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FT: West Wavers on Ukraine

With Ukraine desperate for long-term financial and military commitments, its two most important backers—the EU and the US—were not quite ready. And this raises doubts about the West’s resolve, writes The Financial Times .

In the case of the EU, it is not only financial support that is at risk. It was assumed that the bloc would become a support for Western integration of Ukraine with the prospect of eventual membership. The EU’s agreement to begin accession talks would give Kyiv a much-needed political victory over Moscow after a year of military disappointments, but Hungary has vowed to block it.

What worries Kyiv most is that support for Ukraine, once a matter of broad cross-party consensus, has become a political bargaining chip on both sides of the Atlantic.

The financial difficulties facing Ukraine are enormous and inexorable, the publication points out. The government uses all tax revenues to cover defense costs. They make up about half of government spending.

Although Ukraine has received about $100 billion in weapons and military training, it also needs foreign aid to pay for government operations, public services, pensions and benefits.

According to the budget, $41 billion in external financing will be needed next year. Kyiv is counting on $18 billion from the EU, $8.5 billion from the US, $5.4 billion from the IMF, $1.5 billion from other development banks and $1 billion from the UK. In addition, negotiations are still underway with other partners – Japan and Canada.

While some of the money required will be paid no matter what happens in Washington or Brussels, Kyiv needs the money to start flowing next month. If they don’t arrive and Kyiv is unable to borrow enough funds domestically, it will have to resort to monetary financing from the central bank, which could lead to hyperinflation and threaten financial stability. Hence the concern about the deadlock in the EU and the US.

Source : Glavnoe