The IMF Changes its Rules to Isolate China and Russia
The nightmare scenario of U.S. geopolitical strategists seems to be coming true: foreign economic independence from U.S. control. Instead of privatizing and neoliberalizing the world under U.S.-centered financial planning and ownership, the Russian and Chinese governments are investing in neighboring economies on terms that cement Eurasian economic integration on the basis of Russian oil and tax exports and Chinese financing. The Asian Infrastructure Investment Bank (AIIB) threatens to replace the IMF and World Bank programs that favor U.S. suppliers, banks and bondholders (with the United States holding unique veto power).
Russia’s 2013 loan to Ukraine, made at the request of Ukraine’s elected pro-Russian government, demonstrated the benefits of mutual trade and investment relations between the two countries. As Russian finance minister Anton Siluanov points out, Ukraine’s “international reserves were barely enough to cover three months’ imports, and no other creditor was prepared to lend on terms acceptable to Kiev. Yet Russia provided $3 billion of much-needed funding at a 5 per cent interest rate, when Ukraine’s bonds were yielding nearly 12 per cent.”[1]
What especially annoys U.S. financial strategists is that this loan by Russia’s sovereign debt fund was protected by IMF lending practice, which at that time ensured collectability by withholding new credit from countries in default of foreign official debts (or at least, not bargaining in good faith to pay). To cap matters, the bonds are registered under London’s creditor-oriented rules and courts.
On December 3 (one week before the IMF changed its rules so as to hurt Russia), Prime Minister Putin proposed that Russia “and other Eurasian Economic Union countries should kick-off consultations with members of the Shanghai Cooperation Organisation (SCO) and the Association of Southeast Asian Nations (ASEAN) on a possible economic partnership.”[2] Russia also is seeking to build pipelines to Europe through friendly instead of U.S.-backed countries.
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