Tuesday, September 16, 2014

Ukraine / Russia situation ( September 16 , 2014 ) - Ceasefire still generally holding although undoubtedly both Ukraine Government and Novorussians testing boundaries of the Accord.....Ukrainian politics , Sanctions watch , European politics still in focus ( battlefield generally quiet for now ) ....... Calm before the storms ?


Washington's Bait-And-Switch: NATO Armed Kiev Under Cover Of Ceasefire

Tyler Durden's picture

Just over ten days ago, as the pro-independence forces in east Ukraine were on the march with significant gains on the battlefield, a ceasefire was signed in Minsk, Belarus. According to the terms of the ceasefire, the pro-independence fighters were to lay down their arms, cease their offensive to regain lost territory in the Donetsk and Lugansk region, and disband.
In exchange for this, the US-backed government in Kiev was to agree to an amnesty for pro-independence fighters, commit to economic development in the east, and agree to enshrine decentralization in law to provide autonomy to the east.
Most importantly, the ceasefire was to stop the Kiev government's shelling of major population centers in the east and stop the slaughter of military forces on both sides.
It turns out to be a grotesque sleight of hand, with Kiev receiving guarantees at the September 5, NATO summit in Wales that NATO members would provide the military equipment to finish the pro-independence forces in the east after the ceasefire gave time to re-group a badly beaten, largely conscript Ukrainian army.
This grand deception came to light yesterday, as Valery Heletey, defense minister of the US-backed regime in Kiev, bragged that, as Reuters put it:
NATO countries were delivering weapons to his country to equip it to fight pro-Russian separatists and "stop" Russian President Vladimir Putin.
We are already seeing the result of this bait and switch, as yesterday saw a dramatic resumption of the US-backed government's shelling civilian Donetsk, which is under control of the pro-independence movement.
The ceasefire provided pro-US Kiev forces time to regroup and absorb NATO weapons under the guise of stopping the violence, with the intent of slaughtering rather than negotiating with the pro-independence forces. This is no great surprise, as the February coup itself proceeded with US cooperation just as a compromise power-sharing agreement between the elected president, Yanukovich, and the Maidan rebels was signed.
It remains a great mystery why the pro-independence forces would strike a deal with a Kiev regime which came to power as a result of a US and EU sponsored coup in February, and whose veracity and track record of fair play is rather wanting.
greater mystery perhaps, is why a Russia that was accused of "invading" Ukraine as the NATO summit kicked off, would agree to the decapitation of a Moscow-friendly independence movement next-door as it consolidated its gains.
Whatever the case, the bloodshed in eastern Ukraine is about to resume. The pro-US regime in Kiev, by deception, is about to claim bloody victory from the jaws of defeat.

Zero Hedge....

Ukraine Currency Crashes To Record Low As IMF Blasts "Gross Abuses"

Tyler Durden's picture

Despite celebrations of de-escalations and truce in US equity markets (by asset-gathering commission-takers), the situation continues to go from bad to worse in the nation almost forgotten now that ISIS is stealing American headlines. The Hryvnia plunged 7.5% this morning - its biggest single-day drop on record - following the release of a scathing IMF letter and devaluation warnings from BofA. The IMF blasted Ukraine's "premature emission of extra money," and demanded it "immediately halt these gross abuses," as BofA warns of risk of "10-20% devaluation" in the next year is high given reserves are at a "critical level."
UAH plunges 7.5% to record lows this morning...
As far as the truce is concerned, we leave it to Bloomberg's Richard Breslow to explain the idiocy...
For a truce that people keep celebrating -- the 11th day  -- there seem to be a lot of people still dying, troops moving around, still questions about more sanctions, ultimate effects on Russia eco, the local markets look quite ill.

Russia itself has put out dire f/casts, growth down 3%-4% and recession;

RUB made yet another all-time low, seems to     have quieted, Micex is up, hryvnia getting pole-axed
Additionally Luhansk Rebels Would Like to Switch to Ruble, RIA Says
Self-proclaimed Luhansk People’s Republic hopes it won’t have to use Ukraine’s hryvnia much longer, RIA Novosti reports, citing republic’s leader Igor Plotnitskiy.

Plotnitskiy says political issues complicate matter, though he doesn’t expect hryvnia to be used for much longer: RIA

Luhansk still must resolve many economic, financial issues, including development of banking system: RIA
And then there is the IMF! (Source: e-news)
Which likely confirms BofA's warning of the potential for a Hyrvnia devaluation...
Central bank may have to further deplete FX reserves, now near “critical level” of $15b, Bank of America Merrill Lynch economist Vadim Khramov says in report

Natural gas purchases for winter to widen current-account deficit: Khramov

“We see risks of 10%-20% hryvnia devaluation from the current level within a year": Khramov
*  *  *
But apart from that, everything is under control in Ukraine. Given the extent to which the UAH is falling and the strong language from the IMF, one could be mistaken for thinking the USA is pushing for another leader to be put in place once again...

Ria Novosti.....

US to Recall Latest Russia Sanctions if Minsk Agreements Observed: State Department

Topic: Sanctions Against Russia

US State Department Spokesperson Marie Harf says that the United States could withdraw the latest sanctions imposed on Russia, if the Minsk ceasefire agreement is observed in Ukraine
02:10 16/09/2014
Tags: sanctionsagreementUnited StatesUkraineRussia
WASHINGTON, September 16 (RIA Novosti) - The United States could withdraw the latest sanctions imposed on Russia last week, if the Minsk ceasefire agreement is observed in Ukraine, the US State Department Spokesperson Marie Harf told reporters Monday.
If Russia fully fulfills the Minsk agreement of September 5, a path will be open to recall the latest round of sanctions, Harf said, adding that the United States first has to see whether the 12-step ceasefire plan is acted upon.
If, however, the situation in Ukraine escalates, additional US sanctions against Russia will follow, the spokesperson said.
Harf said the ceasefire in Ukraine's southeast was at risk in the past days due to an attack on OSCE observers and shelling near the Donetsk airport, of which the United States accuse militia.
A new round of Western sanctions against Moscow over its alleged role in the Ukrainian crisis came into force on September 12. The sanctions complicate access to EU and US credit for a number of key Russian banks and oil and defense companies and ban the provision of technical and other assistance to Russian oil companies.
Moscow has repeatedly denied any involvement in the Ukrainian conflict, calling sanctions an ineffective tool, which threatens international peace and stability and contradicts international law.

Diplomat: Russia Sees No Reason to Discuss ‘Illegal’ US Sanctions

Topic: Sanctions Against Russia

Deputy FM Sergei Ryabkov said Moscow sees no reason to negotiate “illegal” sanctions with the United States
11:21 16/09/2014
Tags: political crisissanctionsRussian Foreign MinistrySergei RyabkovUkraineUnited StatesRussia
MOSCOW, September 16 (RIA Novosti) – Moscow sees no reason to initiate negotiations with the United States on the “illegal” sanctions imposed on Russia, Russian Deputy Foreign Minister Sergei Ryabkov said Tuesday.
“We do not encourage any discussions with the US about sanctions. We see no topic for discussion here. We consider unilateral sanctions, imposed beyond territorial jurisdiction, to be illegal and in breach of the international law. So there is no reason to negotiate on these issues on any level. We are not going to do this,” he told RIA Novosti in an interview.
“We will continue our course firmly and consistently. Sanctions or their absence will have no impact on what we did and will do in our relations with Kiev, on what we suggest and what we keep in mind while promoting stabilization in the southeast and the launch of internal political process in Ukraine,” the Russian diplomat said, adding that Russia should “be ready for everything” in its relations with the United States.
Moscow Hopes For ‘Businesslike’ Cooperation With New US Ambassador
Despite the current chill in Russian-US relations, Moscow expects that new US Ambassador to Russia John Tefft will demonstrate a businesslike approach, Russian Deputy Foreign Minister Sergei Ryabkov told RIA Novosti Tuesday.
“It’s too early to make conclusions about his arrival to Moscow,” he said. “But my first impression is that it is possible to work businesslike atmosphere, and we hope this is how it will be.”

Poroshenko: Ukrainian Parliament to Ratify EU Association Deal From 10:00 GMT

The ratification procedure of the EU agreement will start in the Verkhovna Rada simultaneously with the European Parliament.
10:28 16/09/2014
Tags: ratificationEU Association AgreementVerkhovna RadaEUPetro PoroshenkoUkraine
KIEV, September 16 (RIA Novosti) – The Verkhovna Rada, Ukraine’s parliament, will start ratifying its association agreement with the European Union at 1 p.m. local time (10:00 GMT), simultaneously with a European Parliament session, Ukrainian President Petro Poroshenko said Tuesday.
“Today, at 1 p.m. Kiev time, we will start a procedure to ratify the EU agreement in the Verkhovna Rada simultaneously with the European Parliament,” Poroshenko wrote on his Twitter page.
The Ukraine–EU Association Agreement is a treaty that presupposes political and economic association between the parties.
The political provisions of the Association Agreement were signed back in March, after Ukrainian President Viktor Yanukovych was ousted and an interim government came to power.
Ukrainian President Petro Poroshenko signed the economic part of the agreement in June.
Last week, Russia, Ukraine and the European Union reached a crucial compromise on Kiev's free trade pact with the 28-member bloc postponing its entry into force until the end of 2015. The deal was agreed upon during a trilateral meeting in Brussels, which was held after Moscow expressed concerns that the implementation of the Association Agreement carries economic risks for Russia and Ukraine. Moscow warned Kiev that Ukraine's signing of the free trade agreement with the European Union could trigger an uncontrolled flow of duty-free goods from Europe, forcing Russia to protect its market.


Tuesday, September 16

07:49 GMT:
The head of the self-proclaimed Lugansk People’s Republic, Igor Plotnitsky, has welcomed the law on special status for Ukraine’s eastern regions proposed by President Poroshenko.

The law on the special status of Donbass generally reflects the priorities we voiced at the September 1 negotiations. That’s why, even though a lot remains unclear, we may say that peaceful solution has received its first chance of being implemented,” Plotnitsky told RIA Novosti.
03:48 GMT:
At least four people died in the city of Donetsk after an artillery shell hit a car service station on Monday night, RIA Novosti reported. Locals have been hiding in basements and are scared to come out, the agency's correspondent reporting from the scene said.

Monday, September 15

19:58 GMT:
The OSCE’s Special Monitoring Mission to Ukraine (SMM) came under fire while on a mission in the east of the country, the organization reported. "The patrol vehicles were damaged by artillery or mortar fire," the SMM reported, adding that "prior to the departure of the patrol, the routes were agreed upon by both parties both in person and over the phone."
There were six monitors traveling in two armored vehicles. Both cars were "hit by artillery fragments," but the team left the area unhurt.
SMM Chief Monitor Ambassador Ertugrul Apakan said that the teams were operating in Donetsk and Lugansk and had reported a series of cease-fire breaches. "We call on all sides to abide by the cease-fire commitment as agreed in Minsk, and to allow for full monitoring of the implementation of this regime," Apakan said, adding that the SMM is determined to continue its mission in the region.
19:57 GMT:
Austria will supply ten drones to OSCE observers in Ukraine, the Austrian Foreign Minister Sebastian Kurz told Ukrainian President Petro Poroshenko, at a meeting in Kiev.

Our mission is not just to support peaceful settlement by delegating Austrian observers to the OSCE mission, but also to send ten Austrian drones for use by OSCE monitors to enable them to control the conflict territories (in east Ukraine) with an aim to step up the peaceful settlement,” the Ukrainian president’s press service stated, citing Kurz.

Earlier in the day, there were media reports that the Austrian firm Schiebel was ready to supply two drones to Ukraine.
17:58 GMT:
German Chancellor Angela Merkel is unaware of any NATO countries sending arms to Ukraine, according to her spokesman. The response came after Ukrainian Defense Minister Valery Heletey said that alliance members were already providing munitions.
"The question of whether weapons are being delivered should be directed to the countries that supposedly or allegedly are doing it. We are not one of those countries and I know of no such thing,"said Merkel's spokesman, Steffen Seibert, according to Reuters.
Heletey said Sunday that NATO members were supplying his country with weapons. He said this was agreed upon following the alliance’s summit in Wales earlier in the month. NATO officials had previously stated they would not send “lethal assistance” to Ukraine, which is not a member of the organization.
13:38 GMT:
Ukrainian President Petro Poroshenko has introduced a new bill to parliament, allowing special self-administration in some parts of the Donetsk and Lugansk regions in eastern Ukraine, the country's media reported. The bill includes introduction of local elections in the region, which it is proposed are to be held November 9.
The bill also guarantees the right to use Russian or any other language in "social and everyday life" and insures that participants of the events in the region will not be criminally or otherwise prosecuted by the state.
13:33 GMT:
Ukrainian forces were shooting at militia over the weekend in Kirovskoe near Donetsk, militia representatives told Interfax agency on Monday. As a result of the attack, 11 people were killed and four injured. According to the militia, an OSCE car was also fired at during the shelling.
Meanwhile, six civilians were killed and 15 injured in the shelling of Donetsk on Sunday, the City Council reported. Its press service also said that several residential buildings were destroyed in the attack, and that pipelines were damaged in some areas of the city.
07:51 GMT:
A crew from RT’s video agency Ruptly witnessed shelling outside Donetsk on Sunday.


Ukraine President's Days Numbered After Broad Accusations Of "Betraying National Interests"

Tyler Durden's picture

As we summarized late on Friday, while Europe has been banging the populist drums over ever-escalating Russian sanctions, it quietly and without much fanfare folded in the one place where Russia could have been truly hurt, the Free Trade (DFCTA) agreement between Ukraine and the EU. But while Europe would have loved for nobody to notice, some did, and not just on these pages: far more importantly, so did the citizens of Ukraine where as the WSJ reports, Ukrainian President Petro Poroshenko faces rising criticism for his decision to delay implementation of part of a European Union deal to avoid threatened Russian retaliation.
And this is why neither side can afford to blink, because the moment one side folds, its domestic support collapses. And blinking is precisely what Ukraine just did and with that it set in motion the events that will likely terminate prematurely the brief, irrelevant presidency of Ukraine's "Chocolate Baron" Poroshenko.
A senior diplomat resigned in protest over the weekend, and pro-European politicians who are competing with Mr. Poroshenko's party in parliamentary elections next month blasted the decision as caving to Russia, which wants Ukraine to give up the deal and remain in its orbit. The tensions highlight how difficult it will be for Mr. Poroshenko to manage the competing pressures of a Kremlin that isn't backing down and a domestic electorate that wants closer ties to Europe and no concessions to Moscow.

On Friday, Ukraine and the EU agreed to put off implementing a landmark trade deal, which is part of a broader pact aimed at strengthening their ties, after Moscow threatened trade restrictions that would have crippled Ukraine's already limping economy.

A cease-fire in the east, where Russia-backed rebels hold several towns and cities, is still largely holding despite scattered fighting. A government spokesman said Sunday that Ukrainian troops had repelled an assault on Donetsk airport by 200 pro-Russia rebels.

In Kiev, pro-Western rivals of Mr. Poroshenko's party railed against the president's move to compromise at congresses to announce candidates for snap parliamentary elections scheduled for Oct. 26.
It got so bad over the weekend, that former Prime Minister Yulia Tymoshenko, who was the person least actively supported by the CIA and US state department in Ukraine's less than peaceful transition in February, and thus lost a May presidential election to Mr. Poroshenko,said the delay in implementing the EU free-trade part of the pact until 2016 was "a betrayal of national interests."
"There can't be a single day of applying the brakes on our path to Europe," she told a party meeting. She also called a referendum on potential membership of the North Atlantic Treaty Organization.
So as the public mood suddenly and dramatically shifts in its impotent rage directed at Putin up until this point, into a domestic direction in general, and at the new president in particular, Poroshenko appears set to antagonize the public even more, following his disclosure moments ago that he proposes temporary self-governance in separatist-held areas in eastern regions of Donetsk, Luhansk, news service Ukrayinska Pravda reports, citing copy of draft law. Bloomberg has the details:
  • Local elections would be held in those districts this yr on Nov. 9
  • Local authorities in special districts would have right to participate in appointment of local prosecutors, judges
  • People’s militia would be created from local citizens in special districts
  • Kiev authorities wouldn’t open criminal cases against participants of uprising in east
  • Kiev guarantees right to use, learn Russian language; grants it equal status in special areas, for all Ukrainian citizens
  • Ukraine to allocate annual budget spending to rebuild infrastructure, create jobs, back economical development of eastern regions
  • Ukraine to allow areas’ “good neighborly relations” w/ Russia to deepen and strengthen
  • Law, if approved, to remain in effect for 3 yrs from date of approval
  • Parliament may consider draft law among other issues on Sept. 16
  • Lawmakers have received copy of draft
And this is how the Ukraine people, at least those in the west and who care about such things, will interpret the move: Poroshenko is handing over East Ukraine to Russia which will now control not only Crimea but also the land corridor leading to it.
The only question we have here is what the over/under is on number of days before Ukraine has yet another presidential crisis, and whether the next president will also be another US-backed puppet?


Former BP CEO Warns "Sanctions Will Bite West" As US Gives Majors 14 Days To Wind Down Russian Activities

Tyler Durden's picture

For the past six months, even as Obama and the EU were laying harsher sanctions on the Kremlin, one group of companies had managed to sneak by unscathed and largely avoided being impacted by Russia's isolation by the West: the world's biggest E&P companies, as explained in detail over a month ago in "Exxon Drilling Russian Arctic Shows Sanction Lack Bite."
All that is about to change, because while sanctions until this moment had been largely intended to specifically allow energy companies to continue their status quo in Russia, as of this Friday, it is precisely the E&Ps that are being targeted, as we noted on Friday, and as Reutersfollows up today, reporting that some of the world's largest companies, namely Exxon, Anglo-Dutch Royal Dutch Shell, Norway's Statoil and Italian ENI, will have to be put their Russian projects on hold:  to wit, the companies will have 14 days to wind-down activities.
From Reuters:
Projects now in jeopardy include a landmark drilling program by U.S. giant Exxon Mobil in the Russian Arctic that started in August as part of a joint venture with the Kremlin's oil champion Rosneft.

Now this and dozens of other projects that Rosneft and Gazprom Neft agreed with Exxon, Anglo-Dutch Royal Dutch Shell, Norway's Statoil and Italian ENI will have to be put on hold.

"Cutting off U.S. and E.U. sources of technology and services and goods for those projects makes it impossible, or at least extraordinarily difficult for these projects to continue...There are not ready substitutes elsewhere," a senior U.S. administration official told a briefing on Friday.

The companies will have 14 days to wind-down activities.
And just to make sure that there is once again major Obama administration-induced chaos, and thus yet another collapse in global trade, when it comes to the core covenant of capitalism, namely the sanctity of contracts from government intervention, Reuters cites a US official who said that "there is no contract sanctity."
Valery Nesterov from Russian state bank Sberbank, which was also sanctioned by the EU and the United States, foresaw serious complications. "What is really worrying are sanctions on tight oil. Russian companies haven't invested enough in research and technology. They were heavily relying on Western technologies and now it is simply too late," he said.
That may well be, but at the end of the day, Russia still has all the leverage in the long-run: "key among Russian tight oil reserves are the Bazhenov formations, which are located beneath existing mature west Siberian fields. They are estimated to contain as much as a trillion barrels of oil - four times the reserves of Saudi Arabia. Rosneft and Gazprom Neft are working on Bazhenov with Exxon and Shell.
"When we learnt about the first sanctions we decided to speed up work on all fronts to minimize the damage to the company," said a Rosneft source. Rosneft's chief Igor Sechin, a close ally of Putin, said earlier this month the company had approved a program to replace all Western technology in the medium-term.
But while expansion may or may not be hindered, and China certainly will have something to say about the expansion of Russian oil fields in the coming months - and bring its checkbook and smartest heads when it does - one thing that will certainly happen is that once again the West will prove too smart for its own good. 
Enter Tony Hayward, the infamous former CEO of BP (and current Chairman of Glencore) who may have been disgraced by his handling of the Macondo spill but his comments on how the Russian sanctions will play out, are spot on.
As the FT reported moments ago, "US and EU sanctions against Moscow are in danger of turning round and biting the west by constraining global oil supply and pushing up prices in coming years, the former chief executive of BP has warned."
Tony Hayward said that cutting off capital markets from Russia’s energy groups, which would eventually lead to less investment in Russian oil production, was likely to damage long-term supply. He said the US shale boom had obscured the growing risks to the world’s supply picture, but its effect would wear off, leaving the global economy dangerously exposed to potential disruptions in the flow of oil.

“The world has been lulled into a false sense of security because of what’s going on in the US,” Mr Hayward said in an interview with the Financial Times, referring to the shale boom that has driven a 60 per cent increase in US crude output since 2008. But he asked: “When US supply peaks, where will the new supply come from?”
But why worry: after all surely nobody in the Obama administration can possibly conceive that the 8000+ producing wells in the Bakken shale alone, up from 1000 in 2008, could possibly go dry at some/any point in the future...


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