IMF loan to Ukraine chains it to the west

Back in April of this year after the February uprising against president Yanukovych in the Ukraine, the IMF approved a loan of $17 billion to the new Ukrainian government.

The $17 billion is eight times the normal quota. Usually a country will be able at most to borrow just twice its annual quota. However, the Ukraine loan is four times even that amount, indicating that the IMF was very anxious to grant the loan even though past loans have not worked out well, as when a loan was made previously in 2012: The Executive Board of the International Monetary Fund has decided that Ukraine is expected to engage in post-program monitoring1 with the Fund, following the expiration on December 27, 2012 of the 29-month Stand-By Arrangement (SBA) with exceptional access (SDR 10 billion; US$ 15.2 billion; 729 percent of quota). The program went off-track with only two purchases made in the total amount of SDR 2.25 billion (about US$ 3.4 billion). As of June 30, 2013 Ukraine’s outstanding credit to the Fund was SDR 5.27 billion (about US$ 8 billion; 383.8 percent of quota). The Board's decision was adopted on a lapse-of-time basis2 on Friday, July 26.
 Given that the new loan is even larger and more out of line with normal practice, this indicates how anxious the IMF is to tie Ukraine into western international financial institutions. On August 29 the IMF signed off on the loan. The IMF signed off on the loan even though Ukraine was in effect fighting a civil war, was suffering from capital flights, and their balance of payments was in a state of collapse.
This article suggests the loan supported Ukrainian currency long enough for Ukrainian oligarchs to move their accounts to hard currency accounts in the west. The war in the east is further damaging an already faltering economy destroying basic infrastructure for power generation, water, and even hospitals. Many citizens are internally displaced or fled to Russia. Yet an IMF press release praised the Ukrainian government: “The IMF praised the government’s commitment to economic reforms despite the ongoing conflict.” John Helmer has calculated that of the $3.2 billion disbursed by the IMF at beginning of May this year, $3.1 billion had disappeared offshore by the middle of last month. It appears that the financial situation is worsening and that another $5 billion may be needed over above the IMF loan of $17 billion.
President Poroshenko one of the oligarchs may be threatened from the right by another oligarch, Igor Kolomysky, who has his own private militia. Given that Poroshenko has not yet been able to defeat the separatists and economic austerity measures demanded by the IMF will decrease his political popularity, it is possible that there could be another coup by forces even more to the right and nationalist. Ukraine's debt is not dominated in Ukrainian currency but dollars and euros. With Ukrainian currency falling in value the Ukraine needs to gain dollars and euros to finance its debt. To do this, Ukraine will need to sell off its resources to western interests, often at fire sale prices, and in return it will receive the dollars and euros it will need to finance its debt.
 There are clear links to the US at this stage. Senate Bill 2277 directs the US Agency for International Development(USAID) to guarantee loans for the development of oil and gas in Ukraine, Moldova, and Georgia. There are links to the Obama administration as well in all of this. Vice-president Joe Biden's son recently was appointed to the board of Burisma a Ukrainian company although it is registered in Cyprus. The Ukrainian government has even helped using its military: “Ukrainian troopers help installing shale gas production equipment near the east Ukrainian town of Slavyansk, which they bombed and shelled for the three preceding months, the Novorossiya news agency reports on its website citing local residents. Civilians protected by Ukrainian army are getting ready to install drilling rigs. More equipment is being brought in, they said, adding that the military are encircling the future extraction area.” Kolomoysky is reported to a major investor in Burisma. He was appointed by the Ukrainian government to be governor of Dnipropetrovsk a south-central province. In the Eastern Ukraine there had been opposition to fracking even before the Maidan demonstrations.
 There is pressure from the IMF and World Bank for Ukraine to deregulate its agriculture.The Investment Finance Corporation of the World Bank has advised Ukraine "to delete provisions regarding mandatory certification of food in the listed laws of Ukraine and Government Decree," and also "to avoid unnecessary costs for businesses" by regulations on pesticides and food additives.
As part of its efforts to punish Russia for thwarting plans to orient the Ukraine more towards the west and to reliance on western funding, there are various plans afoot to ensure that the IMF loans to do not for the most part go towards paying off the huge debt that the Ukraine owes Russia. Anna Gelpem. a former UK Treasury official wants a $3 billion bond negotiated by Russia's sovereign wealth fund to be declared by law foreign aid rather than a commercial loan. She said: “The United Kingdom can refuse to enforce English-law contracts for the money Russia lent,” thereby taking “away creditor remedies for default on this debt.” Gelpem suggests an even more extensive repudiation of debt: Ukraine may claim that its debt to Russia is “odious.” This applies to situations where “an evil ruler signs contracts that burden future generations long after the ruler is deposed.” She adds that “Repudiating all debts incurred under Yanukovich would discourage lending to corrupt leaders.” Gelpem suggests that it be a universal principle that contracts that are "used to advance military and political objectives..should lose their claim to court enforcement". This should mean then that the IMF loan to the Ukraine need not be paid off. That would help out the Ukraine most of all. As the appended video shows the IMF loan comes with many unpopular provisions.

Putin criticizes Bolsheviks and Lenin as betraying Russian national interest

Speaking at the Seliger National Youth Forum a summer camp for pro-government youth, Putin criticized the Bolsheviks who led the October Revolution and founded the USSR. Lenin led the Bolsheviks.

Putin accused the Bolsheviks of treachery because they undermined the Russian fight against the Germans in the First World War. Russia was allied with France and Britain at the time. After three years Russia was in dire straits with soldiers defecting and a great deal of public unrest. Lenin at the time called for turning the imperialistic war into a civil war and he led the Bolsheviks to power using soldiers, peasants, and workers against the Russian regime.
When Lenin died in 1924 he became part of a cult of personality with his body on display in a Mausoleum in Red Square. Leningrad was one of the cities named after him. In a sign of the times after the USSR fell apart the city became again St. Petersburg. Stalingrad met a similar fate.
 When Putin returned to power in 2012 he began to promote his own ideological views advancing a Russian nationalism, often associated with traditional values including support for the Russian Orthodox Church, and a strong anti-western stance. The Bolshevik's in contrast were internationalists who believed that the new Soviet State could survive only if there were a global communist revolution. Workers belonged to no state. Nationalist rivalry was used to pit workers in one country against those of another in the interests of rival capitals. An article in the New Yorker suggests that Putin has yet to adequately incorporate the Bolshevik revolution in his ideology: Was the 1917 Bolshevik revolution a national disaster that destroyed the imperial Russian statehood? Or was it the beginning of the Soviet state of which today’s Russia is a successor? In other words, since the Russian civil war did not end in a reconciliation, do we identify with the defeated Whites or with the Reds, led by Lenin, who exterminated them?
Putin is now leader of a country that has abandoned socialism but that has its own particular brand of crony capitalism dominated by oligarchs. However, Putin is to a considerable extent in control of the oligarchs as compared to the Ukraine in which the oligarchs dominate the government with president Poroshenko himself being an oligarch.
Ironically, the Russian form of crony capitalism was to a considerable extent a creation of the US itself and a group at Harvard University. Among the chief architects of the Russian privatization were Lawrence Summers and Andrei Shleifer of the Harvard Institute for International Development(HIID) In 1992 the Harvard-led reform of the Russian was front page news: A 1992 front-page story in the Boston Globe (9/22/92), "Red Square Turns to Crimson," announced proudly that Harvard experts were advising Russia in its conversion to capitalism. "Privatization stands as the centerpiece of Russia's economic-reform program," wrote the Globe. It was an equation the "best and brightest" from Harvard would drum home again and again to the media: privatization equals reform. The piece quoted the head of the Harvard Russia project, Andrei Shleifer: "Once you work with Russians for two weeks, you become a free-market enthusiast." However, the results of privatization were to concentrate wealth in the hands of the oligarchs and also lead to charges against some of those in the Harvard project as well. Most of the privatization took place during the presidency of Boris Yeltsin in the early and mid nineteen nineties: Privatization enabled Russia to shift from the deteriorating Soviet planned economy towards a market economy, but, as a result, a good deal of the national wealth fell into the hands of a relatively small group of so-called business oligarchs (tycoons), and the wealth gap increased dramatically.[1] It was described as "Catastroika"[2] and as one of the "most cataclysmic peacetime economic collapse of an industrial country in history"
Harvard University ended up settling charges against it, Schleifer, and another advisor to the tune of millions of dollars in 2005: Harvard will pay $26.5 million to the U.S. government to settle a five-year-old lawsuit that implicated two University employees, including its star economics professor Andrei Shleifer ’82, the Justice Department announced Wednesday. Shleifer, the Jones professor of economics, emerged far less scathed in the settlement, agreeing to pay just $2 million. He had faced damages of up to $104 million for conspiring to defraud the government while advising a U.S.-funded program to privatize the Russian economy in the 1990s.
 Given this background to Putin's crony capitalism it is hardly surprising that Putin should be concerned about any group such as the Bolsheviks who threatened the stability of the status quo. Putin remembers 1917 as a time when "some were shaking Russia from within, and shook it to the point where Russia as a state collapsed and declared itself defeated". Putin no doubt was warning the youth group he was addressing not to repeat the historic events of 1917. He also spoke of the Bolshevik actions as betraying the Russian national interest:It was the Bolsheviks, after all, who “wished to see their fatherland defeated while Russian heroic soldiers and officers shed blood on the fronts of the First World War.” Putin is obviously forging a new counter-revolutionary ideology that rejects the Russian revolution as playing any positive role in the development of modern Russia even though Lenin is regarded as a positive figure by more half of all Russians. However, a new poll released in August shows Putin with an 87 percent approval rating.
 The enclosed video appears to show Putin crying during the playing of the Russian National Anthem. The anthem was first introduced in 1944 during the war but was briefly replaced after the dissolution of the USSR. It was then re-introduced with new lyrics. Until 1944 the USSR used the Internationale as the national anthem. Perhaps Putin has some Mongolian desert dust in his eye. I have also appended a video with Pete Seeger singing the Internationale.