Monday, January 19, 2015

No walk-over for Russia |

In hopes for Ukraine’s liberation we should keep in mind that Ukraine’s economy is not going to collapse the next day and is to be further financed by the West, writes Alexander Belozyorov, economist and’s regular contributor

Ukraine has been assigned to be a proxy for Western aggression against Russia. This became evident during the so called “revolution of dignity” as Kiev’s central square had got a frequent place for foreign managers of Ukrainian coup d’etat. After the accomplished coup and subsequent events there has been hope that Ukrainian regime may collapse under the burden of economic woes. Hardly these hopes have enough rationale. Most likely, there is a long and strenuous struggle ahead to maintain stability in Russia, denazify Ukraine and achieve a world order that is more favorable for Russia.

Ukraine entered 2015 with $7.5 billion in official international reserves, having lost a quarter of its reserves in December. $2.5 billion was spent to repay gas debts to Gazprom and replenish Naftogas’ accounts for current payments. In December Ukraine’s government and National Bank have borrowed more than repaid, $767 million against $738 million.

Most likely, Ukraine’s official reserves will be growing in Q1 2015. First, new loans may easily exceed the redemptions in H1 2015. For instance, a few days ago the EU committed to provide Ukrainian government with a new €500 million loan that covers Ukraine’s government debt payments in January. There is no reason to expect that Ukrainian authorities will not raise funds like that in subsequent months. Second, the December drop in reserves was caused by a one-time event: repayment of the undisputed part of Naftogaz’ debt to Gazprom ($1.65 billion).

And third, the most important: there were leaks that the IMF might disburse not even a double, but a fourfold tranche, approximately $5 billion. Ukraine receiving funds from the IMF may look like a sure thing. First, the USA are not going to allow Ukraine to collapse after they have put in under control. Second, it would not have been reasonable to appoint Natalie Yaresko, former US State department officer as finance minister without commitment to resume IMF financing.

The chart below shows what Ukrainian authorities must pay in foreign currencies in 2015. Payments of state-run companies for natural gas, coal and electricity are omitted as their timing is hardly predictable.

Complete story at - No walk-over for Russia |

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