Theme: Crisis

UKRAINIAN DEFAULT

“In order to prevent a default, someone is going to have to give Ukraine a bunch of money.

It seems small minded to worry about dollars and cents in a revolution-like scenario, but Ukraine’s economy is a shambles and is only going to get worse in the short term. Even with the ongoing chaos in Kiev, Yanukovych recently took a trip to China to sign some trade agreements and to try to arrange a desperately needed short-term injection of cash. That a president would leave while his government did not fully control the capital city should give some indication as to just how dire the situation is.

However the China deal, while helpful, won’t be sufficient for Ukraine’s short and medium-term financing needs. Some entity (the EU, the IMF , or Russia) is going to need to provide Ukraine with a sizable amount of financing, but there are obvious political constraints that bind each actor. The EU won’t help Yanukovych so long as he stalls on the association agreement, the IMF is unlikely to help unless the Ukrainian government promises to get serious about economic reform, and the Russians won’t pay a dime unless Ukraine fully scuttles any talk of an association agreement with the EU. I’d be lying if I said I knew exactly how this would play out, but this is one of the most important questions facing Ukraine at the moment and it seems as if it’s being almost entirely ignored by most media coverage.”

– Forbes