{"id":25860,"date":"2018-08-13T06:00:30","date_gmt":"2018-08-13T10:00:30","guid":{"rendered":"https:\/\/ssgreenberg.name\/PoliticsBlog\/?p=25860"},"modified":"2018-08-13T06:07:21","modified_gmt":"2018-08-13T10:07:21","slug":"understanding-russian-involvement-in-the-ukraine","status":"publish","type":"post","link":"https:\/\/ssgreenberg.name\/PoliticsBlog\/2018\/08\/13\/understanding-russian-involvement-in-the-ukraine\/","title":{"rendered":"Understanding Russian Involvement in the Ukraine"},"content":{"rendered":"

People listening to the USA government and its corporate news media tend to have a very distorted view of the Russian involvement in the Ukraine. I found an interesting story that clarifies what happened in what you may find to be an odd place. Michael Hudson wrote a book that was published in 2015, Killing The Host: How Financial Parasites and Debt Bondage Destroy the Global Economy<\/a>.<\/p>\n

I’ll try to quote enough of one chapter to give you the picture about the Ukraine without quoting too much to violate Hudson’s copyright.<\/p>\n

The point is that the European Union with the collusion of the USA was trying to raid the Ukrainian economy, and Russia was trying to prevent the raid. The nefarious tricks that our side used finally caused Russia to take action to protect itself. In actual fact, our side’s successful raid on the Ukraine has made a shambles of the Ukraine’s economy.<\/p>\n

\nThe most imaginative recent rationales for annulling sovereign debts have been thought up not by Argentina, Greece or Ireland, but by U.S. strategists seeking to enable Ukraine to avoid paying the bonds it has issued or debts run up for gas imported from Russia. In the wake of the New Cold War confrontation in mid-2014 after Crimea voted heavily in a popular referendum to be re-absorbed by Russia, the Peterson Institute for International Economics floated a proposal by former Treasury official Anna Gelpern to deprive Russia of a means for enforcing its loan to Ukraine. \u201cA single measure can free up $3 billion for Ukraine,\u201d she proposed. Britain\u2019s Parliament could pass a law declaring the $3 billion bond negotiated by Russia\u2019s sovereign wealth fund to be \u201cforeign aid,\u201d not a real commercial loan contract worthy of legal enforcement.<\/p>\n

This would be a thunderclap shaking international debt markets. Its principle would be logically applicable to U.S. claims \u201cforeign aid,\u201d which includes loans to pay back American bankers and other creditors, as well as World Bank \u201caid\u201d loans. The bonds held by Russia\u2019s sovereign wealth fund were denominated in euros under strict \u201cLondon\u201d rules. Furthermore, the fund required at least an AA rating for bond investments. Ukraine\u2019s B+ rating was below this level, so Russia acted in a prudent way to add financial protection by making the bonds payable on demand if Ukraine\u2019s overall debt rose above a fairly modest 60 percent of its GDP. Unlike general-purpose foreign aid, the terms of this loan gives Russia \u201cpower to trigger a cascade of defaults under Ukraine\u2019s other bonds and a large block of votes in any future bond restructuring,\u201d Gelpern noted.<\/p>\n

As recently as 2013, Ukraine\u2019s public debt amounted to just over 40 percent of the nation\u2019s GDP \u2013 some $73 billion, seemingly manageable until the February Maidan coup led to civil war against the Eastern Russian-speaking region. Waging war is expensive, and Ukraine\u2019s hryvnia currency ruptured. A quarter of its exports come from eastern Ukraine, sold mainly to Russia (including military hardware). Kiev sought to end this trade, and spent a year bombing Donbas and Luhansk cities and industry, turning off the electricity to its coal mines, and driving an estimated one million of the region\u2019s civilians to flee into Russia. Ukraine\u2019s exchange rate plunged steadily, raising its debt\/GDP ratio far above the 60 percent threshold. That gave Russia the option to make the debt payable immediately, triggering the cross-default clauses it had inserted into the euro-bonds contracted with Ukraine.<\/p>\n

Gelpern\u2019s paper accused Russia of seeking to keep Ukraine \u201con a short leash,\u201d as if this is not precisely what the IMF and most financial investors do. However, \u201cgovernments do not normally sue one another to collect their debts in national courts.\u201d If this should occur, the pari passu rule prevents some debts from being annulled selectively. That is the problem Gelpern has been describing in the Credit Slips blog with regard to Argentina\u2019s debt negotiations. <\/p>\n

Gelpern therefore raises another possibility \u2013 that Ukraine may claim that its debt to Russia is \u201codious,\u201d addressing the situation where \u201can evil ruler signs contracts that burden future generations long after the ruler is deposed.\u201d \u201cRepudiating all debts incurred under Yanukovich would discourage lending to corrupt leaders,\u201d she concludes.<\/p>\n

The double standard here is that instead of labeling Ukraine\u2019s long series of kleptocrats and their corrupt governments \u201codious,\u201d she singles out only Yanukovich\u2019s tenure, as if his predecessors and successors were not equally venal. An even greater danger in declaring Ukraine\u2019s debt odious is that it may backfire on the United States, given its own long support for military dictatorships, corrupt client states and kleptocracies. U.S. backing for Chile\u2019s military dictatorship following General Pinochet\u2019s 1973 coup led to Operation Condor that installed Argentina\u2019s military dictatorship that ran up that country\u2019s foreign debt. Would a successful Ukrainian claim that its debt was odious open the legal floodgates for broad Latin American and Third World debt annulments?<\/p>\n

Ukraine\u2019s sale of bonds to Russia\u2019s sovereign debt fund, as well as its contracts for gas purchases were negotiated by a democratically elected government, at low concessionary rates that subsidized industrial and household consumption. If this debt is deemed odious, what of the EU\u2019s insistence that Greece remove its Parliamentary leader Papandreou in 2011 to prevent a public referendum from taking place regarding the ECB loan? Loans made in the face of evident public opposition may be deemed to have been imposed without proper democratic consent.\n<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

People listening to the USA government and its corporate news media tend to have a very distorted view of the Russian involvement in the Ukraine. I found an interesting story that clarifies what happened in what you may find to be an odd place. Michael Hudson wrote a book that was published in 2015, Killing […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[166],"tags":[],"class_list":{"0":"post-25860","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-stevegsposts","7":"czr-hentry"},"_links":{"self":[{"href":"https:\/\/ssgreenberg.name\/PoliticsBlog\/wp-json\/wp\/v2\/posts\/25860","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ssgreenberg.name\/PoliticsBlog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ssgreenberg.name\/PoliticsBlog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ssgreenberg.name\/PoliticsBlog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/ssgreenberg.name\/PoliticsBlog\/wp-json\/wp\/v2\/comments?post=25860"}],"version-history":[{"count":3,"href":"https:\/\/ssgreenberg.name\/PoliticsBlog\/wp-json\/wp\/v2\/posts\/25860\/revisions"}],"predecessor-version":[{"id":25862,"href":"https:\/\/ssgreenberg.name\/PoliticsBlog\/wp-json\/wp\/v2\/posts\/25860\/revisions\/25862"}],"wp:attachment":[{"href":"https:\/\/ssgreenberg.name\/PoliticsBlog\/wp-json\/wp\/v2\/media?parent=25860"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ssgreenberg.name\/PoliticsBlog\/wp-json\/wp\/v2\/categories?post=25860"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ssgreenberg.name\/PoliticsBlog\/wp-json\/wp\/v2\/tags?post=25860"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}