By David Sole
Ukraine has suffered much death and destruction since it was taken over in the CIA backed 2014 coup and the proxy war it has been fighting against Russia ever since. The news media are filled with dire stories of Ukraine’s inability to fill the ranks of its decimated armies and lack of armaments even though it has received hundreds of billions in military aid and economic subsidies from the United States and other NATO countries. Now Ukraine is facing serious financial problems regarding its enormous debt.
The Wall Street Journal reported on May 4 that “Ukraine’s lenders said Kyiv could wait to pay them back after Russian troops stormed into the country two years ago. Now, their patience is starting to run out.”
Reuters brought the story up to date reporting on June 17 that “Talks between Ukraine and its international bondholders designed to cut its debt to help finance its war effort ground to a halt on Monday after the two sides failed to reach an agreement.”
The problem, of course, is that Ukraine is losing its proxy war with the Russian Federation and is no longer a good bet. Western nations who pushed Ukraine into the war, and especially the Western public that is growing wary of the war, are less willing to fork over the billions to keep the war and the puppet Zelensky regime going. So those nations that lent money to Ukraine are more and more doubtful that they can or will be repaid.
Ukraine, meanwhile, is looking to sell off state assets to raise money to pay for the war. The New York Times reported on June 13 that “The government hopes to sell off a range of companies to fund the military and stabilize the economy as the grueling conflict with Russia drains its coffers.”
“Beginning this summer, the government will auction some 20 state-owned companies, including Hotel Ukraine, a vast shopping mall in Kyiv, and several mining and chemical companies.” Even with all the foreign aid Ukraine “is short $5 billion this year for military spending” according to the Times. However Ukraine “has set itself a modest target of selling a minimum of $100 million worth of assets this year,” hardly making a dent in its deficit. It is doubtful that buyers can be lured into this market even with fire-sale low prices. One executive involved in advising foreign companies on privatization didn’t make a strong pitch when he said “If we don’t sell now and raise money, soon there will be nothing to sell because the property will be either destroyed or occupied.
Ukraine is also counting on the U.S. and the European Union giving it funds from the interest accruing to Russian financial assets frozen by the Western powers. The New York Times reported on June 13 that $50 billion for a loan to Ukraine “will come from the United States, the European Union and other G7 countries….The idea is to use the nearly $300 billion in Russian assets in the West, frozen after Moscow’s invasion of Ukraine…as the basis for the loan. The money will be repaid over time with the profits earned from those Russian assets.” Russia has denounced any such plans as outright theft and pledged to retaliate against any nation that confiscates any of its assets.
“The European Union’s chief diplomat Borrell said 1.4 billion euros ($1.5 billion) in windfall profits would be available in the coming month and another 1 billion euros ($1.07 billion) by the end of 2024 to help Kyiv” according to a Newsweek article of June 25. This is separate from the G7’s plans.
The worsening military situation facing Ukraine is driving the U.S. and its allies to pull out all stops to prop up their faltering proxy. On June 14 President Biden “signed a 10-year security pact with Ukraine and promised, with E.U. help, a $50 billion loan.” But the New York Times had to ask “will the money arrive in time to turn the tide, and will the deal outlast the election in November?”
In any case financial promises and even deliveries are not likely to reverse the long term battlefield defeats. Unable to reverse the steady Russian advances, Ukraine’s President Zelensky fired another top general on June 24. The commander of Ukraine’s Joint Forces Command, Lieutenant General Yury Sodol was dismissed. General Sodol was second in command under Commander-in-Chief Syrsky, who, himself, replaced General Valery Zalushny in February. This instability at the top of the military is a result of the repeated failures of the Ukrainian forces across hundreds of miles of battlefront.
Should the military, financial and political problems of Ukraine continue to worsen, the U.S. and its NATO allies can be tempted to save their proxy by more direct intervention. Their unwillingness to allow Ukraine to negotiate a peace settlement with Russia can easily escalate into a wider war. Anti-war forces in the West need to seriously prepare for this eventuality.
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