May 20, 2015
Translated by Krisitna Rus
For those living outside of Ukraine it is important to point out several aspects which are usually overlooked by online and media analysts. That’s what we are going to focus on.
The first and most important conclusion: In the West there are powerful forces who are playing against Ukraine. Again. In the West there are powerful forces who are playing against Ukraine. Otherwise, default would not be on the table. In the USA there is an influential group, more precisely, the alliance of groups that would love to use Ukraine as a powerful spear against Russia, but the problem is – it requires money, money and more money.
And the Clinton clan and the Republican neo-cons have a big problem with money, not in the sense that they are poor, but in the sense that to find and to put on the table from 60 to 100 billion dollars for the sake of “project Ukraine” is a very non-trivial task.
Many pessimists [on the Ukrainian issue, critics of Putin’s patient strategy, followers of Strelkov – KR] have an extremely simplified picture of the world in which there is an absolute evil monolith — the US political elite, which completely controls Europe, and which is capable of anything, or almost anything. In the world of these pessimists there is only one solution of the Ukrainian issue and the European issue. They demand to immediately destroy the Kiev regime by force, justifying it by shouting “if you don’t do it now, it will get stronger, and then it will capture Crimea and Moscow with its new army and American money!”, and they support fighting with Europe, because “it lies under the United States.”
Such citizens (especially those who work on contract on the project “to create a Patriotic opposition to the Kremlin”), react nervously to the following questions:
1. Why the U.S. has not yet printed a zillion dollars and didn’t give it to Kiev for the army, the salvation of the economy, etc.? The USA is a superpower, it has no economic problems (from the point of view of [Russian patriotic] pessimists) and to wait for the US crisis is stupid. Why? Trying to save on their #1 project against Russia?
2. Why the US, if they are in full control of the European Union, did not force the ECB to print a zillion of Euros? Here even an argument about “saving” does not work, because then the US would fund the creation of a powerful Ukrainian spear against Russia with other people’s money. It’s a dream, not a scheme! Why is this not done?
Honest answers to these questions destroy a super simple (and therefore harmful) picture of the world of the pessimists. They have to search for entirely delusional theories, or to come to the obvious conclusion that all is not so simple.
For example, the most radical Washington politicians have no access to the printing press. The Washington “hawks” who more or less control the foreign policy, can force the EU to adopt sanctions (let’s see how they can extend it), but can’t force the EU to finance Ukraine or to declare an oil embargo against Russia.
The situation with default adds interesting details to the picture:
1. The IMF is obviously playing against Ukraine, which, in view of the conflict along the line of “Lagarde — the U.S. Congress”, seems logical. To remind the essence of the conflict: the head of the IMF demands that the US abandons the controlling stake in the IMF and transfer the control of the fund to the developing countries. This demand enraged the Washington “hawks. ”
The IMF actually became the “accelerator of default”. On the one hand, Kiev was promised money (enough not to die of hunger), but the conditions are tied to the restructuring of existing Ukrainian debts to private Western funds and Russia. If the IMF did not impose this condition, we wouldn’t be discussing the upcoming Ukrainian default.
The Ministry of Finance of Russia immediately told Kiev to bug off and regularly repeats its unwavering position. Some people regret that Russia does not activate “the point of acceleration” from the terms of the issue of Ukrainian Eurobonds, which allows to demand $3 billion immediately, but it would be a wrong decision. Much better if the default of Kiev regime is triggered not by Russia, but by the Western investment funds.
There is a second interesting aspect: the top Western investment funds don’t want to help the Washington radicals — the Clinton clan and the neocons. It is obvious that they are under desperate pressure to write off Ukrainian debts, but the effect is still absolutely zero.
In world practice you can count on one hand the cases when private foundations have agreed to write off debt under conditions, when other major creditors (as Russia in the case of Ukraine) did not agree to it. As I predicted, the demarche of Siluanov, who in March publicly exposed Russia’s position, played against Ukraine:
“From the point of view of the global finance practice Siluanov was not even cruel, but on the verge of sadism. The fact is that usually such negotiations with the creditors, the countries on the brink of default conduct in maximum silence in order to be able to sell good conditions in individual negotiations with each of the lenders, none of whom want to be a looser and write off more than the others. Siluanov violated and trampled a gentleman’s principle of non-disclosure and brought to light not only the fact of negotiations with Russia, but also clearly stated that there will be no write-offs. Thus he put all the other creditors of Ukraine in an awkward position. They have a choice: to admit publicly that they are losers and write off debts for political reasons (and then the careers of managers of the funds-holders of Ukrainian bonds can be flushed down the toilet), or require full repayment of debt following the example of the Russian Ministry of Finance.”
In judo there is a move “tsukkomi jime” which involves smothering the enemy not with hands but with a lapel of his own kimono. It’s funny: no one beat or choked the opponent, only pulled the kimono, as he is laying lifeless. The situation with Ukrainian default is similar. The role of lapel is served by one item from the terms of the issue of Ukrainian Eurobonds, and this item is present in those owned by the Western creditors, and those owned by Russia. Under this paragraph, each issue of Ukrainian Eurobonds must be serviced under the conditions of “pari passu” — i.e. all creditors of Ukraine have the right to equal conditions of payment. This allows investment funds to demand from Kiev to be paid under the same conditions, which are demanded by Russia — i.e. in full. And vice versa. For Kiev, it is a vicious circle. Of course, the Western funds can refuse payment “in good faith”, but to rely on the goodwill of, for example, the fund of Mark Mobius, who is the “wallet” of that part of the American elite that hates the Clinton clan, will be very difficult.
Is there a chance that the creditor funds will still crack under the pressure of the radical parts of the American political elite? Yes. But faint. The fact that they have lasted until now, already says a lot, and Lagarde would not play the combination of linking tranches of IMF to debt forgiveness, if she didn’t believe in its success. As a fun part, we can mention an angry statement by the Ukrainian Ministry of Finance, who is unhappy that “the committee of creditors of Ukraine” refused to disclose their members, talks with Ukraine, “through a secretary” and generally behaves as “an unfair creditor”. With such a starting position the chances to save Ukraine from default are minuscule.
Does Kiev have a chance to win in court against the creditors: i.e., against Russia and against the supposedly anonymous committee of Western investment funds?
There is, but only if London will be destroyed as a global financial center for the sake of Ukraine, which is highly unlikely. Not only the Ukrainian Eurobonds were issued under English law and sold through the Irish stock exchange and from a formal point of view they belong to a special British trust companies, which receive money from Kiev, pay their bondholders and process all the legal work for the service of this financial instrument. This is a very intelligent scheme tested on thousands of bond issues for a few hundred years of London’s operation as a modern financial center. One of the consequences of this scheme is, for example, the fact that Kiev can’t really know the names of who exactly owns its Eurobonds — all the “strings” end in the special trusts, and then – complete darkness. Interestingly, they will have to sue these British private trusts.
Unlike many journalists who write on this topic, your obedient servant found and carefully read the full terms of the issue of Eurobonds, bought by Russia. After reading all 210 pages it turned out, that according to paragraph 13 — “The Enforcement of Commitments”, the Ukrainian Finance Ministry will have to sue the London “Law Debenture Trust Corporation p.l.c” , which is the manager of a private trust, holding the Eurobonds.
This company has been engaged in the business of “enforcing the commitments” for so long and so successfully that it has earned itself a place in the index of the 250 largest UK companies traded on the London stock exchange. The company is run by Carolina Banski – ex-director of finance of “N. M. Rothschild & Sons” bank, and the Board of Directors resembles a “financial security council of UN” if such an organization existed. Among the directors and proprietors there are a senior staff and structures of almost all major financial houses: Morgans, Shroeders (bankers of Confederation, Hitler and Margaret Thatcher), Rathbone (ex-East India Company)… Did not see only the Rockefellers.
Judging by the documents, and the level of experience of those who will be opposing the Ukrainian Ministry of Finance in London court, Kiev has extremely small chances to “get off the hook”. No stories about war, aggression and bloody Russians will help. Of course, it cannot be excluded that the court will be pressured, but a defeat of the creditors with obvious rights will be the end of London as a financial center where the global elite conduct their transactions. Will they sacrifice London for the sake of Ukraine? Extremely unlikely.
What awaits Ukraine?
Unless a miracle happens, Ukraine will default. A default means that there will be no money from the IMF, and that any foreign exchange assets of the Ukrainian state outside of Ukraine (including, financial assistance from countries and governments of the West) will be subject to court “freezing”. Most importantly, without any external financial injections hryvnia will take a fascinating journey along the path trodden by Zimbabwean dollar – to the very bottom of the world economy. The exchange rate will turn the pensions and salaries to dust, and bank accounts — into an unnecessary relic of former happiness. Imports will become really golden, and life – incredibly expensive. Perhaps the Kiev regime will decide to urgently go to war to distract the population from the sad thoughts, but this attempt will be over quickly and ingloriously.
Bankers are not blind to global shifts, when one project (Russia-China-BRICS-Silk Road-Eurasian Union) is looking more lucrative then the other (the crumbling Western empire).
Money has no smell or ideology, and the “evil banksters” don’t necessarily support only the “evil projects”, like Hitler or the Kiev junta, but only those which promise a return.
But it would be a disservice to analyze the situation assuming the world is black and white.
It is quite telling that Russian interests and the interests of a part of Western elite had magically aligned.
According to some Russian analysts, like Andre Fursov, who is a specialist on shadow elites, there is no consensus in Western elites today, which have divided roughly into two camps: those who desperately want to prop up the West/dollar (the Rockefellers’ circle) and those who are betting on the East/(gold?) (the Rothschilds’ circle).
If this is correct, Ukraine is a battleground in a very fierce game.
In this regard the statements of those close to Putin come to mind about the fact, that there are some behind the scenes factors which warrant Putin’s patient approach in Ukraine.
After all, the saying “my enemy’s enemy is my friend” is more true in politics then anywhere else.
The only tragedy is – the Ukrainian people are hostages in this big game. It is a high price to pay for relinquishing control of their destiny or becoming a tool of self-destructive mechanism of their own demise for a short-term gain. Let it be a cautionary tale to others.
But Russia did not start it, and one can hardly demand a clean resolution of the mess that Ukraine has become.