02.04.2015 Author: F. William Engdahl

Kiev Commits Energy Hari Kiri

3545345345345345345435345345What the insane Washington-orchestrated civil war in Ukraine has not yet destroyed in Ukraine over the past year, now the conditions demanded by the US Treasury-controlled International Monetary Fund will. Kiev on March 13 received the first $5 billion tranche of a $17.5 billion three year IMF loan. It desperately needs the cash to avoid insolvency. However, in typical IMF policy, the aim of the money is to act as a poisoned “carrot” to force the victim country to undertake draconian “reforms” whose only effect will be to open the doors to foreign banks and multinationals to further rape and plunder what’s left of their economy. Now Kiev is about to commit energy Hari-Kiri to please the IMF and the US-imposed American-born Finance Minister, Natalie Ann Jaresko.

Before the US coup d’etat on February 22, 2014 in Kiev ousting a democratically-elected Prsident Viktor Yanukovich with aid of CIA snipers, self-styled neo-nazi Pravy Sektor gangsters and George Soros’ Ukrainian NGO, Ukraine’s president had opted to join the Russia-led Eurasian Economic Union in return for generous financial loans from Moscow and a huge cut over 30% in the price the country must pay to Russia’s Gazprom to import natural gas. Yanukovich stressed at the time he wanted to continue a dialogue on closer association with the EU as well. For the neo-conservative war faction in the Obama Administration that was a no! no! Washington wanted to destroy Russia and Putin and the way to do that, the ridiculous neo-conservatives such as John Brennan at CIA or Victoria ‘Fuck the EU’ Nuland at the State Department or Joe Biden or Senator John McCain saw it, was creating a pro-NATO coup in Kiev after a similar US Color Revolution in 2004 failed to achieve the goal.

Since Washington placed its hand-picked marionettes into power in Kiev, including as Prime Minister alleged senior Scientologist Arseniy Yatsenyuk, “Yats” as Nuland affectionately calls him, and a billionaire Poroschenko as President and three US-picked foreign nationals as top ministers including Natalie Jaresko an American ex-State Department senior official, as Finance Minister, the economy has been in a free-fall. The Washington Post reported a current hyperinflation of 272%. The decision by Nuland’s Washington gang to push Kiev to go to war over protests in eastern Ukraine’s energy-rich Donbass in March 2014 rather than creative diplomacy succeeded in severing the heart of Ukraine’s industrial economy from Kiev. The war cost untold billions the government doesn’t have.

Now IMF’s ice-cold Managing Director, former JP MorganChase banker Christine Lagarde, announced on February 12 Ukraine’s new, $17.5 billion bailout package, claiming it would be a “turning point for Ukraine.” She knew. Kiev got the first tranche of $5 billion in February.

Like the Sicilian Mafia, the IMF gives a kind of “protection.” Its loans have strings, called the Washington Consensus or IMF conditionalities. They never vary. That’s because the US Treasury in fact controls IMF policy. The conditions are invariably that a country getting “loans” must open its economy, privatize state assets, slash health and education and public jobs and balance the state budget, something the USA has failed to do for decades. Foreign multinationals are then free to rape what is left. It’s a modern version of “outsourced imperialism” made to look technocratic and politically neutral. It isn’t.

The $17.5 billion is to come over the next 3 years with only $5 billion in 2015. But Ukraine needs to find about $25 billion this year to finance its large current-account deficit and to repay foreign creditors. Foreign-exchange reserves are only $12 billion. Moreover, the IMF demands “reform” of Ukraine’s energy sector including drastic increases in natural as prices.

Energy hari-kiri

Now, on top of the war against their fellow countrymen cutting off coal supplies to Ukraine industry from the eastern Donbass, the IMF has nailed its demand for “energy reform” on the door of the Kiev parliament.

To meet IMF loan demands, the government has imposed exorbitant taxes on local oil and gas producers and is forcing them to sell their output to the government-owned monopoly. Kiev’s new tax rates are mindboggling. The government has just imposed a royalty which taxes output sales not just profits. And the royalty tax rates are 70% for state-owned oil and gas production companies; 55% on wells under 5,000 meters depth, and 35% on wells over 5,000 meters. That will have the effect of killing domestic Ukraine oil and gas production and development at a time Washington is telling Kiev to become free from oil and gas from Russia.

The other major source of Ukrainian power generation – anthracite coal – is no longer accessible, as most of the mines are in the country’s east, in the Donetsk Basin (Donbass).

The new taxes come as part of the IMF demands to Kiev will bring a dramatic immediate rise in the price of natural gas to industry and households. Naftogaz, the state-owned gas giant must end its annual $4 billion deficit, some 6% of GDP, by imposing a 300% rise in gas prices. So one year later, with the EU pleading poverty, Ukraine’s government will force a whole new wave of bankruptcies and unemployment owing to soaring gas costs.

To cap the catastrophic EU and Washington destruction of Ukraine’s remaining economy, half of Ukraine’s energy is produced at its Soviet-built power stations. The uranium fuel for these is supplied by ROSATOM, the Russian state nuclear energy company. To end that dependency, last year Washington pushed Kiev to buy its nuclear reactor fuel instead from Westinghouse Corporation, today actually owned by Japan’s Toshiba, hardly a confidence-inspiring fact after the Japan Fukushima nuclear disaster. In December, 2014, Westinghouse announced it extended an agreement to supply two Soviet-era nuclear plants with fuel until 2020.

There is a little problem with trying to substitute US-made fuel rods for Russian.

According to a statement by the International Union of Veterans of Nuclear Energy and Industry (IUVNEI), use of US-produced fuel for Soviet reactors is not compatible with their design and violates the security requirements. It could lead to disasters comparable with what happened in Chernobyl. They issued the following statement last April, 2014, “Nuclear fuel produced by the US firm Westinghouse does not meet the technical requirements of Soviet-era reactors, and using it could cause an accident on the scale of the Chernobyl disaster, which took place on the 26th April 1986.” IUVNEI consists of more than 15,000 nuclear industry veterans from Armenia, Bulgaria, Hungary, Finland, the Czech Republic, Russia, Slovakia and Ukraine. It was founded in 2010.

A US-imposed 300% natural gas price rise, a punitive new tax on domestic oil and gas production, a Washington-driven war that has either destroyed the coal mines in the east of Ukraine or put them off limits creating widespread electricity blackouts. Loveless warmakers like McCain or Nuland, far away in Washington, obviously do not care what happens to the Ukrainian population or economy. Ukrainians deserve better than this.

F. William Engdahl is strategic risk consultant and lecturer, he holds a degree in politics from Princeton University and is a best-selling author on oil and geopolitics, exclusively for the online magazine “New Eastern Outlook”.


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