Kiev Effectively Cedes East Ukraine to Separatists; Poroshenko Withdraws Hospital and School Funding, Bank Card Operations

Scorched Earth Policy

Last week, the government in Ukraine cut off pensions benefits to residents of rebel-held areas until such time as these areas return to Ukrainian control.

Yesterday, in yet another scorched-earth policy move, president Petro Poroshenko announced Ukraine Rebel Areas to Lose State Services.

Ukraine's president has ordered the withdrawal of all state services, including funding for hospitals and schools, from rebel-held areas.

Mr Poroshenko's ruling says all state companies and institutions should end their work in the Donetsk and Luhansk regions within a week.

It also says Ukraine's central bank is to close down all banking services - including card operations - in some areas within a month.

Initial Thoughts

1. Poroshenko just ceded major portions of Ukraine to rebels
2. Expect a run on ATMs
3. Russia will have to intervene for humanitarian reasons
4. Western Ukraine will have a difficult time getting needed coal from the East

Point number two is happening already.

I picked this up from ZeroHedge Ukrainians Line Up to Withdraw Money from a Bank in Donetsk.



That's a small line now. I suspect it soon won't be.

Human Rights Violations

Here's some additional details on Poroshenko's Bank Servicing Decree.

"National bank of Ukraine [shall] adopt measures within one month to stop serving bank accounts, including card accounts, that belong to economic entities… and residents in the territories of anti-terror operation in Donetsk and Luhansk regions," the decree said.

Poroshenko asked the government Saturday to keep the Council of Europe informed on Kiev being forced to take steps violating the European Convention for the Protection of Human Rights in Donbas.

"To the Ministry of Foreign Affairs of Ukraine… together with the Ministry of Justice of Ukraine… to ensure that within a week in accordance with the article 15 of the [European] Convention for the Protection of Human Rights and Fundamental Freedoms… a statement on behalf of Ukraine about Kiev taking measures derogating from its obligations under the Convention for the Protection of Human Rights on the several territories of the area of special operation in Donetsk and Luhansk Regions, is sent to the Secretary General of the Council of Europe," the decree said.

Expect Major Rebel Advance

Reader Jacob Dreizin, a US citizen who speaks Russian and reads Ukrainian, offers these thoughts via email.

Hello Mish,

I am tentatively calling for the start of the rebel offensive for on or about Friday, November 21st.

I may be wrong on the "when", but I will be right on the "how".

I expect the rebel offensive will be similar to the one in late August to early September and it will proceed in a direction or directions unexpected by Kiev and its CIA handlers.

The outcome will be that Kiev will lose almost all of its remaining heavy weaponry.(Over half was already lost by early September, according to both the rebels and Poroshenko himself.)

Most of the major population centers of Ukraine's Donetsk and Lugansk provinces that have not yet come under rebel control, will come under their control. This will demoralize the remaining Ukrainian troops.

Once that happens, Kiev has no strategic reserve and nothing to stop the remaining areas of historic Novorossia from being overrun or simply breaking off on their own accord. So this will not be a "long retreat." Once the tension snaps, things will be decided very quickly.

Then there will be a slowdown for winter.  The winter will be so brutal for Ukraine that by the time spring comes, the rebels believe they will simply waltz into neighboring regions without much effort and be welcomed as liberators. On that point, we shall see.

Major Mistake?

To combat alleged terrorism, Kiev announced it can suspend article 15 of the Convention for the Protection of Human Rights and Fundamental Freedoms. Lovely.

If Ukraine was looking to give Russia a humanitarian reason to invade, it just did.

Is this a brilliant play by Poroshenko to trap Putin into invading, or was it just plain stupid?

Only the final outcome will tell. But one thing's for certain now:  Poroshenko stirred up major resentment against Kiev, not the rebels, with his decree.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com