Working on the railroad..

I have already blogged several times about how quickly 'Donetski' are moving 'their men' into positions of power following their recent political successes, despite Yanukovych declaring at his first press conference as PM. "Professionalism does not have a color..".

Ukraine is a large country with few motorways, but with a large heavy industry sector, so the state railway administration, 'Ukrzaliznytsya', [UZ], plays a vital role in the Ukrainian economy. The Donetski have wasted no time and last week tried to replace the current head of Ukrzaliznytsya, Vasyl Gladkikh with one of their own, PoR deputy Volodymyr Kozak.

Because Gladkikh is on holiday, according to Ukrainian employment law, he cannot be legally kicked out, so Kozak has been appointed 'zamgendyrektor', but there is little doubt he will get the top job soon.

Kozak was the general director of a large Donetsk corporation - 'Interregional Industrial Union', one of the business structures of Rinat Akhmetov, which also includes freight expeditor 'Lemtrans'.

An article in the latest 'Bez tsenzury' periodical describes the shenanigans and the 'cold war' that have gone on between UZ - which they call it 'a state within a state', and their big industrial customers. It provides an example of the turf wars and asset grabs that have characterized Ukraine's recent industrial past.

In early 2003, the head of UZ, Heorhiy Kirpa, [committed 'suicide' in late December 2004, remember?] opposed by the then PM Yanukovych, but supported by pres Kuchma, significantly increased tariffs for transportation of freight. In response, the metallurgists of Donbas and elsewhere, increased the price of products, in particular rail-track, railcar wheel tires, points etc. sold to UZ.

The min of Transport's riposte was to purchase these and other essential products abroad. The 'metallurgists' then sought an alternative to UZ - Lemtrans.

In 2004-2005 this company was at the center of a big scandal which involved the unsanctioned transfer from UZ to Lemtrans of nearly 4,000 special purpose railcars including those for transporation of metal ores.

In the middle of 2004, when Yanukovych was still PM, the min of Transport and UZ signed an agreement to transfer 13,600 railcars to two private companies - Lemtrans and Ukrtransleasing. At the same time the cabinet of Ministers agreed to reduce transportation tariffs for heavy cargoes to operators using their own, or leased rolling stock. The net result of all this was a loss to UZ of about $50m. plus the loss of railcars worth about $100m.

About a year ago a court adjudication supposedly settled the entire matter, and an agreement was signed between the Donetsk city council, Akmetov's SCM, and Lemtrans. The railcars were to be returned, but to this day are apparently still in the hands of Lemtrans.

Meanwhile minister of Internal Affairs, Yuriy Lutsenko, is investigating fraud amongst the top echelons of UZ involving suspicious tenders, and charitable donations. Lutsenko has complained that Gladkikh threatened a rail strike if he did not 'back off ' with his investigations, but added that Yanukovych has given him the 'green light' to continue..