Ukraine financing - what happens if Trump wins?
Blank faces in the G7
The IMF posted the latest review document under the $15bn EFF:
It increases its financing requirement under the programme from $122bn to $151.4bn to account for a scenario where the war drags on further into 2025. Usefully, the gap is supposedly filled by the addition of the $50 billion ERA put together by the G7 from the interest stream on immobilised Russian assets in Western jurisdictions.
These sound like big numbers, but the fundamental problem I have with all of this are two fold:
First, that the IMF still only takes a partial funding perspective on Ukraine, it only looks at the budget and BOP financing needs. Indeed, the $151.4 billion financing need identified by the IMF over the four years of the EFF implies an annual need of something like $35-40 billion. That is just not the reality, as the West has been funding Ukraine to the tune of $100 billion a year for the duration of the war. See the best source therein, true Kiel Institute,
https://www.ifw-kiel.de/topics/war-against-ukraine/ukraine-support-tracker/
The numbers don’t lie and indeed I have had my own estimates of a $100 billion annual financing need for Ukraine confirmed by two senior separate G7 country sources.
The problem is the IMF fails to include the military funding needs, which are over $60 billion annually. You cannot just take the budget and BOP financing needs in isolation as you need the military financing needs to ensure Ukraine actually survives and wins the war. Without it the IMF’s macro assumptions and financing plans implode - they might even be double those given as above.
Better for the G7 and IMF to be open with everyone and admit the $100 billion actual financing need as then we can figure out how to fill it.
Second, there is no mention in the IMF document about Ukraine getting access to the full $330 billion in immobilised CBR assets. The ERA is a big scam in my mind, as it kicks the can actually to allow foot dragging by the G7 on the use of the underlying $330 billion in immobilised Russian assets. In reality the $50 billion does not touch the side in terms of Ukraine’s financing needs - it’s only half a year financing.
It should be a political scandal that Russia is not being made to pay for its war in Ukraine, but Western tax payers are. But Germany, Italy and Belgium seem to be dragging their feet protecting various vested interests, and ultimately Russia itself. I have written lots on it, see my prior Substacks.
And the reality is that Ukraine is being underfunded and hence is not being given the resources to win the war quickly. We have the funds in G7 bank accounts - Russian money - but it seems to be being protected by the powers that be. They are even slapping themselves on the back about the ERA.
Meanwhile, the G7 are not telling us what happens to Ukraine financing if/when Trump wins the US election, and the 40% of Ukraine financing that has been provided by the US drops off a cliff. Our G7 leaders have had a year to Trump proof Ukraine financing but basically have bottled it, showing zero leadership. A year has been wasted putting the ERA together, a year when the G7 could have been working up laws needed to allocate the underlying $330 billion of CBR assets to Ukraine. These assets would have Trump proofed Ukraine’s financing - it would have given Ukraine the financial resources to fight and win the war.