London Court decision spells financial and political doom for Kiev

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March 29, 2017 – Fort Russ – 

Ruslan Ostashko, Live Journal – translated by J. Arnoldski –

The Kiev regime is fatally unlucky. For example, a week ago the State Duma banned transfers from Russia to Ukraine through foreign payment systems, primarily affecting Poroshenko’s bank through which he hoped to profit from this service. Then at the last moment the IMF canceled the issuing of the much-anticipated loan of one billion dollars and demanded an explanation as to how Kiev plans to live without Donbass, or more precisely without Donbass enterprises’ foreign exchange revenues. Then the World Bank postponed discussions on new loans for Ukraine until May. 

This is enough for the Kiev regime’s economic prospects, which are already bad, to turn into a horror movie. And now, at the most inopportune moment, the London court has come onto the scene giving Kiev a final slap and swift kick in the form of its decision that Russia’s lawsuit on Ukraine’s $3 billion debt will be examined in an expedited manner. 

Experts practically unanimously agree that this is a sign of coming defeat for the Ukrainian side in this trial. In fact, you don’t have to be an expert to understand that when a British judge rejects all the Ukrainian side’s arguments on which the the demand of the Ukrainian government for an expanded trial were based, all of Kiev’s chances for a positive decision are close to zero.

Here’s what judge William Blair said about Ukraine’s position. According to BBC, he assured the parties that the court carefully considered the case, but added: “Ultimately this is a claim for repayment of debt instruments to which the court has held there is no justifiable defense.” It turns out that already at the preliminary examination stage the judge has already formulated his opinion and does not hesitate in front of the cameras to give such an obvious spoiler that deprives this trial of any further intrigue.

So that there are no doubts, the judge further clarified (I quote BBC): “Judge William Blair believes that Ukraine’s arguments, implying that Russia politically pressured Kiev in the beginning and then annexed Crimea and fueled the war in the East of the country, relate to questions of international law and relations between sovereign states. Therefore, the judge ruled, they do not fall within the jurisdiction of the English court and cannot be accepted.”

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As we can see, a British jurist has taken a very sensible position: everything has to be paid for, but if official Kiev wants to, then it can try to condemn Russia for Crimea or Donbass. But first of all, this needs to be done later, and secondly, in a different court. Ukrainian lawyers and ministers are pretending that everything is going according to plan and are preparing to appeal. But if the appeal will use the same arguments about Crimea and Donbass laced with references to social networks and articles about Buryat paratroopers from whom Ukrainian soldiers are defending the EU, then the result will most likely be similar. 

The reasons for the London court’s decisions are obvious, and they are in no way related to some kind of bribe which could allegedly be brought by Russian lawyers to ruin the life of young Ukrainian democracy, as some people on social networks believe. Everything is much simpler. First of all, the British court could not fathom the consequences for the British financial system that would occur if the court made a political decision instead of a legal one. It’s important for London to maintain its status as a world financial center even after Brexit. Taking political judicial decisions on financial disputes is bad for a global financial center which hopes to attract investors and lenders with assurances that disputes will be settled justly.

On the sovereign bond market, it is rare to find completely clean borrowers and investors. Usually all hands are stained with mud or even blood, hence why it is important to have a mechanism for resolving disputes that is trusted by all parties. If the London court sacrificed its reputation in order to do something nice for Ukraine or in order to annoy Russia, in the long term Britain would have lost much more than it gained. It’s even a little bit of a pity that the British did not want to undermine their financial sector.

The second reason for the court’s decision, in my opinion, nevertheless pertains to politics. It’s already very good that this court decision is combined with the IMF And World Bank’s actions, which are like a hint to Kiev and Poroshenko personally that if they behave badly, don’t fulfill Merkel and Trump’s demands, and pretend that the West exists for Ukraine – and not that Ukraine is to serve the interests of the West – then they won’t see any money.  And if they behave really badly, someone will have to pay several billion dollars to Russia. In fact, I recall that Ukraine has had the clock ticking on it, meaning that the interest meter is ticking on its unpaid debt, so this already greater-than-3-billion sum is increasing with every passing day. 

How will this story end? If a miracle doesn’t happen, the court will eventually oblige the government of Ukraine to pay the debt, the interest on the debt, and compensation for the legal costs of the winning side. Of course, the Kiev regime could declare that it will not comply with this decision. However, the fact is that the IMF, World Bank, and other potential lenders are unable to ignore the decision, and it will most likely be used to make sure no more money is given to Ukraine. Not to mention the fact that potential tranches or loans may be subjected to freezing before they reach the grasping claws of the Ukrainian Ministry of Finance. In general, there is now suspicion that Ukraine is gradually being forced to implement the very terms that Poroshenko once signed, but which Kiev simply can’t fulfill. 

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Ukrainian nationalists and the Ukrainian elite will have to learn and experience firsthand one important truth: independent policy is a very expensive pleasure for which Ukraine simply has no money. And Ukraine not only has no money, it has no future either.

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