Ukraine’s lawmakers appeared poised to reject a long haggled-over tax overhaul plan today, after a compromise seemed within reach last week. Officials from the IMF warned that if Kyiv was unable to pass the measures, further disbursements from the Fund’s $17.5 billion bailout program could be endangered. The most recent $1.7 billion disbursement is already being held up by the ongoing impasse.
In other news, two days after the IMF ruled that Russia’s $3 billion bond to Ukraine was in fact sovereign debt, and that Kyiv must make a “good-faith” effort to renegotiate its terms with Moscow, Prime Minister Arseniy Yatsenyuk announced that his country was ready to fight in the courts and would thus not be making payments on the debt until Russia accepted the terms previously offered. (The Finance Ministry sounded a slightly more conciliatory tone, saying it was still open to good faith negotiations with Russia.) The bond comes due on December 20, but Kyiv will not be in official default until 10 days later, when a grace period expires.
A Ukraine–IMF dispute represents a big win for President Vladimir Putin. Those who think Putin’s goal has been to annex Ukraine or reinstate a pro-Russia government might think he has not been all that successful. But that’s not really what he’s trying to do. His goals are more limited: He wants to have the ability to create unrest at any moment. Russia can’t afford an expensive operation in Ukraine, but it doesn’t need one if the goal is influence and instability—and a dysfunctional Ukraine. And on that front, the Kremlin continues to succeed marvelously.