Thread: Is default of Ukraine inevitable?

Andrey Illarionov - Andrey Illarionov - Wikipedia, the free encyclopedia
former economic policy advisor to Vladimir Putin. Currently works in the Center for Global Liberty and Prosperity at the Cato Institute in Washington, DC. has predicted that default of Ukrainian economy would happen in February of 2015 - Случится ли дефолт в Украине? | Все блоги | Блоги | Каспаров.Ru

He says there are several key factors that might lead to that

...увеличение удельного веса госрасходов в ВВП с 53% до 67%, это означает, прямо скажем, самоубийство украинского государства.

...На конец сентября 2014 года объем международных резервов Украины составлял 16,4 миллиардов долларов. За октябрь резервы сократились почти на 4 миллиарда и на конец месяца составили 12,6 миллиарда долларов.
На конец ноября резервы составили уже чуть меньше 10 миллиардов, то есть за ноябрь они сократились еще на 2,6 миллиарда долларов.
... По подсчетам, в январе резервы могут сократиться еще примерно на 2,0-2,5 миллиарда долларов. Таким образом, на конец января 2015 года резервы Украины могут составить около 5 миллиардов долларов.

He also says that he thinks that there are only two ways to avoid default

Первый вариант: Кабмин кардинально пересматривает бюджет-2015 года и радикально сокращает госрасходы.
Второй вариант: МВФ и зарубежные кредиторы предоставляют финансовую помощь Украине. По базовому сценарию, Украина нуждается в помощи в размере не менее 17 миллиардов долларов. Правда, МВФ озвучивал эту цифру еще до принятия бюджета 2015 года. Если главный финансовый документ страны соответствует тем параметрам, о которых написал Виктор Пинзеник, тогда Украине потребуется больше средств.

And he also predicts that Russia would actually push Ukraine to default and that's the goal of Putin

Все это создаст благоприятные основания для господина Путина, внимательно следящего за событиями в Украине и терпеливо ждущего своего часа, в очередной раз (но впервые – более или менее обоснованно) объявить киевскую власть нелегитимной, обозвать Украину failed state, постараться привлечь внимание мирового сообщества к тому, что официальный Киев не в состоянии справиться с элементарными экономическими проблемами.
Дефолт и последующий социально-политический кризис создадут исключительно благоприятные условия для завершения программы господина Путина по установлению контроля над всей Украиной.

What do you think?

He also says that he thinks that there are only two ways to avoid default

Obama has to overcome his intrinsic protestant stinginess and shell out for at least $20 billion. Soros made all the calculations long ago. There is no other way out to save his puppets. It’s a trick-or-treat dilemma exacerbated by European fatigue from never ending financial demands of the Ukraine.))
Soros Says Russia in Ukraine Poses Threat to EU Existence - Bloomberg

And he also predicts that Russia would actually push Ukraine to default and that's the goal of Putin

Putin’s goal is a regime change that will be totally unacceptable for Obama, like the Right sector or some other outright neo-nazi. And imminent default is a definite step toward the direction. Pro-Russian government is improbable in the foreseeable future due to many obvious reasons.

Originally Posted by diogen_

Obama has to...

Hmm, why do you think the US should pay for Ukraine? What would that achieve, besides lost money?

Originally Posted by diogen_

Putin’s goal is a regime change that will be totally unacceptable for Obama, like the Right sector or some other outright neo-nazi. And imminent default is a definite step toward the direction. Pro-Russian government is improbable in the foreseeable future due to many obvious reasons.

I would partially disagree
I don't think the Right Sector or other neo-nazi would be acceptable by anybody, they would pose serious threat for all neighbor countries.
I would agree that changing government is a goal. There is no need to set pro-Russian government, reasonable government would be enough to work with. Right now Ukraine does not have reasonable government, at least judging by the budget and goals current Ukrainian government is anti-Ukrainian

PS: Soros obviously does not want to lose money, so he would come with any propaganda to prevent the default.

Originally Posted by hddscan

Andrey Illarionov - Andrey Illarionov - Wikipedia, the free encyclopedia

On January 3, 2005 Illarionov resigned from his position as presidential representative to the G8.^[2] On December 21, 2005, Illarionov declared "This year Russia has become a different country. It is no longer a democratic country. It is no longer a free country". The Washington Post reported that he had cited a recent report by the U.S.-based and government sponsored Freedom House.^[3]

What do you think?

Come on, surely you can smell this 1000 miles away! Freedom House should rightfully be called Foreign Policy Agitation and Propaganda Department of the United States. That is what it is. He is more or less a defector, or was always working for the US and left Russia when it became a bit hot around his ears.

...former economic policy advisor to Vladimir Putin. Currently works in the Center for Global Liberty and Prosperity at the Cato Institute in Washington

He's sold out. Sure he could be right, but why do you think he is in the USA working for a libertarian think tank?

Think about how much you would trust an ex American politician doing the same thing in Russia or China. Made some comments about how America is no longer a democracy, and then turned up writing pieces about the evilness of the USA in some enemy state's papers.

This practice is vintage from the Cold war days. Defectors are notorious for saying exactly what is expected of them. I am not saying he can't have some valid points, but rest assured his output is expected to fit a certain narrative, or it wouldn't be published. If he doesn't stick with the agenda he won't receive his salary or fee or however they renumerate him.

We get tricked into thinking that what these sponsored parrots who write these type of articles are the real deal. They are not.

Just so we are clear on what the deal is with this and similar articles.

To answer the question>
No I don't think Ukraine will default, they will get just enough money to prevent that, while sinking into really bad poverty.

They probably lost a lot of their Russian export markets and their products are difficult to export to Europe. How are they going to make money?

Ukraine will be a basket case of the EU and USA and used as a pawn in the geopolitical game against Russia.

Probably some limited EU money will be used to keep paying the national debt, but not much more. US promises of practical help for normal people are largely empty, however they might get "help" with the military, weapons etc.

I feel really bad for the people there - they have been tricked into destroying their own country with this coup d'etat and what happened after.

Originally Posted by hddscan

Hmm, why do you think the US should pay for Ukraine? What would that achieve, besides lost money?

-political gain: They expand their zone of control, undermining the zone of influence of the principal adversary. American global leadership is confirmed once again.
-military gain; they can deploy anti-missile shield in the Ukraine in the future, protecting the territory of the allies from Russian nukes.
-electoral gain for the next elections: US foreign policy under Democrats can bring better results than that of Republicans.
-geopolitical gain: save Europe from Putin’s supposed encroachments (if they believe in what Ukrainians shout out loud on every occasion and without thereof ).
-emotional gain: outsmart Putin, revenge for Snowden, Asad, etc
- a few shale gas depositories for Baiden’s son to boot.

Originally Posted by hddscan

I would partially disagree
I don't think the Right Sector or other neo-nazi would be acceptable by anybody, they would pose serious threat for all neighbor countries.

I don’t expect for them to rule for too long. They would probable resume the full-scale war with people’s republics and facilitate collapse of the state. After their inevitable defeat (which is self-evident without external support) some painful issues including Krim status may be resolved faster than if the conflict is going to be frozen on the current stage. Sanctions also would make less sense for Europe and can be dropped off as early as in March.

Originally Posted by hddscan

I would agree that changing government is a goal. There is no need to set pro-Russian government, reasonable government would be enough to work with. Right now Ukraine does not have reasonable government, at least judging by the budget and goals current Ukrainian government is anti-Ukrainian

I believe Ukrainians are too “hyped up” about Putin to have reasonable government at the moment.))

Originally Posted by hddscan

I don't think the Right Sector or other neo-nazi would be acceptable by anybody, they would pose serious threat for all neighbor countries.

If they are against Russia, they are good, remember? Goes for anyone from Caucasus terrorists, to bin Laden or Khodorkovsky.

So these people are not real Nazis, that's just Russian propaganda...!
When they march with swastikas and salute Stepan Bandera they are just expressing their zeal for democracy and against Putin's dictatorship.

But seriously if you read between the lines - the hot shots in the EU know that Ukraine is run by crooks and ultra nationalists. In any other country they would oppose and condemn it, but in Ukraine the recipe seems to be to pretend the problem doesn't exist. And media is playing along, apart from RT which is in serious trouble with Ofcom and others regarding their European broadcasts. They could get banned from the UK for example.

Some journalists do know the situation in Ukraine, but they seem to know they can't write front page stories about it. If you see anything from there which is actually factual, it's a small piece in a bad spot. The bit that's true is squeezed between the normal rhetoric about aggressive Russia, Putin the dictator who invades other countries etc.

Czechs and Hungarians are beginning to wake up to the agenda with Russia, with Milos Zeman and Viktor Orban. Marine le Pen in France and several of the so called "nationalistic populist parties" are warning against listening to the agitation about Russia and Putin. In Germany people seem to be generally aware of what's going on.

Ukraine is among top three countries that have high default probability
default.png

Source - https://www.dbresearch.com/servlet/reweb2.ReWEB?rwnode=DBR_INTERNET_EN-PROD$NAVIGATION&rwobj=CDS.calias&rwsite=DBR_INTERN ET_EN-PROD

Originally Posted by Hanna

If they are against Russia, they are good, remember? Goes for anyone from Caucasus terrorists, to bin Laden or Khodorkovsky.

So these people are not real Nazis, that's just Russian propaganda...!

I don't think the EU would be happy to have ultra radicals on their borders, so I suspect some resistance from Europe would have happened.

Originally Posted by Hanna

But seriously if you read between the lines - the hot shots in the EU know that Ukraine is run by crooks and ultra nationalists.

I think it is not many ultra nationalists in Ukrainian government at the moment and they actually have failed during elections dramatically, showing that Ukrainian people are not ready to accept them, so I think it is not a catastrophe just yet.

Do you really think the US and Eu will go to all the trouble to put in a government they like in Ukraine, and then let that government default? Or fail so badly that there is another uprising (which might happen if they default).

No they will make sure that there is no default, but other than that, Ukraine's economy will be awful.

Austerity in Ukraine will be apalling - at least in Greece they had many good years before the crisis hit, but when did Ukraine have good years?

My heart really goes out to old people there - there is nothing they can do - they live on like 100 USD a month and they are good people, fellow Europeans. They haven't been lazy and they are not guilty of the situation. It's a disgrace and very tragic.

Originally Posted by diogen_

-political gain: They expand their zone of control, undermining the zone of influence of the principal adversary. American global leadership is confirmed once again.
-military gain; they can deploy anti-missile shield in the Ukraine in the future, protecting the territory of the allies from Russian nukes.
-electoral gain for the next elections: US foreign policy under Democrats can bring better results than that of Republicans.
-geopolitical gain: save Europe from Putin’s supposed encroachments (if they believe in what Ukrainians shout out loud on every occasion and without thereof ).
-emotional gain: outsmart Putin, revenge for Snowden, Asad, etc
- a few shale gas depositories for Baiden’s son to boot.

ok, sounds plausible but history shows that the US rarely wants to spend money on other countries to achieve desired goals but rather try to get it done by somebody else.

Originally Posted by diogen_

I believe Ukrainians are too “hyped up” about Putin to have reasonable government at the moment.))

IDK about that. I think many Ukrainians don't trust their MSM anymore. Also if default would have happened then Ukrainian government would be a "larger evil"
And here is something you wouldn't see every day

Во время недавнего визита президента Украины Петра Порошенко во Львов один из жителей города назвал его «предателем» и отказался пожимать протянутую руку главы страны.

«Я вам руку пожимать не буду, потому что вы предатель!», — сказал житель Львова. Собравшиеся раскритиковали главу государства за то, что при его правлении налоги, в том числе акцизы на топливо, растут быстрее, чем при его предшественнике Викторе Януковиче.

http://russian.rt.com/article/67639

Originally Posted by Hanna

Do you really think the US and Eu will go to all the trouble to put in a government they like in Ukraine, and then let that government default? Or fail so badly that there is another uprising (which might happen if they default).

I'll try to explain my point of view on why the US and the EU wouldn't save Ukraine from default.
1. The US does not really care about Ukraine because its goal was to quarrel Russia and the EU and create stronger economical ties with the EU. And the goal has been achieved, the EU wants to reduce its dependency on Russian energy and would probably conclude the Trans-Atlantic Union with the US. Accepting Ukraine to NATO is not possible at the moment, so preventing default won't help in that, no point to spend money on that either.
2. The EU wanted Ukraine as a large market for European goods and this is definitely not happening in nearest future
3. The EU also can't afford to spend money on Ukraine because it has economical problems and it needs to bail Greece once again

Originally Posted by Hanna

No they will make sure that there is no default, but other than that, Ukraine's economy will be awful.

Russia holds Ukraine pretty hard: gas bills, debt needs payments, cheap coal and electricity imports. I don't think the EU or the US would pay all those debts and more to save Ukraine.

Originally Posted by Hanna

That is what it is. He is more or less a defector, or was always working for the US and left Russia when it became a bit hot around his ears. ...

He's sold out. Sure he could be right, but...

We get tricked into thinking that what these sponsored parrots who write these type of articles are the real deal. They are not. ...

Hanna, your views are so strictly one-sided and so dismissive for being an outside observer that I, for example, do not know what to think of you. And you do not even notice that some of your statements fragrantly contradict one another. Much of your conclusions are just double guessing IMO. I appreciate your interest in politics but could you please have some respect, we are not ignorant here.

From what I've been reading, US aid to Ukraine has never really been that much money. Maybe a few billion USD at best. So I don't believe the US will bail out Ukraine if it starts to default.
Also, the EU said last October that they wanted to speak to a new government in Kiev before throwing any more money at Ukraine. They weren't happy with Kiev's "unrealistic" 2014 budget.
The article also noted that Kiev was spending way too much on it's military operations.
Ukraine unlikely to receive IMF loan tranche this year: finance minister | Reuters

So yeah, if the conflict continues much longer then I do think the Ukraine will default. I'm only surprised it hasn't defaulted already since the EU only has so much money it can offer in loans.
Also, Kiev has already forced as much money as it can from the Ukrainian citizens. Poroshenko was booed in Lviv over all the huge taxes and the other Ukrainians probably aren't very happy either.

I think I'm missing something fundamental here, but I somehow I have a sense that if Ukraine defaults, that would not be that much of a catastrophic event for Ukraine. To the best of my knowledge, if a country defaults, it does not mean the country goes out of business . All it means, that the debt would be restructured, the social programs (which aren't that many anyways) would be cut, the other government spending would be restricted (why is that a problem in a country like Ukraine where nobody pays taxes properly anyways?) Obviously, the savings of the financially responsible citizens would go down the drain, but when was it ever a factor? In return, though, Ukrainian government would be able to write off all the T-bills it sold to Russia (I'm not sure if anybody else had ever bought it) and, of course, all the hardship would be blamed on Russia. So, what am I missing here?

Originally Posted by Crocodile

So, what am I missing here?

That somebody would need to give Ukraine a large credit funds and those funds are usually given in exchange for some political and economical decisions.
Right now the EU and IMF are not very happy with Ukraine
Ukraine preparing for war despite peace talks | News | DW.DE | 06.01.2015

So if Ukraine defaults the EU, IMF, Russia and the US will have much more leverage on Ukrainian political and economical decisions

Originally Posted by hddscan

So if Ukraine defaults the EU, IMF, Russia and the US will have much more leverage on Ukrainian political and economical decisions

Hmm.. Well, I'm not a Ukrainian, but that does not sound too scary. Hasn't it already happen before? I mean, don't EU, IMF, Russia and the US had influenced and still influence Ukrainian decisions in those areas? I have heard Ukrainians complain about how their country is 100% controlled by Russia all along.. After all, what type of economical and political decisions could Ukraine independently make to keep its citizens happier?

Originally Posted by Crocodile

Hmm.. Well, I'm not a Ukrainian, but that does not sound too scary. Hasn't it already happen before? I mean, don't EU, IMF, Russia and the US had influenced and still influence Ukrainian decisions in those areas? I have heard Ukrainians complain about how their country is 100% controlled by Russia all along.. After all, what type of economical and political decisions could Ukraine independently make to keep its citizens happier?

It's not about "scary" part
I'm merely hoping that if default happens it would force current Ukrainian government to stop the war and start restoring economy rather then keep spending money they can't afford to spend

Originally Posted by hddscan

I'm merely hoping that if default happens it would force current Ukrainian government to stop the war and start restoring economy rather then keep spending money they can't afford to spend

I appreciate your intention, but something tells me that even if the active phase of the war stops, the attempts to regain full control over the area will not stop in the long run. So, the possible default will not cause the peace, only a temporary ceasefire and a better preparation for the subsequent military clashes. Will that create a stable enough situation for the Novorossian businesses to flourish and deliver some economic prosperity for the region? I highly doubt that. I'd rather say this region would become a resources-sucking addendum for Russia which everybody would be tired of in three to five years. It does not look to me like EU and US are seeking middle ground with Russia, so the conflict is inspired from the outside of Ukraine, there doesn't seem to be any real, material, conflict between the regions, only the emotions, which tend to cool down as time goes by. IMHO, all Russia was and still is trying to do is restoring the balance of power in the region and that does not seem to be what the EU and the US want at this time. The conflict could be ended in a twist of fingers by simply putting the promise that NATO would not expand any further into some solid piece of paper (how hard could that be?) and that is not what the alliance is ready to do.. so, guess what..

Originally Posted by Crocodile

Will that create a stable enough situation for the Novorossian businesses to flourish and deliver some economic prosperity for the region? I highly doubt that.

I currently think that Novorossia is a dead-born child.
I think it will remain in Ukrainian borders but might get wide local political power i.e. so called "decentralization"
And I think this might be somewhat acceptable to everybody

Originally Posted by hddscan

I currently think that Novorossia is a dead-born child.

Only until default. And it can rise from the dead like phoenix thereafter. It may sound attractive for some Russian speaking Ukrainians from southern regions like Odessa to set up a new state from scratch without debts but with cheap gas and other perks.