28 July, 2022
While the United States and Europe flood Ukraine with tens of billions of dollars of weapons, using it as an anti-Russian proxy and pouring fuel on the fire of a brutal war that is devastating the country, they are also making plans to essentially plunder its post-war economy.
Representatives of Western governments and corporations met in Switzerland this July to plan a series of harsh neoliberal policies to impose on post-war Ukraine, calling to cut labor laws, “open markets,” drop tariffs, deregulate industries, and “sell state-owned enterprises to private investors.”
Ukraine has been destabilized by violence since 2014, when a US-sponsored coup d’etat overthrew its democratically elected government, setting off a civil war. That conflict dragged on until February 24, 2022, when Russia invaded the country, escalating into a new, even deadlier phase of the war.
The United States and European Union have sought to erase the history of foreign-sponsored civil war in Ukraine from 2014 to early 2022, acting as though the conflict began on February 24. But Washington had sent large sums of weapons to Ukraine and provided extensive military training and support over several years before Russia invaded.
Meanwhile, starting in 2017, representatives of Western governments and corporations quietly held annual conferences in which they discussed ways to profit from the civil war they were fueling in Ukraine.
In these meetings, Western political and business leaders outlined a series of aggressive right-wing reforms they hoped to impose on Ukraine, including widespread privatization of state-owned industries and deregulation of the economy.
On July 4 and 5, 2022, top officials from the US, EU, Britain, Japan, and South Korea met in Switzerland for a so-called “Ukraine Recovery Conference.” There, they planned Ukraine’s post-war reconstruction and performatively announced aid commitments – while salivating over a bonanza of potential contracts.
New NATO candidates Finland and Sweden committed to assure reconstruction in Lugansk, roughly 48 hours after Russia and separatist forces announced the region had fallen fully under their control.
But the Ukraine Recovery Conference was not new. It had been renamed to save the expense of a new acronym. In the previous five years, the group and its annual meetings were instead referred to as the “Ukraine Reform Conference” (URC).
The URC’s agenda was explicitly focused on imposing political changes on the country – namely, “strengthening the market economy“, “decentralization, privatization, reform of state-owned enterprises, land reform, state administration reform,” and “Euro-Atlantic integration.”
Before 2022, this gathering had nothing to do with aid – and a lot to do with economics.
Documents from the 2018 Ukraine Reform Conference emphasized the importance of privatizing most of Ukraine’s remaining public sector, stating that the “ultimate goal of the reform is to sell state-owned enterprises to private investors”, along with calls for more “privatization, deregulation, energy reform, tax and customs reform.”
Lamenting that the “government is Ukraine’s largest asset holder,” the report stated, “Reform in privatization and SOEs has been long awaited, as this sector of the Ukrainian economy has remained largely unchanged since 1991.”
The Ukraine Reform Conference listed as one of its “achievements” the adoption of a law in January 2018 titled “On Privatization of State and Municipal Property,” which it noted “simplifies the procedure of privatization.”
While the URC enthusiastically pushed for these neoliberal reforms, it acknowledged that they were very unpopular among actual Ukrainians. A poll found that just 12.4% supported privatization of state-owned enterprises (SOE), whereas 49.9% opposed it. (An additional 12% were indifferent, whereas 25.7% had no answer.)
Economic liberalization in Ukraine since Russia’s February invasion has been even more grim.
In March 2022, the Ukrainian parliament adopted emergency legislation allowing employers to suspend collective agreements. Then in May, it passed a permanent reform package effectively exempting the vast majority of Ukrainian workers (those at businesses with fewer than 200 employees) from Ukrainian labor law.
While the most immediate beneficiaries of these changes will be Ukrainian employers, Western governments have been lobbying to liberalize Ukraine’s labor laws for years.
Documents leaked in 2021 showed that the British government coached Ukrainian officials on how to convince a recalcitrant public to give up workers’ rights and implement anti-union policies. Training materials lamented that popular opinion towards the proposed reforms was overwhelmingly negative, but provided messaging strategies to mislead Ukrainians into supporting them.
West calls for aggressive neoliberal reforms at ‘Ukraine Recovery Conference’
The July 2022 Ukraine Recovery Conference, which was held by Lugano, Switzerland and jointly hosted by the Swiss and Ukrainian governments, featured representatives from the following states and institutions:
- Czech Republic
- North Macedonia
- Republic of Korea (popularly known as South Korea)
- Slovak Republic
- Türkiye (formerly known as Turkey)
- United Kingdom
- United States of America
- Council of Europe
- European Bank for Reconstruction and Development
- European Commission
- European Investment Bank
- Organisation for Economic Cooperation and Development (OECD)
Among the prominent officials who attended were European Commission President Ursula Von der Leyen, Swiss President Ignazio Cassis, and UK Foreign Minister Liz Truss.
Ukraine’s Western-backed leader Volodymyr Zelensky also addressed the conference via video.
Physically present at the Switzerland meeting were Ukrainian Prime Minister Denys Shmyhal and Zelensky’s top political ally Ruslan Stefanchuk, the chairman of Ukraine’s parliament, the Verkhovna Rada.
Stefanchuk is the second-in-line for the presidency after Zelensky. He is also a member of Ukraine’s all-powerful National Security and Defense Council, which truly governs the country.
Even the United Nations gave its imprimatur to the conference: UN Secretary-General António Guterres delivered a video statement as well.
At the two-day meeting, the attendees agreed that Ukraine should eventually be given membership in the European Union. The country had already been granted EU candidate status just two weeks before, at a June summit in Brussels.
At the conclusion of the meeting, all governments and institutions present endorsed a joint statement called the Lugano Declaration. This declaration was supplemented by a “National Recovery Plan,” which was in turn prepared by a “National Recovery Council” established by the Ukrainian government.
This plan advocated for an array of neoliberal reforms, including “privatization of non critical enterprises” and “finalization of corporatization of SOEs” (state-owned enterprises) – identifying as an example the selling off of Ukraine’s state-owned nuclear energy company EnergoAtom.
In order to “attract private capital into banking system,” the proposal likewise called for the “privatization of SOBs” (state-owned banks).
Seeking to increase “private investment and boost nationwide entrepreneurship,” the National Recovery Plan urged significant “deregulation” and proposed the creation of “‘catalyst projects’ to unlock private investment into priority sectors.”
In an explicit call for slashing labor protections, the document attacked the remaining pro-worker laws in Ukraine, some of which are a holdover of the Soviet era.
The National Recovery Plan complained of “outdated labor legislation leading to complicated hiring and firing process, regulation of overtime, etc.” As an example of this supposed “outdated labor legislation,” the Western-backed plan lamented that workers in Ukraine with one year of experience are granted a nine-week “notice period for redundancy dismissal,” compared to just four weeks in Poland and South Korea.
In the same vein, the National Recovery Plan urged Ukraine to cut taxes on corporations and wealthy capitalists.
The blueprint complained that 40% of Ukraine’s GDP comes from tax revenue, calling this a “rather high tax burden” compared to its model example of South Korea. It thus called to “transform tax service,” and “review potential for decreasing the share of tax revenue in GDP.”
In short, the Ukraine Recovery Conference’s economic proposal was little more than a repackaged Washington Consensus: a typical right-wing program that involves implementing mass privatizations, deregulating industries, gutting labor protections, cutting taxes on the rich, and putting the burden on Ukrainian workers.
In the 1990s, following the overthrow of the Soviet Union, the United States imposed what it called capitalist “shock therapy” on Russia and other former constituent republics.
A 2001 UNICEF study found that these harsh neoliberal reforms in Russia caused 3.2 million excess deaths, and pushed 18 million children into poverty, bringing about rampant malnutrition and public health crises.
Washington and Brussels appear committed to return to this very same neoliberal shock therapy in their plans for post-war Ukraine.
More calls for neoliberal shock therapy in post-war Ukraine
To accompany its July 2022 meeting in Switzerland, the Ukraine Recovery Conference published a “strategic briefing” compiled by a right-wing Ukrainian organization called the Center of Economic Recovery.
The Center of Economic Recovery describes itself as a “platform that unites experts, think tanks, business, the public and government officials for the development of the country’s economy.” On its website, it lists many Ukrainian corporations as its partners and funders, making it clear that it acts as lobby on their behalf, like a chamber of commerce.
The report that this corporate lobby wrote for the Ukraine Recovery Conference was even more explicit than the National Recovery Plan in its advocacy of aggressive neoliberal economic reforms.
Using right-wing libertarian language of “economic freedom,” the document urged to “reduce government size” and “open markets.”
Its proposal read as neoliberal boilerplate: “decrease the regulatory burden on businesses” by “reducing the size of the government (tax administration, privatization; digitalization of public services), improving regulatory efficiency (deregulation), and opening markets (liberalization of capital markets; investment freedom).”
In the name of “EU integration and access to markets,” it likewise proposed “removal of tariffs and non-tariff non-technical barriers for all Ukrainian goods,” while simultaneously calling to “facilitate FDI [foreign direct investment] attraction to bring the largest international companies to Ukraine,” with “special investment incentives” for foreign corporations.
It was essentially a call for Ukraine to surrender its economic sovereignty to Western capital.
Both the National Recovery Plan and the strategic briefing also heavily emphasized the need for robust anti-corruption efforts in Ukraine.
Neither document acknowledged that fact that Kiev’s Western-backed leader Volodmyr Zelensky, who spoke at the Ukraine Recovery Conference, is known to have large amounts of wealth hidden in a network of offshare accounts.
Zelensky was named in the Pandora Papers, a leak of suspicious offshore companies, and he is linked to luxury properties in London.
Even more calls for liberalization, privatizations, deregulation, tax cuts
In addition to the National Recovery Plan and the strategic briefing, the July 2022 Ukraine Recovery Conference presented a report prepared by the company Economist Impact, a corporate consulting firm that is part of The Economist Group.
This third document, titled “Ukraine Reform Tracker,” was funded by the Swiss government with the stated “aim of stimulating and supporting discussion on this matter at the 2022 Ukraine Recovery Conference.”
The Ukraine Reform Tracker analyzed the neoliberal policies already imposed in Ukraine since the US-backed 2014 coup, and urged for even more aggressive neoliberal reforms to be implemented when the war ends.
Of the three reports presented at the conference, this was perhaps the most full-throated call for Ukraine to adopt neoliberal shock therapy after the war – a tactic often referred to as disaster capitalism.
Quoting the Economist Intelligence Unit (EIU), the document insisted that Ukraine has “issues in deregulation and competition that still need to be addressed, such as ongoing state intervention” – depicting state intervention in the economy as something inherently bad.
In this vein, the Ukraine Reform Tracker pushed to “increase foreign direct investments” by international corporations, not invest resources in social programs for the Ukrainian people.
The report emphasized the importance of developing the financial sector and called for “removing excessive regulations” and tariffs.
“Deregulation and tax simplification has been further deepened,” it wrote approvingly, adding, “Steps towards deregulation and the simplification of the tax system are examples of measures which not only withstood the blow of the war but have been accelerated by it.”
The Ukraine Reform Tracker praised the central bank for “successfully liberalising the currency, floating the exchange rate.” While it noted some of these policies were reversed due to the Russian invasion, the report urged “the swiftest possible elimination of currency controls,” in order to “reinstate competitiveness within the financial sector.”
The report however complained that these neoliberal reforms are not being implemented quickly enough, writing, “Privatisation— which already progressed slowly before the war—stalled, with a draft law aiming to simplify the process rejected” by the Verkhovna Rada, Ukraine’s parliament.
It called for further “liberalising agriculture” to “attract foreign investment and encourage domestic entrepreneurship,” as well as “procedural simplifications,” to “make it easier for small and medium enterprises” to “expand by purchasing and investing in state-owned assets,” thereby “making it easier for foreign investors to enter the market post-conflict.”
“Further pursuing the privatisation of large and loss-making state-owned enterprises” will “allow more Ukrainian entrepreneurs to enter the market and thrive there in the post-war context,” the report urged.
The Economist Impact study stressed the importance of Ukraine cutting its trade with Russia and instead integrating its economy with Europe.
“Ukraine’s trade reforms centre on efforts to diversify its trade operations and enhance its integration into the EU market,” it wrote.
The Western government-sponsored report boasted of significantly reducing Kiev’s economic ties to its eastern neighbor, noting: “Russia was Ukraine’s main trading partner in 2014, capturing 18.2% of its exports and providing 22% of its imports. Since then, however, Russia’s share of Ukraine’s exports and imports has decreased consistently, reaching 4.9% and 8.4% in 2021, respectively.”
“Ukraine made particular progress in diversifying its trade portfolio within the EU, raising its trade volumes with member states by 46.2% from 2015 to 2019,” it added.
The report added that it is “essential” that Ukraine carry out other reforms, such as modifying its railways by “aligning the rail gauges with EU standards.”
The Ukraine Reform Tracker presented the war as an opportunity to impose even more disaster capitalist policies.
“The post-war moment may present an opportunity to complete the difficult land reform by extending the right to purchase agricultural land to legal entities, including foreign ones,” the report stated.
“Opening the path for international capital to flow into Ukrainian agriculture will likely boost productivity across the sector, increasing its competitiveness in the EU market,” it added.
The document proposed new ways for exploiting Ukrainian labor in specific industries, “especially pharmaceutical and electrical production, plastic and rubber manufacturing, furniture, textiles, and food and agricultural products.”
“Once the war is over, the government will also need to consider substantially lowering the share of stateowned banks, with the privatisation of Privatbank, the country’s largest lender, and Oshchadbank, a large processor of pensions and social payments,” it insisted.
The Ukraine Reform Tracker concluded optimistically, stating that that “post-war moment will be an opportunity for Ukraine,” and “there is likely to be significant pressure to continue and speed up the implementation of the reform agenda. Continued business reforms could allow Ukraine to further deregulate [and] privatise lossmaking SOEs.”
While pushing disaster capitalism, the Ukraine Recovery Conference exploits ‘social justice’ rhetoric
While these three documents published by the 2022 Ukraine Reform Conference (URC) were vociferous calls for the imposition of right-wing economic policies, they were accompanied by superficial appeals to social justice rhetoric.
The URC released a set of seven “Lugano Principles” that it identified as the keys to a just, equitable post-war reconstruction:
- reform focus
- transparency, accountability, and rule of law
- democratic participation
- multi-stakeholder engagement
- gender equality and inclusion
- (environmental) sustainability
These principles demonstrate the ways that hawks in Washington and Brussels have increasingly weaponized ideas about “intersectionality” to advance their belligerent foreign policy.
In his report “Woke Imperium: The Coming Confluence Between Social Justice and Neoconservatism,” former US State Department officer Christopher Mott discussed the growing use of left-liberal social-justice talking points to legitimize and enforce Western imperialism.
Mott observed that the “liberal Atlanticist tendency to push moralism and social engineering globally has immense potential to create backlash.”
Western-backed liberals in post-socialist Europe have spent three decades creating a false dichotomy between either a liberalizing cultural project that can only be realized under US-led trans-Atlantic hegemony and neoliberal economic reforms, or a purely fictional socialist past whose political legacy is somehow reflected in right-wing anti-communist nationalist parties attempting to roll back advances that women had achieved under socialism.
Despite its patent absurdity, this narrative has won adherents among younger liberal intellectuals, especially in Central and Eastern Europe, who have little or no memory of the socialist period, and who face increasingly desperate career prospects outside of the Western-backed ideological apparatus.
On the other hand, right-wing nationalists like Hungary’s Viktor Orban posture as the only defenders of their countries’ cultural sovereignty against hostile outsiders, while also refusing to break from neoliberal capitalist orthodoxy.
In turn, organic local activists struggling for legitimate social justice causes find themselves portrayed as agents furthering the agendas of foreign powers.
At best, during peacetime, this undermines their work and hinders progress for their causes. In a country like Ukraine, where Western governments have supported far-right, neo-fascist groups and eight years dragging out a civil war, this is life-threatening.
In Ukraine, what’s even left to loot?
On May 9, 2022, the US Congress passed the Ukraine Democracy Defense Lend-Lease Act, greatly expanding Washington’s authority to provide military aid to Ukraine.
Lend-lease provisions originated during World War II and were used by the US government to provide military aid to countries fighting Nazi Germany, including Britain and the Soviet Union, without formally entering the war.
Under this framework, the US provides military equipment as a loan; if the equipment is not or cannot be returned, recipient governments are on the hook to pay back the full cost.
The Joe Biden administration explained its use of lend-lease by the need to quickly move the bill through Congress before other funding ran out.
While many North Americans protested what they saw as a pointless giveaway of tens of billions of taxpayer dollars to a foreign country, lend-lease provisions are loans, not grants.
Britain, one of the United States’ closest allies, only finished paying back its 60-year-old lend-lease debt in 2006. Russia settled its former Soviet obligations the same year.
Given this historical precedent, Ukraine will likely be saddled with debts it can’t readily pay back – debts extended to corrupt Western-backed elites under wartime duress. This means US financial institutions will have further collateral to impose neoliberal structural adjustment policies on Ukraine, subordinating its economy for years to come.
Washington and its allies have a long history of instrumentalizing debt to force countries to accept unpopular pro-Western policy changes, and difficulties of repayment often compel countries to accept even more debt, leading to debt trap cycles that are extremely difficult to escape.
It was in fact the International Monetary Fund, and specifically the refusal of Ukraine’s democratically elected President Viktor Yanukovych to accept IMF demands that he cut wages, slash social spending, and end gas subsidies in order to integrate with the EU, which led him to turn instead to Russia for an alternative economic agreement, thus setting the stage for the Western-backed “Euromaidan protests” and eventually the 2014 coup.
Meanwhile, in the current war, Moscow and Russian-backed separatist fighters are occupying and may annex what were historically the most industrialized regions of Ukraine, located in the east.
At the same time, much of what remained of the country’s pre-war industrial base has been physically destroyed by the war. And these same regions hold much of Ukraine’s energy resources, notably coal.
Millions of Ukrainians have already emigrated and are unlikely to return, especially if they are able to access work visas in the EU. Young and educated people with technical skills are the least likely to stay.
The situation is even bleaker when one considers that, well before Russia’s February invasion, Ukraine was already the poorest country in Europe.
While Soviet Ukraine had thrived as a centre of the USSR’s heavy industry, and a source for much of Soviet political leadership, post-Soviet Ukraine has been a playground for rival elites supported by the West or by Russia.
Post-Soviet Ukraine has been devastated by persistent economic crises and rampant and systematic corruption. It has consistently had smaller incomes and a lower standard of living even compared to neighboring post-socialist countries, including Russia.
Ukraine has not been able to restore the size of the economy it had in 1990, when it was still part of the Soviet Union. And looking beyond raw GDP data, the quality of life for many Ukrainian workers and their access to social services has significantly declined.
With limited financial means to provide for basic state functions, much less to repay foreign debts, a post-war Ukraine could be forced to accept humiliating and dangerous concessions in other spheres – serving, say, as an Israel-style trying ground for weapons testing, or hosting Kosovo-style black sites for US covert operations, or providing Western businesses a Chile-style no-regulation environment for tax evasion and criminal activities – all while gutting what little remains of its domestic welfare state and labor protections.
Yet instead of advocating for a diplomatic solution to the war, which could help the Ukrainian government and people concentrate their resources on economic recovery, Western governments have adamantly opposed proposed peace talks, insisting, in the words of EU foreign policy chief Josep Borrell, “This war will be won on the battlefield.”
Washington and Brussels are sacrificing Ukraine for their geopolitical interests. And their Ukraine Recovery Conference shows they expect to keep benefiting economically even after the war ends.