This page has been archived and commenting is disabled.
Ukraine’s Next Crisis? Economic Disaster
Submitted by Robert Bensch via OilPrice.com,
Ukraine’s next crisis will be a devastatingly economic one, as violent conflict destroys critical infrastructure in the east and brings key industry to a halt, furthering weakening the energy sector by crippling coal-based electricity production.
The Ukrainian military’s showdown with separatists in the industrial east has forced coal mines to severely cut production or close down entirely. This has led to an electricity crisis that can only be staunched by cutting domestic production along with exports to Europe, Crimea, and Belarus -- or worse, getting more imports from Russia.
In the coal centers of Ukraine’s industrial east—Luhansk and Donetsk—fighting has forced the full closure of an estimated 50 percent of coal mines, while overall coal production has fallen 22 percent over the same period last year.
Key industry sources say they will potentially run out of coal in less than three weeks.
For Ukraine, the second largest producer of coal in Europe, this will have a devastating impact on the energy sector, which is in a state of emergency, unable to get coal to thermal power plants that provide some 40 percent of the entire country’s electricity.
In the wider energy picture, the halt of coal production sets Ukraine back a decade. The plan was to rely more on coal in order to reduce dependence on Russian natural gas.
But the new reality has insiders wondering how Ukraine will produce more of its own natural gas, after the implementation earlier this month of an amended tax code that targets private gas producers with a tax so high that they will significantly reduce production through the end of the year and beyond that is anyone’s guess. (Full disclosure: my firm, Pelicourt LLC, is the majority shareholder of Ukraine’s third-largest gas producer, Cub Energy, and I have advised the U.S. and Canadian governments on the potential harm the new tax will cause.)
Economically, the conflict in the east is a disaster for Ukraine, which has traditionally been a net exporter of thermal coal for power generation. Now it will have to increase imports of fuel to make up for the loss. But even then, the destruction of supply routes makes this challenging.
Not only have coal supply routes been destroyed in the conflict, but other critical infrastructure has taken a hit as well, threatening other industries.
Across the board, Ukraine’s industrial heartland is reeling from cut-off supply and shipping chains that threaten to destroy as much as 5 percent of Ukraine’s gross domestic product in the second half of this year.
In the meantime, observers can be forgiven their confusion over various measures Kiev has taken since the intensification of the conflict. Indeed, the signals coming out of Kiev have been mixed, at best.
While parliament has passed a bill allowing for sanctions against Russia, the state-run Naftogaz leadership has been quick to point out that we probably shouldn’t expect sanctions against Russian gas giant Gazprom, and the new bill doesn’t implement sanctions of any kind—it simply makes it legal to slap sanctions on Russian individuals should Kiev decide to do so. Another paper tiger.
Parliament has also adopted a bill approving the joint-venture lease of Ukraine’s gas-transit facilities with Western firms.
At the same time, however, Kiev passed a new amendment to the tax code that doubles taxes for private gas producers and promises to keep Western investors as far away from Ukraine as they can get.
Each move is designed to negate the other. The economy is being destroyed, yet Kiev is itself destroying any chance of bringing in Western investment to prop it up. Western firms are invited to invest in Ukraine, while at the same time Ukraine makes a mockery of transparency and ensures that the investment climate is suddenly even less attractive than it was two weeks ago. Lip service is paid to developing more resources to build energy independence, but a new tax doubles costs for private producers who will stop producing and pick up stakes.
It’s hard not to conclude that Energy Minister Yuriy Prodan is working hard to discourage new investment in the energy sector.
»
- 18983 reads
- Printer-friendly version
- Send to friend
- advertisements -
If the US thinks that it is sorely deluded.
China and Russia are getting along just fine whilst making friends with the majority of countries in the world.
Were China or the US to really threaten Russia, the military tactics of the past, like massed armies, just fall apart with modern weapons systems. All the power now is in the hands of the defender.
.
Quite a story being sold here. Trouble is that Kievan Yatzi Junta citizens are duplicitous. They invent all kinds of stories to hide their motives. Classical strawsman. When a point can not be addressed, build another you feel you are able to address.
The very fact that Kievan Yatzi Junta citizens led by themselves to the current situation with very little help from the rest of humanity has to be denied.
That would fit the bill for Kievan Yatzi Junta follower. Warmonger, unable to tackle reality at hand, forcing to the exercize of intellectual masturbation...
Quite a spin. Just go to the heavily censored internet in China to get the real news. The middle class who really matters now the poer base of President Xi can see thru US duplicity in not allowing China to emerge even faster as a global power.
They have plenty of lessons learnt from US hegemony in S America, ME and elsewhere not to trust. That Nixon had drew a wedge btw Russia and China is an old cold ware achievement that none following him has taken advantage of.
Relationship with Russia is just a defense that is necessary given China's own economy tottering towards hard land. How much better to have a Putin to be the spokeperson and pay him handsomely while remaining under the radar for any direct confrontation with US.
Hiding daggers behind smiles are in the DNAs of these Eastern gangs.
There are rumors that young and middle-age engineers at military and civilian plants have been offered very generous relocation packages and salaries in Russia.
Many people from the largest Ukrainian helicopter company Motor Sich have already relocated.
That is not a helicopter company, it is the manufacturer of all of Russia's helicopter engines. I should imagine that there is a serious 'brain drain' out of their plants, and probably some 'gear' going missing as well.
This is a total disaster for Ukraine. It is returning very rapidly to being not much more than the peasant society it was in 1900.
Here is the latest on the Russia China gas pipe. Infrastructure is underway.
Gazprom announces first major tender to build highway to Talakan for $500 million 13:50 August 19, 2014 Interfax Russia's Gazprom has announced a tender in the framework of the Eastern Gas Program - building highways from the Chayandy deposit to Talakan deposit worth up to 18.45 billion rubles ($513 million), including VAT, the company said. This facility is one of the main ones in the pioneer entry to the deposit. The construction includes building a hard-surface highway of 94.9 miles from the intersection of the existing site access road of Surgutneftegas to the site of the planned oil treatment facility of the Chayanda oil, gas and condensate field and exits to temporary buildings 1.24, 22.37, 52.2 and 70.84 mile markers along the highway. Ten bridges will be built across the Nyuya River, Syparanda River, Syr River, Chayanda River, Dzhelokan Stream, Kurung-Yuryakh Stream, Orta-Sala Stream, Talakan Stream, Ulakhan-Syuldyukeer Stream, and Eyibdyak Stream. The construction will also include 218 km of ice roads and access roads to four pits. It is planned for now to summarize the tender results no later than September 5. The protocol of summing up the results is usually released within a week after results are concluded. The Chayanda oil, gas and condensate field is the initial gas source for supplies to China with the Force of Siberia pipeline.Source: Russia Beyond the Headlines - http://rbth.co.uk/news/2014/08/19/gazprom_announces_first_major_tender_to_build_highway_to_talakan_for_500_39108.html)
at least the ukrainian mail order bride business is booming
There is no mail order. You have to find,and go there or meet between.
Your post seems to imply lack of respect.
It often comes as a surprise to western men, that just because they seemingly have money, that the Ukrainian women don't automatically whore themselves. When you grow up in the materially minded west, it is hard to conceive of women who are not primarily motivated by money.
True. The good and sharp mind Ladies will watch closely to research what kind of husband and father will he be.
More quiet and is check you and careful is good sign she is level headed, family oriented.
As go more east is more stable and resourceful. Siberian Ladies make best wives.
So does this mean that hot Ukrainian women who would marry a guy 20 yeas older than them to excape that shythole will now up it to 40 years?
Sadly so. The women are so beautiful, smart and really want to have a better life. If the guy is decent, he has a chance.
"failure to release info on why the US won't return the German's gold stored in US vaults is typical."
Because it ain't stored in US vaults, it's been spent! Interesting to note, France, who Germany also asked for their gold back from, said theirs would take 5 yeas, (US 8yrs) to get together. Went in to Mali with USA just weeks later, on pretense of Al-Quada.
Mali is only the largest gold producer in the world?
Ukraine was fragile under normal operating conditions but now, tearing up the more efficient and prosperous east halts any hope for Ukraine economics.
Zerohedge hits right on with this story. But as I watch and read about things unfolding in Ukraine, I realize now it is not about economics; its about straight up looting; looting natural resources.
The appointed oligarchs, many going to great lengths to delete their wanted profiles from Interpol, are parting off and selling natural resources; assets stolen from the Ukraine people.
Ukranians in the west and Kiev are about to get an overdose of reality. Reality will manifest itself in shortages, prices increases, more fighting, and hopefully awareness Ukranians were sold out and robbed by the very people they mob-ruled into power.