More Than Just Gas: Is This Natural Resource The Reason For The Ukraine Civil War?

Ukraine coal

More Than Just Gas: Is This Natural Resource The Reason For The Ukraine Civil War? (ZeroHedge, Sep 18, 2014):

Earlier today, we got a definitive confirmation that when Obama was talking about “costs” when jawboning on the ongoing Ukraine civil war, he envisioned not only Germany, and thus Europe, both of which are teetering on the edge of a triple-dip recession due to Russian sanctions, but Ukraine itself. The reason: the Ukraine economy appears to have ground to a halt following an overnight report that the war-torn country’s industrial output plummeted 21.4% Y/Y in August, above the 18% estimate, and some 12.7% on a monthly basis. As the chart below shows, this was the biggest drop in industrial production since the global crisis of 2009 and followed a 12% fall year-on-year in July.

20140918_ukr3

As the FT further added, according to an EBRD forecast earlier today, the Ukrainian economy will contract 9% this year, a far greater contraction than assumed in the IMF’s bailout (odd how that always happens). Accordingly, this “makes sustainability of Kiev’s government debts much more doubtful, and has sparked concerns that the country will eventually be forced to default and restructure.”

As skepticism grows that Ukraine will be the next Greece, only without the backstop safety net of the EUR currency, bondholders are starting to get skeptical, and overnight the yield on Ukraine bonds due April 2023 slid to 10.61%, the highest in 4 months on rising fears of a default.

20140918_ukr4

And while the collapse, in either the economy or the bonds, were not surprising and were predicted here and many other places, what did seem out of place was the following observation by Reuters:

The statistics office said the main industries of Ukraine’s Donetsk region, one of the areas where the war is most intense, had suffered, with coal extraction down almost 60 percent and steel production down by 30 percent.

In other words, while the most important commodity for Europe is gas, whose supply Russia largely controls on the margin, for Ukraine the one commodity, located deep within the perimeter of the raging civil war, and which it desperately needs to regain access to to stop its economic collapse, is the following (courtesy of Stratfor):

Ukraine coal

Which begs the question: are the massive stores of coal in the Donetsk region the main reason why Russia continues to support a civil war in just that region, a war which with every passing day means the Ukraine bankruptcy, and inevitable regime change, is also one day closer?

2 thoughts on “More Than Just Gas: Is This Natural Resource The Reason For The Ukraine Civil War?

  1. Wars ruin any economy, thank the US and Russia.
    The US is to blame, it has no right to be there.
    We need leaders who care about our home, not just foreign riches.

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