Why Bailout Ukraine? The Truth Behind the IMF Loan

The screams of financial instability are echoing around the world.

Developed nations are busy printing more money, while other nations are busy selling assets (such as gold, i.e.: Venezuela) to survive economic downturns and sanctions.

The word liquidity has become an oxymoron; the more liquidity injected into our financial system, the less liquid our financial system becomes.

This financial instability is intensifying as a result of the battle between the East and the West.

The latest chapter of this battle has just been written and it’s titled:

“Ukraine Wins Bailout Loan, but Loses Freedom.”

This week, Ukraine was approved for a $17.5 billion bailout loan from the IMF.

Like many countries around the world, Ukraine is undergoing a serious political and economic crisis – one that is on the verge of a financial default.

Like many countries around the world, Ukraine is hoping to improve the situation by borrowing money. And we all know what happens when you rob Peter to pay Paul.

Ukrainians will see their standard of living suffer, as a result of significantly higher inflation and energy costs (three times higher).

If you are Ukrainian, you will not like what I am about to say.

Ukraine Loses its Freedom

Ukraine, like many countries around the world, such as Venezuela, will not – in our lifetime – have the chance to become an independent nation. Its rule will always be influenced by either the monetary requirements from the West, or the energy requirements from Russia.

If Ukraine sides with the West, its energy crisis will deepen; if it sides with Russia, its economy will collapse. It is a no-win situation and the ramifications are already destroying the lives of its citizens.

Given the current state of war and poor economic and political environment, the chances of Ukraine’s ability to service the $17.5 billion debt are slim to none.

So why would anyone lend money to someone who can’t pay it back?

The Truth About the Ukraine Bailout

I have always said, “There is no such thing as free political help.”

Via my Letter, “Why Obama Will Soon Make a Very Bold Move“:

“America has stepped into many situations before: It has helped many countries that suffered disasters and helped many countries solve their internal civil conflicts.

But all of this “help” comes at a price.”

In the case of the IMF loan, this “help” is no different.

Last year, I told you that the battle over control of energy was the real reason for war in Ukraine:

“Like Syria ( see The Real Reason for War in Syria: Pipeline Control), the control of Ukraine is about energy; controlling Ukraine means controlling a network of Soviet-era pipelines that carry more than half of Russia’s gas exports to the European Union.

While Syria has slipped down the agenda of Western media, the nation is still very much in conflict without resolution, and the battle for energy control in both Syria and Ukraine is becoming more dangerous.”

Ukraine’s debt is denominated in dollars and euros – currencies of the Western regime. Since we know that it is economically impossible for Ukraine to come up with the funds to pay back the loans, there seems to be only one logical way for Ukraine to come up with the foreign funds to repay its debt: sell its natural resources.

While the media have you focused on war, Ukrainian troopers are busy in the Ukraine province of Donetsk Oblast, installing shale gas production equipment.

Via TASS:

“Ukrainian troopers help installing shale gas production equipment near the east Ukrainian town of Slavyansk, which they bombed and shelled for the three preceding months, the Novorossiya news agency reports on its website citing local residents.

“Civilians protected by Ukrainian army are getting ready to install drilling rigs. More equipment is being brought in,” they said, adding that the military are encircling the future extraction area.”

In other words, it seems the bombing and shelling of the town is just a diversion to move ahead with extracting the shale gas. But why? Why go to such extremes?

The article continues:

“The people of Slavyansk, which is located in the heart of the Yzovka shale gas field, staged numerous protest actions in the past against its development. They even wanted to call in a referendum on that subject.

Environmentalists are particularly concerned with the consequences of hydrofracking, a method used for shale gas extraction, because it implies the use of extremely toxic chemical agents, which can poison not only subsoil waters but also the atmosphere.

Experts claim that not a single country in the world has invented a method of utilization of harmful toxic agents in the process of development of shale gas deposits.

Countries like the Czech Republic, the Netherlands and France have given up plans to develop shale gas deposits in their territories.”

There is a massive wealth of shale gas in Donetsk Oblast, Ukraine, but the problem is that its citizens don’t want it developed.

What better way to develop unwanted gas fields then to turn it into a warzone? Surely, no one will want to live in a dangerous war-ridden small town in Donetsk Oblast, Ukraine? The strategy seems to be working, as many Ukrainians have been forced away from their homes over the past year.

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No Ceasefire?

A month ago, the leaders of Russia, Ukraine, France and Germany reached a ceasefire deal.

Less than a month later, reports of failing to respect the ceasefire are springing up everywhere. Russia blames Ukraine, and Ukraine blames Russia.

Via Reuters:

“Ukraine’s president accused Russian-backed separatists in the east of failing to respect a ceasefire with Ukrainian troops and called for further sanctions on Russia in comments to a German newspaper to be published on Monday.

Attacks have become less frequent since the latest ceasefire came into force in mid-February, but both sides accuse each other of violations.”

Now remember: not only is Ukraine a major energy corridor, but it’s also a country that has a massive shale gas deposit with a government that wants to see it developed. Is it a coincidence that the heart of this deposit also happens to be in the province where the so-called ceasefire hasn’t ceased?

Via  Kyiv Post:

“The Donetsk Oblast town of Myronivsky, located along the so-called “road of life” that connects the besieged railway junction Debaltseve with the rest of Ukrainian-controlled territory, has been shelled non-stop since the Feb. 15 cease-fire began.

The local residents who are staying in the city — with a pre-war population of 8,000 people — are forced to live in bomb shelters or regular basements because no peace came after the Feb. 12 Minsk agreement reached by the leaders of Ukraine, Germany, France and Russia.”

The development of Ukraine’s major gas field is extremely valuable to those who want to reduce Russia’s stranglehold on energy in the eastern hemisphere. Which is why lending Ukraine money makes sense…

The Players

In 2012, Shell (British-Dutch) was one of two companies that were given the right to develop the one of Ukraine’s massive shale gas deposits. The other company? Burisma Holdings.

Burisma Holdings is one of Ukraine’s largest independent oil and gas producers, representing a 25% share in the oil and gas market among the independent oil and gas producers in Ukraine.

Last year, Burisma added a very notable figure to its board: Robert Hunter Biden, U.S. Vice President Joe Biden’s son.

Clearly, this means there is a serious financial conflict of interest in developing the shale gas field during a time of war. But it also means opportunity.

Shortly after the Ukraine bailout was announced last week, Vice President Biden said there were concerns that Russia had violated the ceasefire agreements in Eastern Ukraine.

Via ABC News:

“Word of the new aid came in a telephone call Wednesday from Vice President Joe Biden to Ukrainian President Petro Poroshenko. The White House said Biden also expressed concern that Russian-backed separatists are violating cease-fire agreements in eastern Ukraine and keeping out international monitors.

…Russian President Vladimir Putin denies arming rebels in the war in eastern Ukraine, which began in April after Moscow annexed the mostly Russian-speaking Crimean Peninsula.”

So what’s really going on? Why would Joe Biden express concerns that separatists are violating ceasefire agreements, if (according to Russia), they are not?

Perhaps Senate Bill S. 2277, which is meant to “prevent further Russian aggression toward Ukraine and other sovereign states in Europe and Eurasia, and for other purposes,” might explain Biden’s comments.

In particular, section 306, which explains what “other purposes” mean:

306. European and Eurasian energy independence

(a) Assistance from the United States Agency for International Development

The Administrator of the United States Agency for International Development should prioritize-

(1) loan, lease, and bond guarantees to appropriate financial institutions and other eligible borrowers through the Development Credit Authority to facilitate the involvement of such institutions and borrowers in financing efforts in Ukraine to help exploit existing natural gas reserves, to conduct additional exploration for oil and gas, to develop alternative sources of energy, including oil and gas, and to encourage energy efficiency, for Ukraine, Georgia, and Moldova, including the development of associated transportation, storage, and refinement facilities; and

(2) direct assistance to expand efforts in Ukraine, Georgia, and Moldova to help exploit existing natural gas reserves, to conduct additional exploration for oil and gas, and to develop alternative sources of energy, including oil and gas, and to encourage energy efficiency, for Ukraine, Georgia, and Moldova, including the development of associated transportation, storage, and refinement facilities.

(b) Promotion of United States private sector participation in energy development in Ukraine, Georgia, and Moldova

The Director of the Trade and Development Agency should promote United States private sector efforts to help exploit existing natural gas reserves, to conduct additional exploration for oil and gas, and to develop alternative sources of energy, including oil and gas, for Ukraine, Georgia, and Moldova, including the development of associated transportation, storage, and refinement facilities, by conducting and funding project preparation activities for projects in Ukraine, Georgia, and Moldova, including feasibility studies, technical assistance, pilot projects, reverse trade missions, conferences, and workshops.”

In short, the section focuses on providing financial and direct assistance to Ukraine to help exploit existing natural gas reserves, and also promote United States private sector participation in energy development in Ukraine.

I guess peace is contingent on profits.

What are your thoughts?

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Protect Your Investment

When you lend someone money, you generally want collateral – or, at least, some way of protecting your investment.

So it comes as no surprise that immediately after the bailout, the United States placed sanctions on eight Ukrainian separatists and a Russian bank, warning that recent attacks by rebels armed by Russia violated a European-brokered ceasefire in the war-torn country:

Via Reuters:

“Among the more prominent individuals sanctioned was Roman Lyagin, who chairs an election commission in separatist territory. The U.S. Treasury accused him of preventing voting in Ukraine’s May presidential election.

Lyagin said he was not a fighter and was playing a peaceful role in the separatists’ activities.

“It’s the opposite, I do my best to stop the bloodshed,” he said.

Washington also sanctioned the Russian National Commercial Bank, which the Treasury said moved into Ukraine’s Crimea region after it was annexed by Russia in 2014.”

Of course, according to Interfax, Russian Deputy Foreign Minister Sergei says that he has no idea why the sanctions were all of a sudden put in place, and said that the new sanctions were “unexplainable.”

Sanctions, however, only affect Russia and its allies economically. The United States still needs to have boots on the ground – so to speak – to monitor the progress of its investment. Which is why immediately after the bailout…

Via ABC:

“The United States…is sending small unarmed drones, armored Humvees and other assistance to Ukraine in its fight against Russian-backed separatists. Lethal weapons were not included, to the dismay of some U.S. lawmakers.

…U.S. officials, speaking on a condition of anonymity because they weren’t authorized to discuss the aid on the record, said it includes small Raven drones systems, which can be launched by hand. The U.S. also will send 30 heavily armored Humvees and 200 other regular Humvees.

The drones and other equipment, not including the Humvees, are worth about $75 million. It’s not clear how many drones would be sent or what the Humvees cost.”

More to Come

While officials steer your attention to the war in Ukraine, its problems are the least of the world’s worries. Ukraine’s woes are just a very small part of a chapter in the battle between the world powers.

If rules and laws are broken during times of war, then the IMF bailout of Ukraine should be a sign that the war between the world powers is intensifying.

What do I mean?

Under its own rules, the IMF is restricted from making loans to countries in a state of war. Yet, despite Ukraine clearly being at war, the bailout has been approved.

Sooner or later, one of these nations will break. The question is: when?

I don’t know the answer to that, but I do know Russia is preparing for the worst.

Here are just some of the headlines detailing Russia’s recent defence strategy:

From Syria to Ukraine, the war for energy, profits, and world domination is just beginning.

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