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Is Zelensky’s bet on Normandy Four justified?

Author : Olexandr Honcharov

Source : 112 Ukraine

Ukraine's Foreign Minister Vadym Prystaiko notes there is no alternative to the diplomatic path of solving Donbas conflict
16:21, 16 October 2019

112 Agency

Is President Zelensky’s bet on the Normandy Four format justified? In this regard, Ukraine's Foreign Minister Vadym Prystaiko has already noted that there is no alternative to the diplomatic path, since in order to resolve the situation in Donbas by force we need to significantly strengthen the army, and this will require at least 30% of budget funds. In addition, it is necessary to add another 34% of the revenue of the 2020 budget to the expenses, that is, to repay and service loans and borrowings.

Related: UN peacekeepers to be deployed in Donbas in case of Minsk, Normandy talks' fail

It is clear that nothing would remain for the development of the economy.

That is why there is no alternative to the diplomatic method of a peaceful settlement in Donbas, the infrastructure of which simply cannot be further destroyed by military operations. In June of this year, President Zelensky announced that 12 billion USD are needed for the economic recovery of Donetsk and Luhansk regions with financial support from the West.

I really hope that opponents of the Minsk peace process will think about the fact that until 2014 the enterprises of Donbas provided up to 20% of the country's industrial production, despite the fact that 10% of the population of Ukraine lived in the region.

Related: Kremlin refuses to discuss Crimean issue in Normandy format or in any other

According to the forecasts of the outstanding American economist Nouriel Roubini, we are waiting for the global financial crisis, which will hit the emerging markets, in particular, especially the damping economy of Ukraine.

I believe that this nightmare will end in the near future, and Ukraine will begin to restore its national economy, increasing the welfare of the entire population.

But what would be the position of the opponents of the Norman Format meeting? The issue is crucial. During the press marathon, President Zelensky emphasized: “If we do not adopt a new law on special status and do not implement the Steinmeier formula, we will have to leave the Minsk process. This will happen automatically.”

Related: Steinmeier formula implementation is step to Normandy Format talks, - Zelensky

I think there is no need to explain what large-scale negative consequences will be for the country's economy and the standard of living of citizens.

I’m not ready to predict the situation after the Normandy Four meeting in Paris, but now the governments of the two countries have realized why there is no economic growth in Ukraine and the Russian Federation.

It finally came to light that without peace, capitalists and investors would not throw their put money in a warring country into infrastructure and production projects, since there is a danger of force majeure circumstances.

And now the Russian Federation is officially fighting in Syria, unofficially it is fighting in Donbas.

Against this background, in recent years, the politicians of Ukraine and Russia seem to have been negotiating about nothing - there are no results, however, they provoked a reaction in the markets (especially in the foreign exchange and debt markets).

Speculators used it, making good money on the exchange rates. This week First Deputy Prime Minister, Minister of Finance of the Russian Federation Anton Siluanov became alarmed: "There is money - about 30 trillion rubles have accumulated on the accounts of enterprises. But they don’t work; they don’t go into the economy because there are certain risks."

Related: New law on Donbas special status to appear after Normandy Summit, - parliamentary speaker

This week, Ukraine’s National Bank Deputy Chairman Dmytro Sologub began to explain and disclose the most relevant and sensitive questions in detail: is Ukrainian economy possible to grow by 7% per year? How will the slowdown of the global economy hit Ukraine? Can Ukraine live without the IMF? What is happening in the forex market?

How do prices respond to hryvnia appreciation? And, of course, he noted: “We have a ratio of the share of investments in the country's GDP of 17% -18%.

And in other countries with GDP growth rates above 5%, the ratio of the share of investments in GDP reaches 25% -30%, that is, the investment growth rate must be maintained at 20% per year.

We completely agree with this, but in order for such large investments to come to our economy, first of all, peace is needed in Ukraine.

Anton Siluanov also spoke about the same deplorable situation with investments in the Russian economy. In particular, he emphasized: “In order to ensure the growth rate of at least 3%, as we set ourselves the goal, the investment should be increased to at least 25% of GDP. Today this figure is 20.6%." As I see it, after such statements, politicians in Ukraine and Russia will very soon think about it. Yes, ordinary citizens will think about it too.

MFA head Vadym Prystaiko has already managed to declare that in Paris, at the negotiating table of the Normandy Four, it is necessary to reach agreements that Russia would fulfill under the pressure of our Western partners.

Related: Kremlin not interested in Normandy format negotiation, - Ukraine's MFA head

In this context, we should recall the theory of long waves or the theory of economic cycles, lasting from 40 to 50 years, developed by the great economic prophet Nikolai Kondratieff, who once predicted the stock market crash and the onset of the Great Depression of 1929 in the United States.

However, leading world analysts predict large regional military conflicts to happen in 2019-2020 (the 5th cycle ends and the 6th Kondratieff cycle begins). And this is for us very seriously.

The transition from the 3rd to the 4th Kondratieff cycle took place in the early 1940s (World War II). So the transition from the 4th to the 5th Kondratieff cycle took place in the early 1980s (the war between Soviet Union and Afghanistan).

Nevertheless, I consider it correct that President Zelensky continues to insist on an early meeting in the Normandy Four format.

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