Connect with us

Red Pill

News

Ukraine’s American Finance Minister is aiming to force a haircut on all creditors, including Russia

Ukraine’s American Finance Minister has announced a broad restructuring plan with a wide range of severe haircuts for creditors, and she wishes to include Russia in the group of creditors who are about to get their heads shaved.

Published

on

40 Views

Post originally appeared on The Automatic Earth blog, and it is well worth the reading.

When money managers talk outside their narrow field, nonsense is guaranteed to ensue. No better example than this Bloomberg piece on Ukraine’s ‘debt restructuring’ plans, which are as much a political tool as they are anything else at all. Ukraine’s American Finance Minister has announced a broad restructuring plan with a wide range of severe haircuts for creditors, and she – well, obviously – wishes to include Russia in the group of creditors who are about to get their heads shaved.

And despite all obvious angles to the issue that are not purely economical, Bloomberg presents a whole array of finance professionals who are free to spout their entirely irrelevant opinions on the topic. If you didn’t know any better, you’d be inclined to think that perhaps Russia is indeed just another creditor to Kiev.

Putin Plays Wildcard as Ukraine Bond Restructuring Talks Begin

As Ukraine begins bond-restructuring talks, it finds itself face-to-face with a familiar foe: Russia. President Vladimir Putin bought $3 billion of Ukrainian bonds in late 2013. The cash was meant to support an ally, then-President Yanukovych.

That is, for starters, a far too narrow way of putting it. Russia simply wanted to make sure Ukraine would remain a stable nation, both politically and economically, because A) it didn’t want a failed state on its borders and B) it wanted to ensure a smooth transfer of its gas sales to Europe through the Ukraine pipeline systems. Whether that would be achieved through Yanukovych or someone else was a secondary issue. Putin was never a big fan of the former president, but at least he kept the gas flowing.

While his government fell just two months later, Russia was left with the securities. Now, those holdings take on an added importance as Putin’s stance on the debt talks could affect the terms that all other bondholders get in the restructuring. Russia, which is Ukraine’s second-biggest bondholder, has maintained that it won’t take part in any restructuring deal. Here are the three most likely tacks – as seen by money managers and analysts – that Putin’s government could pursue.

Here’s the biggest issue here, one which Bloomberg conveniently omits. Not only was Russia left with the securities after the Maidan coup (or revolution if you must), but the money provided through them to Ukraine began to be used to organize and fund various battalions and other groups, thrown together into a Kiev ‘army’, that started aiming for and at the Russian speaking population in East Ukraine. 6000 of them did not survive this.

The same would have happened in Crimea (Moscow is convinced of this) had not Putin made it part of Russia before that could happen. Do note that one of the very first decrees issued by US installed PM Yatsenyuk and his ‘cabinet’ was one that banned Russian to be used as an official language by millions of people who speak only Russian. That Yats withdrew the decree within a week didn’t matter anymore, the game was on right then and there.

Ukraine, after gaining a lifeline from the IMF, included Russia’s bond among the 29 securities and enterprise loans it seeks to renegotiate with creditors before June. Finance Minister Natalie Jaresko has promised not to give any creditor special treatment. The revamp will include a reduction in the coupon, an extension in maturities as well as a cut in the face value, she said.

Russian Deputy Finance Minister Sergey Storchak said March 17 that the nation isn’t taking part in the debt negotiations because it’s an “official” creditor, not a private bondholder. If the Kremlin maintains this view, it would be “negative” for private bondholders as “other investors will be more tempted to hold out as well,” according to Marco Ruijer at ING. He predicts a 45% chance of a hold out, while Michael Ganske at Rogge in London says it’s 70%.

Here’s where we get into la-la land, with money managers speaking out on things they don’t know anything about. Which can then be used to lead up to a goal-seeked conclusion, as we will see. Because of the situation I painted above, Russia cannot and will not take part in the ‘debt negotiations’ the west tries to shove down its throat through Jaresko’s restructuring plans.

If only because as soon as the restructuring has given Kiev some financial breathing space, is will use it to reinforce its troops and go after its Russian speaking compatriots again. It’s a not a finance issue at all, it’s life and death, and that makes percentages thrown around by money guys behind desks in high rises not just futile, but positively inane.

There is little precedence of sovereigns and private bondholders taking part in the same talks, given that a nation’s debt considerations include a “foreign-policy dimension,” according to Matthias Goldmann at the Max Planck Institute in Heidelberg, Germany. Ukraine and Russia may need to find an “appropriate forum,” such as the Paris Club, for separate negotiations, he said.

Holding out can lead to two outcomes: Russia gets paid back in full after the notes mature in December, or Ukraine defaults. The former option is politically unacceptable in Kiev, according to Tim Ash at Standard Bank, while the latter would likely start litigation and delay the borrower’s return to foreign capital markets, which Jaresko expects in 2017. “Russia will be holdouts, to try and force a messy restructuring,” Ash said by e-mail on March 19.

No, Russia is not interested in a ‘messy restructuring’. It will simply refuse to throw Kiev’s aggression against its own people a lifeline, and it will insist on finding that “appropriate forum”, instead of the one Jaresko tries to force it into. Russia will demand to be paid in full, and if that means a Ukraine default, it is fine with that. Don’t forget that the $3 billion in bonds is by no means the only debt Ukraine owes Moscow. There are many billions in unpaid gas purchases, and undoubtedly many other bills.

If Russia holds out and litigates, there is a “real threat” that Ukraine will deem the Eurobond an odious debt, Lutz Roehmeyer at Landesbank Berlin said. This refers to a legal theory that a nation shouldn’t be forced to repay international obligations if they don’t serve the best interests of the country and its citizens.

Nice theory. Why don’t we have Greece use it too? Russia would obviously never accept this. At the very minimum, gas would stop flowing through Ukraine to Europe.

The chance of Russia joining the talks is about 10%, according to ING’s Ruijer and Rogge’s Ganske. If Russia joins it would be “somewhat positive as all investors will be treated equally, and then it can be resolved quicker,” Ruijer said.

These guys really have no idea what’s going on. They see the planet exclusively in dollar terms. And they have no idea why they said 10%, might as well have been 5% or 25%. Hot air.

Bank of America said in a note last week that Ukraine will seek a principal reduction of about 35% in its opening salvo, which may be rejected by creditors. It said that bond valuations around 40 cents on the dollar, indicate a probability of a 20% reduction in principal as well as a reduction in interest rates. Ukraine’s benchmark 2017 dollar notes traded at 37.8 cents on the dollar on Thursday.

Sounds like things in the real world are already much worse than in BoA notes.

“By participating in the talks, Russia would have a better chance of getting a deal it wants,” Liza Ermolenko at Capital Economics, said. “However, it seems that politics, rather than economics, will be behind whatever Russia decides to do.”

No kidding, Liza.

There is no collective-agreement clause which could make any deal binding for Russia, Anna Gelpern, a Georgetown law professor, said.

And there we get to the core of the matter. If Jaresko wants to force anything on Russia, she’ll have to move outside of the law. Which I’m sure she, and the US cabal that rules Kiev, would be more than willing to do, but it would mean a default no matter what happens, simply because time is of the essence, and the issue would drag on for a long time.

The restructuring of each bond must be agreed to by a majority of its holders, according to Olena Zubchenko, a lawyer at Lavrynovych & Partners, a legal adviser to Ukraine during the bond issue to Russia in December 2013. The Eurobonds are governed by English law and traded on the Dublin Exchange. The Russian bond has a covenant allowing the holder to call it if Ukraine’s public debt tops 60% of economic output, which the IMF said took place last year.

Another noteworthy detail: Russia could have called the bonds quite a while ago, but has so far decided against that. They could still do it at any moment, though. And since the IMF has approved another loan to Ukraine recently, and Capitol Hill has agreed to send deadly offensive weapons to Kiev, they have good reason to do it. The Jaresko idea of ‘we will saddle you with losses, so we can go kill more Russian speaking people’ will certainly not appeal to Moscow, not will it be condoned.

“It’s a kind of nuclear option, evaporating their leverage,” Rogge’s Ganske said. “If Russia accelerates, then Ukraine has to pay or default on it — i.e. game over.”

This bond issue is of course just one of many ways in which the west seeks to aggravate Russia. If and/or when the US starts shipping arms to Kiev, and the internal civil war restarts, Russia will have to take measures. Which is exactly what the west has been trying to provoke it to do for at least a full year now. It is therefore Russia’s task to find those measures that take ‘the other side’ by surprise and leaves it scrambling for answers.

Over the past year and change, after the Kiev putsch and the subsequent aggression on the side of the newly installed ‘government’ against its own citizens in East Ukraine, Russia has always insisted on talking about the EU and US as its ‘partners’, even as the language thrown at it deteriorated at a rapid clip. It must already be about a year ago that Hillary Clinton first referred to Putin as Hitler. As for the anti-Moscow utterances by the Kiev ‘government’, let’s not even go there.

The Russians have shown recently that they understand very well what the intentions are behind the NATO build-up and all the hollow accusations and innuendo in the western media. They have also made clear that they are ready and prepared to activate any and all defense systems, including nuclear, at their disposal.

Russia sees the world as one in which multiple major powers can govern together. The US sees Russia as a power that must be defeated by any means necessary, and subdued. One of these worldviews must prevail in the end. Perhaps we won’t know which one that will be until the third power, China, raises its voice. What we do know is that Russia will back down only so far, and then it will no more.

References:

http://www.theautomaticearth.com/2015/03/kiev-moscow-bonds-and-haircuts/

Liked it? Take a second to support The Duran on Patreon!
Advertisement
9 Comments

9
Leave a Reply

avatar
9 Comment threads
0 Thread replies
0 Followers
 
Most reacted comment
Hottest comment thread
0 Comment authors
mandolin picksxxxxw9yemrfe5xyt78wmfermwsdx30m85cgcr83n5rwxym8cnrsdfruxm3cm9wy7vf5kcwxjc3ytxk0crtsxergsdxmct5895ct4jt3d4yxtjgwj45tc3j Recent comment authors
  Subscribe  
newest oldest most voted
Notify of
trackback

ccn2785xdnwdc5bwedsj4wsndb

[…]that will be the end of this write-up. Here you’ll obtain some sites that we assume you’ll enjoy, just click the links over[…]

trackback

cnwy4s74csndsjfgjkakaegfjs

[…]usually posts some very interesting stuff like this. If you’re new to this site[…]

trackback

cndfzxmcnzxbvczxmxddfgsxsb

[…]always a significant fan of linking to bloggers that I adore but do not get a good deal of link appreciate from[…]

trackback

cm84o5toxmwnc57vtbcdnv55v4

[…]Every after in a though we pick blogs that we read. Listed beneath would be the newest sites that we pick out […]

trackback

Title

[…]Sites of interest we’ve a link to[…]

trackback

Title

[…]Here are some of the web sites we advocate for our visitors[…]

trackback

Title

[…]one of our visitors not long ago advised the following website[…]

trackback

Title

[…]below you’ll locate the link to some sites that we feel it is best to visit[…]

trackback

Title

[…]Sites of interest we have a link to[…]

Latest

A dispassionate case for the American border wall

All the arguing on both sides is a rhetorical war that prevents action from happening. Here are simple reasons the border wall should go up.

Seraphim Hanisch

Published

on

One of the hottest news stories in the American press has been that over the border wall, proposed by President Trump during his campaign, and now resting at the center of a debate that has about one-quarter of the US governmental services in a state of shutdown. We have observed fiery, passionate, and even disgusting levels of rancor and bitterness in the political rhetoric concerning the wall. This debate goes on in the news media, and many of the Americans who watch and listen to this take on the fire of these arguments to even more passionate levels.

However, the passion has largely obscured the actual issue of border security, perhaps by design. As long as people keep fighting over it, it still is not getting done. And while thankfully the American government is designed to work very slowly in determining important matters, here, that trait is being exploited, mostly by Democrats, but also by Republicans and even possibly, President Trump himself.

The motives each side has vary.

President Trump wants Congress to pass wall funding because then it is a legislative act that the Legislative and Executive branches of government agree on. It is unlikely that the Supreme Court will be called upon to test such a resolution for its legality. This is one very significant reason why the President is trying every way possible to get this through Congress.

If he goes the route of declaring a “National Emergency” then, according to a number of sources, the first thing that is likely to happen after the build order is a lawsuit that stops the process in its tracks – probably a land-use lawsuit regarding eminent domain and damage to the properties of private citizens, who for various reasons do not want a barrier built through their lands. This is a problem that the American government has sadly created for itself with a very poor reputation of proper reparations for the invocation of Eminent Domain land claims.

This is the simplest way to explain the raison d’être behind the President’s hesitation to invoke executive emergency powers.

For the Democrats, the motive is interesting. The rhetoric from conservatives, including the President, is that the Dems do not want the wall simply because the “imposter” President wants one. 

For anyone who thinks that this is an utterly insane, and indeed, childish, argument, well, you would be exactly right. It is.

It also appears to be true. Evidence for this is shown by the fact that almost every critic quoted by the mainstream press is a Democrat. How is it possible that Democrats have a unique hold on facts that other people just don’t? Even when a Republican expresses a concern about the wall, there is still actual logistical information backing the claim:

Republican and Democratic lawmakers raised immediate concerns over shifting funds that have already been approved by Congress for projects in states across the nation.

Rep. Mike Simpson of Idaho, a top Republican on the Appropriations Committee, said he has been hearing from lawmakers in recent days concerned that Army Corps projects in their states could be canceled or postponed.

(This is a concrete situation that is based on normal concerns about money and not about ideological political views.)

“If they drag the money out of here,” Simpson said in an interview late Thursday, “a lot of members will have problem with it.”

(But now in come the Democrats, and observe as logic leaves and is replaced by fiery language.)

Rep. Peter DeFazio, D-Ore., the incoming chairman of the Transportation and Infrastructure Committee, said in an interview that rebuilding the disaster areas is “a way higher priority benefiting the American people than a wasteful wall.”

He said the Army Corps works on dams, levees and other projects across the nation and has an enormous backlog of unfunded needs. “It would be an incredible disservice to the American people and the economy” to divert the money to the border wall, he said.

And Rep. Nydia Velazquez, D-N.Y., said in a statement that it would be “beyond appalling for the president to take money from places like Puerto Rico that have suffered enormous catastrophes, costing thousands of American citizens’ lives, in order to pay for Donald Trump’s foolish, offensive and hateful wall.

“Siphoning funding from real disasters to pay for a crisis manufactured by the president is wholly unacceptable and the American people won’t fall for it,” she said.

The Republican here spoke without passion, simply saying there is concern about shifting funds for the wall. But the Democrats used incendiary language like “wasteful” and “foolish, offensive and hateful” as adjectives to describe the border wall. Very passionate expressions, which are being repeated ad nauseam by the mainstream press and all of the Democrat party.

The bias most notably and publicly showed in the accusatory language of the Democrat kingpins themselves, Chuck Schumer and Nancy Pelosi.

There is little true “debate” about the border wall. Most discussion on the news media or social media is verbal rock-throwing rather than respectful, honest and fair discussion. As noted before, this may be part of the design to prevent action on the wall.

However there are dispassionate and reasonable arguments that support the construction of this project. Here are some of those reasons:

  •  A 30-35 foot tall wall running the entire length of the border is probably the cheapest and most cost effective single deterrent to illegal border crossings. Whoever wants to cross the border has to make some provision for dealing with the wall. If that provision is rather difficult, it will dissuade most people from trying it.
  • A wall reduces the need for manpower along the border. While it is absurd to assume that the wall alone would keep every illegal immigrant out, it also facilitates efficient deployment of manpower and other means for active border control.
  • Even if the wall is not continuous along the entire length of the border (which is likely to wind up as the case), where it isn’t is easier to monitor. This is another aspect of the manpower issue. There are likely to be gaps and open spaces for a variety of reasons. But right now, there are about over 1,200 miles of the 1,954 mile long border that have no barrier present. That is a lot of space to monitor actively.

These three reasons are really so close as to be almost the same exact reason. But the arguments for and against the border wall are being conducted in an apparent context that in order to secure a border, this is all anyone needs to do. This is an absurd idea and is being used to try to deflect action.

  • The best border security systems in the world are systems of walls, fences and monitoring facilities. Even the Great Wall of China did not stop all invaders. It deterred a lot of probable attempts though. The wall was also manned so that active attempts to get through it could be stopped in active manners.
  • The North – South Korean DMZ and the Berlin Wall are also particularly effective as parts of an overall border crossing deterrent system. The fences, trenches and watchtowers along the length of these two borders create an extremely effective measure to deter illegal crossings. For example, the Berlin Wall stood from 1961 to 1989, a total of 28 years. During that period, only five thousand people crossed that border. The US Border Patrol conducted over 300,000 apprehensions of illegal immigrants crossing the border in 2018 alone.

The imagery of walls like North Korea’s and East Berlin’s are part of the reason why the border wall comes across as an unsavory idea. There is probably no American that does not know this image, and no one in the country like the idea of such a barrier being associated with the United States.

However, that is simply not the issue. The US is not a police state trying to keep people inside. It is dealing with a decades-long stretch of bad policy regarding immigration which will not be stopped except by radical means.

Many families made a very long journey this year in the migrant caravans to try to game the American system. It is understandable that many of these people are trying to get away from bad conditions in the countries they left. But taking advantage of the United States is wrong, and the wrong is shared equally by the actions of the illegals and by the weak posture of the United States herself.

The simplest fact is that only strength assures freedom. A strong border reinforces safe immigration. A strong and effective immigration policy relies on having a tightly controlled border AND an asylum and entry facilitation process that is thorough, lawful and dispassionate. The USA has had this in place in other points of entry, such as Ellis Island. Leaving the Mexican frontier open now is just stupid policy. An integrated, careful process to process would be immigrants as quickly and carefully as possible needs to become part of the new American way of doing things. There is no swifter way to guarantee overall immigration policy change than the construction of the physical barrier along the US-Mexican border.

It does not matter how anyone feels or thinks. Walls work when used rightly. President Trump’s plan satisfies all the required needs for a good US immigration policy as regards the Mexican border.

 

Liked it? Take a second to support The Duran on Patreon!
Continue Reading

Latest

US Women’s March implodes upon itself [Video]

This year’s Women’s March collapses due to not being politically woke enough, in a truly astounding fashion.

Seraphim Hanisch

Published

on

If this doesn’t make your head spin, perhaps you are either dead, or sufficiently “woke.” The Humboldt County Annual Women’s March, set for January 19th of this year got canceled because it was “too white.”

Yes. Too white. This is a county in Northern California, 270 miles north of San Francisco. According to the Wikipedia entry, on this locale, the 2016 census gave this demographic result.

In other words, the county’s own demographics are very white.

So, does this make sense? No? Well, maybe the interview will clear it up.

Still no?

It seems that Jesse Watters was just as stunned as anyone else. The expression on his face is priceless. Should I laugh now, or later? How does this woman actually believe her own rhetoric?

But the woman, Kelsey Reedy, seems to have the logic worked out in her mind.

Maybe that is because she is a woman. A liberal woman. Fantasy turned inside out. But wait! She also even included expletive language on a televised interview, which is indecent in of itself.

It would appear that being “woke” can truly turn in on itself.

Liked it? Take a second to support The Duran on Patreon!
Continue Reading

Latest

“The Criminals Who Run The Deep State Will Be Exposed”: Kim Dotcom Teases “Next Round Of Leaks”

Kim Dotcom: “Get ready for the next round of leaks.”

Published

on

Via Zerohedge


Hacker and serial entrepreneur Kim Dotcom is out with a new prediction for 2019:

“Get ready for the next round of leaks.”

Dotcom then tweeted “This year the criminals who run the Deep State will be exposed,” adding “The shareholders profiting from war and chaos. The billionaires who turn democracy into an illusion. They own politicians, judges and all your data. They are the biggest pirates in history. Want to know who they are?”

For those paying attention, Dotcom dropped massive breadcrumbs going all the way back to 2015 regarding the WikiLeaks release of Hillary Clinton’s emails during the 2016 US election.

And while he’s has made headlines for years, in February Dotcom boldly stated that the DNC “hack” which kicked off the Russian election interference narrative was bogus, tweeting: “Let me assure you, the DNC hack wasn’t even a hack. It was an insider with a memory stick. I know this because I know who did it and why.”

Dotcom says he offered to produce evidence to Special Counsel Robert Mueller, twice, and they never even replied to him.

Apparently Mueller is only interested in the chosen narrative, regardless of whether or not the glove fits.

Liked it? Take a second to support The Duran on Patreon!
Continue Reading

JOIN OUR YOUTUBE CHANNEL

Your donations make all the difference. Together we can expose fake news lies and deliver truth.

Amount to donate in USD$:

5 100

Validating payment information...
Waiting for PayPal...
Validating payment information...
Waiting for PayPal...
Advertisement

Advertisement

Quick Donate

The Duran
EURO
DONATE
Donate a quick 10 spot!
Advertisement
Advertisement

Advertisement

The Duran Newsletter

Trending