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The IMF Joins the New Cold War
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On December 8, the IMF’s Chief Spokesman Gerry Rice sent a note saying:

“The IMF’s Executive Board met today and agreed to change the current policy on non-toleration of arrears to official creditors. We will provide details on the scope and rationale for this policy change in the next day or so.”

Since 1947 when it really started operations, the World Bank has acted as a branch of the U.S. Defense Departmnt, from its first major chairman John J. McCloy through Robert McNamara to Robert Zoellick and neocon Paul Wolfowitz. From the outset, it has promoted U.S. exports – especially farm exports – by steering Third World countries to produce plantation crops rather than feeding their own populations. (They are to import U.S. grain.) But it has felt obliged to wrap its U.S. export promotion and support for the dollar area in an ostensibly internationalist rhetoric, as if what’s good for the United States is good for the world.

The IMF has now been drawn into the U.S. Cold War orbit. On Tuesday it made a radical decision to dismantle the condition that had integrated the global financial system for the past half century. In the past, it has been able to take the lead in organizing bailout packages for governments by getting other creditor nations – headed by the United States, Germany and Japan – to participate. The creditor leverage that the IMF has used is that if a nation is in financial arrears to any government, it cannot qualify for an IMF loan – and hence, for packages involving other governments.

This has been the system by which the dollarized global financial system has worked for half a century. The beneficiaries have been creditors in US dollars.

But on Tuesday, the IMF joined the New Cold War. It has been lending money to Ukraine despite the Fund’s rules blocking it from lending to countries with no visible chance of paying (the “No More Argentinas” rule from 2001). With IMF head Christine Lagarde made the last IMF loan to Ukraine in the spring, she expressed the hope that there would be peace. But President Porochenko immediately announced that he would use the proceeds to step up his nation’s civil war with the Russian-speaking population in the East – the Donbass.

That is the region where most IMF exports have been made – mainly to Russia. This market is now lost for the foreseeable future. It may be a long break, because the country is run by the U.S.-backed junta put in place after the right-wing coup of winter 2014. Ukraine has refused to pay not only private-sector bondholders, but the Russian Government as well.

This should have blocked Ukraine from receiving further IMF aid. Refusal to pay for Ukrainian military belligerence in its New Cold War against Russia would have been a major step forcing peace, and also forcing a clean-up of the country’s endemic corruption.


Instead, the IMF is backing Ukrainian policy, its kleptocracy and its Right Sector leading the attacks that recently cut off Crimea’s electricity. The only condition on which the IMF insists is continued austerity. Ukraine’s currency, the hryvnia, has fallen by a third this years, pensions have been slashed (largely as a result of being inflated away), while corruption continues unabated.

Despite this the IMF announced its intention to extend new loans to finance Ukraine’s dependency and payoffs to the oligarchs who are in control of its parliament and justice departments to block any real cleanup of corruption.

For over half a year there was a semi-public discussion with U.S. Treasury advisors and Cold Warriors about how to stiff Russia on the \$3 billion owed by Ukraine to Russia’s Sovereign Wealth Fund. There was some talk of declaring this an “odious debt,” but it was decided that this ploy might backfire against U.S. supported dictatorships.

In the end, the IMF simply lent Ukraine the money.

By doing so, it announced its new policy: “We only enforce debts owed in US dollars to US allies.” This means that what was simmering as a Cold War against Russia has now turned into a full-blown division of the world into the Dollar Bloc (with its satellite Euro and other pro-U.S. currencies) and the BRICS or other countries not in the U.S. financial and military orbit.

What should Russia do? For that matter, what should China and other BRICS countries do? The IMF and U.S. neocons have sent the world a message: you don’t have to honor debts to countries outside of the dollar area and its satellites.

Why then should these non-dollarized countries remain in the IMF – or the World Bank, for that matter. The IMF move effectively splits the global system in half,between the BRICS and the US-European neoliberalized financial system.

Should Russia withdraw from the IMF? Should other countries?

The mirror-image response would be for the new Asian Development Bank to announce that countries that joined the ruble-yuan area did not have to pay US dollar or euro-denominated debts. That is implicitly where the IMF’s break is leading.

• Category: Economics, Foreign Policy • Tags: IMF, Russia, Ukraine 
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  1. Rehmat says:

    IMF’s decision follows American “democratic” system – “Either you’re with US, or against US.”

    The loan was when Ukraine was a Russian client. Now, Ukraine is US-EU client, so the payment on the loan is not required.

    Top EU officials, rather than Russia, threatened Ukraine with a coup d’état if Kiev refused to sign an association agreement in 2013, Nikolay Azarov, Ukraine’s former prime minister, said.

    “I’ve never heard neither Putin nor Medvedev saying that if you sign an agreement with the EU, you’ll have a different government. But I’ve heard [EU Commissioner for Enlargement and Neighborhood Policy, Stefan] Fule, repeatedly saying that if you don’t sign then the other government will sign it,” Azarov said at the presentation of his book ‘Ukraine at a crossroads. Prime Minister’s notes’ in Moscow.

  2. Kiza says:

    There was some talk of declaring this an “odious debt,” but it was decided that this ploy might backfire against U.S. supported dictatorships.

    Obviously, \$3B of Russian money was used to cover interest payments on the previous IMF and other debt of Ukraine. Thus IMF decided that it can accept money from Russia, but does not want to concern about payments to Russia.

    Ultimately, this IMF decision will do even worse than the “odious debt”, because it will be an even stronger incentive for Russia and China to drop US dollar from all consideration. Otherwise, they will keep getting shafted at every corner. Half of the world will be on US\$ and the other half on RMB/Rouble.

    The best is that IMF has not even published this changed rule under which the debt to Russia has been ignored, it remains to be created. Like all the other Western “principles”, everything is tailor-made to benefit the owners of the principles and international laws.

    • Replies: @Kiza
  3. tbraton says:

    Since what is at stake is money borrowed by Ukraine from Russia, the headline to this piece is misleading. Rather than saying “The IMF Forgives Ukraine’s Loan to Russia,” it should say “The IMF Forgives Ukraine’s Debt to Russia.” The body of the piece itself states that “For over half a year there was a semi-public discussion with U.S. Treasury advisors and Cold Warriors about how to stiff Russia on the \$3 billion owed by Ukraine to Russia’s Sovereign Wealth Fund.” Thus, we are talking about \$3 billion lent by Russia to Ukraine, not the other way around. A terrible precedent no matter what you call it.

  4. That is the region where most IMF exports have been made – mainly to Russia

    Hudson should have coffee before he hits ‘post.’ Should read ‘the Donbass is the region from which most of Ukraine’s exports had been made – mainly to Russia’, as well he actually got the article’s title “The IMF Forgives Ukraine’s Loan to Russia” backwards, it is Ukraine owes Russia, Ukraine wasn’t the lender, Russia was.

    I expect the article’s information is about as trustworthy as the immense typos.

    • Agree: Wizard of Oz
    • Replies: @tbraton
  5. Hudson needs to get off the hooch before he writes his columns. Ukraine is not a client of the US, nor is there a US backed “junta” in Kiev. He needs to look at the mafia regime in Moscow and their aggression in Crimea and the Donbas. Ukraine didn’t start the fight, Putin did.

    Ukraine is trying to end corruption, Moscow is feeding it. Quit spouting stupidity and lies.

    • Replies: @annamaria
    , @Rurik
    , @RobinG
  6. I would like the author to give some evidence that he actually knows more than, say, the average primary school teacher about the Ukraine. What are his sources? Does he have a clue about who speaks Ukrainian, who Russian, who both in the Ukraine? No, didn’t think so..

  7. MarkinLA says:

    Moscow and their aggression in Crimea

    Putin followed the script in Crimea that Clinton wrote for Kosovo. One criminal act begets another, I suppose.

  8. annamaria says:

    Gangsterism. And it is coming back to bite the US. The plutocratic plebs that love calling themselves “elites” are going to see their children’s future reduced to catastrophe – thanks to the plutocratic plebs.

  9. annamaria says:

    This is an amazing post by Quartermaster. Made of point-by-point mainstream media propaganda as ordered by masters of the Empire of Federal Reserve. It is surprising that the post does not mention existential threat to the US because of the Russian Federation placing her weaponry at the US borders.

  10. annamaria says:
    @Wizard of Oz

    Ah, your mysterious friend’s son from Australia, which supposedly understands perfectly both Russian and Ukraine languages; he is your only reliable source of info about the US/RF conflict in Ukraine… Are you sure that this “Australian son” is not an asset having good time among other US state dept. assets like Poroschenko and Yatz?

  11. jjc says:

    All democratic governments have constitutionally mandated procedures for transitions in government. None of these procedures were followed in Ukraine in February 2014. The new western-leaning government seized power in an illegal coup. The continuing nonsense about “Russian aggression” is hot air with no factual basis.

    Russia, along with Poland and France, brokered a political agreement within Ukraine to address the concerns raised by Maidan and move up the date of the next scheduled federal election. The agreement was signed off on a Friday night, and the following day the radical right forces which coalesced in Kiev led a violent putsch which removed the sitting government to specifically prevent the agreement from being realized (as reported in the NYTimes and other venues). The US , UK, and Canada foolishly immediately recognized the new illegal government as “legitimate”.

    The supporters of Maidan would have been in position to vote in a government that would follow their wishes a full year ago – with no coup, no loss of Crimea, no civil war, no ongoing disaster. This same scenario is unfolding in Syria, and the same international actors are rejecting a democratic compromise.

  12. tbraton says:
    @Wizard of Oz

    “I would like the author to give some evidence that he actually knows more than, say, the average primary school teacher about the Ukraine.”

    For someone who purports to be a stickler about proper English usage and for someone who purports to be in close touch with every corner of the world from his perch in Australia, you sure haven’t kept up with developments in the last 25 years, Wizard of Ooze. You call into question the author’s expertise, but then you make a reference to “the Ukraine.” That antiquated usage was abandoned by the English-speaking world in 1991, when it gained independence from the Soviet Union. This is what Wikipedia has to say:

    ” “Ukraine” versus “the Ukraine”[edit]

    Since the Declaration of Independence of Ukraine the English-speaking world has changed its usage from “the Ukraine” to “Ukraine”.[40][41][4][42] From November 1991, several American journalists began to refer to Ukraine as Ukraine instead of the Ukraine.[4] The Associated Press dropped the article ‘the’ on 3 December 1991.[4] This approach has become established in journalism and diplomacy since (other examples are the style guides of The Guardian[43] and The Times[44]). In 1993 the Ukrainian government requested that the article be dropped.[45]

    The use of the definite article is standard in some other languages such as French (l’Ukraine) or German (die Ukraine), but this is not a marked feature, since the article in French is required for all countries (except Singapore and Israel), and in German, for all non-neuter countries.”

    Since you are determined to take your usual nit-picking approach to posts, let me pose a question to you: what vital national interests does the U.S. have in Ukraine to justify the call from some Obama Administration officials and some American politicians to finance and arm Ukraine? And following your excellent example in the above response, let me give you the correct answer to my question (since the question is so direct, I’m certain that I will not get a direct answer from you): NONE.

    BTW I think you should change your name from Wizard of Ooze to King of Trolls.

  13. Rurik says:

    nor is there a US backed “junta” in Kiev.

    of course there is

    don’t you remember Victoria Nuland deciding who was going to do what in the new government?

    “Nuland: [Breaks in] I think Yats is the guy ..”

    does that sound like a democratically elected government to you?

    Instead, the IMF is backing Ukrainian policy, its kleptocracy and its Right Sector leading the attacks that recently cut off Crimea’s electricity.

    of course it is

    Should Russia withdraw from the IMF? Should other countries?

    of course they should

    with loans come domination

    you don’t get one without the other, and if you’re willing to suffer under western (Zio/NATO/corporate/MIC) domination, as it exists today, get ready for war

    • Replies: @annamaria
  14. annamaria says:

    And here is a reminder of why there are commenters like Quatermaster:
    The obliging presstitutes would say anything to keep the owners happy. Some fame…

    • Replies: @Rurik
  15. annamaria says:

    Deserves to be read:

    “On their way out, they [empires] do what they can to compromise and weaken the entity they leave behind, by inflicting a permanently oozing and festering political wound. “Poison all the wells” is the last thing on their pre-departure checklist.”

    • Replies: @Rurik
    , @RobinG
  16. tbraton says:
    @Ronald Thomas West

    Ronald Thomas West, I usually read your intelligent posts with some interest since they invariably provide some good insight into whatever you are discussing. That’s why I am somewhat baffled by your instant post, which appears content to take some cheap shots at the author rather than addressing his main point. You dwell on relatively minor typographical errors, i.e., the misleading headline (which I also pointed out without disparaging the author—and which has been changed) and another sentence in the main text which a normal reader could easily figure out he meant to say something else. (I, to my horror, often discover that I have omitted words or used the wrong word, but abstain from cluttering the thread by posting obvious corrections whenever possible.)

    Since your views on Ukraine seem to closely correspond with the author’s, I am puzzled by your failure to address the main thrust of the author’s message, namely the politicization of an institution which, in the past, appeared to work for the benefit of all, despite the fact that it was based in Washington, D.C. I believe the Ukraine matter just follows the increasing political tilt of the IMF, which was forced, over its objections, to participate in new loans to Greece, despite the fact that the loans violated the IMF’s standards. By applying different standards depending on whether the loans were made by Russia or one of the U.S.’s allies, the IMF has appeared to be entering a brave new world, which I believe is Mr. Hudson’s main point.

    • Replies: @Ronald Thomas West
  17. @tbraton

    I think the only new thing going on with the IMF in relation to the recent events (Greece, Ukraine) is an aspect of self-cannibalization where the rules have been changed to insert negative geopolitics (financial terror) into Europe. Perhaps the IMF criminal history hadn’t been much noticed previously because the chicken’s hadn’t come home to roost just yet in the so-called ‘developed world’ but here’s a bit of history:




    Perhaps I have a short fuse or simply lack patience but I look at the Hudson piece and think ‘man, you could do so much better.’ Likely a part of my impatience has to do with having shared (as a social scientist by default, in actuality an anti-corruption investigator) the grinding, rank poverty of those simple, honest folk who only wish to get on in life with a fair chance that doesn’t compromise their community and that never seems to be forthcoming and meanwhile we have all these ‘technicians’ who ‘write’ but I’m not certain they ‘feel’ or have any notion of the reality outside of an abstract grasp. The bottom line in my view is, the IMF has ever been a non-living, criminal entity entirely devoid of a soul and that’s an aspect that needs developed for media consumption, certainly –

    • Replies: @Kiza
  18. RobinG says:

    Not so ‘amazing’ (by another definition). We’ve come to depend on Q.Master for eye-rolling BS.

  19. eah says:

    other creditor nations

    The US is a creditor nation?! That’s news to me!

  20. Anonymous • Disclaimer says:

    What I find intriguing amid all of this opinionated rhetoric is that the Chinese chose last night to devalue the yuan and announce they bought a whole lot more gold. Today, there was a run on the US dollar, driving down the stock markets.

    Coincidence? Stay tuned.

  21. Kiza says:
    @Ronald Thomas West

    …man, you could do so much better…

    Ronald, a most friendly comment from me – you are absolutely right, your comments are often better than the articles you comment on. But we could be a bit more understanding of the authors. Their articles could be taken as discussion props and kick-offs, instead of the ultimate word on a topic. I sincerely consider comments a better part of an article, I am sure some authors do too.

  22. Rurik says:

    A great journalist and a good man

    I suppose, like what they did to Michael Hastings, they have to make an example of one now and then

    and shot himself in the head. The first shot was not lethal, so he fired once more.

    I did find this curious, but I wasn’t there

    certainly Hastings was murdered

    • Replies: @Jonathan Revusky
  23. Rurik says:

    What the Anglo-imperialists were paying for in corrupting Ukraine’s politics was a ring-side seat at a fight between Ukraine and Russia. And what they got instead is a two-legged stool at a bar-room brawl between Eastern and Western Ukraine. … … So, paying billions to watch a bunch of Ukrainians fight each other inconclusively while Russia gets to play peacemaker is not what the Anglo-imperialists wanted, and they are absolutely livid about it


    When the British got tossed out of the Middle East, they set up the State of Israel, then the US made it into its own protectorate, and it has been poisoning regional politics ever since.


    the Brits gave the Zionists Palestine as payback for bringing in the US on behalf of the allies in WWI. US is Israeli’s stooge, not the other way around. And the strife in Ukraine is payback to Putin for ruining Israeli’s designs to (have the US/NATO) destroy Syria like they did Libya.

    the article repeats ‘Anglo-imperialists’ over and over, but I don’t see England as too imperialist today. And the US just looks like the Blaster in a humiliating case of Master Blaster.

    at least to me ; )

  24. RobinG says:

    War and consumerism to control the masses-

    George Orwell, Edward Bernays & Perpetual War

    “Widespread material comfort and spare time would allow the populace to develop intellectually and spiritually, and thus to achieve a kind of universal enlightenment. Orwell argues that with such leisure-based understanding, humanity would question the necessity for hierarchy and begin to threaten the arrangement that so benefits those at society’s pinnacle.”

    “Our leaders constantly cry public poverty when it comes to rebuilding our infrastructure or keeping the lights on in our cities, yet there’s always funds for new carpet bombing, furtive drone campaigns, or boots on the ground abroad.”

    • Agree: Kiza
  25. Kiza says:

    The new IMF policy is: “We only enforce debts owed in US dollars to US allies”, whilst Russia and China are minority members of IMF and debts to them do not count as debt any more. Let me explain why the implications of this IMF decision are worse than if they declared odious debt.

    Would it be difficult to imagine one day that ADB and AIIB declare an equivalent: “Countries which joined our ruble-yuan area do not have to pay their US dollar or euro-denominated debts.”

    Russia and China do have sufficient weaponry to defend their block against the IMF debt enforcers, the US marines and the aircraft carriers.

  26. @Rehmat

    When Western powers bully weaker countries, do they really benefit their citizens? Does it make Joe Bloggs from Croydon any safer or wealthier if the Ukraine is more firmly within the EU orbit? Clearly someone must be benefitting from all the shenanigans, and it’s not us.

  27. @Rurik

    I did find this curious, but I wasn’t there

    Double gunshot suicide. They say it happens… occasionally… (I wasn’t there either of course.)

  28. and this shows china is fucking right again in creating it’s own bank.

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