Friday, September 19, 2014

Ukraine / Russia situation - news and tweets of the day ( September 19 , 2014 ) -- Obama rejects plea of Ukraine President Poroshenko for lethal aid , pledges financial aid of 56 million ( Poroshenko says 1 billion in financial guarantees ) ....... International political theatre and sanctions updates ...... Gas talks set for September 26 , 2014 ( Winter is still coming for Europe ) ..... Coal may be the new four letter word this winter in Ukraine as shortages loom ......

President Barack Obama has declined to supply Ukraine with “lethal aide” despite the passionate plea for more military equipment that Ukrainian President Petro Poroshenko made to Congress earlier on Thursday.
During a White House meeting between the two leaders that occurred after Poroshenko’s address to Congress, President Obama said the United States would keep working to mobilize the international community in order for the conflict in Ukraine to be solved diplomatically, Reuters reports.
Following the meeting, Poroshenko said he was pleased with Washington’s help, and expressed hope that the shaky ceasefire in Ukraine would eventually lead to stability and peace.
Earlier in the day, however, Poroshenko suggested that NATO give “special” security status to Ukraine. Addressing the US Congress, he called on Washington to provide Kiev with “more military equipment, lethal and non-lethal” to “keep peace” in the eastern part of his country.
While President Obama has continued to say that only non-lethal assistance will be supplied to Kiev – bullet-proof vests, helmets and the like – Poroshenko said this would not be enough.
Ukraine President Petro Poroshenko (C) gestures while addressing a joint meeting of Congress in the U.S. Capitol in Washington, September 18, 2014. (Reuters / Kevin Lamarque)
Ukraine President Petro Poroshenko (C) gestures while addressing a joint meeting of Congress in the U.S. Capitol in Washington, September 18, 2014. (Reuters / Kevin Lamarque)

"Blankets and night-vision goggles are important, but one cannot win the war with blankets. You cannot keep the peace with a blanket," he told lawmakers, adding that Ukraine urgently needs "more military equipment, both lethal and non-lethal."
As his statement drew applause from the audience, the Ukrainian leader went on to call on NATO for closer ties.
"I strongly encourage the United States to give Ukraine a special security and defense status which reflect the highest level of interaction with a non-NATO ally," he said.
Russia has warned that NATO’s progress towards the east and Ukraine, which the military bloc sees as a potential member, will trigger a strong reaction.
Poroshenko accused Russia of having an "imperial mindset" and "nostalgia for the Soviet Union,"referring to Crimea’s breakaway and Russia’s alleged support of rebels in eastern Ukraine.
"I urge you not to let Ukraine stand alone in the face of this aggression," he said, also recalling events in Georgia's break-away regions of Abkhazia and South Ossetia in 2008 as well as the 1992 military conflict in Moldova, which resulted in Transnistria unilaterally proclaiming independence.
Saint John of Kronstadt (Ioann Kronshtadsky) Church destroyed during a bombardment in the town of Kirovskoye, Donetsk Region. (RIA Novosti)
Saint John of Kronstadt (Ioann Kronshtadsky) Church destroyed during a bombardment in the town of Kirovskoye, Donetsk Region. (RIA Novosti)

He then drew a sudden parallel with Israel:
"Just like Israel, Ukraine has the right to defend her territory, and will do so with all the courage in her heart and dedication in her soul."
Ukraine has been engulfed in violent internal conflict since April, when Kiev’s military began its crackdown on the southeastern regions of the country.
According to United Nations’ estimates, over 2,249 people have been killed so far and more than 6,033 wounded in the fighting in eastern Ukraine. The number of internally displaced Ukrainians has reached 260,000, with another 814,000 finding refuge in Russia.
Aside from asking for military assistance, Poroshenko called on the US to continue its economic pressure on Russia.
"And I also ask that the US be forceful and stand by its principle with respect to further sanctions against the aggressor. Economic sanctions are important for many reasons. They help to distinguish between good and evil. They help us to defend and stand the moral high ground and not to sink into indifference, disgust and pragmatism," the Ukrainian president said.
Meanwhile, the United States has pledged $53 million in fresh aid to Ukraine. The new assistance would include $46 million to bolster Ukraine's security in its conflict in eastern Ukraine and $7 million in humanitarian aid.

White House Explains Where Your $1.3 Billion Went In Ukraine

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Just minutes after Poroshenko's fearmongering speech to US Congress(and in the face of a collapsing Ukraine economy), The White House has released its "fact sheet" to explain exactly how committed (aside from the lethal aid demands - which may or may not be happening as we noted here) to supprting Ukraine the US taxpayer is... On top of guaranteeing $1 billion of Ukraine's debt, a further $291 million in 'assistance' has been flooded in... here's what for...

FACT SHEET: U.S. Support for Ukraine

The United States is firmly committed to supporting Ukraine as it works to establish security and stability, respond to humanitarian and reconstruction needs, conduct democratic elections and carry out constitutional reforms, restore its economy, and combat corruption.  Along with our international partners, including the IMF, the United States is committed to supporting Ukraine’s reform agenda while also ensuring that Ukrainians are able to determine their future without intimidation or outside coercion. 
In pursuit of these objectives, the U.S. government has provided approximately $291 million in assistance to Ukraine this year as well as a $1 billion loan guarantee.   This includes the President’s announcement today of a new package of assistance totaling $53 million, of which:
  • More than $7 million will be directed to international relief organizations to provide humanitarian aid to those affected by the conflict in Ukraine’s east.
  • $46 million in security assistance will support Ukraine’s military and border guards. This is in addition to the $70 million in security assistance we have previously announced.
The President has also asked U.S. Commerce Secretary Penny Pritzker to lead a U.S. Government delegation to Ukraine September 26-27 to meet with senior Ukrainian government and business leaders and discuss Ukrainian economic reform efforts and the steps that the government needs to take in the short- and medium-term to strengthen its business climate and build an economy that attracts private capital. 
The U.S. government will continue to work with Congress to identify additional opportunities for U.S. assistance to Ukraine.  For example, the Administration has requested from Congress an additional $45 million in FY 2015 as part of the President’s European Reassurance Initiative that would help build Ukraine’s capacity to provide for its own defense and increase interoperability with U.S. and Western forces.
Examples of U.S. assistance to Ukraine in response to the crisis include the following:
Humanitarian Assistance and Reconstruction
  • The U.S. government is contributing to the work in Ukraine of the UN High Commissioner for Refugees (UNHCR), the International Organization for Migration (IOM), the International Committee of the Red Cross (ICRC), the United Nations Population Fund (UNFPA), and the UN Office of the Coordination of Humanitarian Affairs (UNOCHA).
  • These contributions are supporting Ukrainian efforts to ensure adequate reception of internally displaced persons (IDP) as well as to facilitate IDP returns when security conditions allow, including through the provision of food, cash, hygiene kits, medicines, and domestic and winter items.  We are also supporting efforts to address the humanitarian needs of vulnerable populations in Luhansk and Donetsk through support for emergency activities including the procurement and distribution of safe drinking water and relief commodities.
  • The U.S. government is also providing immediate support for economic recovery, small infrastructure repair, and restoration of public services in conflict-affected areas in the east. 
Security Sector Capacity Building and Reform
  • With today’s announcement, the U.S. government has committed to providing $116 million in equipment and training to Ukraine’s security forces to help Ukraine better monitor and secure its border, operate more safely and effectively, and preserve and enforce its territorial integrity.  Ukraine’s security forces include their Armed Forces, National Guard, and State Border Guard Service.
  • This assistance includes the provision of body armor, helmets, vehicles, night and thermal vision devices, heavy engineering equipment, advanced radios, patrol boats, rations, tents, counter-mortar radars, uniforms, and other related items. 
  • The United States has also begun a process led by U.S. European Command and Department of Defense civilian and military experts to work with Ukraine to improve its capacity to provide for its own defense and set the stage for longer-term defense cooperation.  This includes medical advisory and security assistance advisory teams.
National Unity, Democracy, Human Rights, and Media
  • The United States has contributed funding and personnel to the Organization for Security and Cooperation in Europe’s (OSCE) Special Monitoring Mission (SMM) that is monitoring and providing daily reporting, particularly in the conflict regions in the east.
  • During Ukraine’s May presidential election, U.S. assistance supported the work of international and domestic election observers as well as efforts to strengthen election administration, voter education, election security, and independent media.  The United States is providing similar assistance for pre-term parliamentary elections scheduled for October 26.
  • U.S. assistance is also supporting Ukrainian efforts to promote an inclusive process of constitutional reform that will help Ukraine meet European standards and drive the process of decentralization. 
  • The U.S. government is supporting civil society organizations to engage in public outreach, participate in the government reform process, and monitor and defend human rights.
  • We are also providing assistance to boost the capacity of independent media outlets to provide unbiased information and to increase access to information in all parts of Ukraine.  In mid-October, the Broadcasting Board of Governors (BBG) will launch a daily, 30-minute Russian language television news program that will be a joint production of Radio Free Europe/Radio Liberty and the Voice of America. The program will be shown on television affiliates in Ukraine, as well as in Lithuania, Latvia, Estonia, Moldova, Georgia, and possibly other countries. BBG will seek to make the program available to Russian-speaking news-seekers worldwide via digital platforms.
Economic Stabilization, Reform, and Growth
  • In May, Ukraine closed on its offering of a $1 billion sovereign bond, guaranteed by the United States.  With the support of the proceeds raised by the loan guarantee, Ukraine is implementing a new social protection program to compensate vulnerable households for increases in gas and heating tariffs, which will reach 30 percent of the population. The U.S. loan guarantee was part of a coordinated international effort to ensure Ukraine has the resources it needs, which will provide $27 billion to Ukraine as it implements its IMF program. 
  • Immediately following Ukraine’s change in government in March, the U.S. government deployed advisors to help stabilize the financial sector and implement key reforms in partnership with the Ukrainian Finance Ministry and National Bank.  These advisors are supporting a range of reforms related to issues such as banking supervision, public sector debt management, infrastructure finance, and taxation.
  • U.S. assistance also is supporting policy changes that will lay the groundwork for growth in important sectors of the Ukrainian economy.  For example, we are helping Ukrainian authorities to carry out reforms that will boost private sector investment in agriculture, improve access to credit and capital investment for farmers, and streamline agricultural sector regulation.
  • The United States is also contributing to international programs, including through the European Bank for Reconstruction and Development (EBRD) and the Organization for Economic Cooperation and Development (OECD), to support increased access to finance for small- and medium-sized enterprises (SMEs) and to help Ukraine implement the reforms it needs to attract international investment.
Energy Security
  • We are sending a team of experts to help the Ukrainian government to meet its energy needs this winter. 
  • The U.S. government also is working with other international donors to help Ukraine develop strategies to ensure that energy subsidy programs are targeting the most vulnerable Ukrainians and to increase end-use energy efficiency, including among households and in the industrial sector.
  • We also are supporting Ukrainian efforts to enhance its own energy production, including through technical assistance to help restructure Ukraine’s national oil and gas company, Naftogaz, and through the introduction of new technologies to boost yields at existing and new conventional and unconventional oil and gas fields in Ukraine. 
Trade Diversification and Promotion
  • The U.S. government is providing training and technical assistance to build Ukraine’s expertise on World Trade Organization (WTO) obligations and rights and how to meet WTO food safety standards.
  • The Office of the U.S. Trade Representative is convening the U.S.-Ukraine Trade and Investment Council to support Ukraine’s efforts to boost bilateral trade and investment and combat intellectual property theft.
  • U.S. assistance is supporting efforts to help SMEs access new international markets.  This includes plans for a U.S.-Ukraine agribusiness trade mission to promote two-way trade between our countries.
  • The United States is working closely with Ukrainian authorities and others in the international community to help recover stolen assets, including through joint investigative activities as well as support for evidence collection and processing activities. 
  • We are also helping Ukrainian officials develop laws and regulations that will establish anti-corruption institutions within the government and enable authorities to combat corruption more effectively.  Through support for expanded e-governance and procurement reform we are also working with Ukrainian authorities to limit opportunities for corruption.
  • We are also contributing to international efforts, including through the OECD and the EBRD, to deter foreign bribery and improve Ukraine’s business climate.
*  *  *
Feel better now?

More Than Just Gas: Is This Natural Resource The Reason For The Ukraine Civil War?

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Earlier today, we got a definitive confirmation that when Obama was talking about "costs" when jawboning on the ongoing Ukraine civil war, he envisioned not only Germany, and thus Europe, both of which are teetering on the edge of a triple-dip recession due to Russian sanctions, but Ukraine itself. The reason: the Ukraine economy appears to have ground to a halt following an overnight report that the war-torn country's industrial output plummeted 21.4% Y/Y in August, above the 18% estimate, and some 12.7% on a monthly basis. As the chart below shows, this was the biggest drop in industrial production since the global crisis of 2009 and followed a 12% fall year-on-year in July.
As the FT further added, according to an EBRD forecast earlier today, the Ukrainian economy will contract 9% this year, a far greater contraction than assumed in the IMF's bailout (odd how that always happens). Accordingly, this "makes sustainability of Kiev's government debts much more doubtful, and has sparked concerns that the country will eventually be forced to default and restructure."
As skepticism grows that Ukraine will be the next Greece, only without the backstop safety net of the EUR currency, bondholders are starting to get skeptical, and overnight the yield on Ukraine bonds due April 2023 slid to 10.61%, the highest in 4 months on rising fears of a default.
And while the collapse, in either the economy or the bonds, were not surprising and were predicted here and many other places, what did seem out of place was the following observation by Reuters:
The statistics office said the main industries of Ukraine's Donetsk region, one of the areas where the war is most intense, had suffered, with coal extraction down almost 60 percent and steel production down by 30 percent.
In other words, while the most important commodity for Europe is gas, whose supply Russia largely controls on the margin, for Ukraine the one commodity, located deep within the perimeter of the raging civil war, and which it desperately needs to regain access to to stop its economic collapse, is the following (courtesy of Stratfor):
Which begs the question: are the massive stores of coal in the Donetsk region the main reason why Russia continues to support a civil war in just that region, a war which with every passing day means the Ukraine bankruptcy, and inevitable regime change, is also one day closer?

Domestic shortages force Ukraine to import Russian coal

17 September 2014 17:57 Source:ICIS
Ukrainian coal market participants have been sourcing low-calorific coal from Russia because of domestic shortages, physical coal traders confirmed.
Ukraine is traditionally a major coal supplier to Turkey but has become a coal importer since several major coal mines, supplying the country’s thermal coal power plants, were bombed during its geopolitical conflict with Russia.
Vital infrastructure such as railway lines, roads and bridges were also damaged during the conflict, which has made it challenging for coal to be delivered to power plants in Ukraine.
At the beginning of September, the Ukrainian government signed a tender for supply of 1 million tonnes of South African coal ( see CSD 4 September 2014 ). However, Ukrainian coal miner and electricity producer DTEK told ICIS on Wednesday it has not imported any coal from non-CIS [Commonwealth of Independent States] countries.
In addition, physical coal traders said it has become extremely difficult to source coal from South Africa because most of the lower quality South African coal is used for domestic electricity production and is not offered into the international market.
“We are not hearing any further talks as it seems they [Ukraine] needs low volatile coal which is very hard to source. The may have to turn to Russia to supply which is a bit ironic,” a physical coal trader said.
Other sources confirmed that both Ukrainian and Turkish market participants are trying to source coal from other producing regions such as Russia as well as Poland to boosts stocks due to its close proximity and access to low volatile coal.
For Turkish buyers this means that the government may need to grant some electricity producers a permit to use high sulphur coal – usually from US – or coal with a higher percentage of volatile matter. Stacy Irish

Coal production, stockpiles at Ukraine power plants plunge in August

The production of steam coal in Ukraine decreased 1.8x yoy to 2.85 mmt in August because of ongoing warfare in a part of coal-rich Donbas region, the Interfax-Ukrayina news agency reported, citing its sources in the Energy Ministry. Coal production fell 3.9x yoy in the Luhansk region (to 0.54 mmt) and 2.5x yoy in the Donetsk region (to 1.20 mmt). Production in another coal-bearing region, Dnipropetrovsk, remained flat yoy at 1.57 mmt.

Coal stockpiles at Ukraine’s thermal power plants (supplying 40% of the country’s electricity) will be exhausted by mid-November, according to Mykhaylo Volynets, the head of the Independent Trade Union of Miners of Ukraine. Current stockpiles are about 1.7 mmt (the monthly use of coal by Ukraine’s thermal power plants is about 3.0 mmt currently), Volynets said on Sept. 2, as reported by the UNIAN news agency. Volynets stressed that the situation is critical with supplies of anthracitic coal, as the whole area of its production in Ukraine is currently controlled by the Russian army and pro-Russian separatists. He estimates that Ukraine will have to import about 10 mmt of coal for the upcoming heating season to run smoothly.

Volynets also told journalists that combatants are stealing coal from the occupied territories and delivering it to Russian territory. About 15,000 tons of coal has been stolen, according to him.

Alexander Paraschiy: The situation in the coal sector is developing under the worst-case scenario that we outlined three weeks ago. Indeed we believe that Volynets’s forecast of exhausted coal reserves is rather optimistic. According to the latest official information, Coal stockpiles at power plants were 2.16 mmt as of Aug. 25, a 30% decrease month-to-date, or 0.92 mmt, according to Ukrenergo, the dispatcher of Ukraine’s electricity sector. At such a depletion rate, the stockpiles will be exhausted much earlier than mid-November, or probably this month.

Out of eight thermal power plants that are located outside the war-afflicted regions of Donbas (the collective term for Donetsk and Luhansk), four are using the currently scarce anthracitic coal and risk stoppage already in the next few days. With no supply of anthracitic coal, Ukraine’s largest cities of Kyiv, Kharkiv, Dnipropetrovsk and Kryviy Rih will feel a power deficit soon.

At the same time, the four power plants located outside Donbas that are designed to burn non-anthracitic coal look relatively safe as two-thirds of this type of steam coal is mined outside Donbas. The relatively safe power stations include all the three plants of Zakhidenergo (ZAEN UK) and the Zaporizhia Power Plant of Dniproenergo (DNEN UK).

DTEK reports fighters shot up power plant, plans to import coal

The Luhansk Power Plant, which belongs to energy holding DTEK (DTEKUA), was targeted by artillery shooting on Sept. 17, the company reported the same day. As a result, one of the company’s transformers was damaged, disconnecting the station from power grid. The station was the only source of power supply to the northern part of the Luhansk region, which is now disconnected from any power, according to DTEK. Workers are currently trying to reconnect the power plant, DTEK reported on the morning of Sept. 18, adding that the work can be done in couple of hours providing no other damage was done to the station.

In other news, DTEK’s commercial director estimated the monthly coal deficit for Ukraine for the upcoming heating season (staring mid-October) at 1 mmt, and revealed plans to import 0.5 mmt of coal in September. Meanwhile, coal stockpiles at all Ukrainian power plants decreased by 139 kt in the first half of September to 2.0 mmt as of Sept. 15, Ukrenergo reported.

Alexander Paraschiy: The damage comes as no surprise as the power plant is located in the current frontline of warfare in the Donbas region. Earlier, DTEK reported damage to the plant’s railway infrastructure that complicated coal supplies to the station. The Luhansk Power Plant accounted for 9.6% of DTEK’s total electricity production in 2013, while another DTEK asset in the war zone, the Zuyiv Thermal Power Plant, contributed 12.3% to DTEK’s 2013 electricity generation.

Obama Rejects Ukraine Call for ‘Lethal Aid’

US Pledges Another $56 Million in Aid, But No Arms

by Jason Ditz, September 18, 2014
After meeting with his Ukrainian counterpart, President Obama has rejected the call for arms shipments to Ukraine, but instead has agreed to another $53 million aid, including $7 million in humanitarian aid and $46 million in non-lethal military aid.
President Poroshenko had complained about the US policy of providing only non-lethal aid during his speech to the US Congress, insisting that “one cannot win a war with blankets.”
Even though Ukraine is in a state of ceasefire with its eastern rebels, Poroshenko presented the conflict as critical to the future of NATO, and said it was vital to “defeat” Russia.
Poroshenko, and indeed other officials in the new Ukrainian government, have wildly varied their rhetoric in recent days, talking up peace and concessions when addressing eastern Ukraine, promising a great war to wipe them out when talking to hawkish ultranationalists in the west, and presenting a nigh-apocalyptic vision of a war on Russia when addressing potential donors.

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Russia as before suggests a discount for 100 $ per 1000 cubic meters for Ukraine and able for restructing the disputed part of the debt

Changing of Russia-Ukraine gas supply and transit contracts is impossible until Stockholm arbitration will pronounce judgement

Now Gazprom is on its way to fill Russian underground storages before winter time, so there are no extra volumes for export

Oligarch Rinat Akhmetov sent 90,000 food kits, baby food and hygiene articles, weighing 970 tons, from to

Russian Security Council discuss switching Russia off from the global Internet ! Measure for emergencies: Vedo report

Documenting landmines and other explosive devices used during the Battle of Mosul dam via

Ukraine aware no NATO membership possible at the moment — Poroshenko

Japan postpones new sanctions against Russia — source

US to give $1 bn of financial guarantees to Ukraine — Poroshenko

Russia, Ukraine, EU to hold trilateral talks September 26 in Berlin - Russian Energy Minister