From Volume 8, Issue 1 of EIR Online, Published Jan. 6, 2009
Russia and the CIS News Digest

Soros Watch: Fishing in Ukraine's Troubled Waters

Dec. 30 (EIRNS)—George Soros, the megaspeculator and political manipulator on behalf of British imperial geopolitics, is suddenly the talk of the town in Kiev. The office of President Victor Yushchenko is blaming the financier speculator for having "engineered an assault on the Ukrainian hryvnia," through his advice to Prime Minister Yulia Tymoshenko during meetings earlier this month. Yushchenko's spokesman Victor Baloha accused Tymoshenko of speculating on the Ukrainian currency, linking its plunge to her meeting with Soros on Dec. 12. Tymoshenko has acknowledged the meeting, saying that her government is taking advice from Soros, with that advice being "implemented in the form of laws and government resolutions; they are public and you may study them."

Nothing said by Ukrainian politicians in the context of this scandal can be taken at face value, since former Orange Revolution allies Yushchenko and Tymoshenko are locked in a power struggle, with Presidential elections slated for this year. This past Autumn, Tymoshenko broke her party's alliance with Yushchenko in the Supreme Rada (Parliament), and formed one with the Party of the Regions of Victor Yanukovych. She has also shifted from her previous posture of "Containing Russia" (the title of her article last year in the New York Council on Foreign Relations journal Foreign Affairs), to promoting Russian-Ukrainian reconciliation as comparable to the rapprochement of France and Germany after World War II.

As of Dec. 1, the Ukrainian hryvnia had collapsed by 38% against the dollar. Ukraine's industry had fallen by 19.8% year-on-year in October. Steel, which accounts for 40% of the country's export revenue and 25% of industrial output (90% of Ukraine's steel was exported, according to the Economist Intelligence Unit), is being shut down. Remittances from Ukrainian guest workers in Russia and Europe, which are as much a mainstay of the economy in western Ukraine as steel has been in the eastern part of the country, have collapsed.

In November, Ukraine signed for a $16.4 billion loan package from the International Monetary Fund, negotiated on the same October weekend as the IMF/European Central Bank multi-billion bailout for Hungary. The London Economist Intelligence Unit writes, in a Dec. 1 commentary, that the IMF now has "a major say in policy decisions" in Ukraine.

On Nov. 19, the Ukrainian government approved a decree that empowered Vice Premier Grigori Nemyre to sign an agreement with Peter Peterson's Blackstone Group International, Ltd., to advise Ukraine on how to spend the IMF money. The other company hired by the Supreme Rada is Credit Suisse. According to the ProUA website, these companies were proposed by First Vice Premier Alexander Turchinov and VNemyre. Ukrainian press reports note that Ukraine was required to hire such advisors, as part of the agreement with the IMF. George Soros is part owner of the Blackstone Group, and it is evidently in this context that he met with Tymoshenko.

Gazprom Cuts Gas to Ukraine

Jan. 1 (EIRNS)—Russia's Gazprom natural gas monopoly announced the cutoff of natural gas deliveries to Ukraine, last-minute negotiations having failed to end a dispute over back payments and price increases. The negotiations were complicated by the political rift between former Orange Revolution allies, President Victor Yushchenko and Prime Minister Yulia Tymoshenko, into which the IMF inserted George Soros and the Blackstone group as financial consultants. Both sides initially said there was no immediate danger of gas shortages, because of Ukraine's stockpiling over the last year, but the prospect of reduced flow to Western European customers of Gazprom loomed. The gas-price dispute both reflects and represents the crisis facing Russia and Ukraine in the context of the global financial disintegration.

Russian Economy in Downspin

Jan. 4 (EIRNS)—November statistics, released at the close of 2008, provided some parameters of the economic collapse which took Russian leaders by surprise, for reasons given in Lyndon LaRouche's lead article in this issue of EIR Online ("How Russia Was Surprised"). Russian industrial production collapsed 8.7% in November 2008 from its level one year earlier, in the largest decline since the 1998 short-term government bond (GKO) crisis, when Russia defaulted and the ruble was hugely devalued.

When November 2008 is compared to November a year earlier, Russia's manufacturing production fell 10.3%; steel pipe production fell 36.9%; coking coal production dropped 38.7%; and fertilizer production fell 51.6%.

The ruble has declined to a level of about 29 to the dollar, a dollar which itself is wobbly.

Meanwhile, during November, as employers find internal cash reserves shrinking, and borrowing from banks more difficult, the level of wage arrears jumped by 93%.

Internal Affairs Officer Assassinated in Dagestan

Dec. 30 (EIRNS)—Dagestan, in the Russian North Caucasus, was destabilized with the Dec. 29 assassination of Gen. Maj. Valeri Lipinsky, deputy commander of Russian Internal Forces in that area. His car was attacked, and his wife and a friend were wounded by gunfire. Lipinsky was formerly in charge of special operations against insurgents in the Russian North Caucasus.

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