IMF Loan on its way to a Bankrupt Ukraine

Dagens Nyheter 28 March 2014, by Ingmar Nevéus (p.23): This will open the way for loans from the EU, the USA, and other countries amounting to USD 27 billions. At the same time accompanying the loans are demands for tough reforms. 

The opening up of loans from IMF seems to have been the trigger for a number of events. Minutes after this was reported Yulia Tymoshenko announced her candidature for president in the 25 May election, saying also that she would regain Crimea for Ukraine. The IMF loans also triggered the EU subsidies waiting to be given to Ukraine: 

Dagens Nyheter 28 March 2014, by Ingmar Nevéus (p.23): the EU is ready to pay out its emergency loan to Ukraine of €1 billion, once the EU Council of Finance Ministers has met and approved it. The EU total packages of aid to Ukraine amounts to €11 billions which includes loans from the European Investment Bank and the Council of Europe Development Bank.

In addition, the Swedish Government is eager to show its willingness to provide unspecified amounts to Ukraine over and above these sums.

The Dagens Nyheter article continues: All this has to be placed in its context. Ukraine is effectively bankrupt, and has been since the Euromaidan riots began 4 months ago. Credit Rating Agencies give Ukraine’s hryvnja the worst rating it is possible to give, -CCC. Add to this the fall in the value of the hryvnja by nearly 25 percent and the result is a fall of almost 25 percent, mirrored in the soaring costs of imports. The Ukrainian government predicts that the country’s economy will fall by 3 percent in 2014, though many economists believe this is an over-optimistic  estimate.

On top of all this misery [allt elände] has to be added all the measures Russia will be taking. The multi-billion loan that Russia promised the only legally elected government of Ukraine in recent times will not be paid out. The price of natural gas is expected to increase by 80 percent  within a few months and in addition the Russian gas giant Gazprom will be demanding several billions to be paid immediately for earlier deliveries. 

Even after news of the IMF loan yesterday Arseniy Yatsenyuk focussed on Ukraine’s economic problem: “the country is at the edge of economic and financial bankruptcy. The laws we have to push through are very unpopular, very hard. They are reforms that should have been implemented during the last 20 years.

Among the demands that both the IMF and the EU make [see the post of 30 March 2014 in the http://www.ordoliberalism.wordpress.com) on The EU and the Consolidation of the Neoliberal Project] is just the issue of corruption, which was one of the crucial driving forces of the winter’s uproar in Kiev. For the country’s new leadership it will be vital to find a way out of the morass of bribery. 

Some personal observations by way of conclusion: It seems to me that Russia has no need of the use of force in this situation. The long history of interdependency between Ukraine and Russia cannot just be ignored, as if it had never happened: http://en.wikipedia.org/wiki/Russia–Ukraine_relations#Kievan_Rus.27:

“Ukraine and Russia share much of their history. Kiev, the modern capital of Ukraine, is often referred to as a mother of Russian Cities or a cradle of the Rus’ civilisation owing to the once powerful Kievan Rus’ state, a predecessor of both Russian and Ukrainian nations.[6]”. In addition, despite the superficial divisions between west Ukraine and the more Russian based East of the country, the populations  of Russia and Kiev are intensely inter-mixed.

The many agreements that have been made since the end of the Soviet Union under Mikhail Gorbachev during the era of Perestroika and Glasnost are just a short interlude that was much to Gorbachev’s credit. He warns for the return of the Cold War, a return that many observers in Washington and London seem to take for granted with a curious degree of anticipation, even relish on the dubious grounds that Russia is a dictatorship while the EU is democratic.

The knee-jerk reaction to the red menace and Russian soldiers with snow on their boots is antiquated and does not respect the widespread rejection and repugnance of war among ordinary Russians. But this time the instrument of neoliberal revanchism is the EU and its potential ability to flirt with every country in Soviet Central and East Europe. What a pity the EU is not itself a democracy, it is every bit as distant from its subjects as Soviet Central and Eastern Europe. Most important of all, the delusion of moral superiority by the EU commissariat is dangerous for the preservation of peace in Europe.

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