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Ukraine Finance Minister’s American ‘Values’

By Robert Parry | Consortium News | February 18, 2015

Ukraine’s new Finance Minister Natalie Jaresko, who has become the face of reform for the U.S.-backed regime in Kiev and will be a key figure handling billions of dollars in Western financial aid, was at the center of insider deals and other questionable activities when she ran a $150 million U.S.-taxpayer-financed investment fund.

Prior to taking Ukrainian citizenship and becoming Finance Minister last December, Jaresko was a former U.S. diplomat who served as chief executive officer of the Western NIS Enterprise Fund (WNISEF), which was created by Congress in the 1990s and overseen by the U.S. Agency for International Development (U.S. AID) to help jumpstart an investment economy in Ukraine.

But Jaresko, who was limited to making $150,000 a year at WNISEF under the U.S. AID grant agreement, managed to earn more than that amount, reporting in 2004 that she was paid $383,259 along with $67,415 in expenses, according to WNISEF’s public filing with the Internal Revenue Service.

Later, Jaresko’s compensation was removed from public disclosure altogether after she co-founded two entities in 2006: Horizon Capital Associates (HCA) to manage WNISEF’s investments (and collect around $1 million a year in fees) and Emerging Europe Growth Fund (EEGF) to collaborate with WNISEF on investment deals.

Jaresko formed HCA and EEGF with two other WNISEF officers, Mark Iwashko and Lenna Koszarny. They also started a third firm, Horizon Capital Advisors, which “serves as a sub-advisor to the Investment Manager, HCA,” according to WNISEF’s IRS filing for 2006.

U.S. AID apparently found nothing suspicious about these tangled business relationships – and even allowed WNISEF to spend millions of dollars helping EEGF become a follow-on private investment firm – despite the potential conflicts of interest involving Jaresko, the other WNISEF officers and their affiliated companies.

For instance, WNISEF’s 2012 annual report devoted two pages to “related party transactions,” including the management fees to Jaresko’s Horizon Capital ($1,037,603 in 2011 and $1,023,689 in 2012) and WNISEF’s co-investments in projects with the EEGF, where Jaresko was founding partner and chief executive officer. Jaresko’s Horizon Capital managed the investments of both WNISEF and EEGF.

From 2007 to 2011, WNISEF co-invested $4.25 million with EEGF in Kerameya LLC, a Ukrainian brick manufacturer, and WNISEF sold EEGF 15.63 percent of Moldova’s Fincombank for $5 million, the report said. It also listed extensive exchanges of personnel and equipment between WNISEF and Horizon Capital. But it’s difficult for an outsider to ascertain the relative merits of these insider deals and the transactions apparently raised no red flags for U.S. AID officials.

Bonuses for Officers

Regarding compensation, WNISEF’s 2013 filing with the IRS noted that the fund’s officers collected millions of dollars in bonuses for closing out some investments at a profit even as the overall fund was losing money. According to the filing, WNISEF’s $150 million nest egg had shrunk by more than one-third to $94.5 million and likely has declined much more during the economic chaos that followed the U.S.-back coup in February 2014.

But prior to the coup and the resulting civil war, Jaresko’s WNISEF was generously spreading money around. For instance, the 2013 IRS filing reported that the taxpayer-financed fund paid out as “expenses” $7.7 million under a bonus program, including $4.6 million to “current officers,” without identifying who received the money.

The filing made the point that the “long-term equity incentive plan” was “not compensation from Government Grant funds but a separately USAID-approved incentive plan funded from investment sales proceeds” – although those proceeds presumably would have gone into the depleted WNISEF pool if they had not been paid out as bonuses.

The filing also said the bonuses were paid regardless of whether the overall fund was making money, noting that this “compensation was not contingent on revenues or net earnings, but rather on a profitable exit of a portfolio company that exceeds the baseline value set by the board of directors and approved by USAID” – with Jaresko also serving as a director on the board responsible for setting those baseline values.

Another WNISEF director was Jeffrey C. Neal, former chairman of Merrill Lynch’s global investment banking and a co-founder of Horizon Capital, further suggesting how potentially incestuous these relationships may have become.

Though compensation for Jaresko and other officers was shifted outside public view after 2006 – as their pay was moved to the affiliated entities – the 2006 IRS filing says: “It should be noted that as long as HCA earns a management fee from WNISEF, HCA and HCAD [the two Horizon Capital entities] must ensure that a salary cap of $150,000 is adhered to for the proportion of salary attributable to WNISEF funds managed relative to aggregate funds under management.”

But that language would seem to permit compensation well above $150,000 if it could be tied to other managed funds, including EEGF, or come from the incentive program. Such compensation for Jaresko and the other top officers was not reported on later IRS forms despite a line for earnings from “related organizations.” Apparently, Horizon Capital and EEGF were regarded as “unrelated organizations” for the purposes of reporting compensation.

Neither AID officials nor Jaresko responded to specific questions about WNISEF’s possible conflicts of interest, how much money Jaresko made from her involvement with WNISEF and its connected companies, and whether she had fully complied with IRS reporting requirements.

Shared Values?

Despite such ethical questions, Jaresko was cited by New York Times columnist Thomas L. Friedman as an exemplar of the new Ukrainian leaders who “share our values” and deserve unqualified American support. Friedman uncritically quoted Jaresko’s speech to international financial leaders at Davos, Switzerland, in which she castigated Russian President Vladimir Putin:

“Putin fears a Ukraine that demands to live and wants to live and insists on living on European values — with a robust civil society and freedom of speech and religion [and] with a system of values the Ukrainian people have chosen and laid down their lives for.”

However, Jaresko has shown little regard for transparency or other democratic values, such as the right of free speech when it comes to someone questioning her financial dealings. For instance, she has gone to great lengths to block her ex-husband Ihor Figlus from exposing what he regards as her questionable business ethics.

In 2012, when Figlus tried to blow the whistle on what he saw as improper loans that Jaresko had taken from Horizon Capital Associates to buy and expand her stake in EEGF, the privately held follow-on fund to WNISEF, Jaresko sent her lawyers to court to silence him and, according to his lawyer, bankrupt him.

The filings in Delaware’s Chancery Court are remarkable not only because Jaresko succeeded in getting the Court to gag her ex-husband through enforcement of a non-disclosure agreement but the Court agreed to redact nearly all the business details, even the confidentiality language at the center of the case.

Since Figlus had given some of his information to a Ukrainian journalist, the court complaint also had the look of a leak investigation, tracking down Figlus’s contacts with the journalist and then using that evidence to secure the restraining order, which Figlus said not only prevented him from discussing business secrets but even talking about his more general concerns about Jaresko’s insider dealings.

The heavy redactions make it hard to fully understand Figlus’s concerns or to assess the size of Jaresko’s borrowing as she expanded her holdings in EEGF, but Figlus did assert that he saw his role as whistle-blowing about improper actions by Jaresko.

In a Oct. 31, 2012, filing, Figlus’s attorney wrote that “At all relevant times, Defendant [Figlus] acted in good faith and with justification, on matters of public interest, and particularly the inequitable conduct set forth herein where such inequitable conduct adversely affects … at least one other limited partner which is REDACTED, and specifically the inequitable conduct included, in addition to the other conduct cited herein, REDACTED.”

The filing added: “The Plaintiffs’ [Jaresko’s and her EEGF partners’] claims are barred, in whole or in part, by public policy, and particularly that a court in equity should not enjoin ‘whistle-blowing’ activities on matters of public interest, and particularly the inequitable conduct set forth herein.” But the details of that conduct were all redacted.

Free Speech

In a defense brief dated Dec. 17, 2012 [see Part One and Part Two], Figlus expanded on his argument that Jaresko’s attempts to have the court gag him amounted to a violation of his constitutional right of free speech:

“The obvious problem with the scope of their Motion is that Plaintiffs are asking the Court to enter an Order that prohibits Defendant Figlus from exercising his freedom of speech without even attempting to provide the Court with any Constitutional support or underpinning for such impairment of Figlus’ rights.

“Plaintiffs cannot do so, because such silencing of speech is Constitutionally impermissible, and would constitute a denial of basic principles of the Bill of Rights in both the United States and Delaware Constitutions. There can be no question that Plaintiffs are seeking a temporary injunction, which constitutes a prior restraint on speech. …

“The Court cannot, consistent with the Federal and State Constitutional guarantees of free speech, enjoin speech except in the most exceptional circumstances, and certainly not when Plaintiffs are seeking to prevent speech that is not even covered by the very contractual provision upon which they are relying.

“Moreover, the Court cannot prevent speech where the matter has at least some public interest REDACTED, except as limited to the very specific and exact language of the speaker’s contractual obligation.”

Figlus also provided a narrative of events as he saw them as a limited partner in EEGF, saying he initially “believed everything she [Jaresko] was doing, you know, was proper.” Later, however, Figlus “learned that Jaresko began borrowing money from HCA REDACTED, but again relied on his spouse, and did not pay attention to the actual financial transactions…

“In early 2010, after Jaresko separated from Figlus, she presented Figlus with, and requested that he execute, a ‘Security Agreement,’ pledging the couple’s partnership interest to the repayment of the loans from HCA. This was Figlus first realization of the amount of loans that Jaresko had taken, and that the partnership interest was being funded through this means. … By late 2011, Jaresko had borrowed approximately REDACTED from HCA to both fund the partnership interest REDACTED. The loans were collateralized only by the EEFG partnership interest. …

“Figlus became increasingly concerned about the partnership and the loans that had been and continued to be given to the insiders to pay for their partnership interests, while excluding other limited partners. Although Figlus was not sophisticated in these matters, he considered that it was inappropriate that HCA was giving loans to insiders to fund their partnership interests, but to no other partners. …

“He talked to an individual at U.S. Agency for International Development (USAID) in Washington D.C., because the agency was effectively involved as a limited partner because of the agency’s funding and supervision over WNISEF, but the agency employee did not appear interested in pursuing the question.”

A Spousal Dispute

Meanwhile, Jaresko’s lawyers mocked Figlus’s claims that he was acting as a whistle-blower, claiming that he was actually motivated by a desire “to harm his ex-wife” and had violated the terms of his non-disclosure agreement, which the lawyers convinced the court to exclude from the public record.

The plaintiffs’ brief [see Part One and Part Two] traces Figlus’s contacts with the Ukrainian reporter whose name is also redacted:

“Figlus, having previously received an audit from the General Partner, provided it to REDACTED [the Ukrainian reporter] with full knowledge that the audit was non-public. Also on or about October 2, 2012, REDACTED [the reporter] contacted multiple Limited Partners, informed them that he possessed ‘documented proof’ of alleged impropriety by the General Partner and requested interviews concerning that alleged impropriety.”

The filing noted that on Oct. 3, 2012, the reporter told Figlus that Jaresko “called two REDACTED [his newspaper’s] editors last night crying, not me, for some reason.” (The Ukrainian story was never published.)

After the competing filings, Jaresko’s lawyers successfully secured a restraining order against Figlus from the Delaware Chancery Court and are continuing to pursue the case against him though his lawyer has asserted that his client will make no further effort to expose these financial dealings and is essentially broke.

On May 14, 2014, Figlus filed a complaint with the court claiming that he was being denied distributions from his joint interest in EEGF and saying he was told that it was because the holding was pledged as security against the loans taken out by Jaresko.

But, on the same day, Jaresko’s lawyer, Richard P. Rollo, contradicted that assertion, saying information about Figlus’s distributions was being withheld because EEGF and Horizon Capital “faced significant business interruptions and difficulties given the political crisis in Ukraine.”

The filing suggested that the interlocking investments between EEGF and the U.S.-taxpayer-funded WNISEF were experiencing further trouble from the political instability and civil war sweeping across Ukraine. By last December, Jaresko had resigned from her WNISEF-related positions, taken Ukrainian citizenship and started her new job as Ukraine’s Finance Minister.

In an article about Jaresko’s appointment, John Helmer, a longtime foreign correspondent in Russia, disclosed the outlines of the court dispute with Figlus and identified the Ukrainian reporter as Mark Rachkevych of the Kyiv Post.

“It hasn’t been rare for American spouses to go into the asset management business in the former Soviet Union, and make profits underwritten by the US Government with information supplied from their US Government positions or contacts,” Helmer wrote. “It is exceptional for them to fall out over the loot.”

Earlier this month, when I contacted George Pazuniak, Figlus’s lawyer, about Jaresko’s aggressive enforcement of the non-disclosure agreement, he told me that “at this point, it’s very difficult for me to say very much without having a detrimental effect on my client.” Pazuniak did say, however, that all the redactions were demanded by Jaresko’s lawyers.

Unresponsive Response

I also sent detailed questions to U.S. AID and to Jaresko via several of her associates. Those questions included how much of the $150 million in U.S. taxpayers’ money remained, why Jaresko reported no compensation from “related organizations,” whether she received any of the $4.6 million to WNISEF’s officers in bonuses in 2013, how much money she made in total from her association with WNISEF, what AID officials did in response Figlus’s complaint about possible wrongdoing, and whether Jaresko’s legal campaign to silence her ex-husband was appropriate given her current position and Ukraine’s history of secretive financial dealings.

U.S. AID press officer Annette Y. Aulton got back to me with a response that was unresponsive to my specific questions. Rather than answering about the performance of WNISEF and Jaresko’s compensation, the response commented on the relative success of 10 “Enterprise Funds” that AID has sponsored in Eastern Europe and added:

“There is a twenty year history of oversight of WNISEF operations. Enterprise funds must undergo an annual independent financial audit, submit annual reports to USAID and the IRS, and USAID staff conduct field visits and semi-annual reviews. At the time Horizon Capital assumed management of WNISEF, USAID received disclosures from Natalie Jaresko regarding the change in management structure and at the time USAID found no impropriety during its review.”

One Jaresko associate, Tanya Bega, Horizon Capital’s investor relations manager, said she forwarded my questions to Jaresko last week, but Jaresko did not respond.

Further showing how much Jaresko’s network is penetrating the new Ukrainian government, another associate, Estonian Jaanika Merilo, has been brought on to handle Ukraine’s foreign investments. Merilo’s Ukrainian Venture Capital and Private Equity Association (UVCA), which is committed to “representing interests of private equity investors to policymakers and improving the investment and business climate in Ukraine,” included Jaresko’s Horizon Capital as a founder.

In a way, given Jaresko’s background of parlaying U.S. taxpayer’s money into various insider investment deals, perhaps she does have the experience to handle the incoming $17.5 billion in aid from the International Monetary Fund.

But the question remains whether Jaresko’s is the right kind of experience – and whether the money will go to help the impoverished people of Ukraine or simply wind up lining the pockets of the well-heeled and the well-connected.

–With research by Chelsea Gilmour

~

Investigative reporter Robert Parry broke many of the Iran-Contra stories for The Associated Press and Newsweek in the 1980s. You can buy his latest book, America’s Stolen Narrative, either in print here or as an e-book (from Amazon and barnesandnoble.com).

February 19, 2015 Posted by | Corruption, Economics | , , , , , | Leave a comment

Canada adds Russia’s Rosneft, Rostec CEO to sanctions list

RT | February 18, 2015

Canada has added Russia’s largest oil producer Rosneft, and the CEO of Rostec, to a sanctions blacklist along with 37 Ukrainians and 17 Russian and Ukrainian organizations. They are all covered by economic sanctions and travel bans.

It’s a coordinated move with the European Union and the United States, who have already imposed a number of sanctions on Russia, according to Canadian Prime Minister Stephen Harper.

“In coordination with our EU and US partners, Canada is once again intensifying its response to the situation by announcing further sanctions against Russian and Ukrainian individuals and entities,” Harper said in a statement on his official website on Tuesday.

Canada has been trying for months to resist the pressure on taking any further restrictive measures against Russia, despite the fact it had already sanctioned 80 Russian and Ukrainian officials last year.Last May, the country decided not to impose sanctions against Rosneft and Rostec because it didn’t want politics to hurt Canada’s biggest business projects.

Russia’s oil giant Rosneft owns about 30 percent of an ExxonMobil oil field in the Canadian province of Alberta. Rosneft purchased a stake in the Cardium basin deposit in 2012; the deal became Russia’s first Canadian presence and was expected to benefit Canada’s economy by accelerating resource development.

Russian state-owned industrial and defense firm Rostec, and Canadian plane and train maker Bombardier signed a $3.4 billion deal two years ago. The companies had decided to establish joint venture to produce Q400 aircraft, which Canada recognized as a “landmark opportunity for the Q400 NextGen aircraft program.” The venture intended to build 24 aircraft a year, with some 250 constructed by 2030. The deal was postponed last year due to the anti-Russian sanctions imposed then by the Canadian government.

Read more: EU adds more Russians, eastern Ukrainians to sanctions list after successful Minsk talks

February 18, 2015 Posted by | Economics | , , , | Leave a comment

Russian draft resolution on Ukraine passed by UN Security Council

RT | February 17, 2015

The United Nations Security Council has voted unanimously to approve a Russia-drafted resolution to support the Minsk agreements, reached by the leaders of France, Germany, Russia and Ukraine last week.

The resolution was submitted to the UNSC by Russia on February 13, a day after the Minsk deal was agreed on. It is aimed at endorsing and executing the Minsk agreements. The document also expresses concern over the continuing violence in eastern Ukraine, and stresses the importance of resolving the conflict peacefully.

“After the unprecedented diplomatic efforts last week, Ukraine has a chance to turn a dramatic page in its history,” said Russia’s UN envoy Vitaly Churkin, who expressed “gratitude” towards the other parties for endorsing the document.

Moscow would aid “in full” the realization of the agreement, he added.

The resolution calls for a “total ceasefire” and a “political solution” that respects the “sovereignty, independence and territorial integrity of Ukraine”.

The plan, hammered out during 16-hour negotiations on February 12, stipulates the comprehensive ceasefire, the withdrawal of heavy weapons from the frontline, an all-for-all prisoner exchange, and passage for humanitarian aid convoys.

In the medium turn, the Minsk peace plan calls for the withdrawal of any “foreign troops” and “mercenaries” from the conflict zone, general amnesty for the rebels and the OSCE using its drone fleet and monitors on the ground to ensure the implementation of agreements. It also provides for handing back of the border controls of the Ukrainian government, and lifting of the economic blockade that Kiev imposed on the eastern regions.

Eventually, the treaty proposes new elections in eastern Ukraine and a decentralization that would grant more power to the rebel regions.

Read more: ​The Minsk ceasefire deal, point by point

February 17, 2015 Posted by | Aletho News | , , | Leave a comment

Ukraine Denouement

By Michael Hudson | CounterPunch | February 16, 2015

The fate of Ukraine is now shifting from the military battlefield back to the arena that counts most: that of international finance. Kiev is broke, having depleted its foreign reserves on waging war that has destroyed its industrial export and coal mining capacity in the Donbass (especially vis-à-vis Russia, which normally has bought 38 percent of Ukraine’s exports). Deeply in debt (with €3 billion falling due on December 20 to Russia), Ukraine faces insolvency if the IMF and Europe do not release new loans next month to pay for new imports as well as Russian and foreign bondholders.

Finance Minister Natalia Yaresko announced on Friday that she hopes to see the money begin to flow in by early March.[1] But Ukraine must meet conditions that seem almost impossible: It must implement an honest budget and start reforming its corrupt oligarchs (who dominate in the Rada and control the bureaucracy), implement more austerity, abolish its environmental protection, and make its industry “attractive” to foreign investors to buy Ukraine’s land, natural resources, monopolies and other assets, presumably at distress prices in view of the country’s recent devastation.

Looming over the IMF loan is the military situation. On January 28, Christine Lagarde said that the IMF would not release more money as long as Ukraine remains at war. Cessation of fighting was to begin Sunday morning. But Right Sector leader Dmytro Yarosh announced that his private army and that of the Azov Battalion will ignore the Minsk agreement and fight against Russian-speakers. He remains a major force within the Rada.

How much of Ukraine’s budget will be spent on arms? Germany and France made it clear that they oppose further U.S. military adventurism in Ukraine, and also oppose NATO membership. But will Germany follow through on its threat to impose sanctions on Kiev in order to stop a renewal of the fighting? For the United States bringing Ukraine into NATO would be the coup de grace blocking creation of a Eurasian powerhouse integrating the Russian, German and other continental European economies.

The Obama administration is upping the ante and going for broke, hoping that Europe has no alternative but to keep acquiescing. But the strategy is threatening to backfire. Instead of making Russia “lose Europe,” the United States may have overplayed its hand so badly that one can now think about the opposite prospect. The Ukraine adventure could turn out to be the first step in the United States losing Europe. It may end up splitting European economic interests away from NATO, if Russia can convince the world that the epoch of armed occupation of industrial nations is a thing of the past and hence no real military threat exists – except for Europe being caught in the middle of Cold War 2.0.

For the U.S. geopolitical strategy to succeed, it would be necessary for Europe, Ukraine and Russia to act against their own potential economic self-interest. How long can they be expected to acquiesce in this sacrifice? At what point will economic interests lead to a reconsideration of old geo-military alliances and personal political loyalties?

This is becoming urgent because this is the first time the EU has been faced with such war on its own borders (if we except Yugoslavia). Where is the advantage for Europe supporting one of the world’s most corrupt oligarchies north of the Equator?

America’s Ukrainian adventure by Hillary’s appointee Victoria Nuland (kept on and applauded by John Kerry), as well as by NATO, is forcing Europe to commit itself to the United States or pursue an independent line. George Soros (whose aggressive voice is emerging as the Democratic Party’s version of Sheldon Adelson) recently urged (in the newly neocon New York Review of Books) that the West give Ukraine $50 billion to re-arm, and to think of this as a down payment on military containment of Russia. The aim is the old Brzezinski strategy: to foreclose Russian economic integration with Europe. The assumption is that economic alliances are at least potentially military, so that any power center raises the threat of economic and hence political independence.

The Financial Times quickly jumped on board for Soros’s $50 billion subsidy.[2] When President Obama promised that U.S. military aid would be only for “defensive arms,” Kiev clarified that it intended to defend Ukraine all the way to Siberia to create a “sanitary cordon.”

First Confrontation: Will the IMF Loan Agreement try to stiff Russia?

The IMF has been drawn into U.S. confrontation with Russia in its role as coordinating Kiev foreign debt refinancing. It has stated that private-sector creditors must take a haircut, given that Kiev can’t pay the money its oligarchs have either stolen or spent on war. But what of the €3 billion that Russia’s sovereign wealth fund loaned Ukraine, under London rules that prevent such haircuts? Russia has complained that Ukraine’s budget makes no provision for payment. Will the IMF accept this budget as qualifying for a bailout, treating Russia as an odious creditor? If so, what kind of legal precedent would this set for sovereign debt negotiations in years to come?

International debt settlement rules were thrown into a turmoil last year when U.S. Judge Griesa gave a highly idiosyncratic interpretation of the pari passu clause with regard to Argentina’s sovereign debts. The clause states that all creditors must be treated equally. According to Griesa (uniquely), this means that if any creditor or vulture fund refuses to participate in a debt write-down, no such agreement can be reached and the sovereign government cannot pay any bondholders anywhere in the world, regardless of what foreign jurisdiction the bonds were issued under.

This bizarre interpretation of the “equal treatment” principle has never been strictly applied. Inter-governmental debts owed to the IMF, ECB and other international agencies have not been written down in keeping with private-sector debts. Russia’s loan was carefully framed in keeping with London rules. But U.S. diplomats have been openly – indeed, noisily and publicly – discussing how to “stiff” Russia. They even have thought about claiming that Russia’s Ukraine loans (to help it pay for gas to operate its factories and heat its homes) are an odious debt, or a form of foreign aid, or subject to anti-Russian sanctions. The aim is to make Russia “less equal,” transforming the concept of pari passu as it applies to sovereign debt.

Just as hedge funds jumped into the fray to complicate Argentina’s debt settlement, so speculators are trying to make a killing off Ukraine’s financial corpse, seeing this gray area opened up. The Financial Times reports that one American investor, Michael Hasenstab, has $7 billion of Ukraine debts, along with Templeton Global Bond Fund.[3] New speculators may be buying Ukrainian debt at half its face value, hoping to collect in full if Russia is paid in full – or at least settle for a few points’ quick run-up.

The U.S.-sponsored confusion may tie up Russia’s financial claims in court for years, just as has been the case with Argentina’s debt. At stake is the IMF’s role as debt coordinator: Will it insist that Russia take the same haircut that it’s imposing on private hedge funds?

This financial conflict is becoming a new mode of warfare. Lending terms are falling subject to New Cold War geopolitics. This battlefield has been opened up by U.S. refusal in recent decades to endorse the creation of any international body empowered to judge the debt-paying capacity of countries. This makes every sovereign debt crisis a grab bag that the U.S. Treasury can step in to dominate. It endorses keeping countries in the U.S. diplomatic orbit afloat (although on a short leash), but not countries that maintain an independence from U.S. policies (e.g., Argentina and BRICS members).

Looking forward, this position threatens to fracture global finance into a U.S. currency sphere and a BRICS sphere. The U.S. has opposed creation of any international venue to adjudicate the debt-paying capacity of debtor nations. Other countries are pressing for such a venue in order to save their economies from the present anarchy. U.S. diplomats see anarchy as offering an opportunity to bring U.S. diplomacy to bear to reward friends and punish non-friends and “independents.” The resulting financial anarchy is becoming untenable in the wake of Argentina, Greece, Ireland, Spain, Portugal, Italy and other sovereign debtors whose obligations are unpayably high.

The IMF’s One-Two Punch leading to privatization sell-offs to rent extractors            

IMF loans are made mainly to enable governments to pay foreign bondholders and bankers, not spend on social programs or domestic economic recovery. Sovereign debtors must agree to IMF “conditionalities” in order to get enough credit to enable bondholders to take their money and run, avoiding haircuts and leaving “taxpayers” to bear the cost of capital flight and corruption.

The first conditionality is the guiding principle of neoliberal economics: that foreign debts can be paid by squeezing out a domestic budget surplus. The myth is that austerity programs and cuts in public spending will enable governments to pay foreign-currency debts – as if there is no “transfer problem.”

The reality is that austerity causes deeper economic shrinkage and widens the budget deficit. And no matter how much domestic revenue the government squeezes out of the economy, it can pay foreign debts only in two ways: by exporting more, or by selling its public domain to foreign investors. The latter option leads to privatizing public infrastructure, replacing subsidized basic services with rent-extraction and future capital flight. So the IMF’s “solution” to the debt problem has the effect of making it worse – requiring yet further privatization sell-offs.

This is why the IMF has been wrong in its economic forecasts for Ukraine year after year, just as its prescriptions have devastated Ireland and Greece, and Third World economies from the 1970s onward. Its destructive financial policy must be seen as deliberate, not an innocent forecasting error. But the penalty for following this junk economics must be paid by the indebted victim.

In the wake of austerity, the IMF throws its Number Two punch. The debtor economy must pay by selling off whatever assets the government can find that foreign investors want. For Ukraine, investors want its rich farmland. Monsanto has been leasing its land and would like to buy. But Ukraine has a law against alienating its farmland and agricultural land to foreigners. The IMF no doubt will insist on repeal of this law, along with Ukraine’s dismantling of public regulations against foreign investment.

International finance as war

The Ukraine-IMF debt negotiation shows why finance has become the preferred mode of geopolitical warfare. Its objectives are the same as war: appropriation of land, raw materials (Ukraine’s gas rights in the Black Sea) and infrastructure (for rent-extracting opportunities) as well as the purchase of banks.

The IMF has begun to look like an office situated in the Pentagon, renting a branch office on Wall Street from Democratic Party headquarters, with the rent paid by Soros. His funds are drawing up a list of assets that he and his colleagues would like to buy from Ukrainian oligarchs and the government they control. The buyout payments for partnership with the oligarchs will not stay in Ukraine, but will be moved quickly to London, Switzerland and New York. The Ukrainian economy will lose the national patrimony with which it emerged from the Soviet Union in 1991, still deeply in debt (mainly to its own oligarchs operating out of offshore banking centers).

Where does this leave European relations with the United States and NATO?

The two futures

A generation ago the logical future for Ukraine and other post-Soviet states promised to be an integration into the German and other West European economies. This seemingly natural complementarity would see the West modernize Russian and other post-Soviet industry and agriculture (and construction as well) to create a self-sufficient and prosperous Eurasian regional power. Foreign Minister Lavrov recently voiced Russia’s hope at the Munich Security Conference for a common Eurasian Union with the European Union extending from Lisbon to Vladivostok. German and other European policy looked Eastward to invest its savings in the post-Soviet states.

This hope was anathema to U.S. neocons, who retain British Victorian geopolitics opposing the creation of any economic power center in Eurasia. That was Britain’s nightmare prior to World War I, and led it to pursue a diplomacy aimed at dividing and conquering continental Europe to prevent any dominant power or axis from emerging.

America started its Ukrainian strategy with the idea of splitting Russia off from Europe, and above all from Germany. The U.S. playbook is simple: Any economic power is potentially military; and any military power may enable other countries to pursue their own interests rather than subordinating their policy to U.S. political, economic and financial aims. Therefore, U.S. geostrategists view any foreign economic power as a potential military threat, to be countered before it can gain steam.

We can now see why the EU/IMF austerity plan that Yanukovich rejected made it clear why the United States sponsored last February’s coup in Kiev. The austerity that was called for, the removal of consumer subsidies and dismantling of public services would have led to an anti-West reaction turning Ukraine strongly back toward Russia. The Maidan coup sought to prevent this by making a war scar separating Western Ukraine from the East, leaving the country seemingly no choice but to turn West and lose its infrastructure to the privatizers and neo-rentiers.

But the U.S. plan may lead Europe to seek an economic bridge to Russia and the BRICS, away from the U.S. orbit. That is the diplomatic risk when a great power forces other nations to choose one side or the other.

The silence from Hillary

Having appointed Valery Nuland as a holdover from the Cheney administration, Secretary of State Hillary Clinton joined the hawks by likening Putin to Hitler. Meanwhile, Soros’s $10 million on donations to the Democratic Party makes him one of its largest donors. The party thus seems set to throw down the gauntlet with Europe over the shape of future geopolitical diplomacy, pressing for a New Cold War.

Hillary’s silence suggests that she knows how unpopular her neocon policy is with voters – but how popular it is with her donors. The question is, will the Republicans agree to not avoid discussing this during the 2016 presidential campaign? If so, what alternative will voters have next year?

This prospect should send shivers down Europe’s back. There are reports that Putin told Merkel and Holland in Minsk last week that Western Europe has two choices. On the one hand, it and Russia can create a prosperous economic zone based on Russia’s raw materials and European technology. Or, Europe can back NATO’s expansion and draw Russia into war that will wipe it out.

German officials have discussed bringing sanctions against Ukraine, not Russia, if it renews the ethnic warfare in its evident attempt to draw Russia in. Could Obama’s neocon strategy backfire, and lose Europe? Will future American historians talk of who lost Europe rather than who lost Russia?

Michael Hudson’s book summarizing his economic theories, “The Bubble and Beyond,” is now available in a new edition with two bonus chapters on Amazon. His latest book is Finance Capitalism and Its Discontents.  He is a contributor to Hopeless: Barack Obama and the Politics of Illusion, published by AK Press. He can be reached via mh@michael-hudson.com

Notes.

[1] Fin min hopes Ukraine will get new IMF aid in early March – Interfax, http://research.tdwaterhouse.ca/research/public/Markets/NewsArticle/1664-L5N0VN2DO-1

5:40AM ET on Friday Feb 13, 2015 by Thomson Reuters

[2] “The west needs to rescue the Ukrainian economy,” Financial Times editorial, February 12, 2015.

[3] Elaine Moore, “Contrarian US investor with $7bn of debt stands to lose most if Kiev imposes haircut,” Financial Times, February 12, 2015.

 

February 16, 2015 Posted by | Economics, Militarism | , , , , , | Leave a comment

Russia negotiating UNSC resolution on Minsk agreement

The BRICS Post | February 16, 2015

The UN Security Council is due to vote soon on a resolution that would approve the recently concluded Minsk agreements, Russian media reported on Monday.

Russia is engaged in negotiations with the 15-member UN council on the resolution initiated by Moscow.

The draft resolution “welcomes the results of the talks in Minsk and includes a call for the parties to be committed to implementing them”, according to a UNSC diplomat quoted by Russian Tass agency.

The vote has been delayed due to amendments introduced in regard to the document.

Britain’s UN envoy Mark Lyall Grant said the diplomats were unable to vote on the resolution on Sunday night due to pending amendments to the document.

Permanent Representative of Malaysia to the UN Security Council Hussein Haniff said members of the global organization were waiting for the Russian side to voice its approval for the amendments before the voting could start.

Ukraine and its Western allies accuse Moscow of fueling a pro-Russian uprising in the country.

Leaders of France, Germany, Russia and Ukraine on Sunday held a teleconference, demanding a strict observance of the latest cease-fire agreement struck in Minsk, capital of Belarus.

The four leaders also discussed the importance of getting the Organization for Security and Cooperation in Europe (OSCE) to play a bigger role in monitoring the latest truce agreement struck in Minsk Thursday.

Ukrainian forces and independence-seeking insurgents in Ukraine observed a cease-fire as from Sunday local time as per the agreement which also envisages the withdrawal of heavy weapons from the front line and constitutional reform to give eastern Ukraine more power.

Officials of the self-proclaimed Donetsk and Lugansk people’s republics confirmed that militia forces of the two republics have stopped fire.

Poroshenko on Saturday also issued an order of ceasefire in the conflict zones in the country’s southeastern Donbass region as of Sunday.

The 16-hour marathon summit talks of – Russian President Vladimir Putin, Ukrainian President Petro Poroshenko, French President Francois Hollande and German Chancellor Angela Merkel – were held in Minsk last Thursday.

The Minsk negotiations lasted for around 16 hours and agreed on a ceasefire from midnight, February 15.

February 16, 2015 Posted by | Aletho News | , , | Leave a comment

Poland to spend $42 billion on military buildup

Press TV – February 15, 2015

Poland, a NATO member, has launched an unprecedented multi-billion military spending spree amid tensions between the Western military alliance and Russia over the crisis in Ukraine.

Warsaw has reportedly earmarked 33.6 billion euros (USD 42 billion) to upgrade its military equipment over a decade, including a missile shield and anti-aircraft systems as well as combat drones.

The largest purchase is seventy multi-role helicopters worth 2.5 billion euros, while the Eastern European NATO member also plans to buy armored personnel carriers, submarines and cruise missiles.

The cruise missiles would reportedly enable the Polish air force to attack targets in Russia without having to leave their own airspace.

Polish Defense Minister Tomasz Siemoniak has said that the military boost is a reaction to the crisis in neighboring Ukraine, which he has described as the biggest security threat to Europe since the end of the Cold War.

NATO expansion in Eastern Europe

The move also comes as NATO is planning to expand its military presence in Eastern Europe amid the Ukraine crisis.

The defense ministers of NATO’s 28 member states agreed on February 5 to establish six new command and control posts in the Eastern European nations of Estonia, Latvia, Lithuania, Poland, Bulgaria and Romania.

NATO also decided to set up a new headquarters in western Poland to support northeastern member states as well as a similar site in Romania for members in southeastern Europe.

The military alliance has over the past year increased its presence and conducted several exercises in Eastern Europe amid the crisis in Ukraine. In 2014, NATO forces held some 200 military exercises and the alliance’s General Secretary Jens Stoltenberg has promised that such drills would continue.

Moscow has repeatedly condemned NATO’s exercises and military buildup toward its borders.

Last week, Russian Foreign Minister Sergei Lavrov said NATO’s move provokes confrontation and undermines European security.

Russia’s Chief of the General Staff of the Armed Forces Valery Gerasimov announced last month that Moscow plans to boost its military capabilities in the Crimean peninsula, the Arctic and the westernmost Kaliningrad region, amid NATO build-up in Eastern Europe.

NATO-Russia relations

Relations between Russia and NATO strained after Ukraine’s Crimea re-integrated into the Russian Federation following a referendum on March 16, 2014. The military alliance ended all practical cooperation with Russia over the ensuing crisis in Ukraine last April.

Russia approved last December an updated version of the country’s military doctrine which considers NATO military buildup as a major foreign threat against its national security.

The United States and its European allies accuse the Kremlin of destabilizing Ukraine and have imposed a number of sanctions against Russian and pro-Moscow figures. Russia, however, rejects the accusation and has retaliated with sanctions of its own.

February 15, 2015 Posted by | Militarism | , , , | Leave a comment

‘Minsk II’ – What About Foreign Troops in Ukraine?

By Daniel McAdams | Ron Paul Institute | February 12, 2015

After a marathon 17 hour negotiation session, the leaders of Russia, Germany, France, and Ukraine agreed on an upgraded ceasefire plan, “Minsk II,” that lays out 13 points to be implemented by the west-backed government in Kiev and the independence-seeking regions in eastern Ukraine.

While there is much to be skeptical about in such an agreement — the devil is always in not just the details but especially in the interpretation of the agreement — there is one point of the plan that appears very much worth pondering.

According to a translation of the 13 points, point number ten reads:

All foreign troops, heavy weapons and mercenaries are to be withdrawn from Ukraine. Illegal armed groups would be disarmed, but local authorities in Donetsk and Lugansk would be allowed to have legal militia units.

There are two very significant points to ponder in this statement to which all sides agreed. First, it is most likely that when proposing this point, France and Germany, along with Kiev, were thinking of what they claim are as many as 10,500 regular Russian soldiers fighting inside Ukraine. For this point to be implemented and thus the plan carried out in good faith, the “10,500 Russians” as well as a handful of French and other volunteers for the breakaway regions must return home.

But the statement is unequivocal: All foreign troops must leave Ukraine.

What about US troops, including CIA and Special Forces, that are said to be assisting the US-backed government in Kiev? Would Kiev not have the same obligation to expel these foreign troops? And, most importantly, what of the 600 US paratroopers that are to be sent by President Obama to train the Ukrainian military starting next month?

Would it not be a violation of “Minsk II” ceasefire agreement for the US to go through with sending 600 troops into Ukraine?

The second important issue to consider about point ten of the agreement is the 10,500 regular Russian army troops that Kiev claims are fighting in the breakaway east. Russia has always maintained that this claim is a fiction and has called on Kiev and Washington to produce some evidence for the claim. Surely a satellite photo would easily prove such a claim.

However, something significant will happen either way on point ten of the agreement. There are three possibilities: either, 1)  Russia will initiate a massive withdrawal of troops that will be easily visible to anyone watching; 2) Russia will not initiate a massive and easily visible withdrawal of troops from eastern Ukraine because it chooses to violate the “Minsk II” agreement; or, finally, 3) Russia will not initiate a massive withdrawal of troops from eastern Ukraine because there are no regular Russian army troops in eastern Ukraine.

In other words, point ten of the agreement is key to determine who is lying about Russian troops in eastern Ukraine.

Indeed, point ten appears a make or break issue in the agreement. Will Kiev break the agreement by allowing in 600 American troops — or even American weapons? Will Russia finally prove or disprove the claims made about the Russian military in Ukraine?

Something interesting is bound to happen soon. Don’t count on the western mainstream media to report it, however.

February 15, 2015 Posted by | Deception, Mainstream Media, Warmongering | , , , , , | Leave a comment

E. Ukraine leaders order ceasefire, voice amendments to constitution

RT | February 14, 2015

The eastern Ukrainian militias have stopped all military action in accordance with the Minsk peace deal. They will suppress any provocations that may be organized by Kiev forces, said Aleksandr Zakharchenko, head of Donetsk People’s Republic.

Ukrainian President Petro Poroshenko has ordered troops to cease fire at Sunday midnight local time (22:00 GMT) in line with the Thursday Minsk agreement. Ukrainian Interior Minister Arsen Avakov said on his Facebook page that “all National Guard and Interior Ministry units will halt fire at midnight.”

Meanwhile, Defense Ministry spokesman of Donetsk People’s Republic, Eduard Basurin, has ordered that all eastern Ukrainian militia units halt fighting “on the entire line of contact,” RIA Novosti reports. A similar statement has come out of the self-proclaimed Lugansk People’s Republic, saying that local militia are to stop all combat actions at midnight.

Earlier, leaders of the restive Ukrainian republics said their regions have ratified the peace deal.

The militias will stop all military action outside the territory of the Donetsk People’s Republic, Zakharchenko said. However, he said that the self-defense forces will reply to any provocative actions by the Kiev troops, including assaults and precision fire.

The DPR leader also said that rebels won’t release a large group of Ukrainian troops, who have been entrapped near the village of Debaltsevo since early February.

“Their every attempt to break out will be suppressed,” Zakharchenko is cited by RIA-Novosti news agency.

The rebels’ leader reminded that “there wasn’t a word mentioning Debaltsevo in the agreements” signed in Minsk on February 12, which means that “Ukraine simply betrayed the 5,000 people trapped in the Debaltsevo ‘cauldron’.”

Earlier, Basurin said that the Ukrainian troops near Debaltsevo won’t be shelled, but won’t be released as well, with surrender being the only option.

Zakharchenko has put his signature under a decree, which foresees the beginning of the ceasefire at 01:00 AM local time on Sunday – midnight for Kiev and 2200 GMT.

The DPR head also said that the Donetsk People’s Republic won’t grant control over its border with Russia to Ukrainian border guards: “Today an order will be issued to create the border guard service. Not a single Ukrainian soldier will enter our territory.”

Poroshenko warns of martial law

Meanwhile, Ukrainian president Petro Poroshenko has once again warned that if the Minsk agreements fail, “martial law will be implemented not only in Donetsk and Lugansk, but in the whole country”.

Moscow has expressed hopes Kiev and the rebels, as well as all the sides, which supported the Minsk peace deal, including France and Germany, “will do everything for the signed agreements to be scrupulously implemented,” the Russian Foreign Ministry said.

“Ukraine’s official representatives… as well as those of several Western countries, the US in particular, have essentially expressed solidarity with the opinion of radical nationalists in the Verkhovna Rada (Ukrainian parliament) and have began distorting the contents of the Minsk agreements,” the ministry said.

On Saturday, Poroshenko spoke to German Chancellor Angela Merkel and French President Francois Hollande on the phone, with the three heads of state stressing that all sides must fulfill the obligations they’ve taken according to Minsk agreements, first of all, those concerning the ceasefire.

The Ukrainian president also had a telephone conversation with US president Barack Obama, during which the two leaders “agreed on the further coordination of efforts in the event of an escalation” in Ukraine’s southeast.

Poroshenko and Obama “discussed the situation in Donbass and expressed concerns about the situation in Debaltsevo,” according to the Ukrainian president’s website.

Russian Foreign Minister Sergey Lavrov and his US counterpart, John Kerry, also discussed the situation in southeastern Ukraine on the phone, and stressed “the importance of strict implementation of the ceasefire regime by the conflicting sides.”

Lavrov also emphasized that the Minsk peace deal “also includes obligations by Kiev to remove the financial and economic blockade of the [Ukrainian] southeast; to provide an amnesty; to stage a constitutional reform by the end of the year and adopt legislation on the special status of Donbass,” Russia’s Foreign Ministry said on its Facebook page.

The contact group, which includes representatives from the Donetsk and Lugansk regions, held video consultations on Saturday, the Organization for Security and Co-operation in Europe (OSCE) said.

According to the OSCE, all parties agreed to take necessary measures to establish the agreed truce and de-escalation of the conflict, including in the areas of Debaltsevo and Mariupol.

The contact group will continue holding consultations on a regular basis to ensure the implementation of the Minsk agreements, a statement from the watchdog added.

Constitutional change

The Minsk agreement provides for a security zone separating the Kiev forces and the rebels, a ceasefire beginning on Sunday and a heavy weapons pullout to be completed in 14 days. The deal was signed by the contact group, which includes the leaders of the self-proclaimed Donetsk and Lugansk People’s Republics, a representative of the OSCE, Ukraine’s former president Leonid Kuchma, and the Russian ambassador to Ukraine,

A separate declaration supporting the deal was agreed upon by the so-called “Normandy Four” leaders – French President Francois Hollande, German Chancellor Angela Merkel, Russian President Vladimir Putin and Ukrainian President Petro Poroshenko, who also gathered in Belarusian capital.

In accordance with the deal, on Saturday the eastern Ukrainian republics also proposed amendments to the constitution. One of the key demands is to grant certain regions the right to define and form the structure of local governments themselves, Denis Pushilin, DPR representative at the Minsk talks, said.

The rebels also want the official status for the Russian language and other minority languages, spoken in Ukraine’s central regions, he said. Another proposed amendment foresees the decentralization of fiscal and tax systems, “up to the possibility of creating in free economic zones and other special economic regimes on certain territories,” Pushilin is cited by TASS news agency.

While the Minsk deal is hoped to secure an end to the bloody and devastating internal conflict that has taken the lives of over 5,300 people in the UN’s estimates since last April, shelling in Donetsk was reported throughout the whole of Saturday.

READ MORE: Ukraine ultranationalist leader rejects Minsk peace deal, vows ‘to continue war’

February 14, 2015 Posted by | Aletho News | , , , , , | Leave a comment

Ms. Merkel and Peace

By Dagmar Henn | Oceania Saker | February 12, 2015

What a lot of theatrical activity during the last days — Angela Merkel’s hasty trip to Kiev and Minsk (carrying Hollande as hand luggage), and then the appearances at the Munich “Security Conference” … truly a heroic effort to save peace? That at least is what we are expected to think.

But how realistic is this idea? Is that possibly what she honestly wants?

Actually there are simple criteria to test her interest in peace — sober, technical criteria.

One can assume that all European governments, including Ms Merkel’s, are well informed about the real situation in the Donbass. In public they talk about the ‘evil separatists’, but they do know that the Ukrainian army shells the cities. They know the extent of destruction and they know who is responsible. Why? Because OSCE delivers this information daily to their desks. Publicly the OSCE acts as though it is not capable of calculating from the remains of a rocket stuck in the ground the direction from which it came. The reality is different. We can assume that all the atrocities committed by the Ukranian regime throughout the last months are well known. That includes the humanitarian situation in the Donbass.

That means, they know the consequences a closure of the Russian border would have under the present conditions —  that it would not only cut off military supplies for the militias, but also any humanitarian support by Russia. They know that such a step would be impossible, and that any reasonable person could consider it only if the menace from the other side were to disappear. That it would require a completely different government in Kiev, also where it’s military power is concerned. Recently a retired Russian General said it explicitly in an interview with the Süddeutsche Zeitung: “Don’t you Europeans understand that? Closing the border would mean the physical extermination of a significant part of the Donbass population.”

Throughout all these months just one single phrase could be heard from Merkel and Steinmeier regarding the Minsk agreement. Nothing about the continued shelling of Donbass cities. Nothing about the difficulties regarding the exchange of POWs. Nothing about the blockade of humanitarian assistance through Kiev. Nothing about the use of forbidden weapons. Nothing about Kiev’s refusal to discuss a line of demarkation, nothing about non-withdrawal of heavy armaments. Just one single phrase was repeated over and over again: Russia must close its border to the Donbass.

Did anything change? Did the position towards the Kiev junta change? You can listen to Merkel’s speech at the ‘Security Conference’ – no, there has been no change. Not by a single inch did she criticize the rulers of Kiev, never mind  coming closer to any mention of the realities. Instead she explicitly repeated the demand that the border be closed . She still demands that the Donbass become a Gaza Strip on speed.

But she is against arms deliveries to Kiev. Couldn’t that be considered some kind of peaceful intent?

Not at all. She gives some reasons why she doesn’t want to take that step. First: it doesn’t make sense. More weapons won’t enable the junta to win. That’s a point where — exceptionally — she is right. Second: she says quite clearly she would give preference to economic warfare. That’s an area where the German government is truly experienced and successful; several European neighbour countries can tell the tale. Anyone who wants to know a bit more about the effects of German economic warfare should watch the Greek documentary Agora (which was broadcast by the German channel WDR on 05.02). Third (and this is what she actually said): there isn’t sufficient control over public opinion. (One can try to imagine on his/her own what that means regarding our remaining democratic rights; months of uninterrupted propaganda don’t seem sufficient to Ms Merkel, she demands more).

The arguments she cites in calling for “peaceful” alternatives, seem to be purely decorative. The West, she says, won the Cold War through persistence and because it offered “more prosperity to those who made more of an effort”. Even Ms. Merkel should realize that those times are gone and the promises of prosperity have been museum ripe for some time already.

At this point we must consider the same probability as we faced regarding the conflict situation in the Donbass. Ms Merkel may tell a certain story. But she must know better. She knows about the gigantic black hole of fictional capital which has been thrown at one country after the other. She knows what was done to the people of Greece, Portugal, Spain, Ireland and so on, in order to save the German banks. She was one of the people that arranged it. So she also knows that the attractiveness of the West is somewhat limited, to put it diplomatically. So these sentences are pure propaganda. It’s a game which cannot be repeated.

But if the idea, that she and her US allies could reach their goals by ‘peaceful means’ via a remake of the Cold War, is a fiction, and yet there seems to be no moving away from the goal of Russia’s submission, where is the difference between them and the USA?

That is the one thing she didn’t spell out.

Now, let’s take a short diversion. Some believe this ‘Security Conference’ trip was caused by fear. Merkel and Hollande had suddenly realized that they would not escape unscathed in a real war against Russia. They would try now to save their own skins (and possibly even ours).

It wasn’t only the interview in the Süddeutsche. Sometimes one gets the impression that the Russian side tries to explain very slowly three times to intellectually challenged people of Berlin the effects of what they are actually doing at the moment. I would consider the interview with Fedorov in this context — a kind of tedious pedagogic effort. Could it be that Merkel saw this video and became deeply frightened, when she heard that in case of a Ukrainian attack against Russia “Washington and Berlin would be burned to ashes”?

Well, some decades ago someone, after meeting Merkel — at that time minister of enviromental issues — commented that she is not any more intelligent than her appearance suggests. But it would need someone incapable to count up to three not to understand that we are talking about a real and massive risk of a nuclear war. This risk has existed since the day of the coup in Kiev, and we have escaped it twice already — through the reunification of the Crimea with Russia, and through the uprising in the Donbass, which has up to now prevented an attack of the junta against the Crimea.

So even if this specific question more or less escaped public attention until today, and now suddenly becomes so acute that even Der Spiegel remembers it, the leading players in Germany must have realised this tiny problem right from the start. (And they should have been able to imagine what it might mean if creatures like members of the Right Sector gained access to nuclear weapons, which might have happened, had their access to the Crimea not been blocked so promptly).

So let’s go back to what Merkel didn’t spell out.

She said Washington’s idea to deliver weapons would be foolish playing around without any practical use. She hinted at the possibility that ‘diplomatic efforts’ (the phrase used repeatedly for the same blackmailing) might be doomed to fail. She should know that the possibilities for economic warfare have far greater limitations than is apparent.

So what is left? Sending troops?

In that connection her remark about ‘hybrid warfare’ and her opinion that better control of public opinion is needed suddenly makes sense. For the installation of sanctions, the small amount of freedom of thought remaining outside of corporate media was not a menace. But the intention to send the residents of this country personally to the front, to the war zone, that could cause greater resistance — the people might develop foolish ideas.

She wants to win time, in order to strangle any opposition, and then to act in whatever way she thinks is efficient. Which goes much further than the delivery of weapons. But for that she first needs a ceasefire… somehow.

For months, Merkel and Obama seem to have been following a good cop/bad cop scenario. It looks about the same considering the Cease fire/Weapons delivery alternatives. But what guarantee is there that the one acting as the good cop is actually the good guy?

Right, there is none.

For those who believe the German government is being forced into this position — any politician who has a bit of experience is capable of saying one thing and meaning the opposite. He/she understands the technique of pinning undesirable statements onto others; also, how to counter one coercion by another one that they might have set in scene themselves. At all these levels it is as if nothing had happened. They intend it like that. There is no reason at all to let them escape responsibility.

PPS. In the sense that Fedorov in this case may be something like a semi-official channel in the interview, the nasty attack that Elmar Brock made against Lavrov at the Munich conference might be considered a semi-official attack by Merkel. Brock is the political mouthpiece of Bertelsmann, Germany’s big media corporation, and Bertelsmann-owner Liz Mohn is Merkel’s close friend. No wonder that Lavrov nearly lost patience at that moment.

February 14, 2015 Posted by | Militarism | , , , | Leave a comment

EU and Russia: No option but peace and coexistence

The BRICS Post | February 13, 2015

At the moment of writing, the ink on the second Minsk agreement has not yet dried.

On February 15, fighting is supposed to come to an end in Ukraine. What are the chances for success of this agreement and what’s in it for the EU and Russia?

Are we on the path to a new peace or to a new cold/hot war? That is the question that will be on the minds of many in the days to come.

There are too many uncertain factors to reliably predict what will happen. The EU and the US have different agendas, and one can even make a case that they have conflicting interests.

For Russia, a peaceful resolution to the conflict means ending the sanctions and facilitating closer economic cooperation with the EU.

But tighter economic relations with Russia, the natural hinterland of Europe, goes against the core of the transatlantic NATO alliance. This has been a nightmare scenario for the Washington elite since 1945.

Pointedly, neither the US nor the UK were involved in the Minsk negotiations, so for Washington all options are still on the table. Considering the warmongering majority in the US Congress, that is not a good omen for peace.

Then there is the matter of the government in Kiev. Hardly ever mentioned in the news, it is far from stable. Extremist militias who do not bother to hide their fascist ideologies have been integrated into the Ukrainian army.

Considering their behaviour on the battlefield so far, it is very doubtful that Kiev will be able to make them abide by the ceasefire conditions.

Besides the extremists in their own ranks, the Kiev government faces another problem – young Ukrainian men in the west are bitterly resisting military conscription. This is not to say that they sympathize with their compatriots in the east – they just do not want to die fighting them.

Furthermore, there is the inner political struggle for power.

While President Petro Poroshenko is more than willing to find a pragmatic solution to the conflict, his prime minister Arseniy Yatsenyuk, however, is a fanatic Ukrainian nationalist, who is not a man of compromise.

He wants total victory and would be more then happy to replace his president.

Then there are the rebels in Eastern Ukraine, the so­-called ‘pro-­Russian separatists’.

Western media make it look like they are mere pawns in Putin’s hands, but that is hardly the case.

Nobody denies that Russia is giving them ample logistic support, but the leaders of the resistance are very unreliable. Will they accept the ceasefire? Hard to tell.

First step toward peace

Yet, despite all these challenges, history shows that worse situations have led to lasting peace.

The second Minsk agreement might just work. It is only a first step, and a peaceful long-term resolution of the conflict is still to be negotiated, but it is the only way out for the EU, Russia and Ukraine.

One of the reasons it might just work is precisely that the EU alone brokered it, or rather Germany and France, and not the US. That might seem contradictory given the different variables mentioned above, but it’s not. It all depends on who and what will prevail.

The real issues are still on the table – disarmament and federalization of the country. If the EU really wants it, Brussels has the financial leverage to force Kiev’s hand in accepting a new constitution granting the eastern regions meaningful autonomy.

The EU has experience with forging complex compromise solutions. After all, the EU itself is a permanent compromise.

What is really at stake is much more than just an end to an internal conflict stoked by outside forces. A resumption of violence carries with it the risk of an all out war between nuclear powers.

This is about a possible major war on European soil.

Border control

Hence, peace is the only option for Europe and Russia.

Personally, I consider one of the last paragraphs in the Minsk agreement, which focuses on control of the border, the most difficult one.

Kiev wants to regain full control of the border between the eastern provinces and Russia. This may at first appear to be a technicality, but it isn’t. Control of the border is highly symbolic, for all parties involved.

Kiev’s control of the border would impede Russia’s direct influence on the ground; for the rebels it would symbolize a partial surrender. The only party that stands to gain from this paragraph in the agreement is Kiev, which would have been delivered a highly symbolic victory.

A reasonable option would be to deploy UN troops on the border. Russia has proposed it, but apparently it was not on the negotiating table in Minsk.

While the Cold War has prevented Europe and Moscow from peaceful coexistence on their common continent, peace in Ukraine might just open up the whole Russian hinterland to the European economy.

At the end, it boils down to two options: The renewal of the old transatlantic pact with the ally overseas leading to a new Cold War (that could turn very nasty), or peace and coexistence with Russia.

February 13, 2015 Posted by | Economics, Militarism | , , , , , | Leave a comment

Kiev MPs try to fool US senator with ‘proof’ of Russian tanks in Ukraine

RT |February 13, 2015

MPs in Kiev hoodwinked a US senator, presenting his office with photos of columns of Russian military hardware allegedly roaming Ukrainian territory. The photos turned out to have been taken during the conflict in South Ossetia back in 2008.

The photos were “presented to the Armed Services Committee from a delegation from Ukraine in December,” Senator Jim Inhofe’s communications director Donelle Harder told The Washington Free Beacon.

The Americans planned to publish the photos with credits to the Ukrainian MPs, and “they were fine with that,” the spokesperson said.

Yet, after thorough checking, images of the Russian convoys turned out to have been taken years ago, in 2008, during Russia’s conflict with Georgia.

“We are currently making calls to our sources,” Harder said.

“The Ukrainian parliament members who gave us these photos in print form as if it came directly from a camera really did themselves a disservice,” Senator Inhofe said in a statement.

“I was furious to learn one of the photos provided now appears to be falsified from an AP photo taken in 2008,” the lawmaker wrote.

At the same time the revealed forgery “doesn’t change the fact that there is plenty of evidence Russia has made advances into the country with T-72 tanks and that pro-Russian separatists have been killing Ukrainians in cold blood,” the US senator maintains.

February 13, 2015 Posted by | Deception, Mainstream Media, Warmongering | , , , , , | Leave a comment

Ukrainian specialists find no signs of military activity in Russia’s Rostov region

TASS | February 12, 2015

MOSCOW – Ukrainian specialists have not observed any military activity on the part of Russian army units in the course of an inspection that was held in the southern Rostov region from February 9 to February 12, the chief of the Russian Defense Ministry’s department for observance of agreements, Sergey Ryzhkov said on Thursday.

He said the ministry had complied with the provisions of the 2011 Vienna Document and had ensured inspection on an area of about 15,000 sq km that had been selected by the Ukrainian side.

“Ukrainian representatives said they hadn’t noticed any military activities on the part of units of the Russian Armed Forces in the area chosen for the inspection,” Ryzhkov said. “They pointed out precise observance of the Vienna document by the officials who had escorted them.”

February 12, 2015 Posted by | Aletho News | , | Leave a comment

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