This very strange situation was one we mentioned here on the blog last year. The US/IMF find themselves in an odd position of possibly having to provide the Ukraine more money in order to pay off a $3 Billion bond due to Russia. All this while the US has sanctions in place against Russia. Bloomberg updates the situation in this recent article. Some quotes are below.
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"President Vladimir Putin called on the International Monetary Fund to help Ukraine repay a $3 billion bond due December, as Russia said it was weighing plans for a possible default on the debt.
The Washington-based fund is preparing to allow countries supported by a loan program to default on debt to official creditors, Finance Minister Anton Siluanov said at a government meeting with Putin on Tuesday. Current policy only allows member states to miss payments to private investors, meaning Ukraine would risk a $17.5 billion loan from the IMF by not fulfilling obligations on the note.
“Seems to me it’s easier to go this way, add these $3 billion, so that they can pay and everybody’s fine,” Putin said at the meeting. Russia has so far waived its right to call early repayment of the bond to avoid putting Ukraine in a difficult position, he said." . . . . . . . . .
"Russia isn’t planning to compromise on the debt, the Russian state news service RIA reported Friday, citing Siluanov."
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My added comments:
So far the split between the East (BRICS nations) and the US seems pretty genuine. It's always hard to tell if disagreements are serious or not since we have no access to all that goes on behind the scenes inside the system. But Russia is doing a number of things that seem to be irritating to the US (Syria, Iran, Ukraine, etc). China and Russia just continue to slowly and surely build alternative financial institutions and systems to bypass the US led western based institutions if need be. China still gives every indication that gaining acceptance of the yuan into the SDR currency basket at the IMF is very important to them. So far they have not carried through with threats to push forward a "Plan B" at the IMF due to the 2010 reforms remaining stalled in the US.
What we can say is that all this lack of cooperation at the global level is contributing to the gridlock situation that seems to exist in the global financial system. The western banks continue to try to dominate the global financial system using the US dollar as reserve currency. The BRICS nations keep working to get out from under this arrangement, but do so very gradually so as not to rock the boat.
It still seems as though absent some kind of major global financial crisis we are likely to see this stalemate continue and therefore see change happening very slowly if at all in the global monetary system. A crisis changes that of course so we always have to stay alert since the conditions are always present for one to emerge (geo-political stress, sovereign debt problems, derivative contracts hidden in the system, etc, etc). The situation between Russia and the US would fall into the potential geo-political stress category.
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