Davos, Switzerland, Jan. 21, 2016: Christine Lagarde, managing director of the International Monetary Fund, with Ukrainian President Petro Poroshenko after Ukraine refused to repay its debt to Russia (source: dpa)

IMF puts itself in a fix as it bends rules to bail out Ukraine

On December 18, 2015, the government of Ukraine announced it had no intention of honoring a $3 billion Eurobond loan owed to Russia that would mature on December 20. Given the cross-default clause written into that bond, under British law, this was a momentous decision. It gave the Kremlin the right to have Ukraine declared in sovereign default, which would have precluded further financing from the International Monetary Fund (IMF). This, in turn, would have led to state failure.

At least that is what would have happened, if long-accepted rules had still applied. But that is no longer the case. Just as the Kremlin has demonstrated it can ignore treaties regarding national sovereignty ...

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Professor Stefan Hedlund
Private bondholders agreed to freeze bond repayments for a period of four years and to cut the total principal by 20 percent. It seemed like a triumph. But a major problem remained, namely, the $3 billion Eurobond owed to Russia
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