0 $
2,500 $
5,000 $
100 $
NOVEMBER 2024

Bermuda Triangle: USA – Ukraine – IMF

Support SouthFront

A new problem called ‘’The Bermuda Triangle’’ has uncovered a dangerous situation surrounding Ukraine’s debt to Russia, which amounts to 3 billion dollars. On the 9th of October the Ukrainian Ministry of finance gave a statement that consists of only two acts.

Bermuda Triangle: USA – Ukraine – IMF

Oiginally appeared at Fsksrb, translated by Никола Цвејић exclusively for SouthFront

Act one. Creditors met with the representatives of Ukraine in London which has led to the definite decision to execute a complete restructuring of the country’s debt to its private creditors. The reconstruction will be executed in the form of exchanging old Eurobonds with new ones, whose denominations amount to 80% of the previous ones. The interest rates will be changed as well as the payment horizon. The approval for a reconstruction like this, whose price equals to 15 billion dollars, has been given by the owners of the paper. The haircut included in the deal equals 3 billion dollars.

Act two. Ukraine writes off the 3 billion dollars it owes Russia, because Russia, given that it’s the owner of Eurobonds worth that amount, refuses to take part in the reconstruction process. As a resultKiev decreased their international debt with one signature on the 29th of October by 6 billion dollars. However, this is just the headline announced by the Ukrainian media.

The real situation is: Ukraine is heading full speed towards bankruptcy. A technical bankruptcy has already been announced at the end of September, when Kiev failed to pay the private owners of the Ukrainian debt 500 million dollars. Looking at the dynamics of the payment, the next test for Kiev should be paying back Russia the original value of the Eurobonds which were bought on the 20th of December 2013 and which last until the 20th of December 2015. Kiev has decided to dodge bankruptcy and in an exceptionally extravagant way: it has simply thrown away its responsibilities. Poroshenko, Jazenjuk and Jaresko are following the path of the Bolsheviks: The Bolsheviks, when they took power in 1917. Already in January of 1918 refused to pay the debts of the Czars and intermediary government.

Just before the meeting of Ukraine with the creditors in London, the mass media, citing The Wall Street Journal, announced that the USA along with other western countries plan to move forward with the changes of the IMF’s lending policy so they could help it continue to finance Ukraine. So bankruptcy can be averted in the face of the debt it owes Russia.

After the February coup in Kiev in 2014 Washington started to regularly appeal to the IMF to use its power to help Washington’s causes regarding Ukraine. In April of last year the IMF had to come to a solution regarding the credit that should be given to Ukraine which amounts to 15 billion dollars. A portion of the loan was paid but then the payments stopped. Kiev failed to fulfill any conditions of the program regarding the refinancing of the economy, which was given at the time of the loan agreement. It seems that the time has come to put an end to IMF financing Ukraine. But instead, new negotiations have started. In March of 2015 a new agreement between the IMF and Ukraine was concluded regarding a new loan of 17 billion dollars. Under the new agreement the conditions were even more privileged. In just one year of working with Ukraine the IMF has made countless violations of its rules, above all the rule that says that it’s prohibited to lend money to a country on which ground war is being waged. The decision of the IMF to give Ukraine a new loan right after it failed all the preconditions for getting the credit is also a scandal, a stain on the IMF’s reputation.

The problem is that the leadership of the IMF, which is headquartered in Washington, has been infiltrated by US government structures located directly next to it. Primarily – from Pennsylvania Avenue 1500, where the USA’s Ministry of finance is located. The ministry has gotten used to look at the IMF as its subsidiary. That is not a colorful comparison, it is a lawful fact which comes from the fact that the USA’s participation in the votes and paid in capital of the IMF is enormous. It amounts to about 17% which enables Washington to put a veto on all decisions of the IMF (the percentage that allows placing a veto is 15%).

Prior to the dismantling of the Bretton Woods foreign currency exchange-financial system in the 1970’s the functions of the IMF were very specific: giving credits to members so they could cover their budget balances. With the introduction of the new, Jamaican foreign currency exchange-financial system, the floating exchange rate currency was legalized, and so the survival of the IMF came under question. Washington managed to save the IMF and from then on the IMF has been a tool of American foreign policy. The most important instrument for that kind of use of the Fund is the Washington consensus – a number of regulations in the spirit of the economic liberalism of the country – members that receive loans from the IMF.

The acute phase in the IMF’s crisis started five years ago. At the end of 2010. The Council of directors of the IMF voted for the 14th correction of the countries quotas – which include the members of BRICS, as well as the lowering of the USA’s and its European allies quotas. The 14th corrections have brought Washington closer to the ‘’red line’’ of the 15%, because when it takes power Washington will lose real power over the Fund. In 2010 alongside that a decision was brought to double the Funds capital. All the countries, with the exception of the USA, have ratified that decision a long time ago, but Washington is stalling. Why give the IMF 60 billion dollars (the obligation of the USA due to the decision to double the capital) when the USA can lose power over the Fund in the short future? For many of the American politicians and officials the IMF has become similar to a suitcase without a handle: it’s hard to carry around, but it’s a pity to throw it away. Regardless, there are many people in the USA that think that the ‘’suitcase’’ should be thrown away, because it can’t always rely on international forums, constantly answering the same question: ‘’When will the USA ratify the IMF decisions?’’

The violations that the IMF has made can only be explained by the fact that Washington is spiting on the future of the IMF. But, before the suitcase is thrown away before we use it to its assets, no matter how small they are. Those attempts look awkward, or even stupid.

What kind of ‘’changes’’ are possible? I only see two options:

  1. Clean up the regulations so they enable Ukraine’s debt to Russia to be reduced like the private loans.
  2. Change the regulation that prohibits that the IMF can lend money to countries which violate their obligations or do not qualify under current IMF rules.

Ukraine favors both options but they are fatal to the IMF. Suicide is being suggested to the IMF – to make a precedent which other countries will quickly use. From that moment on every country, even if it declares a bankruptcy because of its debt will receive a loan from the IMF. Elementary logic says that if Kiev can do it, why shouldn’t we?

Besides, regarding Kiev the IMF cannot have any illusions. The appetite occurs during the feast. If the IMF decides that the Ukrainian debt to Russia can be subject to reconstruction, Kiev will immediately insist on the reconstruction of the debt… and the IMF. And in the case that the IMF rejects Kiev – the Ukrainian wise men will give an ultimatum to the Fund, counting on the support from Uncle Sam. This follows the saying: ‘’Give a man a hand, and he will take the whole arm.’’

If Washington truly wishes to help Ukraine, it would probably listen and follow the advice given by the Russian president: give Ukraine 3 billion dollars so they can return its loan to Russia. In that case it won’t come to any kind of bankruptcy on the 20th of December. Otherwise there will be a scandalous situation with bad side effects for all 3 countries of the new ‘’Bermuda triangle’’. And regarding the IMF, when it turns 70 years old in December that ‘’suitcase without a handle’’ will very easily be found in the trash with the help of its American owners.

Support SouthFront

SouthFront

Subscribe
Notify of
guest
1 Comment
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Real Anti-Racist Action

Ukraine is lead by…. you guessed it. Zionist-Jews. Just like the first Soviet government was that genocided millions of indigenous ethnic Russians. This time around, it is the EU and Ukraine who is Communist, and Russia is the good guy Nationalist. http://ihr.org/

1
0
Would love your thoughts, please comment.x
()
x