Tuesday, May 6, 2014

The Ukraine continues to be a mess

This article illustrates how messed up everything is right now.

The US says that the Ukraine revolt started from protestors who were unhappy with the existing government. Russia says the revolt started due to encouragement from the US and has now broken down into chaos. Since everyone involved has intelligence agencies whose job it is to spin events in their favor, it is impossible to know the truth.

But whatever started this problem, it continues to drag on and the the threat of military conflict is still quite possible. The IMF attempted to get Western influence over the new government by approving a $17 Billion loan. Russia wants the US/IMF to stay out but does want the Ukraine to pay for debt it owes Russia for gas deliveries. So they want any IMF loan to pay the over $3 Billion debt due Russia.

But now this article shows that even the approved IMF loan is in question now. With the latest events in the Ukraine, the IMF says the approved loan will have to be changed if parts of Eastern Ukraine break away from the central government.

Here are some quotes from the article:

" Ukraine's loss of its territory in the east would force the International Monetary Fund to re-design its $17 billion bailout of the country, and would require additional financing, the Fund warned on Thursday."

"A long-lasting disruption of relations with Russia that depresses exports, investment, and growth, or a loss of economic control over the East that reduces budget revenue would require a significant recalibration of the program and additional financing, including from Ukraine's bilateral partners," the IMF said in a staff report released on Thursday."
We keep an eye on this situation as it relates to possible monetary system change. So far, nothing has happened that would trigger that. However, if the situation drags on and gets worse, it could lead to problems that could impact global financial stability. 

Obviously a war involving major players would cause problems. Ramping up of sanctions and retaliation for sanctions could cause problems. If the Ukraine had to default on debt, that could cause problems.

All we can do is just continue to monitor events and see where they lead.

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