June 6, 2015
Translated from Russian by J.Hawk
The US-appointed MinFin head, Natalya Yaresko, said in an interview by Zerkalo Nedelyi that if Ukraine were to suddenly declare a default, it would not seriously affect the Ukrainian nation. However, in her words, it would complicate efforts to secure credits on the international financial market. Or, in plain English, nobody would give Ukraine money since it doesn’t pay back its debts. But, in general, well done! You’ve managed to wreck the country’s finances in 6 months. The Yanks certainly know how to work in the colonies.
Da_dzi came up with the perfect illustration:
“To be honest, it will have no impact on the people of Ukraine. The payment moratorium law has only one effect–hard currency stays in the country, and the pressure on the balance of payments is reduced. It’s not a negative for the people, it will not affect their lives. Granted, the default will have a negative impact on Ukraine’s ability to access international financial markets, but we don’t have that ability even today, without a default, due to our difficult financial situation,” Yaresko said.
Yaresko also emphasized that the default will not cause a new round of devaluation, because currency market pressure will be reduced, “since we won’t be spending hard currency on debt payments.”
She “forgot” to say that Ukraine will have no currency inflow whatsoever, and the Junta is selling far less than it is buying. Therefore the hryvnia will collapse, deposits will be frozen (including in hryvnia), and banks will implode. But the people–“the people will not be affected.”
Yaresko, however, explained that commercial enterprises will feel negative consequences. Well, that’s obvious enough–nobody will sell them hard currency in order to buy from abroad.
She added: “Ukraine has no properties abroad. We have no riches outside our borders! I won’t say we have no assets there, that there are no risks, they exist and we are preparing for any eventuality. But it doesn’t mean I want a default. To the contrary, I want to lead the negotiations to their conclusion.”
That was a reference to the possibility that Ukraine might lose its embassies and whatever else.
Former US Treasury Secretary Lawrence Summers advised Ukraine to prepare for a default, while Poroshenko ruled out that possibility. As did Yatsenyuk, who cited Argentina’s example boasting that something like that would never happen in Ukraine. But now–“no big deal.”
In the words of the US subject Yaresko, Ukraine might not receive the second IMF tranche if it does not reach a restructuring agreement with its creditors by the end of May, which is when the IMF reviews Ukraine’s crediting program. Yaresko recently said that the negotiations are more difficult than expected, it’s now the first week of June, and the default is looming ever-closer.
One thing is for sure, if there’s one party which won’t suffer from the default, it’s the US. They gave Ukraine practically no money. What’s a couple of billion to them, considering they managed to stick both Russia and the EU with a mess that will require years to clean up?!
J.Hawk’s Comment: So, is this more bluff by Yaresko? Brinksmanship? One thing is for certain, neither the US nor the EU seem to be even hinting at their displeasure at the intransigence of the creditors who, after all, are mostly US and European financial institutions. Yaresko’s own US connection doesn’t seem to be yielding any tangible results either.
It is still a mystery to me exactly what is Yaresko’s mandate from the US government. But whatever it is, it doesn’t seem to come with any actual, you know, power to implement it or resources to back it up.