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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. [1] (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 [2]. 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 [3]778 [4]779 [5]780 [6]781 [7]782 [8], 783 [9]784 [10].)

There’s a map here [11] show­ing the dis­pro­por­tion­ate num­ber of gas fields in the east­ern half of Ukraine. In the hot­ly-con­test­ed area around Slo­vian­sk [12], Shell has a con­tract to devel­op shale gas.

Two recent devel­op­ments should come as no sur­prise to an expe­ri­enced observ­er:

“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. [13]

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 [16] 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 [17] 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 [18]. 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. [14]

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) [19]

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.