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This paper presents the design of a variable inductor with a rotational magnetic core whose position is controlled in a closed-loop system. This magnetic structure facilitates the impedance changes which may be used for load balancing, harmonics elimination, transient response improvement, and as a controlled reactor in static VAr compensation (SVC). The design of the inductor and analysis of its impedance change caused by positioning a movable element are carried out by using the finite element method. As a result, the variation range of the impedance is determined. The proposed variable inductor is compared with a typical SVC reactor. The results show good performances in static var compensation with higher reliability and no harmonics generated. For closed-loop control, a secondorder sliding mode controller is designed for position control of the rotating core via a DC motor. Simulation results of the proposed system present highly robust and accurate responses without control chattering in face of nonlinearities and disturbances.