Thursday, 27 March 2014

Money and international recognition

The International Monetary Fund (IMF) has today announced that it has reached a staff-level agreement with the acting government of Ukraine. The agreement concerns an economic reform programme for Ukraine, which can be supported by a two-year Stand-By Agreement with the IMF. The Fund expects that it will assist Ukraine with an amount ranging from $14bn to $18bn, with an additional $9bn to $13bn expected to be offered by other, so far unidentified international donors. (

In practice, this offer of financial support has been spearheaded by the USA. In the complicated system of voting rights within the IMF each of the 188 member states has a percentage of the votes, to some extent depending on the financial contributions of each state to the Fund. Currently, the USA holds 16.75% of all votes; almost three times the votes of Japan, which holds the next most number of votes. ( Thus, it appears that the USA, once more, spearheads international support for the acting government in Kiev. At the same time, though, it is equally clear that this offer of aid to Ukraine only could have appeared on a background of broad international support for Ukraine - and of opposition to the annexation of Crimea by Russia.

Such opposition also appeared in the UN General Assembly, which today voted on a resolution "calling upon states not to recognise changes in status of Crimea region." 100 member states voted in favour of this resolution, while only 11 voted against it, with 58 states abstaining. Not quite unanimous support for Ukrainian territorial integrity, but quite a strong signal from international society, nonetheless. ( And it is noteworthy that, among the few countries supporting the Russian position in this vote, we mainly find states with a chequered international reputation - such as Belarus, Cuba, North Korea, Syria and Zimbabwe. Finally, and worth keeping an eye on for the future, note that Russia received support here from just one other post-Soviet state (Belarus) - a fact that says a great deal about Vladimir Putin's dreams of Eurasian union. (

Returning to the question of aid from the IMF, it remains to be seen, though, whether Ukraine can live up to the standards of reform required by the Fund. The IMF has stated publically that there is currently no need for a restructuring of Ukrainian state debt. ( However, it must be remembered that Ukraine has a recent history of reneging on promises to reform its economy. For sure, such lack of economic rigour took place under former president Viktor Yanukovych ( and it is likely that the acting Ukrainian government wants to make as much distance to his policies as possible. Indeed, acting Ukrainian Prime Minister Arseniy Yatsenyuk has vigorously advocated Ukraine as a country with which the IMF - and the Western world more generally - can do business. (

Clearly, Yatsenyuk has managed to convince the IMF and thus the USA and its allies that Ukraine after Yanukovych is serious about reforming its economy once and for all. Yet, it is worth remembering that Yanukovych did not resist reforms of the Ukrainian economy simply to spite the US-dominated Fund. Well, a little spite might have been involved... Nevertheless, though, Ukraine of today, like Ukraine of the last couple of decades, remains a state with a seriously troubled economy. One problem remains Ukrainian dependence on Russian energy - and debt accrued by Ukraine in this regard. Partly, such debt has accumulated due to less-than-friendly dealings by Russia (, yet the Ukrainian economy also remains a mess due to many years of half-hearted reforms, corruption, and generally poor governance. ( This problem did not disappear following the Orange Revolution. And, despite Yatsenyuk's seemingly honest pledges now, it remains to be seen whether the acting Ukrainian government retains the domestic political capital to satisfy the IMF in the longer run and, more importantly, to showcase a Ukraine that can get by without Russian subsidies.

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