PRABAT PATNAIK explains the insidious role of the International Monetary Fund in precipitating the conflict between Ukraine and Russia.
HE Russia’s security concerns stemming from Ukraine’s intention to join the North Atlantic Treaty Organization [NATO] have been widely discussed in the media. But the International Monetary Fund [IMF]The connection between Ukraine and Ukraine, which is a parallel issue, has received little attention. The IMF, as it is known, “opens” the economies of the whole world to the penetration of metropolitan capital by making them “investor-friendly” through the adoption of a multitude of anti-worker and anti-people policies (” austerity”) ) measures; and such “openness” generally involves the taking over of the natural resources of countries as well as their territories by metropolitan capital. The mechanism the IMF typically uses for this purpose is the imposition of “conditionalities,” such as the cancellation of loans to countries in need of balance of payments support.
However, in addition to this general role that the IMF plays, there are occasions when it plays a specific role, namely that of supporting the cold war objectives of the American government. And in the case of Ukraine, it played this specific role almost from the start, apart from its general role of opening up the Ukrainian economy to metropolitan capital.
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The United States, angered by President Yanukovych’s temerity in turning to Russia instead of the IMF, decided to limit further ‘damage’, and he was overthrown in a state-sponsored coup. United in 2014, which was carried out with the help of Nazi elements in Ukraine. who had been at the forefront of anti-Yanukovych protests in the run-up to the coup. These elements have now been formally incorporated into the Ukrainian military through its inclusion of the Azov Battalion, an all-volunteer right-wing far-right infantry military unit that was previously part of the military reserve of the Ukrainian National Guard. .
IMF intervention in Ukraine
Prior to 2014, when Viktor Yanukovych was President of Ukraine, that country was in negotiations with the IMF as part of its trade integration with the European Union. [EU]. The IMF had asked Ukraine to undertake a number of “reforms”: cut wages; “reform” and “reduce” the health and education sectors which, in Ukraine, are important job-creating sectors; and reducing the subsidy on natural gas provided by the state to all Ukrainian citizens, which made energy affordable for them (For more background, see here). President Yanukovych was reluctant to implement these “reforms” which would have imposed a heavy burden on the people; he stopped negotiating with the IMF and started negotiating with Russia instead.
It became his unforgivable “crime”. Breaking off negotiations with the IMF was tantamount to escaping the hegemony not only of international capital eager to impose a neoliberal regime, but of the Western imperialist powers, notably the United States, and therefore of NATO. In other words, NATO and the IMF were not seen as separate organizations, each working in its own sphere of operation, with its own objective; but organizations with similar and overlapping goals. The United States, angered by Yanukovych’s temerity in turning to Russia instead of the IMF, decided to limit further “damage”, and he was overthrown in a US-sponsored coup. United in 2014, which was carried out with the help of Nazi elements in Ukraine who had been at the forefront of anti-Yanukovych protests in the run-up to the coup. These elements have now been formally incorporated into the Ukrainian military through its inclusion of the Azov Battalion, an all-volunteer right-wing far-right infantry military unit that was previously part of the military reserve of the Ukrainian National Guard. .
The government that came to power after the 2014 coup has relaunched negotiations with the European Union, for which it obtained a loan commitment of $27 billion from the IMF after showing its “good intentions” by reducing half the gas subsidy to citizens. This loan had several notable characteristics: first, it was enormous, much larger (in fact more than six times) than what the IMF would normally grant in a comparable situation; second, it was granted to a country in the midst of a civil war (like Ukraine was then), which is contrary to the usual practice of the IMF; and, thirdly, it was known from the start that the loan could not be repaid, so that the only means by which it would be sought to recover it would be for metropolitan capital to take control of the land and mineral resources of the country (of which most important is natural gas).
The IMF’s operations in Ukraine in 2014 therefore highlight not only the typical aspect of its policy, which is to open the economy to metropolitan capital, but also an additional aspect, namely support for American Cold War objectives. . The objective of openness to metropolitan capital, markets, land and natural resources of Ukraine could have been achieved in 2014 even with a much smaller loan from the IMF. But the extraordinary size of the loan underscores the connection between the US administration (which wants Ukraine in its orbit), the Ukrainian oligarchs (who want to get their wealth out of the country in dollars or euros), the post-coup government of State (which must organize all these transfers), and the IMF (which must foot the bill).
Now, following the Russian invasion, Ukraine has again approached the IMF for help; and the IMF’s current managing director, Bulgarian economist Kristalina Georgieva, has recommended that the IMF’s board provide this support. The precise amount of aid and the purpose for which it is requested are still unclear; but one thing remains certain: after the end of the current crisis in this region, whatever form this resolution takes, Ukraine will become a second Greece in Europe. Also in the case of Greece, the IMF loan was much larger than the usual practice for this organisation. Most of it was to ensure that European banks that had lent to Greece got their money back. And now Greece is caught in the vicious grip of perpetual debt.
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The Evolution of the IMF into a Neoliberal Weapon
The IMF, it follows, has changed a great deal since the day it was established. When it was launched at Bretton Woods in the United States in 1944, it was part of an international regime based on the pursuit of a dirigiste economic strategy. In fact John Maynard Keynes, the British economist who had been a proponent of dirigiste intervention, together with Harry Dexter White, the American representative, had been the principal authors of this international regime. As each country imposed and continued to impose trade and capital controls, if a balance of payments problem arose in a particular country, then it could borrow from the IMF in order to “stabilize” its own economy. From there, the IMF became a protagonist of “structural adjustment”, where it not only provided loans to alleviate transitory balance of payments problems (until the economy in deficit of balance of payments has “stabilized”), but in fact encouraged a neoliberal regime, namely a set of policies involving the dismantling of all trade and capital controls, the privatization of public sector assets and the introduction of “labour market flexibility” (meaning attacking unions).
The IMF is not only an instrument of international finance capital; it also serves as an instrument for the western metropolitan powers that stand behind this capital. While defending the interests of international finance capital, it intertwines with the entire coercive apparatus of Western metropolitan powers.
From being a facilitator of an interventionist regime, the IMF has become, in short, a destroyer of the interventionist regime and an instrument for the advent of a neoliberal regime. It has become an instrument in the hands of international financial capital, allowing it to penetrate the four corners of the globe. But it is not only an instrument of international finance capital; it also serves as an instrument for the western metropolitan powers that stand behind this capital. While defending the interests of international finance capital, it intertwines with the entire coercive apparatus of Western metropolitan powers.
Russian President Vladimir Putin is in no way waging a struggle against the hegemony of international finance capital. He is not a socialist waging an ideological battle against the domination of a neighboring country by an organization which acts in the interests of international finance capital. He is only interested in Russian security; it is limited only to ensuring that Russia is not surrounded by NATO. And his offer of help to Yanukovych instead of “assistance” from the IMF arose only for this reason. In other words, he is only interested in the IMF’s role as a promoter of US geostrategic interests, not the IMF’s role as a promoter of neoliberalism in general. In fact, the blatant inequality, even absolute misery that a neoliberal regime engenders is not far removed from what Putin himself “achieved”. (API Service)
(Prabhat Patnaik is a Marxist economist and political commentator, and former professor of economics at Jawaharlal Nehru University, Delhi. Opinions expressed are personal.)