John Helmer: Ukraine Readies Itself for War When No One Wants to Pay for It | naked capitalism

What if the Ukrainian government resumes the war noone wants to pay for – not the US, the European Union, Poland, Canada, least of all Kiev?

Public statements by Ukrainian and international officials identify two payment deadlines for war, and for peace. The first falls on May 31, Natalie Jaresko, the US minister of Ukrainian Finance, has told the London Times, when $15.3 billion in sovereign bond debt must be written off “through lower interest rates, longer payment terms, and in some cases, a cut in the sum owed.” The second deadline falls a month later, at the end of June, when the International Monetary Fund (IMF) must decide whether the government in Kiev has met the conditions required for payment of $1.5 billion, the second instalment of the Extended Fund Facility (EFF) which commenced just six weeks ago. A default on May 31 will make inevitable a delay in IMF loan disbursement in June. The combination will halt the European Union promise to start a new €1.8 billion in Macro Financial Assistance (MFA).

Russian sources believe that unless Kiev starts a new military offensive in the Donbass within days, when cross-border Russian action can be blamed, creditor governments pressured into paying and bondholders into conceding losses, there won’t be enough cash later on to pay for troops, machines and ammunition.

“We have done everything possible to get to peace”, Jaresko told the Times on March 29. “Russia seems to have a much grander plan here. They are trying to ensure we are a failed state.”

A month later, her threat has proved unconvincing to bond-holders, a majority of them American. At Monday’s (April 27) summit meeting between Ukrainian President Petro Poroshenko (lead image, left), Donald Tusk, President of the European Council, and Jean-Claude Juncker, President of the European Commission, the EU was also unmoved. In a lengthy communique, the EU insisted on “decentralisation” of government in the east; “inclusive constitutional reform”; and “de-escalation and a political solution based on respect for Ukraine’s independence, sovereignty and territorial integrity, in particular in the framework of the Normandy format [and] the Minsk Agreements.” These are all provisos against the resumption of large-scale fighting in the Donbass.

In response to Ukrainian requests for up-front and accelerated funding from Brussels, Tusk and Juncker said no; that’s to say, not yet. In a paper distributed before the summit began, the EU announced “€1.8 billion in medium-term loans between now and early 2016. Disbursement will be conditional on implementation of specific economic policy and financial conditions outlined on the Memoranda of Understanding.”

By the time the communique was released yesterday, the desperation of the Ukrainians and the reluctance of the Europeans were revealed in the word “swiftly”, inserted twice into the final communique, to make the unlikelihood of new money seem more adverbial, less subjunctive. Here they are in Point 8.

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