Back in April I discussed for Russia Insider some of the legal arguments that have been made concerning the $3 billion debt Ukraine owes Russia, which is due to be repaid in December.
I said that Ukraine’s argument that the debt was a “private” as opposed to a “public” debt looked in legal terms a hopeless one.
The
point was that if Ukraine defaulted on a “public” debt, then according
to its current rules the IMF cannot proceed with its bailout programme.
Ukraine has now made it utterly clear that it will default on the debt.
A
cheeky suggestion from Putin - echoing a suggest that I made in my
April article - that the IMF increase its lending by $3 billion so that
Ukraine could pay the debt, has gone unheeded.
Instead, caught between the legal reality that the debt is a “public
debt” and the political imperative to support Ukraine, it seems -
according to comments by Russian Finance Minister Anton Siluanov and an
article in the Wall Street Journal - that the IMF is going to change its rules so that it can go on supporting Ukraine even if it defaults on the debt.
As the Russians correctly say,
this is a major precedent that will undermine further the IMF’s
credibility at a time when it is being increasingly challenged by the
new financial institutions that China is setting up.
It seems a very big price to pay when the cost of avoiding having to make such a precedent is just $3 billion.
What
that shows is how unwilling Western governments are to back Ukraine
with money - even if doing so avoids putting them in a position where
the IMF’s credibility is being put at risk - exposing it as nothing more
than an instrument of Western foreign policy.
There will now be a court case in London, which the Russians are certain to win - there being no defense to it.
How
the Russians will enforce the Judgment they will obtain - and whether
the IMF will become a third party in the case - remains to be seen.
No comments:
Post a Comment