In October, the World Bank forecast that Ukraine's 2014 GDP will fall by at least —8%. That now appears to be a floor for the decline, as the economy has continued to further deteriorate rapidly. At the start of 2015 the situation has become dire. Ukraine's central bank foreign currency reserves are now equal to less than one month. Meanwhile Ukraine's own currency continues to decline in value, its export earnings fall, and credit is quickly drying up.
The latest IMF mission that visited Kiev before the New Year break confirmed fears that Ukraine will soon need an additional $15 billion loan. That additional funding was also confirmed by a USA White House spokesperson who, in response to a press query, admitted a new package was coming and that the USA would participate. The IMF is therefore, in recent weeks, in the process of implementing its ‘Plan B' for restructuring Ukraine's economy. In anticipation of providing more money, Plan B means "front-loaded implementation of reforms", as the IMF's December 13, 2014 press release noted. That in turn means more aggressive restructuring and even more direct control of Ukraine's economy.
In the past, the IMF has allowed a host country to implement the plans and restructuring details it defines as necessary. The IMF lays out the program; the host country implements-under the direction of the IMF mission team of technocrats. However, this time it appears the IMF-and the European and American interests behind it-are demanding that its own more ‘reliable' western managers directly manage the IMF program implementation.
After a flurry of IMF missions back and forth to Ukraine in November, on December 2 the Poroshenko government therefore agreed and appointed two western shadow bankers-one from the USA and one from Europe-to its two key economic positions of Minister of Finance and Economics Minister-to ensure that restructuring now occurs more rapidly, more aggressively, and to the fullest benefit of western economic interests.
In an unprecedented move, Natalie Jaresko, a USA citizen and current private equity firm, Horizon Capital, CEO was appointed Ukraine Finance Minister; and Aivaras Abramavicius, a Lithuanian with past employment ties to Swedish and German investment banks and, like Jaresko, educated in the USA, was appointed Ukraine Economics Minister.
Who is Natalia Jaresko?
Jaresko is not just a shadow banker, the CEO of the USA, Chicago based, private equity firm, Horizon Capital. She began as a former official of the US State Department, a chief of the economic section of the US Embassy in the Ukraine in the early 1990s. Jaresko was, as they say, ‘in the right place at the right time', when President Bill Clinton in 1995 set up the USA government funded, ‘Western NIS Enterprise Fund' (WNISEF), a USAID $150m fund to promote USA and western investments into the then newly created Ukraine after the Soviet Union breakup. WNISEF specifically targeted Ukraine and Moldova for western investors. Clinton appointed Jaresko to the WNISEF, along with several other ‘private' bankers who together would operate WNISEF on behalf of the US State Department. Jaresko became WNISEF's president and CEO in 2001.
As a new Clinton-appointed director of WNISEF in 1995, Jaresko lost no time in quickly leveraging WNISEF to create her own private equity firm targeting investments into Ukraine and other former East European Soviet republics. In 1995, according to Bloomberg News, at the same time WNISEF was established, Jaresko and two other Chicago investors, Jeffrey Neal and Mark Iwashko, together founded Horizon Capital, a US private equity firm. Horizon Capital thereafter managed WNISEF, extracting millions in fees over the years since 1995.
Around the time of the ‘orange revolution' in 2005, Jaresko and Horizon subsequently set up another fund within Horizon, called the ‘Emerging Group Growth Fund' (EGGF). Today Horizon, WNISEF, and EGGF coordinate their investment activities throughout the Ukraine-Moldova and beyond, including Belarus.
In her current role as Finance Minister, Jaresko may be in a unique position to indirectly funnel the most lucrative Ukraine investment opportunities and Ukraine company acquisitions to her Horizon Capital private equity firm.
Who is Horizon Capital?
Horizon Capital, like all private equity firms, not only seeks deals on its own, but also functions as a conduit to other big investors and shadow banks. Horizon will arrange and broker the ‘deals' for big USA finance capitalists to purchase Ukrainian companies, in return for fees and for sharing spin-offs and sell-offs in the future.
Who Horizon will likely benefit is suggested by its Board of Directors' many other USA corporate connections. The board members have interests and ownership in scores, perhaps hundreds, of other companies in the USA. It will be easy for them to put these companies in touch with Horizon's Kiev offices which in turn no doubt will be in constant contact with Jaresko. She apparently plans to retain her position as CEO of Horizon even as she functions as Finance Minister. Jaresko and Horizon need not consider any of this a ‘conflict of interest'. Horizon need not directly invest or acquire companies; it will be the enabler-broker for the real investors back in Chicago and the USA. Jaresko will suggest the relationships, Horizon set them up, collect fees, and put the right USA capitalists in touch with the ‘right' Ukraine businesses.
A closer look at Horizon's Board of Directors reveals the likely USA companies, banks and investors who may directly benefit from their Horizon Capital-Jaresko connection:
Board director Patrick Arbor has long time connections with Chicago banks, USA commodity producers, options and futures traders. Director Whitney Macmillan with the giant USA agribusiness firm Cargill. Directors Robert Cotton and Richard Arthur with USA defense companies, like Hughes Electronics and Lockheed-Martin's naval and submarine electronics divisions. Horizon co-founder Jeffrey Neal, held long time CEO and senior positions with global investment banks and Merill-Lynch, now a subsidiary of Bank of America. The other Horizon co-founder, Mark Iwashko, co-founder with Jaresko in EGGF, now independent, has extensive holdings and connections in mortgage banking and industrial manufacturing. He is also chairman of the Ukraine real estate firm, Dragon Ukraine properties PLC'.
Not coincidentally, agribusiness, naval construction, finance & banking, construction, and defense sales to Ukraine will prove among the ‘hot Ukraine investment opportunities' as the USA deepens its economic and political penetration of the Ukraine in the months ahead. Horizon and its investor connections in the USA are thus well-positioned to benefit from Jaresko's key role as Finance Minister.
Poroshenko's other ‘foreign' appointment of Aivaras Abramavicius, a Lithuanian with similar deep connections to German and Swedish west European hedge funds and bankers. He'll serve a similar role of ‘conduit' no doubt, on behalf of western European economic exporters and importers.
Together, Jaresko and Abramavicius will function much like western ‘economic viceroys' (in the British 19th century imperialist tradition), determining who gets the IMF money, who gets connected with western bankers and investors, who gets investments and acquisitions from western corporations-in short who benefits (and who doesn't) from new western economic ties now being deeply forged in Ukraine.