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Russia sends warning to IMF on Ukraine

Russian Finance Minister Anton Siluanov warns IMF against funding Ukraine – hints at legal action if funding continues.

Alexander Mercouris

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The IMF is due to meet tomorrow Wednesday 14th September 2016 to discuss Ukraine. In advance of that meeting Russian Finance Minister Anton Siluanov has fired a warning shot across the IMF’s bows.

Here is what Russia’s official news agency TASS reports Siluanov as having said:

“The International Monetary Fund has made changes to its policy on the provision of funds to a country, which is in arrears to an official creditor. 

The fund set the indicators for reduction of Ukraine’s debt without taking into account the interests of Russia, and our $3 billion of debt was included in the list of liabilities which are to be restructured. Until 2018, the program was made in such a way that Russia will receive no single penny of that debt from Ukraine. 

We were going to meet halfway with our neighbours and partner even amid such tensions. As the result of zero export duties Russia’s contribution to the stabilisation of the Ukrainian economy amounted to more than $1 billion, while the total international assistance to Ukraine amounted to $3.6 billion. 

Today, we will give the necessary orders to our representative in the International Monetary Fund – during the consideration of the International Monetary Fund’s loan to Ukraine we will vote against this decision, because we believe that it was made in non-compliance with the regulations.  It is possible that the fund did not have the full information on negotiations, though, it would seem strange – our negotiating position was entirely open.”

Siluanov is being disingenuous.  The IMF did change its rules last year to allow it to provide funding to countries like Ukraine which have defaulted on debts they owe to state creditors.  However as Siluanov of course knows that has no bearing on Ukraine’s existing IMF programme.

The reason the IMF has persisted with its programme for Ukraine despite Ukraine’s failure to pay the $3 billion debt it owes Russia is not because the IMF recently changed its rules. 

It is because Ukraine is disputing the debt, which is the subject of legal proceedings brought by Russia against Ukraine in London’s Commercial Court.  Since the debt is disputed the IMF has to disregard it since it cannot oblige Ukraine to pay a debt the Commercial Court might say Ukraine does not owe.

In other words what Siluanov is doing is taking the decision of the Commercial Court in January for granted, assuming in advance that it will be in Russia’s favour.  On the strength of that he is telling the IMF that it cannot proceed with its programme for Ukraine, and is saying that on the strength of that Russia’s representative on the IMF Board will now vote against it doing so.

Whilst Siluanov is obviously free to take the Commercial Court’s pending decision in January for granted, the IMF obviously cannot do so.  In light of this it has told Siluanov – quite rightly – that its position at the meeting tomorrow will not be changed in response to what he has just said.

The reality is that for many months now Ukraine has received no IMF funding.  Ukraine nonetheless continues to include IMF funding it has not received in its budget for this year. 

The extent to which this bluff can be kept going is problematic, and especially in light of the court hearing in January – which if it goes in Russia’s favour has the potential to bring IMF funding to a complete stop – someone has apparently decided that some IMF funding has to be given to Ukraine now in order to keep the budget ticking over at least until the hearing of the court case in January. 

Reports suggest the sum that is being considered and which the IMF Board is expected to authorise for disbursement to Ukraine on Wednesday is $1 billion, which is less than the $1.7 billion Ukraine was apparently hoping for.

What Siluanov is doing by making this statement is not trying to stop the disbursement being authorised on Wednesday.  As the TASS report of his comments show, the Russians know perfectly well that they cannot stop the disbursement being authorised on Wednesday, and that they know that it will be authorised on Wednesday and paid to Ukraine.  

Rather what Siluanov is doing is warning the IMF that if the Judgment in January goes in Russia’s favour then Russia will insist that Ukraine’s IMF programme be brought to a stop, with no further disbursements being authorised or made after that date.  

Ukraine would at that point be in unequivocal default on its debt to Russia, and what Siluanov is saying is that further IMF funding for Ukraine would in that case be illegal despite the IMF’s recent change of its rules, and would therefore have to stop.   

The IMF’s recent change of its rules requires a country like Ukraine in case of default to negotiate in good faith with its creditor before any further IMF funding can be provided.  Siluanov in his statement goes to considerable length to show that Ukraine has not negotiated with Russia in good faith

“We have not received an official request from the Ukrainian side to start the negotiation process, the process of debt restructuring.  All attempts to conduct any negotiations both at the ministerial level, level of consultants, in fact, were fake.

Colleagues (ie. Ukraine – AM) presented us a proposal to write off through restructuring 36% of the debt.  We did not take such proposals seriously because they could also propose writing off their whole debt to Russia and it could also be considered as a proposal.

I remind you that as a result of agreement with Ukraine commercial lenders wrote off about 18-20% of the debt by using the term of discounted value.  Ukraine has to provide the Russian side with offers surely on more favourable terms than those proposals made and agreed with commercial creditors.”

(bold italics added)

In saying that Ukraine cannot be expected to treat a state creditor like Russia less favourably than it has its private commercial creditors Siluanov is obviously right.  Indeed the IMF has already said as much, and has admitted that Ukraine has so far failed to negotiate repayment of its debt with Russia in good faith.  Given that this is so, Siluanov is also obviously right to say that – provided the Commercial Court decides the case in Russia’s favour – once Ukraine is in unequivocal default on its debt to Russia it cannot take advantage of the IMF’s recent change in its rules, and that payments by the IMF to Ukraine would at that point have to be brought to a stop.

Behind Siluanov’s warning to the IMF there is a clear threat of further legal action if IMF funding continues, with Russia looking to enforce its Judgment through the courts against any funds the IMF allocates to Ukraine after the Judgment.  This is what Siluanov is clearly hinting at when he says

“….our $3 billion of debt was included in the list of liabilities which are to be restructured. Until 2018, the program was made in such a way that Russia will receive no single penny of that debt from Ukraine”.

Siluanov has a reputation as a colourless technocrat.  That was not quite the impression I got of him when I saw him recently at SPIEF.  Though he is clearly not in the same league as Kudrin or Nabiullina – two Russian officials I saw him with – he came across to me as non-intellectual but rather tough, which is what an effective finance minister has to be.  Here we see an example of him acting tough. 

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It’s Official: ‘Britain’s Democracy Now At Risk’

It’s not just campaigners saying it any more: democracy is officially at risk, according to parliament’s own digital, culture, media and sport committee.

The Duran

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Via True Publica, authored by Jessica Garland – Electoral Reform Society:


Britain’s main campaign rules were drawn up in the late 1990s, before social media and online campaigning really existed. This has left the door wide open to disinformation, dodgy donations and foreign interference in elections.

There is a real need to close the loopholes when it comes to the online Wild West.

Yet in this year’s elections, it was legitimate voters who were asked to identify themselves, not those funnelling millions into political campaigns through trusts, or those spreading fake news.

The government trialled mandatory voter ID in five council areas in May. In these five pilot areas alone about 350 people were turned away from polling stations for not having their papers with them — and they didn’t return. In other words, they were denied their vote.

Yet last year, out of more than 45 million votes cast across the country, there were just 28 allegations of personation (pretending to be someone else at the polling station), the type of fraud voter ID is meant to tackle.

Despite the loss of 350 votes, the pilots were branded a success by the government. Yet the 28 allegations of fraud (and just one conviction) are considered such a dire threat that the government is willing to risk disenfranchising many more legitimate voters to try to address it. The numbers simply don’t add up.

Indeed, the fact-checking website FullFact noted that in the Gosport pilot, 0.4 per cent of voters did not vote because of ID issues. That’s a greater percentage than the winning margin in at least 14 constituencies in the last election. Putting up barriers to democratic engagement can have a big impact. In fact, it can swing an election.

In the run-up to the pilots, the Electoral Reform Society and other campaigners warned that the policy risked disenfranchising the most marginalised groups in society.

The Windrush scandal highlights exactly the sort of problems that introducing stricter forms of identity could cause: millions of people lack the required documentation. It’s one of the reasons why organisations such as the Runnymede Trust are concerned about these plans.

The Electoral Commission has now published a report on the ID trials, which concludes that “there is not yet enough evidence to fully address concerns” on this front.

The small number of pilots, and a lack of diversity, meant that sample sizes were too small to conclude anything about how the scheme would affect various demographic groups. Nor can the pilots tell us about the likely impact of voter ID in a general election, where the strain on polling staff would be far greater and a much broader cross-section of electors turns out to vote.

The Electoral Reform Society, alongside 22 organisations, campaigners and academics, has now called on the constitution minister to halt moves to impose this policy. The signatories span a huge cross-section of society, including representatives of groups that could be disproportionately impacted by voter ID, from Age UK to Liberty and from the British Youth Council to the Salvation Army and the LGBT Foundation.

Voters know what our democratic priorities should be: ensuring that elections are free from the influence of big donors. Having a secure electoral register. Providing balanced media coverage. Transparency online.

We may be little wiser as a result of the government’s voter ID trials. Yet we do know where the real dangers lie in our politics.

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Corrupt Robert Mueller’s despicable Paul Manafort trial nears end (Video)

The Duran – News in Review – Episode 79.

Alex Christoforou

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Paul Manafort’s legal team rested its case on Tuesday without calling a single witness. This sets the stage for closing arguments before the judge hands the case to jurors for a verdict.

Manafort’s defense opted to call no witnesses, choosing instead to rely on the team’s cross-examination of government witnesses including a very devious Rick Gates, Manafort’s longtime deputy, and several accountants, bookkeepers and bankers who had financial dealings with Manafort.

Closing arguments are expected on Wednesday. Jurors may begin deliberating shortly after receiving their final instructions from judge Ellis.

Manafort case has nothing to do with Mueller’s ‘Trump-Russia collusion witch-hunt’ as the former DC lobbyist is accused of defrauding banks to secure loans and hiding overseas bank accounts and income from U.S. tax authorities.

U.S. District Judge T.S. Ellis III denied a defense motion to acquit Manafort on the charges because prosecutors hadn’t proved their case.

The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris discuss the circus trial of Trump’s former Campaign Manager Paul Manafort, and how crooked cop Robert Mueller is using all his power to lean on Manafort, so as to conjure up something illegal against US President Donald Trump.

Remember to Please Subscribe to The Duran’s YouTube Channel.

Via Zerohedge

Prosecutors allege he dodged taxes on millions of dollars made from his work for a Ukrainian political party, then lied to obtain bank loans when cash stopped flowing from the project.

The courtroom was sealed for around two hours Tuesday morning for an unknown reason, reopening around 11:30 a.m. with Manafort arriving around 10 minutes later.

The decision to rest their case without calling any witnesses follows a denial by Judge T.S. Ellis III to acquit Manafort after his lawyers tried to argue that the special counsel had failed to prove its case at the federal trial.

The court session began at approximately 11:45 a.m.:

“Good afternoon,” began defense attorney Richard Westling, who corrected himself and said, “Good morning.”

“I’m as surprised as you are,” Judge Ellis responded.

Ellis then heard brief argument from both sides on the defense’s motion for acquittal, focusing primarily on four counts related to Federal Savings Bank.

Federal Savings Bank was aware of the status of Paul Manafort’s finances,” Westling argued. “They came to the loans with an intent of doing business with Mr. Manafort.”

Prosecutor Uzo Asonye fired back, saying that that even if bank chairman Steve Calk overlooked Manafort’s financial woes, it would still be a crime to submit fraudulent documents to obtain the loans.

“Steve Calk is not the bank,” Asonye argued, adding that while Caulk may have “had a different motive” — a job with the Trump administration — “I’m not really sure there’s evidence he knew the documents were false.”

Ellis sided with prosecutors.

The defense makes a significant argument about materiality, but in the end, I think materiality is an issue for the jury,” he said, adding. “That is true for all the other counts… those are all jury issues.”

Once that exchange was over, Manafort’s team was afforded the opportunity to present their case, to which lead attorney Kevin Downing replied “The defense rests.

Ellis then began to question Manafort to ensure he was aware of the ramifications of that decision, to which the former Trump aide confirmed that he did not wish to take the witness stand.

Manafort, in a dark suit and white shirt, stood at the lectern from which his attorneys have questioned witnesses, staring up at the judge. Ellis told Manafort he had a right to testify, though if he chose not to, the judge would tell jurors to draw no inference from that. – WaPo

Ellis asked Manafort four questions – his amplified voice booming through the courtroom:

Had Manafort discussed the decision with his attorney?

“I have, your honor,” Manafort responded, his voice clear.

Was he satisfied with their advice?

“I am, your honor,” Manafort replied.

Had he decided whether he would testify?

“I have decided,” Manafort said.

“Do you wish to testify?” Ellis finally asked.

“No, sir,” Manafort responded.

And with that, Manafort returned to his seat.

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One more step toward COMPLETE de-dollarization

Over the past several months, sitting here in Moscow, it has become increasingly obvious that while the US Dollar is unquestionably the world’s leading and liquid reserve currency, it comes with an ever increasing high price (of sovereignty and FX) if you are not the USA.

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I have opined and written about the trend towards de-dollarization before, but with the latest US –Turkish spat it has hit the wallets, mattresses and markets of a number of countries, be they aligned with Washington or not. One thing they all have in common was that in this recent era of low cost available money, many happily fed at the US dollar trough.

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This serves as a further albeit loud example to many nations for the need to diversify to an extent away from the greenback, or risk being caught up in its volatile, sudden and unpredictably risky increasingly politicized directions.

The Dollar and the geopolitical winds from Washington are today as never before openly being used as policy, which can be called the “carrot and stick”, a distinctly Pavlovian approach. Sadly, few if any can make out where or what the carrot is in this recent US worldview branding.

Tariffs, sanctions, pressured exchange rates, the Federal Reserve loosening or tightening, trade agreements and laws ignored or simply trashed… there is a lot going on which seems to democratically affect America’s allies as well as those on Washington’s politically popular and dramatic “poo-poo” list.

Just now from a press conference in Turkey, I watched Russia’s foreign minister Lavrov say that through the actions shown by the US, the role of the US dollar as a secure global reserve currency for free trade will diminish as more countries switch to national currencies for international trade.

He clearly spoke for many nations when he said; “It will make more and more countries that are not even affected by US sanctions go away from the dollar and rely on more reliable, contractual partners in terms of currency use.” Putting the situation in a nutshell he went on to say “I have already said this about sanctions: they are illegal, they undermine all principles of global trade and principles approved by UN decisions, under which unilateral measures of economic duress are unlawful.”

Turkey, a long-standing NATO ally and a key line of western defense during the long cold war years fully agreed with his Russian counterpart. The Turkish foreign minister Mr. Cavosoglu openly warned that US sanctions or trade embargoes can and are being unilaterally imposed against any country at any time if they do not toe DC’s political line.

He said at the same press conference; “Today, sanctions are imposed on Turkey, and tomorrow they can be used against any other European state. If the United States wants to maintain respect in the international arena, then it is necessary for it to be respectful of the interests of other countries.”

What is happening in Turkey is symptomatic of the developed and emerging markets globally. When trillions of dollars of newly issued lucre was up for grabs, thanks to several developed country central banks, it was comparatively easy for governments and companies just like Turkey’s to borrow funds denominated in dollars and not their national currencies.

Turkey has relied on foreign-currency debt more than most EM’s. Corporate, financial and other debt denominated mostly in dollars, approximates close to 70% of it’s economy. Therefore as the Turkish lira plunges, it is very costly for those companies to repay their dollar-denominated loans, and even now it is patently clear many will not.

The concern rattling around the underbelly of the global markets is what can be reasonably expected for assets and economies that were inflated by cheap debt, the United States included. All this points not so much to a banking crisis as has happened eight years ago, but a systemic financial market crisis.

This is a new one, and I doubt if any QE, QT, NIRPs, or ZIRPs will make much of a difference, despite the rocket-high equity markets the US has been displaying.

One financial trader I spoke to, whom I have known since the early 1980’s (and I thought him ancient then) muttered to me “we’re gettin’ into the ecstasy stage, nothing but the high matters, everything else including the VIX is seen as boring denial, and not the warning tool it is. Better start loading up on gold.”

Meanwhile, de-dollarization is ongoing in Russia and is carefully studied by a host of countries, especially as the Russian government has not yet finished selling off US debt; it still has just a few billion to go. The Russian Finance Minister A. Siluanov said this past Sunday that Russia would continue decreasing holdings of Treasuries in response to sanctions.

The finance minister went on to say that, Russia is also considering distancing itself from using the US dollar for international trade, calling it an unreliable, conditional and hence risky tool for payments.

Between March and May this year, Russia’s US debt holdings were sold down by $81 billion, which is 84% of its total US debt holdings, and while I don’t know the current figure it is certain to be even less.

The latest round of tightening sanctions screws against Russia were imposed by the State Department under a chemical and biological warfare law and should be going into effect on August 22. This in spite of the fact that no proof was ever shown, not under any established national or international law, or with any of several global biochemical conventions, not even in the ever entertaining court of public opinion.

Whatever Russia may continue to do in its relationship with US debt or the dollar, the fact of the matter is that Russia is not a heavyweight in this particular financial arena, and the direct effects of Russia’s responses are negligible. However, the indirect effects are huge as they reflect what many countries (allied or unallied with the US) see as Washington’s overbearing and more than slightly unipolar trade and geopolitical advantage quests, be they Mexico, Canada, the EU, or anyone else on any hemisphere of this globe.

Some of the potential indirect effects over time may be a similar sell-off or even gradual reduction of US debt exposure from China or any one of several dozens of countries deciding to reduce their exposure to US debt by reducing their purchases and waiting for existing Treasuries to mature. In either case, the trend is there and is not going away anytime soon.

When Russia clears its books of US dollarized debt, then who will be next in actively diversifying their US debt risk? Then what might be the fate of the US Dollar, and what value then will be the international infusions to finance America’s continually growing debt, or fuel the funds needed for further market growth? Value and the energy of money has no politics, it ultimately trends towards areas where there is a secure business dynamic. That being said, looks like we are now and will be living through the most interesting of disruptive times.

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