Wednesday, November 07, 2007

Despite sweet words..RosUkrEnergo stays...

"Today's gas import scheme [for importing three-quarters of Ukraine's gas needs from Central Asia and Russia via monopolistic trader RosUkrEnergo] is dubious from the the ethical point of view," said president Yuschenko in an interview several days ago.

Even chairman of Gazprom's board of directors, Dmitriy Medvedev, one of Putin's closest buddies, recently spoke of the possible liquidation of RosUkrEnergo. But, as with many matters in Ukraine, reality is something quite different.

Ekonomichyeskiye Izvyestiya reports that by the end of the week the price of gas for Ukraine for next year will be fixed, but that the annulment of the agreement of 4th January, 2006, whereby RosUkrEnergo was nominated monopolist intermediary for supplying gas to Ukraine until 2011, will not be considered at all.

In spite of statements by President Victor Yushchenko that negotiations on the price of gas for Ukraine must be conducted at intergovermental level, the big decisions will be made by people behind Gazprom, the Ukrainian state gas company Naftogaz Ukrainy, and Swiss-registered middleman RosUkrEnergo. [RUE is 50% owned by Gazprom, and 45% and 5% by Ukrainian front-men Dmitriy Firtash and Ivan Fursin respectively].

'Gazeta po Kyevski' is puzzled why Yushchenko today met Fuel and Energy minister Yuriy Boyko, National Security and Defence Council head Ivan Plyushch, and Minister of Foreign Affairs Arseniy Yatsenyuk, and suggests it was to give secret directives to Boyko before the minister goes to Moscow and the price of Russian gas for 2008 is finalized. The deputy head of the pressa's secretariat also attended. All those present left the encounter without comment.

Yesterday Gazprom had announced that Ukraine's mysterious $2 Bn gas debt had been paid off, but how this huge debt had been allowed to build-up in the first place is unknown. And why is the president entrusting Boyko, a very shady character to say the least, and now a PoR deputy-elect, on such a vital mission? They probably want to sort out gas supply deals with Gazprom/Kremlin before [or just in case] Tymoshenko becomes prime minister again. She has vowed to clean up Ukraine's entire shadowy gas procurement business.

It was Tymoshenko's loyal adjutant Oleksandr Turchynov's investigations in September 2005 when he headed the SBU, into allegedly fraudulent practices involving the transport of Turkmen gas to Ukraine by two companies, Eural Trans Gas and RosUkrEnergo, that eventually led to president Yushchenko dismissing prime minister Tymoshenko and her entire cabinet to the dismay of orange supporters.

RosUkrEnergo is just too efficient and useful a siphon mechanism to be scrapped..

Sweet words butter no parsnips


elmer said...

Yushchenko has made many statements about getting rid of corruption.

What do "they" have on Yushchenko?

And who might "they" be, that have such a hold on the government?

The King or Queen of England used to give out "patents" or monopolies for assorted business ventures. The Crown, of course, would get its cut.

I did not realize that such a system still existed - in Ukraine.

Except that the Crown is not getting a cut.

What kind of hold do Firtash and company have, that this can be allowed?

elmer said...

May I suggest the following article? And I would be very interested in your take on it.

I've pasted in a small excerpt from November 1, 2007, below.

Capital flight: Ukraine’s gas price controls push US firm out
By Tammy Lynch
Senior Fellow
Institute for the Study of Conflict, Ideology and Policy

In the midst of Ukraine’s ongoing political negotiations to create a new government, a number of worrying signs for the country’s potential investors have gone almost unnoticed internationally. During the last two weeks, an independent US energy firm chose to leave the country, while a military-style raid on a major oil refinery called into question the country’s ability to enforce the rule of law.

Cardinal Resources
On 30 October, Cardinal Resources plc announced plans to sell its Ukrainian assets. The US-owned corporation was one of the first independent oil and gas exploration firms to invest heavily in Ukraine 10 years ago, drawing largely from US investors. Its experience speaks volumes about the difficulties of working in an environment that provides no legitimate avenues for influence on government decisions and no clear rule of law.

According to Cardinal CEO Robert Bensh, his company’s exit from the country is necessary because government price controls and increased fees make it impossible to earn a profit – or even to break even. The company, he said, “can’t generate any revenue because of capped prices.” (1)


Kolomoisky vs. Firtash
This drop in revenue has allowed fellow oligarch Dmitro Firtash to gain a foothold in Kolomoisky’s interests. Firtash controls the gas distribution company Ukrgazenergo—a subsidiary of gas intermediary RosUkrEnergo—and Ukrnafta’s direct competitor. His interests are primarily co-owned with Russia’s Gazprom.

Firtash has pushed in the last year to dominate Ukraine’s entire gas system, from extraction to production to distribution. The government’s new regulations have (possibly unintentionally) assisted him, as his international gas sales have cushioned his companies from the cap on domestic prices. (12)

All of this reportedly has forced Kolomoisky into a deal. Firtash now is said to have taken over the controlling share of Ukrnafta. This information could not be confirmed. If it is true, one company, backed by Russia, may now control Ukraine’s entire gas system, with only the pipelines remaining clearly under state control. The most important effect of Decree 31 may be a lessening of the already limited competition that existed in the gas sector.