According to George Soros, international sanctions on Russia aren’t enough to save the country from its nationalistically aggressive neighbor. He says that in order for Ukraine to survive as a viable political entity, the EU and the international community must provide significant financial aid to the country, much more than the paltry few billion currently under consideration.
Soros highlights that all of the consequences of giving Ukraine financial assistance would be positive. He notes that by “By enabling Ukraine to defend itself, Europe would be indirectly also defending itself.”
He goes on to argue that financial assistance to Ukraine would help stabilize its economy and also offer stimulus to the Euro-area economy by encouraging exports and investment in Ukraine. There is even the hope that Russia’s troubles and economic progress for Ukraine would persuade Putin to give up his foolish and dangerous efforts to destabilize Ukraine.
Current/planned international financing for Ukraine
One major problem is that the IMF-led package for Ukraine that is currently on the table is based on overly optimistic forecasts, and the Ukrainian economy is worse than anticipated. Furthermore, complicated Euro-area politics led to the IMF’s contribution of approximately $17 billion in cash to Ukraine being much larger than the $10 billion of commitments by EU members and even less from the U.S.
George Soros: Other possible sources of funding
Soros highlights that there are several potential sources of funding for Ukraine already in place in the EU. He notes that the Balance of Payments Assistance facility has unused funds of $47.5 billion and the European Financial Stability Mechanism still has close to $15.8 billion of unused funds. These funds are currently only available to EU member states, but the regulations could be changed by a qualified majority with a proposal by the European Commission. Soros also notes that the Commission could just expand the Macro-Financial Assistance Facility which has already been used in Ukraine.
Increased matching funds from the EU would mean the IMF could increase loans Ukraine by $13 billion and create a longer-term Extended Fund Facility program.
Soros also points out that European Investment Bank project bonds could also provide €10 billion or more to Ukraine. The funds would connect Ukraine to the European gas market and allow for the break up Naftogaz, the Ukrainian state gas firm. A thoughtfully planned breakup of Naftogaz is a key part Ukraine’s reform plans.
Finally, Soros mentions that long-term financing from the World Bank and the European Bank for Reconstruction and Development could be able to provide around $5 billion to help restructure the Ukrainian banking sector. The total? as Soros states:
The additional sources of financing I have cited should be sufficient to produce a new financial package of $50 billion or more.