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Ukrainian Money-Go-Round

Dave Emory’s entire life­time of work is avail­able on a flash dri­ve that can be obtained here. (The flash dri­ve includes the anti-fas­cist books avail­able on this site.)

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 777778779780781782, 783784.)

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.

“Why Did an Ener­gy Firm with Big Assets in Ukraine Hire Joe Biden’s Son?” by Olivia Knox and Mered­ith Shin­er; Yahoo News; 5/14/2014.

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. . . .

“Ukraine Just Issued $1 Bil­lion Bonds Backed by The US Tax­pay­er” by Tyler Dur­den; zerohedge.com; 5/14/2014.

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.







2 comments for “Ukrainian Money-Go-Round”

  1. Look what just got added to the EU’s still emp­ty eco­nom­ic stim­u­lus pipeline: pub­lic grants for pri­vate pipelines:

    Prague Post
    Euro­pean Com­mis­sion to fund increased ener­gy secu­ri­ty

    Cat­e­go­ry: Tech­nol­o­gy
    Pub­lished: 18 May 2014
    Writ­ten by Peter Tabern­er

    Ukraine cri­sis cit­ed as impe­tus to upgrade infra­struc­ture and con­nec­tions

    Cross-bor­der ener­gy infra­struc­ture projects are to receive a boost, with the Euro­pean Com­mis­sion allo­cat­ing 750 mil­lion euros under the Con­nect­ing Europe Facil­i­ty (CEF) to finance key ener­gy schemes.

    The main pri­or­i­ty areas will be the gas and elec­tric­i­ty sec­tors, where the aim of the Com­mis­sion is to increase ener­gy secu­ri­ty with­in the EU, and to end ener­gy iso­la­tion for some of the mem­ber states.

    The fund­ing will increase invest­ment in cross-bor­der links that cur­rent­ly are not in place, as the finan­cial sup­port will lever­age the nec­es­sary pri­vate and pub­lic fund­ing.

    Also the Com­mis­sion said the allo­ca­tion will con­tribute toward the com­ple­tion of the EU’s inter­nal ener­gy mar­ket, and to fur­ther inte­grate pow­er from renew­able sources into the ener­gy grid.

    Fol­low­ing the Euro­pean Coun­cil and Par­lia­ment agree­ing on the bud­get for the finan­cial frame­work for 2014–20, the CEF is set to receive a total of 5.85 bil­lion euros over that peri­od to increase ener­gy capac­i­ty.

    “This is a cru­cial step. Such a huge amount of EU finan­cial sup­port will make a sol­id dif­fer­ence. The cur­rent Ukraine cri­sis under­lines the impor­tance of upgrad­ing ener­gy infra­struc­ture and build­ing miss­ing inter­con­nec­tions between mem­ber states in order to enhance the ener­gy secu­ri­ty in the EU,” said Euro­pean Ener­gy Com­mis­sion­er Gün­ther Oet­tinger.

    “In gen­er­al mem­ber states can only help each oth­er with ener­gy sup­plies, if they are well con­nect­ed. More­over, improv­ing the ener­gy infra­struc­ture is a pre­req­ui­site for com­plet­ing the inter­nal ener­gy mar­ket for the ben­e­fit of con­sumers and busi­ness­es in the EU.”

    In order to be con­sid­ered for a grant, any ener­gy project pro­pos­al has to prove that it has com­mon inter­ests, ensur­ing that ben­e­fits would be gained by at least two mem­ber states.

    The grants can be direct­ed toward the financ­ing of stud­ies, and con­struc­tion works. Last Octo­ber the first list of 250 projects was first adopt­ed by the Com­mis­sion, hav­ing met all the require­ments of the strict cri­te­ria.

    To qual­i­fy for con­struc­tion grants, the cri­te­ria stip­u­late a cost-ben­e­fit analy­sis that has to embrace ben­e­fits to enhance the secu­ri­ty of sup­ply of ener­gy, ener­gy sol­i­dar­i­ty, or tech­no­log­i­cal inno­va­tion.


    If there is any dis­agree­ment between nation­al gov­ern­ments on the com­mer­cial val­ue of a project, the deci­sion will then be passed on to the Agency for the Coop­er­a­tion of Ener­gy Reg­u­la­tors (ACER).

    There is also a cap on how much sup­port can come from the EU, as this can­not exceed 50 per­cent of the total of the eli­gi­ble costs, although in some cas­es the cap will be lift­ed to 75 per­cent, if there is a sig­nif­i­cant lev­el of ener­gy sup­ply that will be gar­nered from a project pro­pos­al.

    The appli­ca­tion dead­line for new ener­gy pro­pos­als is on 19 August, after that date the final deci­sion on which projects will receive the CEF fund­ing from the Com­mis­sion will be tak­en by Novem­ber.

    Posted by Pterrafractyl | May 18, 2014, 7:20 pm
  2. 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:

    Nat­ur­al Gas House of the Year: Koch Sup­ply & Trad­ing

    Author: Ener­gy Risk staff

    Source: Ener­gy Risk | 06 Jun 2014

    With a swift launch in Euro­pean gas and glob­al LNG, oil heavy­weight Koch Sup­ply & Trad­ing becomes a glob­al play­er in nat­ur­al gas

    Koch Sup­ply & Trad­ing (KS&T), a unit of Kansas-based Koch Indus­tries, is well known as a major trad­er in crude oil deriv­a­tives, par­tic­u­lar­ly in North Amer­i­ca, where its par­ent com­pa­ny has deep roots in refin­ing, fer­tilis­er pro­duc­tion and oth­er ener­gy-inten­sive busi­ness­es. But in 2012, KS&T began a dri­ve to deep­en its involve­ment in glob­al nat­ur­al gas mar­kets by launch­ing a Europe, Mid­dle East and Africa (Emea) gas busi­ness, as well as a liq­ue­fied nat­ur­al gas (LNG) trad­ing arm.

    Since then, KS&T has become a tru­ly glob­al play­er in gas. The Gene­va-based Emea busi­ness now has about 60 coun­ter­par­ties, up from zero less than three years ago, and is active in 15 coun­tries, from the North Sea to the Mediter­ranean. The LNG busi­ness – based in Lon­don with offices in Dubai, Hous­ton, Rio de Janeiro and Sin­ga­pore – has tak­en deliv­ery of and sup­plied its first car­goes, and trades finan­cial con­tracts linked to sev­er­al LNG mark­ers.


    Notably, this has tak­en place as banks have retreat­ed from gas and pow­er, caus­ing liq­uid­i­ty to dry up and leav­ing util­i­ties and oth­er ener­gy firms scram­bling to find reli­able trad­ing part­ners. Although Hagert stress­es KS&T does not offer the same ser­vices as a bank, he says the gap in the mar­ket has cre­at­ed oppor­tu­ni­ties for his team to enter into phys­i­cal deals with var­i­ous types of firms, includ­ing gas dis­trib­u­tors, munic­i­pal­i­ties and indus­tri­als.

    “It has been very sad to see the retreat of high­ly respect­ed finan­cial insti­tu­tions from the mar­ket­place,” Hagert says. “On the oth­er hand, though... it cre­ates demand for oth­er play­ers such as our­selves, and it allows com­pa­nies with our sort of pan-Euro­pean, cross-val­ue-chain breadth to step into the fold.”

    Many of the key peo­ple in KS&T’s Emea gas busi­ness – includ­ing man­ag­ing direc­tor Stephen Cor­nish, who over­sees both the Emea and LNG groups – are vet­er­ans of the trad­ing arm of Nether­lands-based util­i­ty Essent, which was acquired by Ger­man util­i­ty RWE in 2009. Anoth­er large part of the Emea team pre­vi­ous­ly worked at Switzer­land-based com­mod­i­ty trad­er Gun­vor, while oth­ers came from var­i­ous banks, trad­ing firms and oil majors.

    Coun­ter­par­ties say KS&T’s expe­ri­ence makes it a sol­id trad­ing part­ner. “What I appre­ci­ate is that they are fast and effi­cient,” says a senior ener­gy trad­er with an Ital­ian gas com­pa­ny. “They have strict rules, but they are clear in advance, and once you under­stand these con­straints and rules, it is easy to work with them.”

    The phys­i­cal capa­bil­i­ties of KS&T’s Emea team include the abil­i­ty to source gas direct­ly from the North Sea and, in some coun­tries, to trans­port it all the way down­stream to indus­tri­al cus­tomers. More­over, KS&T has accu­mu­lat­ed a sig­nif­i­cant stor­age port­fo­lio, giv­ing it a great deal of option­al­i­ty that it can use to cre­ate struc­tured prod­ucts for clients in places such as east­ern Europe, accord­ing to Hagert. “Our abil­i­ty to chan­nel volatil­i­ty and option­al­i­ty across the val­ue chain, with us in the mid­dle, is part of our core strat­e­gy to add val­ue to the mar­ket and its par­tic­i­pants,” he says.

    On the LNG side, KS&T has been char­ter­ing ves­sels and build­ing a sup­ply port­fo­lio with short‑, medi­um- and long-term dura­tions. Hagert believes KS&T is well posi­tioned to become a major new play­er in glob­al LNG as the mar­ket evolves.

    “The LNG busi­ness has got­ten off to a strong start,” he says. “To date, the LNG indus­try has oper­at­ed with only a few dom­i­nant play­er types. We believe a healthy mar­ket should also have indus­tri­al play­ers like KS&T, with a strong cred­it rat­ing, a glob­al pres­ence and an indus­tri­al back­ground.”

    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:

    Koch to Start EU Pow­er Trad­ing as It Plans LNG Expan­sion
    By Anna Shiryaevskaya Jun 25, 2014 4:52 AM CT

    Koch Sup­ply & Trad­ing, a unit of Koch Indus­tries Inc., will start buy­ing and sell­ing Euro­pean elec­tric­i­ty and expand its liq­ue­fied nat­ur­al gas busi­ness to take advan­tage of a glob­al­iz­ing mar­ket for the fuel.

    The trad­ing unit of the sec­ond-largest close­ly held U.S. com­pa­ny by rev­enue is hir­ing one or two pow­er traders in Gene­va and plans to be ready for trad­ing next year, Stephen Cor­nish, direc­tor of Koch Sup­ply & Trad­ing, said in a tele­phone inter­view from Lon­don. The com­pa­ny will expand into Turkey and the Caspi­an region in 2015 and open an office in Tokyo for its LNG busi­ness this year, he said.

    Koch is expand­ing in pow­er as com­pa­nies from Bank of Amer­i­ca Corp. to Cargill Inc. pull out of the mar­ket as prices trade near a nine-year low after the euro region’s longest reces­sion cut demand. As many as 120 Euro­pean pow­er and gas traders lost or changed their jobs last year in the biggest shake­out of the indus­try since the col­lapse of Enron Corp. more than a decade ago.

    “We don’t build our busi­ness based on whether the mar­kets are up or down,” Cor­nish said. “There are a lot of coun­ter­parts out there that are re-eval­u­at­ing their busi­ness mod­els and are look­ing for high qual­i­ty coun­ter­parts to do deals with. In that sce­nario we think we can add val­ue.”

    Ger­man year-ahead pow­er, a Euro­pean bench­mark, fell to the low­est since 2005 in April and trad­ed at 34.50 euros ($46.93) a megawatt-hour at 10:17 a.m. Lon­don time today, accord­ing to data from Euro­pean Ener­gy Exchange AG. Thir­ty-day volatil­i­ty fell to 4.3 per­cent today, its low­est since June 2003.
    Gas, LNG

    Koch is look­ing to expand into main­land Euro­pean pow­er mar­kets from Gene­va, its base for gas trad­ing and orig­i­na­tion in Europe, the Mid­dle East and Africa, after a sep­a­rate Lon­don-based busi­ness focused on the U.K. exit­ed the mar­ket in 2011, Dean­na Altenhoff, a spokes­woman for Koch, said June 23 by e‑mail. Koch Ener­gy Europe Ltd. trad­ed nat­ur­al gas, pow­er and emis­sion cred­its, accord­ing to a com­pa­ny state­ment in 2010.

    Koch start­ed trad­ing crude oil in 1969 and added glob­al gas and LNG to its port­fo­lio in 2012, accord­ing to the company’s web­site. As part of a large indus­tri­al con­glom­er­ate, which itself is a gas con­sumer, Koch ben­e­fits from deal­ing with indus­tri­als, which “want to talk to like-mind­ed com­pa­nies,” Cor­nish said.

    “When it comes to pow­er, we believe there should be an oppor­tu­ni­ty for us there too,” Cor­nish said by tele­phone from Lon­don on June 13. “We are get­ting requests to get involved in that mar­ket to map over the suc­cess that we have had in Euro­pean nat­ur­al gas.”

    Koch Sup­ply & Trad­ing plans to enter Turkey and the Caspi­an region next year, he said. In addi­tion to Gene­va, the com­pa­ny has an Ams­ter­dam office for its gas sourc­ing needs and a pres­ence in Dus­sel­dorf, Ger­many, for some of its mar­ket­ing activ­i­ty, he said.

    ‘Nat­ur­al Need’

    The company’s LNG busi­ness is based in Lon­don with trad­ing and orig­i­na­tion oper­a­tions in Sin­ga­pore and Hous­ton and satel­lite offices in Rio de Janeiro and Dubai. The com­pa­ny may expand fur­ther in the Far East and in South Amer­i­ca, if oppor­tu­ni­ties arise, he said.

    Renew­ables, shale gas, the 2008 eco­nom­ic cri­sis and the Fukushi­ma nuclear dis­as­ter in Japan have all impact­ed the mar­ket, Cor­nish said. While the glob­al LNG mar­ket will remain tight through next year, trade will start to increase in 2016 as Aus­tralian projects now under con­struc­tion start pro­duc­ing the super-chilled fuel and U.S. exports begin, the Inter­na­tion­al Ener­gy Agency said in its medi­um-term nat­ur­al gas mar­ket out­look on June 10.


    Good times for all are on the way.

    Posted by Pterrafractyl | August 26, 2014, 9:01 am

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