The IMF’s New Cold War Loan to Ukraine
Losing Credibilityby MICHAEL HUDSON
CounterPunch, Sept. 09, 2014
In April 2014, fresh from riots in Maidan Square and the February 22 coup, and less than a month before the May 2 massacre in Odessa, the IMF approved a $17 billion loan program to Ukraine’s junta. Normal IMF practice is to lend only up to twice a country’s quote in one year. This was eight times as high.
Four months later, on August 29, just as Kiev began losing its attempt at ethnic cleansing against the eastern Donbas region, the IMF signed off on the first loan ever to a side engaged in a civil war, not to mention rife with insider capital flight and a collapsing balance of payments. Based on fictitiously trouble-free projections of the ability to pay, the loan supported Ukraine’s hernia currency long enough to enable the oligarchs’ banks to move their money quickly into Western hard-currency accounts before the hernia plunged further and was worth even fewer euros and dollars.
This loan demonstrates the degree to which the IMF is an arm of U.S. Cold War politics. Kiev used the loan for military expenses to attack the Eastern provinces, and the loan terms imposed the usual budget austerity, as if this would stabilize the country’s finances. Almost nothing will be received from the war-torn East, where basic infrastructure has been destroyed for power generation, water, hospitals and the civilian housing areas that bore the brunt of the attack. Nearly a million civilians are reported to have fled to Russia. Yet the IMF release announced: “The IMF praised the government’s commitment to economic reforms despite the ongoing conflict.”[1] A quarter of Ukraine’s exports normally are from eastern provinces, and are sold mainly to Russia. But Kiev has been bombing Donbas industry and left its coal mines without electricity.
This loan is bound to create even more dissension among IMF staff economists than broke out openly over the disastrous $47 billion loan to Greece – at that time the largest loan in IMF history – prompted a 50-page internal document leaked to the Wall Street Journal acknowledging that the IMF had “badly underestimated the damage that its prescriptions of austerity would do to Greece’s economy.” staff economists blamed pressure from eurozone countries protecting their own “banks [that] held too much Greek government debt. … The IMF had originally projected Greece would lose 5.5% of its economic output between 2009 and 2012. The country has lost 17% in real gross domestic output instead. The plan predicted a 15% unemployment rate in 2012. It was 25%.[2]
SNIP...
John Helmer’s Dances with Bears calculates that “of the $3.2 billion disbursed to the Ukrainian treasury by the IMF at the start of May, $3.1 billion had disappeared offshore by the middle of August.”[4] This raises the question of whether the IMF’s loan is legally an “odious debt,” being made to a military junta and stolen by government insiders. The IMF acknowledged that the central bank was simply turning money over to the kleptocrats who run the country’s banks as part of their conglomerates (as well as funding the government’s military attack on the East, largely on behalf of the leading kleptocrats behind the Maidan coup). “The proportion of government securities and loans to banks increased from 28 percent of NBU total assets at end-2010 to 56 percent at end-April 2014.” The financial situation is getting so much worse that to stave off insolvency, Ukraine’s leading banks are reported to need another $5 billion over and above the IMF’s $17 billion commitment.
CONTINUED...
http://www.counterpunch.org/2014/09/09/the-imfs-new-cold-war-loan-to-ukraine/
kleptocrat
Syllabification: klep·to·crat
Pronunciation: /ˈkleptəˌkrat /
NOUN
A ruler who uses political power to steal his or her country’s resources.
= new reply since forum marked as read
...it wasn't a coup. If anything it makes the case for it even more. If he was leaving on his own accord....it would have took longer as he still left a lot of stuff behind....and I like how you missed this little gem:
"
including, apparently, a large number of secret documents thrown into a lake)."
If you got a bunch of documents (and from I read from other articles, even more were found that didn't get completely burned, and plenty more still found in the file cabinets) that can incriminate you...you don't just dump them into the lake and you make damn sure they burn up well.
Shoot even the first line of that article says he fled. Fled from what? You said it yourself "Yes, Viktor Yanukovych spent three days packing up his goods, right at the very height of Maidan."
He left...the police switch sides. How perfectly opportune. Three days is not enough time to pack up a mansion and destroy evidence. Its just enough time pack up your most valuables (as you are seriously going to be without an income soon), because perhaps someone told him his protection was going to go bye bye on a certain date.
from unaccountability-there's a coup for ya to ponder on this 9-11, Tommy.
http://cheneywatch.org
K&R
From my understanding of the deals on offer, I can understand that Yanukovich may thought that Russia's offer was better for Ukraine. Russia had made it clear that there was a big downside if Ukraine chose a trade deal with the EU and Russia terms were indeed more favorable, at least in the short terms - which is all politicians care about.
The real problem he had was that he had campaigned for president on a platform of seeking closer integration with Europe rather than with Russia. Did he really mean that during the campaign or was he just saying something that he thought people wanted to hear? (He would not be the first politician to say something that he did not believe just to get elected.)
He had every 'right' to change his mind about a policy he had campaigned on, just as Obama and all politicians and political leaders seems to think they have. Of course, citizens had every right to express their discontent about his policy reversal, just as our voters do. Either voters felt more deeply about the issue than Mr. Yanukovich understood or he simply did not do a good job of explaining why the Russian offer was superior and he was reversing his previous pledge.
The massive crowds of protesters were not just Western-backed protesters unless you assume that Ukrainians don't care enough about their country to protest political decision they don't agree with. They protested in Kiev throughout a Ukrainian winter - which is not an endeavor for the faint of heart.
And they did not stage a coup. Mr. Yanukovich did not have to leave but chose to do so and flee to Russia with his money. (Perhaps coincidentally, his departure for Russia provided the pretext for the chain of events that led to Russian annexing Crimea. Funny how that worked out.) He still controlled the army and security forces, including the Berkut, when he left. The demonstrators had none of the tanks, mortars, artillery, anti-aircraft missiles and other military equipment that the separatists in eastern Ukraine have. He was in no danger and could still be in Kiev governing until December elections which is what he had agreed to do.
In December 2013:
Although Russia has repeatedly warned Kiev it will end trade benefits if it signs an association deal with the EU, Ukraine remains caught between Russia and the EU. Ukraine will send delegations to both the EU and Moscow “to restore economic trade relations,” Prime Minister Azarov said Tuesday.
http://rt.com/business/ukraine-china-loan-yanukovych-763/
Ukraine has borrowed $10 billion from China as of last December. They weren't getting any more.
In February 2014:
China sues Ukraine for breach of US$3b loan-for-grain agreement
China is seeking compensation of US$3 billion from Ukraine for the breach of a loans-for-grain contract signed in 2012, Russian media reported yesterday
http://www.scmp.com/news/china/article/1435976/china-sues-ukraine-breach-us3b-loan-grain-agreement
It looks to me like China was not likely to loan Ukraine any more money. So it probably came down to Russia or the EU/IMF.
