The ‘Troika’ – the European Union (EU), the International Monetary Fund (IMF) and the World Bank (WB) – are negotiating the provision of a standby loan for Ukraine in case Russia will impose economic pressure on Kiev. Reportedly, the talks are already well advanced.
Moscow feels uncomfortable about Ukraine coming closer to Europe and loosening its ties to Russia. The country is soon to sign a free trade agreement with the EU provided that it will fulfill a number of conditions including releasing Yulia Tymoshenko, former Prime Minister, from jail. The EU summit in Lithuania, on November 28-29, is therefore like to host one of major geopolitical East-West shifts since the end of the Cold War.
It is expected that if Ukraine signs the agreement, Moscow is likely to retaliate and use the Ukrainians’ economic and energy dependence on Russia for geopolitical purposes. The EU wants to ensure that Ukraine will not be economically affected by such moves. Thus, the IMF is said to have been asked to negotiate possible standby arrangement for Kiev – an anonymous EU source reported. Yet, according to the IMF representative in Kiev, there is no connection between Ukraine receiving help and signing the association agreement. Ukraine’s representative also denied any possible link between the two and said that the country had been already in talks with the Fund directly.
As it is not clear what moves Russia would eventually use, it is hard to calculate possible amount that Ukraine could need as a back-up plan. However, the crudest estimates speak about the range of 10-15 billion USD. Moreover, even if the country received such an aid package from the IMF, it would necessarily imply strict conditionality measures. Ukraine already has problematic reputation following the suspension of its last IMF loan after it had not lifted household gas subsidies. Allegedly, the EU officials believe that IMF would this time consider Ukraine’s special circumstance and relax conditionality.
