Blood Debt — Russia Will Pay for Ukraine's Sacrifice - CEPA
S E E D E D C O N T E N T
By Timothy Ash August 29, 2024
The West is inching towards the right solutions for Ukraine, but must finally acknowledge what's staring it in the face.
It seemed like good news when on August 28, Ukraine agreed to a debt restructuring with holders of $24.3bn in Eurobonds.
Nearly all the holders agreed to the proposals which provide for a 37% upfront debt write-off, agreement over lower coupons, and maturity extensions. The deal should save Ukraine around $11.7bn over the next three years and open the way for further help from the International Monetary Fund (IMF.)
The speed at which this deal was agreed was striking — a matter of months compared to the years taken for other recent restructurings, including Ghana, Zambia, and Sri Lanka. So was the high approval rate among bondholders, reflecting the relative generosity of the deal for a country still at war, plus the willingness of the private sector to share the burden of supporting Ukraine to defend itself, and Western democracy more broadly.
So, this is an achievement for Ukraine. Although the financing contribution is not much more than could have been secured with an extension of the two-year debt service freeze agreed in August 2022, the prize for Kyiv is clearing the decks on restructuring and moving speedily toward the day it can borrow once again on the markets.
While that is unlikely while the war continues, an end to the fighting should see the private sector quickly move to help share the burden of the huge reconstruction costs.
And yet — there's always a yet. This deal does not address Ukraine's significant challenges in getting to peace in one piece.
The IMF, in its Extended Fund Facility (EFF) program document, assumes financing needs of $122bn over the period 2024-2027, and they assume this is covered partly through the $11.7bn freed up the debt deal, as well as with Western bilateral and multilateral support.
The IMF perspective is oddly myopic. It only looks at budget and balance of payments financing needs, which have been running at up to $40bn annually since the full-scale invasion of Russia by Ukraine. It altogether ignores the huge military financing needs.
Get the Latest Sign up to receive regular emails and stay informed about CEPA's work. Email
Total Western financing to Ukraine since the full-scale invasion has been running at closer to $100bn a year (see here the excellent work by the Kiel Institute.) In my view, Ukraine's financing needs are actually higher — at more like $150bn if we want it to win.
Indeed, while Western funding for Ukraine has averaged around $8.5bn a month for the past two and a half years, we can see rises and falls mirroring the country's defensive and offensive operations, the latter being more expensive than the former.
For example, in the summer of 2023, funding picked up to $12.5bn monthly (nearer $150bn annualized) as the armed forces recaptured territory. But then as the 2023-24 $61bn US funding got stuck in Congress, funding dropped to $3.5bn a month between October 2023 and February 2024, and Ukraine lost territory.
To reiterate, Ukraine needs $100bn-$150bn a year to win, not the $35bn-$40bn suggested by the IMF. Failure to be honest about Ukraine's financing needs means it is short-changed, the war drags on, more Ukrainians die, and the risk of actual Ukrainian defeat becomes a possibility.
So how can the West fund this? It is, after all, a huge sum of money, and Western taxpayers don't have an endless appetite to pay the bills. Debt relief and private sector funding cannot fund the gap.
The only realistic approach is to tap the full $330bn in immobilized Russian Central Bank assets in Western jurisdictions. It's no good using short-term fixes like securitizing the interest flow on these assets — as with June's G7 agreement for a $50bn fund. This does not touch the sides, covering just four to six months of Ukraine's financing needs. And worryingly, there have been hints from the German government that they will cut their bilateral funding for Ukraine to take account of this.
The reality is that the G7 and IMF are just not being serious or transparent about Ukraine's financing needs. But reality will return, as it always does, and the West will be forced to act.
Those frozen Russian assets are never returning to Kremlin control. They are a downpayment for all the blood and sacrifice Ukraine has spent to keep the Kremlin's imperial project at bay.
Why not just say so and get on with it?
Tags
Who is online
623 visitors
Kamala Harris will make Putin pay. Trump would let him get away...
Exactly how would she do this? She has no skills when it comes to diplomacy, negotiation, leadership, or working with the House and Senate, which is likely to be in Republican hands. Why did Putin wait until Biden was president to invade? Because he knew Biden was incompetent pushover,
How? Good Old Yankee $$$ in the form of excellent US arms...
He knew if the former 'president' convicted felon and rapist became 'president' that the former 'president' traitor would have handed over Ukraine to the killer putin. That's what traitor turds like trump do.
Yep, the Ukraine war is a godsend for the American Military Industrial Complex - can't imagine how much they pay the government in taxes. You might think it could be worth keeping pouring fuel on the fire just enough to keep it burning well.
Putin needs to be on the brutal receiving end of Ukrainian bombs.
Made In The USA!
The Ukraine War is 100% Putin's fault, and not the fault of the U.S., "the American Military Industrial Complex", the Europeans or NATO. Putin is being assisted in his homicidal rampage by China, which is providing material support to Russia's war effort, and North Korea and Iran, who are continuing to arm Russia. China, North Korea and Iran are collectively guilty of "pouring fuel on the fire" and are complicit in Russia's crimes against humanity.
Truth!
There are always at least two sides to every story. That's yours. Although I'm absolutely unendingly dedicated to only one side in the Israel/Hamas conflict, I have made it clear throughout that I will never take sides in the Russia/Ukraine one. My father was born in White Russia, my mother in Ukraine - I have the blood of both nations running through my veins.
If America is so sure China is supplying material support to Russia, then why aren't they doing something about it? What are they doiing about India's 'material support' of Russia? Could it be because they're already doing everything they possibly can to contain China, and trying to convince other nations to do so. Amazing, isn't it, when America has virtually PUSHED China into forming strong ties with Russia that now it's complaining about it. But I suppose if we're looking for international hypocrisy, it could be in a nation that says it adheres to China's One China Policy while its lawmakers bypass Beijing to visit Taiwan and supplies Taiwan with huge amounts of weaponry and military training.
In this I agree with you 100%.
One of my grandfathers was born in White Russia, and the other one was born in Ukraine. I don't owe allegiance to either country, and the circumstances of my ancestry do no obscure moral clarity. Russia is conducting a totally unprovoked criminal assault on Ukraine. If you are aware of Putin's position over the years, he has repeatedly stated that Ukraine is not a country and belongs to Russia. So, under your thinking, the two sides to the story are whether or not Ukraine exists as an independent country and has the right to remain as such, and that Putin's imperial proclivities justifies his reign of terror against the Ukrainian people. Sorry, but I don't buy it.
As far as U S./China relations are concerned, the U.S. is one of China's largest export markets resulting in billions of dollars in income to China. In no way has the U.S. "PUSHED" China into an alliance with the fascist Russian regime. The Chinese dictatorship, viewing democratic countries as an impediment to its quest for regional and international hegemony, has determined that its interests are best served by strengthening relations with other dictatorial regimes.
Regarding America and Taiwan, the recent example of the repression of Hong Kong after it reverted to Chinese control, along with China's repeated threats to take military action to subjugate Taiwan, is more than enough reason to continue to provide support to the free people of Taiwan.
I have to agree with you, this is all on putin and trump too for his support of murdering thugs.
You are an American and I respect your American opinion. However I am not and I intend to have my own opinion about things.
My opinion is based on a careful analysis of the facts. It is only an "American" opinion in that I happen to be an American. There are undoubtedly Americans who have a different opinion than I do. Some may have a factual basis for their opinion and some may not, but having one's own opinion for the mere purpose of intending to have an opinion, with an insufficient or no factual basis, is an opinion built on shifting sands.
I don't consider my living in China for the past 18 years to be relying on "shifting sands". And if you don't consider blocking China's advancement in every possible way through bans and tariffs and influencing other nations to contain China and arming and frequenting Taiwan, and NASA, who partners with Russia, but blocking China "PUSHING" China to make friends elsewhere, especially with a Communist neighbour, your "opinions" need a bit of adjustment. As well, who else but an American would already be familiar with the word "hegemony" but a resident of the most competent nation for doing it. How can ANYONE be concerned that China would invade its most valuable customer - does anyone even think that China WANTS to go bankrupt?