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Debt Sanctions Can Help Ukraine and Fill a Gap in the International Financial System

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  • Anna Gelpern

    (Peterson Institute for International Economics)

Abstract

The escalating crisis in Ukraine has prompted the United States and Europe to impose the toughest economic sanctions against Russia since the end of the Cold War. Continued instability and military conflict in eastern Ukraine are straining Ukrainian finances. Despite a generous international support package, the government faces shrinking revenues, rising costs, and a spike in foreign debt payments over the next two years. A single measure can free up $3 billion for Ukraine and send a powerful message to Russia: The United Kingdom can refuse to enforce English-law contracts for the money Russia lent former Ukrainian resident Yanukovych late last year. Ukraine could then walk away from this debt without the usual legal and market consequences of repudiation. Such debt sanctions would reinforce the financial, energy, and trade sanctions under way, and by themselves would represent an appropriately targeted response to the conflict. They would be in line with international law and legislative precedent in the United Kingdom and Europe, most recently used for Iraq and the poorest countries—and would, uniquely among sanctions tools, offer financial relief for Ukraine.

Suggested Citation

  • Anna Gelpern, 2014. "Debt Sanctions Can Help Ukraine and Fill a Gap in the International Financial System," Policy Briefs PB14-20, Peterson Institute for International Economics.
    • Handle: RePEc:iie:pbrief:pb14-20
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    References listed on IDEAS

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    1. Seema Jayachandran & Michael Kremer, 2006. "Odious Debt," American Economic Review, American Economic Association, vol. 96(1), pages 82-92, March.
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    3. International Monetary Fund, 2013. "Greece: Ex Post Evaluation of Exceptional Access Under the 2010 Stand-By Arrangement," IMF Staff Country Reports 2013/156, International Monetary Fund.
    4. Christoph Trebesch & Mr. Michael G. Papaioannou & Mr. Udaibir S Das, 2012. "Sovereign Debt Restructurings 1950-2010: Literature Survey, Data, and Stylized Facts," IMF Working Papers 2012/203, International Monetary Fund.
    5. Centre for Global Development, 2010. "Preventing Odious Obligations: A New Tool for Protecting Citizens from Illegitimate Regimes," Working Papers id:3300, eSocialSciences.
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    Cited by:

    1. Andriy Shkliar, 2014. "Ways of Ukrainian debt restructuring under conditions of military and economic crisis," Ukrainian Journal Ekonomist, Yuriy Kovalenko, issue 12, pages 10-13, December.

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