Michael Hudson — The IMF forgives Ukraine’s loan to Russia

Since 1947 when it really started operations, the World Bank has acted as a branch of the U.S. Defense Department, 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.…

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.…

The Vineyard of the Saker

The IMF forgives Ukraine’s loan to Russia
Michael Hudson specially for the Saker Blog

Michael Hudson is the president of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and Guest Professor at Peking University

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The IMF’s decision to lift the ban on loans to nations with overdue sovereign debts was made to prejudice Russia and in order to legalize opportunity for Kiev not to pay its debts, Russia’s Finance Minister Anton Siluanov said on Tuesday.

"It was made solely to prejudice Russia and for purposes of legalizing the opportunity for Kiev not to pay its debts. Reluctance of the United States to resolve the issue with replenishment of IMF’s capital that would be highly useful for tackling Ukraine’s debt problems appears glaring against such background. It turns out it is much simpler to change base rules of IMF work formed for years on end and delay the decision on amendments to its Articles of Agreement and capitalization then to essentially resolve problems of defaulting nations implementing the IMF program," Siluanov said.
The Russian Ministry of Finance will defend its rights as a lender and is already preparing documents for the court, minister Anton Siluanov said on Tuesday.

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IMF’s decision made to prejudice Russia — Russia’s Finance Minister