Ukraine at Risk from Austerity Demands

by Frédéric Mousseau

OAKLAND, United States - Mostly unreported as the Ukraine conflict captures headlines, international financing has played a significant role in the current conflict in Ukraine.

In late 2013, conflict between pro-European Union and pro-Russian Ukrainians escalated to violent levels, leading to the departure of president Viktor Yanukovych in February 2014 and prompting the greatest East-West confrontation since the Cold War.

A major factor in the crisis that led to deadly protests and eventually Yanukovych's removal from office was his rejection of an EU association agreement that would have further opened trade and integrated Ukraine with the European Union. The agreement was tied to a US$17 billion loan from the International Monetary Fund (IMF). Instead, Yanukovych chose a Russian aid package worth $15 billion plus a 33% discount on Russian natural gas.

The relationship with international financial institutions changed swiftly under the pro-EU government put in place at the end of February 2014 which went for the multi-million dollar IMF package in May 2014.

Announcing a $3.5 billion aid program on May 22, World Bank president Jim Yong Kim lauded the Ukrainian authorities for developing a comprehensive program of reforms, and their commitment to carry it out with support from the World Bank Group.

He failed to mention the neo-liberal conditions imposed by the Bank to lend money, including that the government limit its own power by removing restrictions that hinder competition and limiting the role of state control in economic activities.

Frederic Mousseau is Policy Directory of the Oakland Institute and co-author of the report "Walking on the West Side: the World Bank and the IMF in the Ukraine Conflict".