As the deal with IMF seems more and more unlikely, Ukraine is looking to China for financial support. But the money from China also comes with requirements.
The past year has shown how hard it has been for Zelensky’s nominatively reformist government to meet the governance standards required by IMF. As it has become more and more unlikely, that a second tranche of the 5 billion USD loan from IMF is going to be paid out, Ukraine has turned to China for support.
But the deals with China comes with different strings attached, Kyiv Post reports in a lengthy feature worthy of a read. While IMF asked for reforms and good governance, China has other kinds of demands for their Eastern European friends in Kyiv, the article argues calling it a “dangerous debt.
“IMF cash requires reform, including important anti-corruption measures and de-oligarchization. Chinese money does not,” said Amanda Paul, a senior political analyst at European Policy Center based in Brussels to Kyiv Post.
But what do China want in turn for their financial support? What is the price to be paid? It is hard to say, though the Ukrainian government said they borrowed the money on “preferential terms.”
“China usually argues that it does not have requirements when it lends money, but there are usually political requirements. They are just often a little bit unstated,” said Zack Cooper, China expert and a scholar at American Enterprise Institute, a public policy think tank. “The constraints from the IMF are very transparent, they are public, and the constraints from China are much less transparent and in some cases much more coercive.”
It’s a trap!
According to the article in Kyiv Post, China has a history of giving nations risky loans and then claiming assets, when the nations in question are unable to pay back the loans. One of them, according to Kyiv Post, was Montenegro. They signed a 944 million USD loan in 2014 to finance a highway project – a project similar to the infrastructure investments that Ukraine borrowed money for.
As the country is struggling to pay back the loan, China is ready to take possession of land and assets should the country default. The financial alliance between China and Ukraine is not popular with Western partners like the US. Biden has increasingly shifted the US foreign policy focus on China as the great enemy, and Ukraine being in bed with China is not popular among the Americans.
They have previously been very sceptical of the Ukrainian plans of selling of the military complex company Motor Sich to the Chinese. The plans were stopped in the last minute, angering the Chinese and pleasing the Americans. The article in Kyiv Post holds many interesting points and should be read by anyone interested in foreign politics and the relationship between China and Ukraine.