Now that voters in the UK have elected leave the European Union (EU), the future of Ukraine is in even more jeopardy.
In a recent article titled “Ukraine & Europe: What Should Be Done?” on the New York Review of Books website, George Soros spells out the financial problems facing his homeland.
Soros, a staunch supporter of Ukraine, continues to warn the world about Russia’s President Vladimir Putin continuing threat to the independent nation. While Putin claims that Russia’s current economic and political difficulties are due to the hostility of the Western powers, led by the United Sates, Soros claims that Russia is the victim of its own aggression.
Putin uses the old ploy of asking the Russian citizens to put up with the hardships they are facing in the name of patriotism. The collapse of oil prices and international sanctions imposed for their annexation of the Crimea region of Ukraine have caused much of their financial instability and shortages.
Soros says the best way to offset that argument is for the EU to offer more support for Ukraine. With the EU now faced with additional countries threatening to leave, closer ties with Ukraine are more important then ever.
George Soros spelled out his strategy that would combine large-scale financial assistance to Ukraine combined incentives for the private sector. In order to move in that direction, he said, the state gas monopoly, Naftogaz, would have to be restructured to move to market-determined prices. For the needy, low-income households, gas subsidies could be provided in order to move away from the current artificially-low price structure. .
George Soros – Business Leader, Philanthropist
George Soros – Project Syndicate
In another article published in the Wall Street Journal on August 12, 2015 titled “Ukraine Deserves Debt Relief,” Soros detailed the continuing struggle the country was having trying to renegotiate its debt with the International Monetary Fund (IMF).
Russia’s aggression against Ukraine has exacted a terrible burden on the country’s economy. It’s $19 billion foreign debt not sustainable.
There no bankruptcy instrument like Chapter 11 available to Ukraine in order to call a time out to decided which debts need to be reorganized. Because of this dilemma, Ukraine has no choice, other than default, but to negotiate with their private lenders who often take the position that “might makes right.”
In this situation, with its back against the wall, Ukraine might have to do the unthinkable and threaten to default on its outstanding debt. The pitfall there, according to Soros, is that foreign bondholders will threatened and warn Ukraine that a default would cut off any further foreign investment in the country for a very, very long time.
Ukraine’s bondholders admit they have no problem admitting that they oppose debt relief assistance from the EU or the IMF. That is hard to understand, Soros wonders. They certainly take no joy in the loss of their investments that a default would bring.
Soros suggests the bondholders should vigorously try to persuade Ukraine that default would bring years of depression to the country. Instead, the debt holders should be cheerleaders in encouraging debt relief to avoid default.
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