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By John Helmer, Moscow

Not since the British started the Δεκεμβριανά in Greece in 1944, and not unless you count Na Trioblóidí in Northern Ireland until 1998, has the possibility of civil war in civilized Europe loomed so gravely. No wonder the mailbox is brimful of questions, for which there are no obvious answers.

1. Whatever happened to Mrs Freedom, Yulia Tymoshenko?

For months leading up to the November deadline for Ukraine to sign the partnership agreement offered by the European Union (EU), the Europeans seemed to be saying that release of former Prime Minister Yulia Tymoshenko (second image, second from left) from her 7-year jail sentence was the precondition for the deal. The Germans seemed to be demanding her release as late as November 18.

That very day the US Senate’s Foreign Relations Committee agreed on the text of Senate Resolution 165 which “(1) calls on the Government of Ukraine to release former Prime Minister Yulia Tymoshenko from imprisonment based on politicized and selective charges and in light of the April 2013 European Court of Human Rights verdict; (2)calls on the European Union members to include the release of Ms. Tymoshenko from imprisonment based on politicized and selective charges as a criterion for signing an association agreement with Ukraine at the upcoming Eastern Partnership Summit in Lithuania; (3)expresses its belief and hope that Ukraine’s future rests with stronger ties to Europe, the United States, and others in the community of democracies.”

In seventy-two more hours President Viktor Yanukovich and his parliamentary majority decided to reject the EU deal in favour of a Russian one; that was on November 21. That day too, the Verkhovna Rada voted down a bill allowing Tymoshenko’s release for medical treatment in Germany. A week later, Ukrainian demonstrators in Kiev were shouting for her release, combining that with shouts in favour of the EU agreement.

But the State Department was beginning to go cold on Tymoshenko’s fate. On December 2, the State Department spokesman put Tymoshenko in the past tense. “We have consistently spoken about this in the past and expressed our concern about her detention…So we’ve consistently expressed concern, encouraged them to take steps forward. Obviously, there hasn’t been progress on that on the ground.”

Even in the past tense, January 15 was the last time a US Government official mentioned Tymoshenko. As the Euromaidan demonstrations escalated against government targets in the capital and across the country, not only has the US been mum on Tymoshenko; it has been actively backing someone else to be the next president of Ukraine. Why?

The last independent Ukrainian poll of voter intentions was undertaken between December 23 and 27. With a sample of 2,079 and coverage of 24 regions of the country, the survey found support for the EU partnership was running at 43%; support for the Russian customs union, 30%; with 20% in favour of no change in either direction. The poll also found that 47% were positive towards the Moscow agreement; 27% negative. As for the Euromaidan protests, 50% said they were against; 45% in favour. As for their presidential vote if an election were called immediately, 25% picked Yanukovich; 8% Tymoshenko. Among the other contenders, Vitali Klitschko (first image, first left) did better at 14%, while Arseny Yatseniuk (first image, first right) did worse at 5%.

No independent Ukraine poll has been published since then. Much private polling has been done, though, especially by those financing the opposition. Douglas Schoen, a pollster currently employed by the anti-Russian Ukrainian oligarch Victor Pinchuk, is an expert at creating political front-runners out of no voter support at all. According to US investigations, Schoen has done this Venezuela and in the Czech Republic.

In the Ukraine, there has been a problem – and that’s Tymoshenko. Between the time she was expected to be released and the time the Obama Administration decided to drop her, it became clear that if the Euromaidan campaign for Europe and against Russia were to succeed, it had to oust Yanukovich. Managed more or less constitutionally, that meant pressuring him into calling a new election.

The trouble with this, according to the private polls, was that the most likely candidate to win instead would be Tymoshenko. So why wouldn’t Mrs Freedom be just the ticket for Washington? Answer: she was ready to do a deal with Moscow and was thus acceptable to the Kremlin. President Vladimir Putin said as much last week: “For us it isn’t important [who from the opposition wins]— we carried on a very constructive dialogue with the government of Ukraine when this government was headed by Madam Tymoshenko.”

Inflating Klitschko has therefore been the principal goal of the US political technologists. Taking the air, er gas, out of him is the obvious Russian counter.

2. Where can be done for Ukraine’s gas pains?

Everyone in the Ukraine is stealing Russian gas. On this point there is unanimity from Moscow to Brussels, from Dniepropetrovsk to Kiev and Lviv.

yanukovichYanukovich (right) doesn’t pay Naftogaz, the state gas distributor, and when Klitscho and Yatseniuk turn on their cookers, what burns for them is free of charge. The Roshen Group, which generates Petro Poroshenko’s (first image, third left) fortune, owes Naftogaz a sum of money Naftogaz says is too confidential to release, and Roshen refuses to admit at all.

After the Ukrainian courts have ruled a half-dozen times, Pinchuk’s Interpipe still will not pay a debt of almost $70 million. Whether Tymoshenko is in hospital or prison, the gas keeping her and her guards warm is not being paid for. And if the EU and the White House could find an alternative supplier of gas to Gazprom, that too would be stolen.

Starting with gas and including most other commodities, Ukraine has become a pyramid of debt for stolen goods. Lend or pay any amount of cash into the system, and it will disappear immediately, converted into real goods consumed with the intention not to pay for them, leaving nothing but growing debts behind.

When Yanukovich, Putin and their subordinates agreed in December on a Russian programme of rescue measures, $15 billion was promised to refinance Ukraine’s treasury and foreign debts, partly to repay $2.7 billion in debt already owing for deliveries of Gazprom gas last year; and partly to enable Gazprom to continue delivering gas this year at a higher volume than 2013, and at a newly negotiated 36% discount in price.

But it’s now clear the first instalment of $3 billion in Russian bailout financing has gone – Ukraine still isn’t repaying the old Gazprom debt, and Naftogaz cannot afford to pay for current deliveries. Where did the money go? Putin is asking publicly – there’s not a Russian, nor Ukrainian, who doubts the answer.

According to Russian calculations, during the month of January Gazprom delivered 2.5 billion cubic metres of new gas for an invoice value of $658 million. At the start of the new month, however, Naftogaz was owed $3.4 billion by the country’s municipal and regional administrations. How much more is owed to Naftogaz by the Ukraine’s commercial enterprises hasn’t been counted. If the defaulters were paying up, Naftogaz would be able to repay Gazprom as promised, and start meeting its new delivery invoices. But the defaulters won’t, so Naftogaz can’t.

In order for Naftogaz to continue supplying local consumers with gas at a tariff which has been fixed below its supply cost, the state budget must meet its promised subsidy for Naftogaz. But it too cannot pay. There is simply no free cash left in the Ukrainian government.

If the guardian of the Euro-American rescue for Ukraine is to be the International Monetary Fund (IMF), this is how the IMF board of directors reported the Ukrainian situation on December 13, just before the Russian bailout began. “The fiscal stance loosened in 2012–13, contributing to the buildup of vulnerabilities. Large pension and wage increases, generous energy subsidies, and soccer cup spending led to a widening of the combined deficit of the general government and the state-owned company Naftogaz to 5½ percent of GDP in 2012. In 2013, the combined government-Naftogaz deficit is projected to expand to 7¾ percent of GDP.”

The American and European directors on the IMF board didn’t sound then that they were in favour of keeping Ukrainians warm this winter, at least not on the terms Gazprom has been agreeing to. “An inefficient and opaque energy sector continues to weigh heavily on public finances and the economy. Overall energy subsidies in Ukraine reached about 7½ percent of GDP in 2012. The very low tariffs for residential gas and district heating cover only a fraction of economic costs and encourage one of the highest energy consumption levels in Europe. As a result, Naftogaz’s losses in 2013:H1 more than doubled and the company is late on payments for imported gas.”

“Opaque” in IMF-speak means theft in Russian; in English too.

catherine_ashtonAs Secretary of State John Kerry was poking his finger on the weekend at the rank of Ukrainian candidates the secret-service pollsters are recommending, the EU’s foreign minister Lady Catherine Ashton (right) claimed she’s putting together a new financial offer to top the Russian one. In November Ashton was careful to insist that this should take the form of “a new standby arrangement with the IMF”. This week Ashton’s scheme offered short-term money with long-term conditions. According to Ashton, the new numbers “won’t be small”. She also claimed that although the non-small down-payment won’t require IMF conditions, there will be no non-small money to follow unless IMF conditionality is exactly what the government in Kiev agrees to. That money, according to Ashton, is “contingent on the new Ukrainian government pursuing economic and political reforms.”

Between Ashton’s taster and the IMF’s medicine, US officials have announced: “Nobody [American] is going to give them money if they’re not doing the economic reform as well as the political reform, because then it is money down the rat hole…The point is to say to them we will be with you if you walk this tough economic path and we’re not going to let you fall into default as you do it.” According to this Wall Street Journal version, “U.S. officials believe it could be easier for a transitional government to raise natural gas prices in the spring as temperatures rise.”

Here’s the IMF again, revealing what Ukrainian reforms it has in mind: “High budget expenditure should be reduced by rationalizing public procurement, restraining the growth in public sector wages and employment, and limiting pension indexation to inflation. In addition, authorities should refrain from unaffordable tax cuts. Directors agreed that these measures would reduce the fiscal deficit to a sustainable level over the medium term while creating space for essential public investment.”

“Directors underscored the need for a comprehensive energy sector reform. They stressed that upfront, meaningful, and broad-based tariff increases are essential for reducing large quasi-fiscal losses, attracting new investments, and improving governance. Energy tariff increases should be accompanied by measures to protect the most vulnerable households. Directors welcomed the authorities’ plans to continue with energy-saving reforms, increase domestic gas production, and diversify energy imports, but stressed that these measures cannot substitute for the indispensable tariff adjustments.

So who wants to be president of the country with the IMF in charge of the alternative to the Russian agreement? Which of them wants to go first in explaining that freedom to be European will mean job losses, wage cuts, lower pensions, higher prices for everything, especially gas, and higher taxes.

No hands are up, not Klitschko’s, not Yatseniuk’s. There’s no cure for the gas pains, at least not until the warm weather arrives.

3. Why is the Austrian Government guarding the Azarov family silver?


At the Munich Security Conference on the weekend, Yatseniuk, whose standing in the prospective presidential polls isn’t matching Klitschko’s, announced his alternative to the Russian rescue programme – a Euro-American giveaway. “Ukraine desperately needs a Marshall plan and not martial law in order to stabilize the political and economic situation in the country”, he said, according to German radio.

Klitschko has so far avoided making statements about what bailout terms he would agree to, if he were to become president. In Munich he stuck monosyllabically to a presidential replacement script. “Mr. Yanukovich, Ukrainians ask you if this is the right path. It is the path for rights for our people? Let me say as a Ukrainian citizen, this is not an acceptable path for us. For two months, the people of Ukraine have showed their will for political change…The people have said enough. Enough corruption, enough living without laws, enough of this system. The people, with this system, they don’t see the future.”

In impromptu remarks that followed, Klitschko did say he favours the type of sanctions initially proposed in the US. According to Klitschko, these would include bans on issuing travel visas and freezes on credit card and bank account operations by Ukrainian government officials. Klitschko named noone.

Why was Klitschko so reticent?

If sanctions are to be exemplary, painful and a deterrent to violence, as their proponents apparently want, the most accessible target is ex-Prime Minister Mykola Azarov and his family, now living in Vienna. The family also includes only child, Oleksiy Azarov, a member of the Ukrainian parliament whose expensive tastes are well-known.

Ukrainian protesters in Austria have targeted the Azarov house. But for the time being, the Ukrainian opposition leadership, and the governments supporting them, are sparing the Austrian Government the trouble of opening an investigation of the larceny, embezzlement, and money laundering allegations which have been made against Azarov senior.

If the Austrians, like the rest of the EU, genuinely believe what they are accusing the Ukrainian government of, this refusal to act is a sign that sanctions talk is bluffing. Why shouldn’t President Yanukovich think so? When naivety meets cynicism there’s nothing to be said.

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