It is very unlikely that Ukraine would strike a Key European infrastructure while asking for debt payment postponement it worked for several months to agree on.
Without debt postponement and new loans Ukraine would go into messy default.
Economic Impact of War: Since the Russian invasion, Ukraine's economy has faced significant challenges, including the need to redirect national resources towards defense and humanitarian needs rather than debt servicing.G7 and Paris Club Agreement: In July 2022, a group of creditors from G7 countries and the Paris Club agreed to suspend Ukraine's debt service payments until the end of 2023, with the possibility of extending this suspension by another year. This was aimed at easing financial pressure on Ukraine and allowing it to focus on internal needs during the conflict.
Extension and Future Plans: By December 2023, the suspension was extended to 2027, as reported by the Ukrainian Ministry of Finance. This extension was part of a broader financial support strategy where the EU and G7 have provided substantial aid, including loans backed by the interest from immobilized Russian assets.
G7 Loan Initiative: In June 2024, the G7 pledged a $50 billion loan to Ukraine, to be repaid through the revenue generated by frozen Russian assets, showcasing international solidarity and an innovative approach to funding without directly burdening taxpayers.
Debt to Private Creditors: Despite the suspension, there are concerns about resuming payments to private creditors, which include major investment funds like BlackRock and PIMCO. These creditors aim to resume interest payments by 2025, putting additional pressure on Ukraine's already strained finances.
RELATED DATA AND EVENTS:
Ukraine has asked its international creditors, including Western powers and the world's largest investment firms, to freeze its debt payments for two years so it can focus its dwindling financial resources on repelling Russia.
Facing an estimated 35% to 45% crash in GDP this year following Moscow's invasion in February, Ukraine's finance ministry said on Wednesday it was hoping to finalise the deferral on its roughly $20 billion of debt by Aug. 9.
12 August 2022 - Ukraine's creditors agree 2-year freeze on $20 billion overseas debt
Ukraine's overseas creditors backed its request for a two-year freeze on payments on almost $20 billion in international bonds, a regulatory filing showed on Wednesday, a move that will allow the war-ravaged country to avoid a messy debt default.
14 September 2022 - Ukraine's western government creditors agree debt service freeze
Ukraine's western government creditors concluded on Wednesday a memorandum of understanding on a planned debt service suspension, the group said.
The group, which includes Canada, France, Germany, Japan, United Kingdom and the United States, said in July that they would provide a coordinated suspension of Kyiv's debt servicing to the end of 2023 and potentially for an additional year.
"This MoU eases Ukraine's liquidity pressures and allows its government to increase social, health and economic spending in response to Russia's unjustified, unprovoked and illegal war of aggression," the group said in a statement issued by France's finance ministry.
14 September 2022 - Statement by Group of Creditors of Ukraine (USA)
The representatives of the Group of creditors of Ukraine (“The Group”) and the government of Ukraine met virtually on September 14, 2022 to conclude a Memorandum of Understanding (MoU) in order to implement the debt service suspension announced on July 20, 2022.
This MoU eases Ukraine’s liquidity pressures and allows its government to increase social, health and economic spending in response to Russia’s unjustified, unprovoked and illegal war of aggression.
During the meeting, the Minister of Finance of Ukraine provided a description of the economic and financial situation in his country and presented the measures taken by his government in the past few months to support the Ukrainian economy in the context of the war.
The Group welcomed the reforms implemented by the government of Ukraine to address the economic and financial consequences of the war. In addition, the Group welcomed the conclusion of an agreement with bondholders and warrantholders to defer debt payments for two years, which represents substantive support for the government and people of Ukraine.
Finally, the Group strongly encourages all other official bilateral creditors to swiftly reach agreement with Ukraine on a debt service suspension.
We will continue to closely coordinate and assess the situation with the support of the IMF and the World Bank.
Background note: The Group of Creditors of Ukraine includes Canada, France, Germany, Japan, United Kingdom, and the United States of America.
Observers to the Group include Australia, Austria, Belgium, Brazil, Denmark, Finland, Ireland, Israel, Italy, Korea, the Netherlands, Norway, Spain, Sweden, and Switzerland.
14 September 2022 - Debt Relief for Ukraine - Debt Service Suspension (Japan)
27 September 2022 - US presses EU to speed up financial aid to Ukraine
IMF is separately working on new emergency funds for Kyiv.
28 September 2022 - Biden approves an additional $1.1 billion in security assistance for Ukraine
The Biden administration announced $1.1 billion in additional security assistance for Ukraine on Wednesday, bringing the U.S. commitment to more than $16.2 billion since Russia’s invasion in late February.
The announcement of the upcoming aid package, the 22nd such installment, follows referendums held in four Russian-occupied regions of Ukraine that are backed by Russian President Vladimir Putin.
27 March 2023 - The Government of Ukraine approved a memorandum with the IMF and its G7 creditors – loan guarantees and postponement of debt payments until 2027.
The Cabinet of Ministers of Ukraine approved the government’s and the National Bank’s draft letter of intent to the IMF and the draft Memorandum on Economic and Financial Policy. Minister of Finance Serhii Marchenko must sign the specified letter.
In turn, a group of Ukraine’s creditors from the G7 countries and members of the Paris Club (GCU) have provided financial guarantees for the IMF program to restore the country’s macroeconomic stability.
In addition, the moratorium on the payment of Ukraine’s debts has been extended from August 1, 2022, for the duration of the IMF program (2023-2027). In July 2022, the Group of Creditors announced its intention to suspend principal and interest payments on bilateral debts from August 1, 2022, until the end of 2023, with the possibility of extending the suspension for another year.
CONCLUSSIONS:
Reasons Why Ukraine is Less Likely to be the Perpetrator:
1. Dependency on Western Support:Financial Aid: Ukraine has been heavily reliant on Western financial aid, including loans and grants from the EU, G7, and the United States. Sabotaging key European infrastructure would jeopardize this support, which is crucial for both its military efforts and economic survival.2. Energy Security:Alternative Energy Supplies: Since the conflict with Russia began, Ukraine has been working to diversify its energy sources, moving away from Russian gas. Destroying Nord Stream would not align with its strategy to secure alternative energy routes but rather would harm European allies who are also Ukraine's supporters.
3. Political Repercussions:
Diplomatic Relations: Any involvement in such an act would severely damage Ukraine's diplomatic relations with Western nations, potentially leading to sanctions or withdrawal of support at a time when unity and backing are most needed.
4. Economic Impact:
Economic Stability: The Ukrainian economy is already under immense strain. An act that could lead to further economic instability in Europe by disrupting energy supplies would indirectly harm Ukraine's own recovery efforts.
5. Strategic Alignment:
Common Goals: Ukraine's strategy has been aligned with Western interests in reducing Russian influence. Sabotaging Nord Stream would be counterproductive as it would potentially increase tensions or fears among European countries about energy dependency, possibly leading to negotiations or concessions with Russia.
How Ukraine Would Less Likely Endanger Creditors' Energy Security:
1. Timing:
During the critical months when Ukraine was negotiating or had already secured financial aid packages, any action that could be perceived as an attack on its creditors' interests would be politically and economically suicidal.
2. Visibility and Accountability:
With international eyes on Ukraine due to the ongoing conflict, any covert operation would be extremely risky. The transparency and accountability demanded by creditors and international bodies would make it challenging for Ukraine to engage in such activities without repercussions.
3. Strategic Communication:
Ukraine has been actively communicating its needs and alignment with Western values and security interests. Sabotaging Nord Stream would contradict this narrative, especially when the country is trying to strengthen its case for continued support.
4. Alternative Means:
If Ukraine sought to disrupt Russian energy dominance, there are less confrontational and more politically savvy methods available, like enhancing its own energy infrastructure or promoting sanctions against Russian energy exports.
The meme "Until the last Ukrainian" = "Save creditors before haircuts"
It is unclear if in a case of messy default Ukrainian debt would be honoured.
It is unclear that the Ukrainian state would have successor
or a one which would be able to pay its debts.
It is unclear what would happen with debts if Ukraine dissolves,
soe regions become part of Russia.
Russia does not recognize the legitimacy of Ukrainian government,
therefore it will not honor its debts.
- Default - All over me -
Concluding remark: The latest WaPo news from spin doctors
is that Ukrainian did it and UA official coordinated the mission.
Here is my take on the issue ,
and how I may have caused that news to appear.
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