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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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Ukraine Wants Nuclear Weapons: Will the West Bow to the Regime in Kiev?

Efforts to prevent nuclear proliferation are one of the few issues on which the great powers agree, intending to continue to limit the spread of nuclear weapons and to prevent new entrants into the exclusive nuclear club.

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Authored by Federico Pieraccini via The Strategic Culture Foundation:


The former Ukrainian envoy to NATO, Major General Petro Garashchuk, recently stated in an interview with Obozrevatel TV:

“I’ll say it once more. We have the ability to develop and produce our own nuclear weapons, currently available in the world, such as the one that was built in the former USSR and which is now in independent Ukraine, located in the city of Dnipro (former Dnipropetrovsk) that can produce these kinds of intercontinental ballistic missiles. Neither the United States, nor Russia, nor China have produced a missile named Satan … At the same time, Ukraine does not have to worry about international sanctions when creating these nuclear weapons.”

The issue of nuclear weapons has always united the great powers, especially following the signing of the Non-Proliferation Treaty (NPT). The decision to reduce the number of nuclear weapons towards the end of the Cold War went hand in hand with the need to prevent the spread of such weapons of mass destruction to other countries in the best interests of humanity. During the final stages of the Cold War, the scientific community expended great effort on impressing upon the American and Soviet leadership how a limited nuclear exchange would wipe out humanity. Moscow and Washington thus began START (Strategic Arms Reduction Treaty) negotiations to reduce the risk of a nuclear winter. Following the dissolution of the USSR, the Budapest Memorandum on Security Assurances persuaded Ukraine to relinquish its nuclear weapons and accede to the NPT in exchange for security assurances from its signatories.

Ukraine has in recent years begun entertaining the possibility of returning to the nuclear fold, especially in light of North Korea’s recent actions. Kim Jong-un’s lesson seems to be that a nuclear deterrent remains the only way of guaranteeing complete protection against a regional hegemon. The situation in Ukraine, however, differs from that of North Korea, including in terms of alliances and power relations. Kiev’s government came into power as a result of a coup d’etat carried out by extremist nationalist elements who seek their inspiration from Nazi collaborator Stepan Bandera. The long arm of NATO has always been deeply involved in the dark machinations that led to Poroshenko’s ascendency to the Ukrainian presidency. From a geopolitical point of view, NATO’s operation in Ukraine (instigating a civil war in the wake of a coup) follows in the footsteps of what happened in Georgia. NATO tends to organize countries with existing anti-Russia sentiments to channel their Russophobia into concrete actions that aim to undermine Moscow. The war in the Donbass is a prime example.

However, Ukraine has been unable to subdue the rebels in the Donbass region, the conflict freezing into a stalemate and the popularity of the Kiev government falling as the population’s quality of life experiences a precipitous decline. The United States and the European Union have not kept their promises, leaving Poroshenko desperate and tempted to resort to provocations like the recent Kerch strait incident or such as those that are apparently already in the works, as recently reported by the DPR authorities.

The idea of Ukraine resuming its production of nuclear weapons is currently being floated by minor figures, but it could take hold in the coming months, especially if the conflict continues in its frozen state and Kiev becomes frustrated and desperate. The neoconservative wing of the American ruling elite, absolutely committed to the destruction of the Russian Federation, could encourage Kiev along this path, in spite of the incalculable risks involved. The EU, on the other hand, would likely be terrified at the prospect, which would also place it between a rock and a hard place. Kiev, on one side, would be able to extract from the EU much needed economic assistance in exchange for not going nuclear, while on the other side the neocons would be irresponsibly egging the Ukrainians on.

Moscow, if faced with such a possibility, would not just stand there. In spite of Russia having good relations with North Korea, it did not seem too excited at the prospect of having a nuclear-armed neighbor. With Ukraine, the response would be much more severe. A nuclear-armed Ukraine would be a red line for Moscow, just as Crimea and Sevastopol were. It is worth remembering the Russian president’s words when referring to the possibility of a NATO invasion of Crimea during the 2014 coup:

“We were ready to do it [putting Russia’s nuclear arsenal on alert]. Russian people live there, they are in danger, we cannot leave them. It was not us who committed to coup, it was the nationalists and people with extreme beliefs. I do not think this is actually anyone’s wish – to turn it into a global conflict.”

As Kiev stands on the precipice, it will be good for the neocons, the neoliberals and their European lackeys to consider the consequences of advising Kiev to jump or not. Giving the nuclear go-ahead to a Ukrainian leadership so unstable and detached from reality may just be the spark that sets off Armageddon.

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Mike Pompeo lays out his vision for American exceptionalism (Video)

The Duran – News in Review – Episode 158.

Alex Christoforou

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The Duran’s Alex Christoforou and International Affairs and Security Analyst via Moscow, Mark Sleboda take a look at Mike Pompeo’s shocking Brussels speech, where the U.S. Secretary of State took aim at the European Union and United Nations, citing such institutions as outdated and poorly managed, in need of a new dogma that places America at its epicenter.

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Speaking in Brussels, U.S. Secretary of State Mike Pompeo unwittingly underscored why nobody takes the United States seriously on the international stage. Via The Council on Foreign Relations


In a disingenuous speech at the German Marshall Fund, Pompeo depicted the transactional and hypernationalist Trump administration as “rallying the noble nations of the world to build a new liberal order.” He did so while launching gratuitous attacks on the European Union, United Nations, World Bank, and International Monetary Fund (IMF)—pillars of the existing postwar order the United States did so much to create. He remained silent, naturally, on the body blows that the current administration has delivered to its erstwhile allies and partners, and to the institutions that once upon a time permitted the United States to legitimate rather than squander its international leadership.

In Pompeo’s telling, Donald J. Trump is simply seeking a return to the world that former Secretary of State George Marshall helped to create. In the decades after 1945, the United States “underwrote new institutions” and “entered into treaties to codify Western values of freedom and human rights.” So doing, the United States “won the Cold War” and—thanks to the late President George H. W. Bush, “we won the peace” that followed. “This is the type of leadership that President Trump is boldly reasserting.”

That leadership is needed because the United States “allowed this liberal order to begin to corrode” once the bipolar conflict ended. “Multilateralism has too often become viewed as an end unto itself,” Pompeo explained. “The more treaties we sign, the safer we supposedly are. The more bureaucrats we have, the better the job gets done.” What is needed is a multilateralism that once again places the nation-state front and center.

Leave aside for the moment that nobody actually believes what Pompeo alleges: that multilateralism should be an end in itself; that paper commitments are credible absent implementation, verification, and enforcement; or that the yardstick of success is how many bureaucrats get hired. What sensible people do believe is that multilateral cooperation is often (though not always) the best way for nations to advance their interests in an interconnected world of complicated problems. Working with others is typically superior to unilateralism, since going it alone leaves the United States with the choice of trying to do everything itself (with uncertain results) or doing nothing. Multilateralism also provides far more bang for the buck than President Trump’s favored approach to diplomacy, bilateralism.

Much of Pompeo’s address was a selective and tendentious critique of international institutions that depicts them as invariably antithetical to national sovereignty. Sure, he conceded, the European Union has “delivered a great deal of prosperity to the continent.” But it has since gone badly off track, as the “political wake-up call” of Brexit showed. All this raised a question in his mind: “Is the EU ensuring that the interests of countries and their citizens are placed before those of bureaucrats and Brussels?”

The answer, as one listener shouted out, is “Yes!” The secretary, like many U.S. conservative critics of European integration, is unaware that EU member states continue to hold the lion’s share of power in the bloc, which remains more intergovernmental than supranational. Pompeo seems equally unaware of how disastrously Brexit is playing out. With each passing day, the costs of this catastrophic, self-inflicted wound are clearer. In its quest for complete policy autonomy—on ostensible “sovereignty” grounds—the United Kingdom will likely have to accept, as the price for EU market access, an entire body of law and regulations that it will have no say in shaping. So much for advancing British sovereignty.

Pompeo similarly mischaracterizes the World Bank and IMF as having gone badly off track. “Today, these institutions often counsel countries who have mismanaged their economic affairs to impose austerity measures that inhibit growth and crowd out private sector actors.” This is an odd, hybrid critique. It combines a shopworn, leftist criticism from the 1990s—that the international financial institutions (IFIs) punish poor countries with structural adjustment programs—with the conservative accusation that the IFIs are socialist, big-government behemoths. Both are ridiculous caricatures. They ignore how much soul-searching the IFIs have done since the 1990s, as well as how focused they are on nurturing an enabling institutional environment for the private sector in partner countries.

Pompeo also aims his blunderbuss at the United Nations. He complains that the United Nations’ “peacekeeping missions drag on for decades, no closer to peace,” ignoring the indispensable role that blue helmets play in preventing atrocities, as well as a recent Government Accountability Office report documenting how cost-effective such operations are compared to U.S. troops. Similarly, Pompeo claims, “The UN’s climate-related treaties are viewed by some nations simply as a vehicle to redistribute wealth”—an accusation that is both unsubstantiated and ignores the urgent need to mobilize global climate financing to save the planet.

Bizarrely, Pompeo also turns his sights on the Organization of American States (OAS) and the African Union (AU), for alleged shortcomings. Has the OAS, he asks, done enough “to promote its four pillars of democracy, human rights, security, and economic development?” Um, no. Could that have something to do with the lack of U.S. leadership in the Americas on democracy and human rights? Yes. Might it have helped if the Trump administration had filled the position of assistant secretary of state for Western Hemisphere affairs before October 15 of this year? Probably.

Equally puzzling is Pompeo’s single line riff on the AU. “In Africa, does the African Union advance the mutual interest of its nation-state members?” Presumably the answer is yes, or its members would be headed for the door. The AU continues to struggle in financing its budget, but it has made great strides since its founding in 2002 to better advance security, stability, and good governance on the continent.

“International bodies must help facilitate cooperation that bolsters the security and values of the free world, or they must be reformed or eliminated,” Pompeo declared. Sounds reasonable. But where is this “free world” of which the secretary speaks, and what standing does the United States today have to defend, much less reform it? In the two years since he took office, Donald Trump has never expressed any interest in defending the international order, much less “returning [the United States] to its traditional, central leadership role in the world,” as Pompeo claims. Indeed, the phrase “U.S. leadership” has rarely escaped Trump’s lips, and he has gone out of his way to alienate longstanding Western allies and partners in venues from NATO to the G7.

When he looks at the world, the president cares only about what’s in it for the United States (and, naturally, for him). That cynicism explains the president’s deafening silence on human rights violations and indeed his readiness to cozy up to strongmen and killers from Vladimir Putin to Rodrigo Duterte to Mohammed bin Salman to too many more to list. Given Trump’s authoritarian sympathies and instincts, Pompeo’s warnings about “Orwellian human rights violations” in China and “suppressed opposition voices” in Russia ring hollow.

“The central question that we face,” Pompeo asked in Brussels, “is the question of whether the system as currently configured, as it exists today—does it work? Does it work for all the people of the world?” The answer, of course, is not as well as it should, and not for nearly enough of them. But if the secretary is seeking to identify impediments to a better functioning multilateral system, he can look to his left in his next Cabinet meeting.

“Principled realism” is the label Pompeo has given Trump’s foreign policy. Alas, it betrays few principles and its connection to reality is tenuous. The president has abandoned any pursuit of universal values, and his single-minded obsession to “reassert our sovereignty” (as Pompeo characterizes it) is actually depriving the United States of joining with others to build the prosperous, secure, and sustainable world that Americans want.

“Bad actors have exploited our lack of leadership for their own gain,” the secretary of state declared in Belgium. “This is the poisoned fruit of American retreat.” How true. Pompeo’s next sentence—“President Trump is determined to reverse that”—was less persuasive.

 

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Russia calls on US to put a leash on Petro Poroshenko

The West’s pass for Mr. Poroshenko may blow up in NATO’s and the US’s face if the Ukrainian President tries to start a war with Russia.

Seraphim Hanisch

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Russia called on Washington not to ignore the Poroshenko directives creating an active military buildup along the Ukrainian-Donbass frontier, this buildup consisting of Ukrainian forces and right-wing ultranationalists, lest it “trigger the implementation of a bloody scenario”, according to a Dec 11 report from TASS.

The [Russian] Embassy [to the US] urges the US State Department to recognize the presence of US instructors in the zone of combat actions, who are involved in a command and staff and field training of Ukraine’s assault airborne brigades. “We expect that the US will bring to reason its proteges. Their aggressive plans are not only doomed to failure but also run counter to the statements of the administration on its commitment to resolve the conflict in eastern Ukraine by political and diplomatic means,” the statement said.

This warning came after Eduard Basurin, the deputy defense minister of the Donetsk People’s Republic noted that the Ukrainian army was massing troops and materiel for a possible large-scale offensive at the Mariupol section of the contact line in Donbass. According to Basurin, this action is expected to take place on 14 December. TASS offered more details:

According to the DPR’s reconnaissance data, Ukrainian troops plan to seize the DPR’s Novoazovsky and Temanovsky districts and take control over the border section with Russia. The main attack force of over 12,000 servicemen has been deployed along the contact line near the settlements of Novotroitskoye, Shirokino, and Rovnopol. Moreover, more than 50 tanks, 40 multiple missile launcher systems, 180 artillery systems and mortars have been reportedly pulled to the area, Basurin added. Besides, 12 BM-30 Smerch heavy multiple rocket launchers have been sent near Volodarsky.

The DPR has warned about possible provocations plotted by Ukrainian troops several times. Thus, in early December, the DPR’s defense ministry cited reconnaissance data indicating that the Ukrainian military was planning to stage an offensive and deliver an airstrike. At a Contact Group meeting on December 5, DPR’s Foreign Minister Natalia Nikonorova raised the issue of Kiev’s possible use of chemical weapons in the conflict area.

This is a continuation of the reported buildup The Duran reported in this article linked here, and it is a continuation of the full-scale drama that started with the Kerch Strait incident, which itself appears to have been staged by Ukraine’s president Petro Poroshenko. Following that incident, the president was able to get about half of Ukraine placed under a 30-day period of martial law, citing “imminent Russian aggression.”

President Poroshenko is arguably a dangerous man. He appears to be desperate to maintain a hold on power, though his approval numbers and support is abysmally low in Ukraine. While he presents himself as a hero, agitating for armed conflict with Russia and simultaneously interfering in the affairs of the Holy Eastern Orthodox Church, he is actually one of the most dangerous leaders the world has to contend with, precisely because he is unfit to lead.

Such men and women are dangerous because their desperation makes them short-sighted, only concerned about their power and standing.

An irony about this matter is that President Poroshenko appears to be exactly what the EuroMaidan was “supposed” to free Ukraine of; that is, a stooge puppet leader that marches to orders from a foreign power and does nothing for the improvement of the nation and its citizens.

The ouster of Viktor Yanukovich was seen as the sure ticket to “freedom from Russia” for Ukraine, and it may well have been that Mr. Yanukovich was an incompetent leader. However, his removal resulted in a tryannical regíme coming into power, that resulting in the secession of two Ukrainian regions into independent republics and a third secession of strategically super-important Crimea, who voted in a referendum to rejoin Russia.

While this activity was used by the West to try to bolster its own narrative that Russia remains the evil henchman in Europe, the reality of life in Ukraine doesn’t match this allegation at all. A nation that demonstrates such behavior shows that there are many problems, and the nature of these secessions points at a great deal of fear from Russian-speaking Ukrainian people about the government that is supposed to be their own.

President Poroshenko presents a face to the world that the West is apparently willing to support, but the in-country approval of this man as leader speaks volumes. The West’s blind support of him “against Russia” may be one of the most tragic errors yet in Western foreign policy.

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