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COMMENT: Applying the time-honored adage of following the money works in Ukraine. We have noted in posts and programs that Ukraine has 25% of the world’s proven natural gas reserves. The Eastern part of the country is richer in natural gas than the West.
(We have covered the ascension of the OUN/B heirs in the Ukraine in a number of programs: FTR ‘s 777, 778, 779, 780, 781, 782, 783, 784.)
There’s a map here showing the disproportionate number of gas fields in the eastern half of Ukraine. In the hotly-contested area around Sloviansk, Shell has a contract to develop shale gas.
Two recent developments should come as no surprise to an experienced observer:
- Exemplifying the very crony capitalism that the U.S. decries when it occurs elsewhere (including Russia), Burisma–a Cyprus-based company with significant investments in Ukrainian natural gas fields –has hired Vice President Joe Biden’s son R. Hunter Biden. The company’s board of directors features Devon Archer, the former college roommate of Secretary of State John Kerry’s Stepson Christopher Heinz (of the wealthy food-empire family. Put THAT on your hamburger!) Archer was national co-finance chair of Kerry’s Presidential campaign in 2004.
- Ukraine has issued $1 billion bonds, backed by the U.S. taxpayer. The bonds were guaranteed through the U.S. Agency for International Development, which was involved with channeling money to finance the coup in Ukraine.
EXCERPT: In the span of a few weeks, an energy firm little-known inside the United States added two members to its board of directors — scoring connections to Secretary of State John Kerry and Vice President Joe Biden in the bargain.
On April 22, Cyprus-based Burisma announced that financier Devon Archer had joined its board. Archer, who shared a room in college with Kerry’s stepson, Christopher Heinz, served as national finance co-chair for the former senator’s 2004 presidential campaign.
Then, on Monday, the firm announced that Biden’s younger son, R. Hunter Biden, would join the board of directors.
Why would the company, which bills itself as Ukraine’s largest private gas producer, need such powerful friends in Washington?
The answer might be the company’s holdings in Ukraine. They include, according to the firm’s website, permits to explore in the Dnieper-Donets Basin in the country’s eastern regions, home to an armed pro-Russian separatist movement. They also include permits to explore in the Azov-Kuban Basin of the strategic Crimean peninsula, annexed earlier this year by Moscow. . . .
EXCERPT: The bailout floodgates are open and the US taxpayer is footing the bill once again — whether through IMF loans or more directly. Today saw Ukraine issue $1 Billion 5‑Year Notes at a stunningly low risk of only 28bps above US Treasuries and dramatically cheaper than the cost of capital in the public markets (and from the IMF) which yield over 10%. The reason for the 1) low cost, and 2) actual ability to raise debt... the bond is guaranteed by the US Agency for International Development and “assures full repayment of principal and interest” based on the full faith and credit of the US (Taxpayer). We assume Gazprom will be happy...
So why not pile into these bonds? 28 extra basis points for no apparent additional credit risk... some liquidity risk but we are sure your friendly local central bank will enable you to swap them for infinitely rehypothecatable cash with no haircut...
They’re gonna need moar [sic]... (and this does not include Gazprom)
Oh and Ukraine says “thanks America”... (as WSJ reports)
“The $1 billion loan guarantee that (U.S. Agency for International Development) will implement will help the government of Ukraine access capital at reasonable rates and manage the transition to a prosperous democracy,” Mark Feierstein, assistant administrator at USAID, said in April.
“The guarantee assures investors of full repayment of principal and interest.”
The deal follows similar guarantees provided for bonds issued by Tunisia in 2012 and Jordan last year.
But — there is a catch...
Bank of America Merrill Lynch said Tuesday that Ukraine’s bondholders could face losses if separatists in the country’s southeastern regions successfully gain independence.
The bank said a breakup of the country could potentially force the International Monetary Fund to tear up Ukraine’s current $17 billion aid package and trigger a debt restructuring program that would hit private investors. An IMF spokesperson said the fund is monitoring the situation.
Look what just got added to the EU’s still empty economic stimulus pipeline: public grants for private pipelines:
ith Koch industries signing a two year European natural gas distribution deal with Norway’s Statoil, it’s worth pointing out that the Koch’s new international liquid natural gas trading house that was just started in 2012 is already pretty huge:
Yep, Koch industries certainly has grand ambitions for the global markets that go far beyond oil and coal, so it’s also worth pointing out that those ambitions might be include becoming a global Enron. The Kochs are getting into EU electricity trading:
Good times for all are on the way.