Thursday, January 31, 2008

Bombshells in war between Tymo and Yush

The war of words and tension between president Yushchenko and prime minister Yulia Tymoshenko has just been ratcheted up significantly, yet again.

In the past, whenever Tymoshenko was asked the inevitable question: would she be standing for president in the 2009/10 presidential election campaign, she would always give a non committal: 'Let's wait and see' reply.

But in Brussels yesterday she said: "If our co-operation with Viktor Andriyevych Yushchenko will be harmonious, balanced, if a unified common approach to the solution of problems can be demonstrated, then there is no sense putting forward two candidates from the democratic coalition. In that case, in my limitless love for Ukraine, I can support Viktor Andriyevych Yushchenko once more. But I would want this to be a two-way street."
Quite an innocuous statement, it would seem.

But no. The response from the president's secretariat has been swift, brutal, and 'way over the top'.

Viktor Baloha, head of the secretariat has issued a statement posted on the official presidential secretariat's website: "Declaration on support for Viktor Yushchenko in the next presidential elections may be explained by their authors' attempts to gain political gravitas for themselves - Viktor Baloha"

"The leader of the presidential secretariat of the president of Ukraine Viktor Baloha has called all kinds of expressions on possible support for Viktor Yushchenko in the next presidential elections, in event of him carrying out a series of preconditions, as being "without reason" and "excessively self-confident".

In Baloha's opinion, such declarations are an indication of an electoral false start by political forces..or they mean their authors are attempting to gain political weight by putting themselves on the same platform as the Head of State. Two years before the election someone wants to play on electoral strings... similar declarations can be spoken of in the context of the well-known axiom that a true statesman cares about the interest of his country, but a politician is bothered only about the next elections.

The determination of V. Yushchenko to counteract attempts to reanimate political corruption in the higher echelons of the authorities...are met with deaf resistance by those whose corporate interest do not coincide with notions of 'law', 'honesty', 'morals', and 'responsibility'. For this reason the naphthalene idea of impeachment has been resurrected....It cannot be excluded that in order to resist the president, the most unexpected political configurations and unions are possible."

There is more of this agitprop 'drivel' there too.

LEvko says there's no knowing where this childish Punch and Judy show will lead...and there is no one to bang people's heads together..

p.s. A brief interview with Tymoshenko on Euronews here

Wednesday, January 30, 2008

Punch and Judy show continues

President Yushchenko has all but accused his prime minister Yulia Tymoshenko of fixing the sale of Ukrainian power utility companies to the benefit of her allies, as part of her privatization campaign.

This is a most serious escalation in their long-running Punch and Judy show, and a 'fiery' riposte is awaited from her by Ukrainian journalists.

The "4post" website outlines their main points of disagreement in an article entitled:

"Yushchenko and Tymoshenko on the path to war - from cold, to hot"

"It seems as if the awaited conflict between the President of Ukraine Viktor Yushchenko and prime minister Yulia Tymoshenko predicted by political experts, has begun. After the government failed to satisfy the president's secretariat's request to affirm the introduction of a packet of privatization bills in the Supreme Rada, Viktor Yushchenko has decided to escalate matters by accusing Tymoshenko of intenting to privatize a number oblenergoes in an underhand way.

Tymoshenko has thus far not responded to the statement of Head of The State, but it is obvious, that the beginning of public 'polemics' between the President and the prime minister is only matter of time.

There are three main areas of disagreement between them:

Tymoshenko wants receipts from privatizations to go to into social welfare programs, into return of bank savings, increases in pensions, state employees wages etc. Yushchenko wants this money reinvested in economic development schemes, introduction of innovations, purchase of contemporary technologies, etc.

Tymoshenko wants privatized enterprises, whose owners does not fulfil investment agreements, to be returned to government ownership by order of the KabMin or State Property Fund, with no refund for the investor. Yushchenko says that the return of such enterprises to state ownership should only take place after a court ruling.

The premier minister has publicly declared that in her opinion, Ukrainian law courts are so corrupt that their decisions cannot be relied on, so the cabinet of ministers and state property fund should not be bound by them. The faith of society in the legal system is already rock-bottom so where this will lead is anyone's guess.

Finally Tymoshenko is adamant that intermediaries must be removed from the Ukrainian-Russian gas trade, the price for transit of Russian gas into Europe must be increased, and consequently all agreements on the delivery of gas to Ukraine, and its transport through Ukrainian territory, must be reviewed. Yushchenko has warned that such a radical position by Ukraine in relations with "Gazprom" could have unpredictable consequences, and so the price for transit of Russian gas should not be increased, and "RosUkrEnergo" should be removed only after agreement with "Gazprom". In gas questions neither side seem to be willing to seek compromise.

The article ends by declaring that when Yulia Tymoshenko digs up her tomahawk - it always produces an unsurpassed show."

In whose back will it be buried again, I wonder?

p.s. Punch and Judy shows traditionally include a crocodile with a string of sausages in its jaws, a policeman, a clown, a baby, etc. I will leave it to the reader to decide who these represent in Ukrainian politics' dramatis personae.

"The stereotypical view of Punch casts him as a deformed, child-murdering, wife-beating psychopath who commits appalling acts of violence and cruelty upon all those around him and escapes scot-free – this is greatly enjoyed by small children..."

[sorry about the bad attack of mixed metaphors.]

Tuesday, January 29, 2008


Watch Sunday's ICTV interview with Yulia Tymoshenko here. Her burning sense of injustice about the rigged privatization of many of Ukraine's most valuable enterprises, is almost palpable.

And contrast this with photos of Yushchenko [and family] hobnobbing in the rarified atmosphere of Davos with some of the the very people who benefited most from these blatantly rigged privatizations.

Monday, January 28, 2008

Economist on gas, NATO

Check out this article, entitled "Pipedreams - America seems to care more than the European Union about eastern Europe", from the current 'Economist'.

It covers some themes I have mentioned in several postings lately, and also includes quite a good map of the main European gas pipelines.

Sunday, January 27, 2008

Europeans may not be so keen on Ukraine's MAP

Today's "Gazeta po Kiyevski" prints an enlightening interview with Valentina Badrak, the director of the center of army, conversion and disarmament studies. She explains what the Membership Action Plan [MAP], written by Ukrainian President, PM, and VR speaker to the general secretary of NATO, is all about, and its potential threats to Ukraine.

" Signing MAP does not mean that Ukraine will soon definitely become a member of NATO. The process can drag out ten or more years. For example, Albania and Macedonia submitted their plans in 1999 but they still haven't joined NATO because they are not ready.

If NATO, at the summit in Bucharest, approves Ukraine MAP, then this will serve as the signal that they want to see that country in their ranks. The difference from previous years will be the fact that the alliance's leadership will express its position officially, not just at the level of statements from diplomats. Incidentally, the program of co-operation of Ukraine-NATO, conducted in 2007, practically hardly differs from the MAP.

The MAP takes the form of a number of measures.

First of these is an information campaign explaining to the population what NATO is really about. Right now about 90% of Ukrainians know little of this organization. When the Czech republic submitted their MAP, only 10% of its population were in favour of joining. But afterwards it was more than half.

In the second place, MAP will accelerate the rearmament of the obsolete Ukrainian army. It will allow the country's military enterprises to buy foreign technologies and licences. It will allow Ukraine's arms industry to compete better in world markets where it has been slipping back. [In the past it was considered joining NATO would be harmful to Ukraine's miliary armaments complex because it is so closely linked to that of Russia - the proposal here is that this no longer the case..LEvko]

It is necessary at the same time to understand: two centres of the influence are fighting over Ukraine: Europe/USA and Moscow. But this seriously complicates the prospects for the entrance of Ukraine into NATO.

Let us take this example. Bulgaria and Romania quite rapidly became the members of NATO, since they were well supported by Germany and France. However, in the case of Ukraine, knowing the hostile attitude of Russia to Ukraine's possible membership, the large European countries do not want to complicate their relations with Moscow. A not inconsequential factor is their dependence on Russian gas. Therefore the USA's stance is very significant, and at the moment that country is quite favourably inclined to Ukraine."

James Sherr, who seems to have sight of 'the MAP letter' considers it to be "very strange", and Ukraine's "interest" in joining NATO is expressed in a "reserved style". "For Ukraine, it would be understandable not to link all its hopes, and particularly all of its efforts, with success in Bucharest of this initiative." [If anyone knows where Sherr's article can be read in English, please let me know.]

LEvko's view is that the current crisis in Ukraine's parliament over this matter could have been stoked up deliberately by the President's secretariat in order to sow disarray and hasten the formation of a broad coalition. [see previous blog]

There is not much else for the opposition to bash the current government with. Even the 'handbags at ten paces' between Lutsenko and Chernovetsky may not have that much political mileage. Lutsenko is completely out of favour with the president, and Chernovetsky is not flavour-of-the month with PoR either. Ukrainiana has an excellent posting on the escalation of their spat.

[A videotape of the Lutsenko/Chernovetsky 'dust-up' atthe NCDC meeting may be in the hands of the president's security officers, but could be used at a later date, if required, to discredit Lutsenko. He is now just too close to Tymoshenko for pres's liking.]

p.s. Putin's latest successes in spreading the Kremlin's influences over the EU's energy markets, and tightening control over Caspian oil exports are described in detail here [Bad news for Odessa-Brody, I'm afraid]

Friday, January 25, 2008

Bad t-t-t-timing

Tomorrow morning the VR is supposed to be reconvening, but PoR deputies will most likely block any proceedings by "rearranging" the chairs and tables again in the session hall. They are highly disgruntled because President Yushchenko, Prime Minister Tymoshenko, and VR speaker Arseniy Yatsenyuk signed a letter "calling for consideration on Ukraine's entry into the NATO membership action plan" during the NATO heads' summit in Bucharest later this year.

Information that such a letter was sent dribbled out at U.S. senator Richard Lugar's press conference when he visited Kyiv last Tuesday,

There is a last-minute meeting scheduled between opposition leader Viktor Yanukovych and VR speaker Yatsenyuk tonight. PoR are demanding that the full text of the letter, written to NATO General Secretary Jaap de Hoop Scheffer on 11th January 2008, be revealed, and are also calling for their supporters to picket the VR, the presidential secretariat, and the KabMin tomorrow at 9 a.m. Nevertheless speaker Yatsenyuk rather optimistically hopes that the VR will function "constructively" tomorrow.

Today's "Obozrevatel' carries a story entitled: "There is such a party - [called] the President's secretariat", describing how the entire matter of "the letter" has been bungled, particularly by the secretariat; but explains that there may be ulterior motives for this.

Some paraphrased or loosely translated portions:

"The ease with which our so-called political elite drags society into conflicts, yet again illustrates that they are not capable of anticipating the consequences of their decisions.

The need for writing this letter has been belatedly explained, but its contents have not, giving rise to many rumours and much speculation. There has been no explanation why it is that Ukrainians only got to know about the letter from a U.S. senator, and not from its signatories, several days after it had been sent.

It looks as if the prime minister and speaker have been 'set-up' by the strongly pro-NATO president.

VR speaker Yatsenyuk is going to find his job even more difficult now - the VR has hardly started to operate in any systematic way, and the ruling coalition has the slenderest of majorities. This latest flare-up was the last thing he needed.

PM Tymoshenko is highly pi$$ed about about all of this too. Any personal gains in popularity she may have made due to reimbursement of Oshchadbank savings to millions of savers will have been lost, particularly in the Eastern and Southern regions of the country. Being despatched to NATO headquarters by the president next week does not help at all. And there are more similar controversial proposals from the president to come.

Some observers consider (with a worrying sense of 'deja vu') that a 'parallel' cabinet of ministers is being formed under the roof of the National Security and Defence Council - a 'presidential party' which, together with some of the country's largest industrial moguls, could support him during the next presidential elections.

LEvko thinks signing such a letter to NATO was inopportune to say the least, particularly at a time when perhaps less than 20% of the population support joining that organisation; when important legislation needs to be pushed through parliament (on at least some of which there could be a degree of unanimity); and when there are delicate negotiations to be held with Russia on the gas business.

"That's another fine mess you've got me in Stanley"

p.s. Yanukovych met U.S. Assistant Secretary of State for European and Eurasian Affairs, Daniel Fried today.

And thanks to everyone for their authoritative comments to my last few blogs.

Tuesday, January 22, 2008

Who's pipes will be running on empty?

Last week, during Putin and Medvedev's visit to Bulgaria, the South Stream gas pipeline project under the Black sea got the green light. When complete, it will enable transportation of Russian and Central Asian gas to southern Europe, bypassing Ukraine.

From what I have seen and read, the significance of this pipeline has not registered in a major way in the Ukrainian media, but this EDM article has certainly picked up on it. Here's a quote:

"The South Stream pipeline is a hugely...complicated project in technical terms, but the most obvious question about it is where the gas would come from. Neither Russia nor Central Asia has the 30 billion cubic meters a year that would be needed in the next 5-7 years, so the only logical answer is that Moscow plans to reduce its gas transit through Ukraine. The same logic applies to the Nord Stream line to be built across the Baltic Sea, and these two pipelines would leave Ukraine with transporting only about a quarter of Russia’s export to Europe compared with the three-quarters flowing before the gas war of early 2006. The Ukrainian leadership is acutely aware that its leverage is going to shrink, so the government of Yulia Tymoshenko is now desperately trying to negotiate a better deal by cutting out the ignoble intermediary RosUkrEnergo."

Everybody knows that Gazprom are struggling to maintain current gas production rates, and they need all the cash they can get their hands on to do this.

Here's a quote from Nadejda Victor's superbly detailed January 2008 Stanford University paper "Gazprom: Gas Giant Under Strain":

"Huge investments are needed to replace Russia’s dwindling supply of natural gas, and all the options for new production will prove costly and difficult. New fields in the far north and east of the country are distant from most of the Russian people and from export markets, requiring wholly new transport systems such as pipelines. Moreover, most of these new fields are located in extremely harsh environments where it is technically and financially difficult to operate. Gazprom controls neither the capital nor the technology needed for the task. The state-controlled company is already highly indebted and faces many expensive obligations that drain its coffers, such as supplying Russia and its friends with cheap gas."

The paper also gives details of the dreadful wastage of gas in Russia due to grossly inefficient electric generation plants, flaring off of billions of cu.m. of gas at oil fields, and absence of what most would consider normal housekeeping measures by domestic suppliers and consumers.

Constructing the two massive South and North Stream underwater pipelines means even less cash will be available to Gazprom to develop new Siberian and Arctic shelf gas fields and to improve efficiency. And someone's gas transit system will be running half empty. It's all quite depressing really.

Monday, January 21, 2008

Tymoshenko running on gas

Two stories, both on the Ukrainian gas business, caught my eye today.
'Gazeta po Kiyevski' carries a story entitled "Kremlin's hand pulled away from our gas reserves":"UkrGazEnergo" forbidden from developing the largest Odessa and Bezymyannoye [gas] fields.

Premier Yulia Tymoshenko continues to deliver her pre-election promise to exclude all gas intermediaries connected with Moscow from the gas market in Ukraine. Today the press-secretary of "ChornomorNaftogaz", Yuriy Avdeyev, reported that the company has torn up the agreement with "UkrGazEnergo" that provided them access to develop these two gas fields. Now the extraction of the strategic fuel will be undertaken by the state company "Ukrgazdobycha", a subsidiary of National Stock Company "Naftogaz".

This is the third blow delivered by Tymoshenko to "UkrGazEnergo", which is half-owned by "RosUkrEnergo"

On 8th January, the national commission for the regulation of electric power (NKRE) drastically chopped gas monopolist UkrGazEnergo's gas quota for the sale of gas in 2008 to 5 bcm per year. Now "UkrGazEnergo" has tens of billions of cubic metres of gas in underground depositories which it cannot sell.

And last week the KabMin delivered a second blow by sacking sack the deputy-head of "Naftogaz", Igor Voronin. He was simultaneously "UkrGazEnergo's" boss.
The estimated reserves of the above-mentioned gas fields are estimated to be 30 bcm of gas.

The second article, entitled: 'Gazprom gets a signal from Prodan', appeared in "Ekonomicheskiye Izestiya",

The minister of fuel and power Yuriy Prodan, during his meeting with the European Commission energy advisor Faouzi Bensarsa. found mutual understanding with Brussels on the question of modernization of the Ukrainian gas transport system [GTS]. He confirmed their readiness to put 2,5 billion Euro into its reconstruction, by 2013. [The (rather different) Brussels interpretation of this encounter can be read in English here ]

The Ukrainian GTS belongs to the state and is run by "UkrTransHaz" — a subsidiary company of "NaftoHaz". In terms of its capacity, extent and complexity it is the second largest in the world (second only to the Russian GTS). The enormous underground gas storage facilities, which make it possible to solve problems associated with seasonal consumption, make it unique. The Ukrainian GTS comprises 37,5 thousand km. of gas pipes, 71 compressor stations, and 13 underground storage facilities having a volume 32 bcm of gas. The maximum capacity of the system at entry is 288 bcm of gas per year, and at exit, 175 bcm, including 141 bcm to EU countries.

LEvko considers Tymoshenko's forthright stance does no harm to her political career. Yushchenko and Tymoshenko fell out 'big time' over gas in September 2005. Will history repeat itself?

Incidentally, the "New Europe" 'Energy Insider' column in an article entitled: "Tymoshenko gets rid of the energy middleman", considers:

"Moscow is unlikely to be opposed to the removal of RosUkrEnergo, an intermediary half-owned by Gazprom that sells Russian natural gas to Ukraine, because it will actually lead to greater transparency in Gazprom’s revenues in its dealings with Ukraine. The Russian gas monopoly has said that it is perfectly willing and capable of selling gas directly to Ukraine. "I don’t see the Russian side looking to defend this company because Gazprom wants to move towards greater transparency and to remove these question marks as it tries to push its way downstream into the European Union," Chris Weafer, chief strategist at Moscow-based UralSib Bank, told New Europe."

Update: From UNIAN

Tymoshenko to pay visit to Russia late in February

Prime Minister of Ukraine Yulia Tymoshenko will pay a visit to the Russian Federation late in February.
According to the President`s press-office, this was agreed at the today’s weekly meeting of the President with the Prime Minister of Ukraine.
Besides, Security Chief of Ukraine Raisa Bohatyryova will visit Russia on January 28-30. She will be busy with preparing the visit of President of Ukraine Victor Yushchenko to Russia, scheduled for 12 February.
This was agreed during the today’s telephone conversation of Victor Yushchenko and RF President Vladimir Putin.

Some reports claim it was president Yushchenko that prevented Tymoshenko from making her own trip to Moscow, planned for 23rd January. During this visit she was was to meet her opposite number PM Viktor Zubkov, President Putin, and Dmitriy Medvedev.
LEvko thinks next time at the NSDC meeting it may be Yushchenko that gets kicked, "in places that men often take pride in", and not Kyiv Mayor Leonid Chernovetsky..

Sunday, January 20, 2008

Russia and the West

I can heartily recommend James Sherr's weighty paper: "Russia and the West: a Reassessment", published just a few days ago. It can be downloaded here

There is a hell of a lot in it for readers to think about.

Particularly interesting is the section entitled 'Energy', and its analysis of the Russian-Ukrainian gas business.

p.s. Tonight in a television interview, president Yushchenko warned against making changes to the 'gas market', in particular re-evaluating the price for transit of gas across Ukrainian territory. His waffling comments must fill the hearts of those trying to get rid of parasitic intermediaries and obtain the best possible deal for Ukraine, with dismay.

"I have warned those people who are engaged with this question - the head of the national stock company [Naftohaz] in particular. I know it is fashionable to throw into public discussion the revision of this or other sector of the market, including the gas [sector]," said Yushchenko.

Saturday, January 19, 2008

Bad press for 'Regiony'

In the previous convocation of the VR, the Communist party of Ukraine [KPU] co-operated with Party of Regions and Socialists to form the Yanukovych-led Anti-Crisis coalition.

The communists obtained 27 seats in the new parliament in last Autumn's pre-term VR elections, but an interview with their leader Petro Symonenko in "Fokus" weekly exposes the wide rift that now exists between them and PoR.

Member of communist party Oleksandr Holub stated recently that the KPU was ready to sign agreement about a united opposition. Is this true?

No...The communist party cannot enter into an opposition coalition with the supporters of widening collaboration with the acting regime. The Party of Regions cannot be opposition. It was the supporter of liberalisation, reforms which are taking place in the country, it participated in agreements with the authority. In 2005, didn't Yanukovych did sign a memorandum with Yushchenko? Fact! In 2006, did he not sign the 'universal? Fact! Did he not conduct negotiations about the creation of wide coalition? Fact! Agreement on early elections – fact! What more can you say?

Why does the Party of Regions behave so peacefully in the Verkhovna Rada?

The national capital which is represented in PoR, is dependent on external factors: offshore companies, foreign banking systems and financial institutions and, naturally, the influence of Americans, who control all finances. In this situation the substantial part of PoR representatives' capital is located abroad, and it is possible in two minutes to accuse them of its unclean origin. To accuse them, and to immediately seize all these accounts. This is why they are obedient and do everything that is required of them.

More articles are appearing speculating on splits in Party of Regions. Quite astonishing, bearing in mind that the orange coalition in the VR has a cigarette-paper-thin majority of one. PoR are the largest party in parliament with 175 deputies. BYuT have 156, and NUNS 72.
Money for jam*

Rinat Akhmetov is an extremely smart and rich businessman, but perhaps not as smart as some British lawyers and solicitors who will probably earn many, many thousands of pounds for presenting, and winning, the Ukrainian billionaire's libel case against the Ukrainian news website 'Obozrevatel', in a the British High court.

'Oboz' did not contest the law suit, hardly surprising since the cost of mounting a serious defence in British civil court would have been hundreds of thousands of pounds. So, an easy 'pay-day' for Akmetov's lawyers..

A compensation hearing is to take place later this year to determine the appropriate award of damages. The total number of regular readers of 'Oboz' in Great Britain would probably fill at least all the front row seats on the upper deck of a London bus. I hope the learned judges bear this in mind.

Litigious wealthy people are often treated with suspicion too. But lawyers are unlikely to tell their clients this, are they?

*In England this means money easily earned.

Friday, January 18, 2008

Troubles in both orange, and blue and white camps

An indication of possible conflict and splits inside PoR are provided by whispers that Yanukovych may have recently disposed of all of his shares in the companies owned by his party's financial sponsor, Rinat Akhmetov.

Raisa Bohatyryova [considered to be an Akhmetovite and recently appointed as secretary of the National Security and Defence Council by the president] agreed to this move "not simply for his beautiful eyes," according to a source of "Novyi Region", adding, "Yushchenko has given clear guarantees, that Akhmetov and his business will be given immunity from any possible reprivatisatsion tricks of Yulia Tymoshenko."

"In this situation what use is Yanukovych to Akhmetov? He has not been needed for a long while. The guarantees of the inviolability of Akhmetov's SCM empire are provided at the level of Yushchenko. Therefore Yanukovych and his group, together with Mykola Azarov, have, in essence, found themselves in very deep opposition," he noted. Some analysts conside a "complete divorce" between Viktor Yanukovych and Rinat Akhmetov may even take place in the near future.

Much of Yanukovych's wealth may have been acquired during the period of his governorship in Donetsk, when the privatization of numerous enterprises took place and Akhmetov's wealth burgeoned. Yanukovych's eldest son Aleksandr was deputy to the director-general of "DonbassNefteProdukt", connected with Akhmetov. His younger son works in the construction business, and has project managed several hotels owned by Akhmetov. It can be assumed therefore that Yanukovych and members of its family, one way or another, made big money via a number of firms and companies linked to Akhmetov.

Matters are not much better in the orange camp where storms are brewing up between PM and President.

Yushchenko is annoyed that Tymoshenko will be visiting Moscow on 23rd January, days before his own visit there planned for 12th February. A spokesman for the president's secretariat considers Tymoshenko's visit 'pointless', adding Tymoshenko can start talks on gas only after receiving corresponding directives from the president. Communist leader Petro Symonenko has hinted the Tymoshenko's negotiations on gas deals with Russia may interfere with Yushchenko's own "schemes" in this business.

Yushchenko is also proposing new laws to 'beef up' his own powers vis-a-vis the cabinet, and tighten personal control over internal armed forces, again causing disquiet in some parts of the new ruling coalition, but maybe more on this another time.

The former defence minister, Anatoliy Hrytsenko, who was recently replaced by Yuriy Yekhanurov, and who is now head of the parliamentary security defence committee, has suggested that criminal immunity should be stripped from the president, as well as from VR deputies, "because he is subjected to much greater temptation to break the law." [Sour grapes for not being reappointed to his former position by the pres.?]

Another presidential secretariat man has proposed six oblenergo's [power companies] be excluded from the list of enterprises to be privatised by the government, and Luhanskteplovoz be added to the list. [Possible string-pulling here?]

President and his secretariat are fighting with the PM and cabinet over whose hands are on the steering wheel...

Thursday, January 17, 2008

Stanislav Belkovsky sniffs RUE gas

Stanislav Belkovsky, the controversial Russian political scientist [who recently claimed President Putin was the richest man in Europe and that he would leave power completely after the March elections], in an article in 'RIA Novosti' considers Yulia Tymoshenko to be "Lukashenko in a skirt", but as a partner-negotiator for the Kremlin, she is more convenient than Viktor Yushchenko, or even Viktor Yanukovych.

Belkovsky says relations between Putin and Tymoshenko cannot be defined simply, but that he should not be considered an absolute enemy of the Ukrainian premier. "Remember that during September 2005, immediately after Tymoshenko's resignation from the post of prime minister, Putin twice met with her; but after this, contact between them was broken. The question now is will Tymoshenko be able to renew [their relationship] to the previous level of mutual loyalty and trust ," questions Belkovsky.

According to him there are arguments for and against this course of events. "The main argument for is the figure of Viktor Medvedchuk, head of former president Kuchma's presidential administration (and a close personal friend of Putin and [Dmitry] Medvedev), and who supports Tymoshenko and is one of her main unofficial representatives in Moscow. Arguments against - Putin considers Tymoshenko has not kept any of her promises given to him in September 2005 during their informal encounter on the anniversary of the-then secretary of the Security Council of Russia Igor Ivanov, and subsequently at their joint dinner in the residence of the President in Novo-Ogarevo, near Moscow ", explained the political scientist.

Belkovsky considers that gas will be the main theme of negotiations of the Ukrainian premier in Moscow [during her visit next week]. Tymoshenko has long expressed a wish to reorganize Ukraine's gas import schemes, but it's clear that the basics cannot be changed. In order to preserve the price of gas for Ukraine below the Gazprom price, it is necessary to mix expensive Russian gas with cheaper Central-Asian gas; and to make up this cocktail, a mediator [i.e. RosUkrEnergo] is necessary. [LEvko considers this to be baloney]

He does note that in the Kremlin there are people who would like to see the back of the indermediary companies, but there is a considerable lobby of supporters in favour of them. It is not possible to underestimate the fact that the executive director of "RosUkrEnergo", Konstantin Chuychenko is a close friend from student days at university of the future President of Russia Dmitry Medvedev, which makes it possible to confidently assume that Medvedev is rather a supporter of the present system of trade in gas, than an enemy, concludes Belkovsky.

At best Ukraine and Russia may agree on the replacement of one intermediary company with another; but major change in the way the Ukrainian/Russian gas business proceeds will not change. If it did, the price of gas would increase to $230 dollars per thousand cu.m. or more, says Belkovsky.

ps. According to 'insiders', Ukraine may demand transit tariffs for westbound Russian gas to be increased from $1.7 to $9.32 /1000 cu.m/100km.

Tuesday, January 15, 2008

Tymoshenko's big gamble

I liked this 'broader view of the economy' article on the Ukrainian/Russian 'Unian' site, so I've paraphrased and translated some bits of it below:

The policies of Tymoshenko's government directed toward radical increases in wages, pensions, other social benefits, and the reinbursement of depreciated personal bank balances of former Soviet bank account holders, are commendable. But there is one but. The threat of inflation returning on the scale of the '90's is real unless state revenues can be increased substantially soon. So where is the money to come from?

According to the Ukrainian Ministry of Finance, revenues to the state budget grew in 2005 [the time when Tymoshenko was last in government] by 63% (from 51,8 billion hryven in 2004 to 84,4 billion hryven in 2005.). Reciepts of the state customs service increased by 73%; VAT receipts grew by 100%; and tax receipts on profits grew by 45%. The corresponding indices in 2004 were considerably lower, even though the rates of growth of GDP in 2005 was much higher (in 2004 increase in GDP was 12,1%, and into 2005 - 2,6%).

The increase in state revenue in 2005 was primarily from taxes applied to the profits of enterprises, particlarly those who exported a large portion of their production and had understated their profits, and, correspondingly, underpaid taxes to the state coffers. Many of these enterprises are in the mining and metallurgical complex (HMK) of Ukraine which provides about 40% of entire commodity export and about one third of the entire GDP.

In 2005, tax audits revealed massive illegal VAT reimbursements for fictitious exports, of about 5 billion hryven. Smaller businesses 'came out of the shadows' at that time following the orange revolution, and were more positively disposed to paying taxes. But after the 'round tables' with Yushchenko and Yanukovych and the coming to power of Yanukovych's government, small businessmen became disenchanted again, and returned to their old habits, as did the large industrial enterprises.

In the first quarter of 2006 large problems began appear again in the state budget, with large enterprises using offshore schemes to supress incomes. E.g. the portion of production that went through offshore schemes were: for Mariupol metkombinat 13%, Industrial Union of Donbas 63%, Alchevsk metkombinat 63%, Dniprovsk metkombinat 70%, Donetskstal 61%, Dnipropetrovsk metzavod im. Petrovskoho 74%, Zaporizhzha aluminium plant 82% etc.etc. [see source article for full list]

According to the ministry of finances' estimates, loss to the state budget from the off-shore schemes as a result of understatement of the true value of exports comprised, in the first quarter of 2006, 2,5 billion hryven.

'Mittal Steel - Kryviy Rih' decreased payment of tax on profits by half in comparison with 2005, the Interpipe corporation by half, Nikopol' ferro alloys - a ninefold reduction, Mariupol metkombinat - tenfold reduction. [Incidentally, many of the owners of these large enterprises are frequently seen 'brown-nosing' with the president and his followers at various charity bashes, Elton John concerts etc. So can you blame smaller businessmen and entrepreneurs for not paying taxes? ..LEvko]

After the appointment of prime minister Viktor Yanukovych, similar information was not published and one can only guess what has taken place in the last year and a half as regards non payment of taxes by major enterprises in Ukraine. At the same time there has been a massive inflow of capital into Ukraine, cynically laundered via offshore companies, under the guise of direct foreign investments. According to government data, in the second half-year of 2006, and in 2007 more that $2 billion of 'investments' have entered the country from Cyprus alone...

So specific reserves for filling the treasury''s coffers in 2008 exist, but this will not be as easy as in 2005. There will be resistance from large businesses; and smaller businesses will be less ready to co-operate this time, having been let down before. The new Ukrainian government will have to work especially hard to gain the trust of the people. Unless they see corruption tackled in the courts, tax administrations, police and customs service, the growth in tax revenues seen in 2005 will not be achieved. And if the authorities have not borne this in mind as they increase wages, pensions, allowances and benefits, then difficult times await the Ukrainian economy - either these will not be paid, or they will be clawed back, or the government will have to resort to the printing presses. All of these alternatives are obviously extremely negative.

The only thing that could help would be wide-scale privatizations (or reprivatisations), or large external loans.

It is obvious that Tymoshenko has taken a large risk - either she will succeed..or she will perish..Matters will become more clear by the Spring.

p.s . EDM have today posted a concise roundup of what Tymoshenko has done so far as PM

New ally for Yulka in battle to eliminate RUE

Tymoshenko's KabMin is to propose a seasoned politician, one of Ukraine's biggest industrialists, Vitaliy Hayduk, for the currently vacant position of vice PM resonsible for the Fuel-Energy complex. The proposal is no surprise. I have written a small biography on the man before.

Today's "Ekonomicheskiye Izvestiya" includes this story, parts of which I've translated below, entitled: "Tymoshenko will receive another deputy"

"Mr. Hayduk was vice-premier responsible for the fuel and energy complex [PEK] previously - in 2003, in the first government of Viktor Yanukovych. He also had experience as the head of fuel department during premier Anatoliy Kinakh's stint as PM (November 2001 - November 2002), and was first Deputy Minister of PEK in Victor Yushchenkos' government in 2000).

At the beginning of 1998 Hayduk was offered chairmanship of the newly-created National stock compay "Naftohaz Ukrainy", but he turned it down. As a result [the notorious] Ihor Bakay got the job.

In January 2006 Hayduk turned down the post of vice-premier of PEK, even though President Yushchenko stated in the interview on four Ukrainian television channels on 30th December, 2005, that he signed an edict appointing him. The document was never published. Hayduk says that he turned down the post after the conclusion of the January 4th 2006 agreement between the Ukraine and Russia "on regulating relations in the gas sphere", [during that winter's gas crisis], because of the introduction of RosUkrEnergo into the gas delivery scheme. RosUkrEnergo is controlled by Russia's "Gazprom", and Ukrainian businessman to Dmytro Firtash. "I do not see any possibility, under the given circumstances, of working at that post.." he said.

Hayduk and Tymoshenko are united in their dislike of RosUkrEnergo. They can combine efforts in government to remove it from the gas delivery scheme. On Saturday Tymoshenko confirmed her intentions to enter into direct relations with "Gazprom", and also to liquidate the internal gas market monopolist "UkrGaz-Energo", owned in equal shares by "RosUkrEnergo" and "Naftohaz Ukrainy", which supplies gas entering Ukraine from Russia.

Liquidation of "UkrGas-Energo" should positively influence the financial state of "Naftohaz". The minister of PEK, Yuriy Prodan, even before his recent appointment to this post, stated that at present, in essence, instead of "Naftohaz", it is "UkrGaz-Energo" [only] that operates in the [Ukrainian gas] market: the previous government created "specific additional conditions of profitability" for the latter.

"The profitability of UkrGaz-Energo is provided at the expense of "Naftohaz". We have substantially worsened the financial state of "Naftohaz", since it does not earn anything on the domestic market and cannot even obtain it's share of the activity of "UkrGaz-Energo", said Mr. Prodan.

Other factors which have lead to he [dreadful] financial situation which "Naftohaz" is now in will become known on 10th February, when the the inter-departmental verification commission investigating "Naftohaz's"financial-economic activity during 2006-2007 and headed first vice- premier Oleksandr Turchinov, completes its work. [Will criminal charges be brought against any of the company's bosses, LEvko wonders?]

Among Hayduk's priorities will be to ensure Caspian oil flows through the Odessa-Brody pipeline in the European direction. At the moment Russian-British TNK-BP Urals oil is transported in the reverse direction [for further transport by sea through the Bosphorous]. At the end of last week the chairmen of two Western Ukrainian refineries wrote a letter to the President, to the prime minister, and to the chairman of "Naftohaz" with a request to make a decision on the "averse functioning of the Odessa-Brody oil pipeline". [Hayduk has always supported transporation of Caspian oil northwestward though this pipeline.]

LEvko considers that for Tymoshenko removal of the gas intermediaries and dealing direct with the gas producing countries has become almost a crusade. But she may well have influential allies in Gazprom who would like to see the back of RosUkrEnergo too.

Monday, January 14, 2008

Tymoshenko' s plan for gas

Yesterday prime minister Tymoshenko told journalists that over last three years gas relations between Ukraine and Turkmenistan have been completely destroyed. Most of Ukraine's imported gas is sourced in Turkmenistan, but it sold to Ukraine via monopolistic middleman RosUkrEnergo.

Tymoshenko said that Ukraine envisages Turkmenistan as a reliable partner and a country which could ensure diversification of gas supply to Ukraine. She noted that her government intends to renew the high level of collaboration between Ukraine and Turkmenistan.

The premier also expressed a desire to renew direct deliveries of gas from Turkmenistan to Ukraine and eliminate the RosUkrEnergo and Ukrgaz-Energo intermediaries.

President Yushchenko seems to have rather different views in these matters. On 27th December he did not answer a question from journalists about the need for mediators in the market for deliveries of gas to Ukraine, and only advised those Ukrainian politicians who sometimes blame Russia, "to turn back to Ukraine" and to start up effective programs of energy economy in order to prepare the economy to adapt to European market prices.

Yushchenko stated that Ukraine already has the lowest price of the gas among the European countries - $179,5 per thousand cu.m at the Russian-Ukrainian border. [So there..]

Saturday, January 12, 2008

Who's robbing who?

Approximately 115 billion cu.m. of Russian gas transits westward over the territory of Ukraine p.a., over an average transit distance of 1090 km. Multiplying these numbers by the current transit rate of $1,7 dollars per 1000 cu.m per 100 km, the current total income for Ukraine from the transit of gas is $2,13 billion.

The authoritative periodical "Zerkalo Tyzhnya" consider a realistic European gas transit rate to be $9,32 per 1000 cu.m per 100 km. This would provide a total income from the transit of gas of $11,68 billion.

The periodical considers the 'European' price for imported gas to be $350 per 1000 cu.m at Ukraine's western borders, i.e. around $250 at its eastern borders.

By buying gas from monopoly supplier RosUkrEnergo at the current rate of $179,5 instead of a 'market' rate of $250 Ukraine saves about $4 billion, but is losing about $9,5bn on transit fees.

The Tymoshenko goverment has clearly got plenty of negotiation room. And the $2 billion Naftogaz default does not look that terrible.

The figures above give an indication of the the magnitude of kickbacks in this gas business.

"Zerkalo Tyzhnya" asks " can a state company, strategically important to the ecomomy of the country, which should be one of the main contributors to the budget, and which provides a fundamental portion of oil and gas transit routes to Europe, and also extracts nearly 90% of oil and gas in Ukraine, can be a loss-maker and have a financial deficit? Particularly at a time of record prices for oil and gas?!"

It includes this semi-cryptic paragraph in its conclusion:

The "Naftogaz" default is a serious problem and those responsible should be most ashamed of themselves. They can only hide from the reproachful gaze of the community in the "Mandarin" restaurant, in 'the building of the century' in Obolon, in the Emirates' office of "Petrogaz", and in the presidential suite of the Emirates' "Sail" hotel.

p.s. If anyone is interested in 'Petrogaz' just enter it into this site's search engine.

Update on Tymoshenko's squeeze on gas middlemen

In my previous posting I wrote about the new admininstration's efforts to cut out the non transparent middlemen who supply most of Ukraine's gas. By doing so the administration is treading on the toes of some of the most powerful people in Russia. Similar efforts in Summer 2005 caused president Yushchenko to sack Tymoshenko during her first stint as PM after just 7 months of her being in office.

UkrHazEnerho's response on their official website declares the company will fulfil all of its obligations to customers in supplying natural gas, "despite the attempts of the national commission for regulating electric power [NKRE] to destabilized the situation."

"We are forced to state that the groundless acts of the NKRE could lead to the non fulfulment of balance of supply and allocation of natural gas throughout Ukraine and to breaches in Ukraine's transit responsibilities."

[The English language version of their site is not yet up-to-date]

Europeans are getting worried about the gas which passes through Ukrainian pipelines to their markets already - see here and here. How far Ukraine's energy regulator could go to enforce reduced gas quotas to UkrGazEnergo is not clear.

Oh, and "Naftohaz Ukrainy's" creditors will have to be repaid eventually too...More on this at the excellent 'Kremlin Inc. blog.

p,s, Additional background info on UkrGasEnergo can be found in Vladimir Socor's February 2006 EDM article "UkrGasEnergo - a new Russian-Ukrainian venture to dominate Ukraine's gas market" here

Friday, January 11, 2008

Tymoshenko tackles gas

"Gazeta po Kievski' runs a story explaining how Tymoshenko intends to keep gas prices low for domestic consumers, while tackling the shady middlemen that supply gas to Ukraine.

Below are [loosely translated] portions:

Tymoshenko squeezes the Kremlin's arm - will cheap fuel for 'kommunalki' [municipal requirements] be obtained from the intermediary company "UkrGazEnerho's" reserves?

Today the first serious offensive by prime minister Yulia Tymoshenko directed against the gas mediators, connected directly with Moscow, took place. The national commission for the regulation of electric power (NKRE) declared, that on 8th January it has set the quotas for sale of gas for the monopolist "UkrGazEnerho" at 5 billion cu.m. per year. For the company, which had earlier sold 30-40 billion cu.m. p.a. to industrial enterprises - this will represent multimillion financial losses. Experts consider Tymoshenko can now provide cheap gas for a minimum of half a year to provide 'kommunalky' with cheap gas, obtained from the reserves "UkrGazEnerho", located in Ukrainian underground depositories.

Lustre of "UkrGazEnerho" [contrasts with] the poverty of "Naftohaz Ukrainy"

First a note about the mediator "UkrGazEnerho" itself. It was created as one of the conditions of the signing of agreement between Russia and Ukraine which put an end to the "gas war" of winter 2005/2006 when Russia closed off the gas valves.

"UkrGazEnerho" was founded by two companies - National Joint Stock Company "Naftohaz Ukrainy", and the [infamous] intermediary "RosUkrEnergo" (50% of which belongs to "Gazprom"). It was determined, that the company would concern itself [with the more lucrative] deliveries of gas to industrial users in the Ukraine. But how much gas it had the right to sell was not specified.

The ex-head of "Naftohaz Ukrainy" Aleksey Ivchenko, noted to 'Gazeta po Kievski', that in the spring of 2006, the NKRE issued a licence to "UkrGazEnerho" for the sale of 5 billion cu.m. of gas only. The remaining gas they had to sell to "Naftohaz Ukrainy".

However, elections took place soon after. Because of the [intractable] squabble between the "orange factions", Yanukovych's team came to power, and the Minstry of Fuel and Energy team changed. During August 2006 the same NKRE approved an increase of the gas quota that could be sold to "UkrGazEnerho" to 10 billion cu.m. This despite, as Ivchenko noted, in reality "UkrGazEnerho" was selling about 40 billion cu.m of gas to industrialists annually.

So we have the following picture: "Naftohaz Ukrainy" was selling expensive imported gas at reduced rates for municipal needs to provide hot water and heating for the population. And despite the fact that bills were being paid, money was disappearing to the intermediaries. As a result, debts of "Naftohaz Ukrainy" to "RosUkrEnergo" for the supplied Central-Asian gas were growing, as were the debts of the middleman to "Gazprom". The situation came to a head during the autumn last year when a "gas debt" of 2 billion dollars owed to Russia came to light. It was necessary to pay for this with our gas from Ukraine's underground storage facilities. During the summer "Naftohaz Ukrainy" had 8 billion cu.m. of gas stored. Now - this has 'gone', according to the new head of the National Stock comany Oleh Dubina.

[In contrast] the financial picture at "UkrGazEnerho" was excellent. Industrial consumers are forced to agree to buy gas at any declared price, considerably higher than the price for the population. And if bills were not paid in time, the principle "no payment - no gas", was applied. The company made multi-million profits, and as a result, the Russian "Gazprom" profited rather well too.

By giving approval to NKRE to "screw down "UkrGazEnerho", Tymoshenko solves several problems. First she provides 'recognition' to the businesses that supported her , and secondly there will be low tariffs for citizens' municipal services' gas consumption.

Firstly, the fundamantal portion of gas to industrialists will now be supplied by "Naftohaz Ukrainy", probably at prices lower than those proposed by "UkrGazEnerho". Furthermore, the industrialists will have an alternative, in contrast to the previous years.

Benefits from the innovations of lady Yu will be accrued e.g. by the Industrial Union of Donbass (ISD), headed by Vitaliy Hayduk. This is not for free - according to the information gained by "Gazeta po Kievski", they sponsored BYuT during last year's prematurely-called parliamentary elections. And Oleh Dubina, an associate of Hayduk, was appointed head of "Naftohaz Ukrainy".

Secondly, Tymoshenko has now, at the beginning of the year, started her campaign to displace intermediaries from gas deals between the Ukraine and Russia. This will ensure she will be better prepared for the complex talks with Russia on the price of gas for 2009.

Experts consider that lady Yu has acted correctly by tightening the screws on "UkrGazEnerho" gradually. But it does not deprive them of the license to sell gas, which could have caused an international scandal and heightened the desire of Russia to re-examine price for the current year. It is clear though that as a result of the quotas introduced, "Gazprom" will lose money, for which it will eventually present a bill to Tymoshenko.

Thirdly, Yulia Volodymyrivna has prepared a trap for "UkrGazEnerho" - the gas exists, but cannot be sold.

It's a simple scheme. There are approximately 30 bn cu.m. of gas in the Ukrainian underground depositories right now. If we believe the management of the National stock company, none of this belongs to Ukraine, i.e. the gas there is owned in essence by "RosUkrEnergo" and "UkrGazEnerho". Let's assume at least half - 15 billion cu.m. belongs to "UkrGazEnerho". But now they can sell only 5 billion cu.m. What can they now do with the remaining 10 billion?

An expert, Yelena Viter, notes export to Europe would be the most favoured version, but lady Yu can close off this path legislatively. Anyhow, transit pipes to the West are the property of the state.

The other option remains the sale of this gas to "Naftohaz Ukrainy" - at the low rates of 2006 as a fuel for municipal market. Everything is brilliant and simple. Not without reason has Yulia Voldymyrivna "froze" any increase in the price of the gas to the 'kommunal'shchikiv' for 2008, and also, therefore, tariffs to the population. Compensation from the budget will hardly cover any increase in the price of imported gas to 180 dollars per thousand cu.m.

While the authorities re-engineer their different gas schemes, which they themselves concocted, to us, to simple Ukrainians, only one matter is important - that the price of heating and hot water does not rise. What methods Tymoshenko acheives this by is of little interest."
The response from "UkrGasEnerho has been swift. An article from today's "Ekonomicheskiye Ivestia" entitled "NKRE has opened door to gas traders" provides details. Here are some portions:

The national commission for the regulation of electro-energy (NKRE) has decided to liquidate the monopoly of the joint enterprise "UkrGazEnerho" on the internal gas market by limiting the deliveries of fuel by the company at uncontrolled tariffs. Now instead of 32 billion cu.m of gas per year, UkrGazEnerho will only be able to supply its consumers with 5.04 billion cu. m.

Member of UkrGazEnerho supervisory council Andriy Halushchak considers that such limitations will lead to the destabilization of gas market, and that they are incorrect and could negatively affect the 'fulfillment of the gas balance'. At UkrGazEnerho they fear the decision of the NKRE means the terms of fulfillment of obligations on transit of Russian gas to the countries the European Union will be broken.

The NKRE justified the legality of their decision by the fact that UkrGazEnerho is a structure affiliated to "Naftohaz Ukrainy". According to Ukrainian legislation, the total share a business group possesses in the market for gas cannot exceed 35%. Taking into account the acting licences on the delivery of gas for other enterprises of "Naftohaz Ukrainy," the remaining volume of gas for UkrGazEnerho is 5,04 billion cu.m ".

The NKRE ruling implies that UkrGazEnerho will have spare gas, but the company will not will have the rights to deliver it to its consumers. According to the head of NKRE, Mr. Valeriy Kal'chenko, "The remaining volumes of gas UkrGazEnerho can be turned over to other suppliers at uncontrolled tariffs".

One expert considers the purpose of the actions of the NKRE is to create conditions that will stimulate revival of gas traders who will earn money on the resale of gas from the importer to end user. Because of this, its cost will grow.

LEvko says, as one door [or valve] closes, another one opens..

"All the rich people in Ukraine made their money on Russian Gas" - Ihor Bakai, 1998

Thursday, January 10, 2008

Cynical VR deputies

For many years parliamentary deputies have cynically bent the rules when voting in the VR by circumventing the constitutional requirement of personal voting by every legislator. Multiple voting by deputies is an everyday occurence.

Yulia Tymoshenko has often condemned such callous disregard of their responsibilities by deputies, even suggesting, in a proposed VR procedure ammendment in 2006, that a fingerprint voting system be introduced.

On 28th December last year, the Tymoshenko revised budget for 2008 was passed in the VR with the aid of 8 Communist votes, even though there were fewer than 200 deputies present for the vote, far below the 226 required to pass any legislation.

Tymoshenko herself was elected PM by a show of hands because the VR voting system was deemed to be unreliable, but now BYuT are in power, dignified parliamentary voting procedures [and plans for biometric data verification] can be quietly forgotten. What breathtaking, bare-faced cheek..

Tuesday, January 08, 2008

Segodnya on Bohatyryova

One of the most surprising political events that took place 2007 was the appointment last month, by President Yushchenko, of Raisa Bohatyryova, as Secretary of the influential National Security and Defence Council. She was #2 on the Party of Region's VR early election list, and is considered a leading member of Rinat Akhmetov's 'young Donetskiite' wing of PoR.

The appointment caused much dismay in the party's ranks, and there was serious talk of her being excluded as a turncoat.

Today's 'Segodnya' daily, owned by Akhmetov, includes this story. parts of which I include below:

"Bohatyryova sings Christmas carols with Yushchenko on her birthday

The head of the NSCD is 55 years old - she celebrated her birthday with her sisters from Kramatorsk [Donetsk]. On 6th January, "regionalka" ['Segondnya's' inverted comas] Raisa Bohatyryova, who several days ago received a gift from the President in the form of the NSDC secretary's chair, celebrated her 55th anniversary. 'Segonya' have discovered that Raisa Vasylivna [Bohatyryova] spent this evening with her family.

Greetings from the Secretariat

Several days before her birthday, the President's press-service had announced that two women would be invited to his traditional Christmas Eve dinner at his residence: Raisa Bohatyryova, and prime minister Yulia Tymoshenko.

Bohatyryova's press secretary confirmed to 'Segodnya' that she had flown to the President, but that this was during the day. Together with Yushchenko, she had visited a childrens' orphanage in Vorokhta [in the Carpathian mountains] and they had sung Christmas carols together with the President.

A source in the President's secretariat confirmed that that Bohatyryova spent some time at the presidential residence, where she was congratulated on her birthday by the Head of The State and the leader of presidential secretariat, Viktor Baloha.

Raisa Vasylivna's party colleagues did not forget to wish her happy birthday either, despite her recent "demarche" and disobedience. (As 'Segodnya' has already written, this despite the majority of "regionalov" expressing themselves to be against Bohatyryova accepting the proposal of the President and becoming leader of the NSDC, and the presidium of the party 'politsovyet' recommending she refuse Yushchenko's proposal.)

For example, 'Regional' Mikhail Chechetov, told 'Segodnya' that he had sent her a government telegram "with wishes of health, and success in the sphere of government, for the good of Ukraine". But another 'Regional', Vasyl Khara was unable to greet her over the telephone. "I got the impression, that she was isolated from all calls," he explained.

Yet another 'Regionalka', Yelena Bondarenko, did manage to contact her, though. "I sent her an 'sms' message, and she called me herself. In the course of the conversation I wished her the same courage, which she possesses now," revealed the VR deputy."

What does all of this mean? LEvko considers this to be a 'planted' story - an impimatur from Akhmetov, on the day after orthodox Christmas day. [Journalists call such a day a 'bummer' news day because there is often not much to write about.]

If Tymoshenko's government, against the odds, does have a reasonable run, then the 'young Donteskiites' have someone in a position of authority to protect their interests from the worst ravages of the new government. If the government soon disintegrates and a grand coalition is formed, then they will have gained more leverage with the president by co-operating with him at this time. And the president, by reaching out to Regionaly, is showing what a reasonable man he is, thus increasing his appeal in the east of the country.

UNIAN, quoting tomorrow's 'Ukraina Moloda', a newspaper close to Yushchenko, reports that Bohatyryova did spent part of orthodox Christmas Eve "around a table with PM Yulia Tymoshenko, presidential secretariat head Viktor Baloha, NUNS leader Vyacheslav Kyrylenko [I wondered where he had got to], constitutional court head Andriy Stryzhak, and others. The paper says "this was her first private 'vechirka' [non formal meeting] in the company of the 'oranges', and a warm and friendly atmosphere reigned.

Maybe the thought of Bohatyryova and Tymoshenko sitting around a table, enjoying a traditional festive meal together in the Carpathian mountains was just too much for 'Segodnya's readers to bear..

Monday, January 07, 2008

Happy Christmas!



Veselykh Svyat!

Thanks for the comments - and don't get to downhearted about Ukraine, some of you - it was never going to be easy.

The new man in the Kremlin in March will, I believe, help 'normalize' Ukrainian-Russian' relations. No newly-elected leader, likes back-seat drivers, especially if they have received a healthy mandate from their electorate. A brief video of Medvedev in Davos last year here

Even Rinat Akhmetov is, as my mum used to say, "sticking [lipyt'] one candle for God, and one for the devil."

[Every church-goer knows that to ensure candles are held securely in position, it's best to melt the wax at the bottom on another lit candle, before 'sticking' it in position. But who is who?]

Saturday, January 05, 2008

Putin's place in the sun

Update to yesterday's posting, from Britain's 'Daily Telegraph'

"World politics seems to be turning into a playboy convention.

Holidaymakers on the Côte d'Azur this summer may spot a familiar - albeit unlikely - figure sipping Pastis in Saint Tropez's Place des Lices.

I hear that Russian President Vladimir Putin has bought a château perched high on the Saint Tropez peninsula, in Gassin, and is busy making it ready in time for spring.

"Putin's got 50 people working on the place, which used to be a hotel," says one local. "It'll take some time, because it was quite run down and it's apparently got between 20 and 30 rooms, but it'll be an amazingly lavish property when it's all completed.
"It's also got two pools, one inside, one outside. The security measures are obviously pretty stringent," adds my source.

"The property is hidden away behind pine trees and the doors are going to be armoured, but he won't be holing himself up in there all the time because he's always been a fan of Tropezian glamour."

Just imagine the swimwear."

St. Trop. would be most handy. Putin allegedly owns a flotilla of yachts worth $80m, including the 57 metre royal-class yacht the 'Olympia' - a 'gift' from Russia's wealthiest businessman, Roman Abramovich.

We will soon see if Putin will also be included in 'Forbes Rich List'.

p.s. Has anyone else noticed that whenever Tymoshenko's name is mentioned in western publications, more often than not it is preceeded merely by 'charismatic', and no longer by 'firebrand'?

Corruption in Kremlin

Britain's biggest-selling broadsheet newspaper runs a story today on how "Putin's men 'lined pockets' from state funds". It include quotes from Andrey Illarionov, Putin's economic advisor until his resignation two years ago.

Illarionov claims the Russian government's £75 billion Stabilisation Fund, created in 2004 to cushion the budget from a fall in oil prices, was being exploited by members of the ruling elite for their personal benefit, and that the state's institutions have become the tools of Putin's circle.

"At the moment for many of the people who are in power, there is almost no other means left to them but to escalate violence and aggression in order to remain in power. They are not stupid people and they understand that the peak of their popularity has passed and that they will have to resort to the kind of violence seen in the past few weeks."

"The country has entered one of the most dangerous phases in its history, when almost all the institutions of a modern state have been destroyed and there is nothing that can be used as a support in a crisis."

He insisted, though, that Russia's present direction was a deviation. "This option is a dead end - and will come to an end. It will end much more quickly that many people think," he said.

He also speaks of alleged "velvet re-privatization" i.e. the forcing down of the value of ex-state assets before putting them into the hands of loyalists.

A couple of days ago a goverment commission was set up to examine the dire financial situation in which the Ukrainian state gas company"Naftohaz Ukrainy" finds itself. Tymoshenko has given the commission until the end of the month to determine why the company is on the verge of bankruptcy. Many, including Tymoshenko, and new "Naftohaz" head Oleh Dubyna claim former government officials and their forerunners deliberately engineered it in order to "hand over the pipelines [and associated systems owned by Naftohaz] to settle debts."

Mykola Syvulskiy, a BYuT deputy, claims "This is Putin's plan, to grab Ukraine by the throat, and then - Europe!..[cripes!]

Pipelines passing over Belarus are already under Russian control. Oh, and Ukrainian atomic energy company "Enerhoatom" is similarly tottering on the verge of bankruptcy.

We will see how the new Ukrainian administration tackles these stategic companies' problems. Probably best wait until the new man, who is untainted with any suspicion of 'mokrie dela' at home or [near?] abroad, arrives in the Kremlin in just a couple of months time.

Friday, January 04, 2008

Yulka and Yush needling one another - as usual

"Oglyadach" today writes of 'the needle' seen already between Yushchenko and Tymoshenko during the first few days of the new administration. They are both trying to show one another who is top dog.

E.g. last Thursday when a KabMin session was attended by the President, he sat at the centre of presidium, the premier and VR speaker on either side. He twice drew to Tymoshenko's notice that she had exceeded the time allotted for addressing the meeting according to the 'reglament', by several minutes. He also announced that he intends to attend [and interfere in?] further cabinet meetings.

But she got her own back later. That evening she arrived [demonstrably?] late to the President's 'showcase' press conference, and instead of listening attentively to the 'wise words' of the President, she shameless shuffled pages of documents, which was picked up and seen by the live nationwide TV audience. [Yushchenko himself is notorious for being habitually late for meetings. Some photos of the press confence and cabinet meeting here and here]

Tymoshenko was also later interviewed on the "1+1" TV channel. [Watch it here ] Viewers could immediately compare her communication skills with those of the President - she clearly overshadowed him. [I have posted recently on Yushchenko's PR presentation and rather dreary delivery.]

On Saturday Tymoshenko's again appeared in a television studio - this time that of the first national channel, to speak glowingly of the merits of the recently passed state budget for 2008, and to praise the government, which had only been in existence for ten days.

"Oboz" claim the President and his secretariat are unhappy about Tymoshenko's overall performance, and are even, possibly, in a state of panic. They suggest that she may be deliberately goading the President into sacking her again so that she will not be held responsible for unkept promises. Open confrontation with the President could increase her rating in the future presidential elections.

Other bitter pills for Yushchenko to swallow are the latest opinion polls. The Ukrainian Razumkov centre of economic and political studies reveal Viktor Yushchenko is now trusted by only 17,6% of Ukrainians, whilst Tymoshenko is trusted by 32,6% - her highest rating since April 2005. The same sociological center reports 30,7% of voters consider Tymoshenko to be politician of the year for 2007. Yushchenko's rating was only 6,6%, after Yanukovych on 14,8%. Hearty congratulations for Tymoshenko poured in when she became PM for a second time from the likes of German chancellor Angela Merkel, and French President Nicolas Sarkozi, to the displeasure of the pres.

"Oglyadach" also report that Yushchenko, Tymoshenko, and newly-appointed National Security and Defence Council secretary Raisa Bohatyryova are to meet in the Carpathian mountains where the President normally spends Orthodox Christmas. Maybe they can work out a co-ordinated plan of action.

LEvko thinks that ever since Yushchenko and Tymoshenko started to work together he has treated her shabbily, but as long as she does not dig her stilettoes into the toes of Yushchenko's business friends, they won't fall out just yet.
p.s. Thanks for the comments - they encourage me to continue with the scribbling.

Thursday, January 03, 2008

Big business and politics

Just before Christmas, ex-PM Viktor Yanukovych defended last year's privatization of "Luhanskteplovoz", the sole producer of cargo diesel locomotives in the CIS, stating that he considers it to be legal. 76% of the share of the company had been purchased by the Russian Bryansk Machine Building Plant and by the Demikhovskiy Machine Building Plant, both of which are affiliated structures of the Russian TransMashHolding.

On 26th September last year a Kyiv appeal court ruled that the privatization "Luhanskteplovoz" was illegal.

I posted in detail on the background to the highly dubious rigged Luhanskteplovoz sale several months ago. As president Yushchenko said at the time: "Instead of the expected 2 billion hryven [$400m], the treasury obtained only 292 million hryven."

Yanukovych's pleas seem rather forlorn, now that Yulka is back. But rather as with Kryvorizhstal during Tymoshenko's first stint as PM, Luhanskteplovoz may be the only major reprivatization that will take place this time around.

p.s. In its final edition of 2007, the business weekly "Kontrakty" provides an overview of the performance of Ukraine's most powerful oligarchs.

How their companies fare in global markets is critical to the Ukrainian economy, but frequent turbulent events in Ukrainian politics means this is often overlooked in the media. The article suggests the return of Yulia Tymoshenko to the Kabmin means Rinat Akhmetov will be less active in mergers and acquisitions in the Ukrainian market, but will most likely, make purchases abroad.

Another article in the same periodical speculates that the huge Mariupol MetKombinat, and also Zaporizhstal could be taken over by the Russian Evraz financial-industrial group. Wouldn't it be better if they were absorbed by one of the Ukrainian FIGS?

Tuesday, January 01, 2008


On the cusp of the new year both Tymoshenko and Yushchenko have made confident, upbeat televised pronouncements to the nation. You would never have guessed that the new Tymoshenko-led government was voted in, after a first failed attempt just a couple of weeks ago, by "the length of a gnat's ****".

"Segodnya", in a poll, asked its site readers how long they think Tymoshenko's government will survive. About 3500 votes have been cast.

44% said until the first Spring crisis
8% said until the start of the presidential campaign (2009)
12% said until the presidential elections (2010)
14% said until the new parliament is elected (2012)
15% said until she is locked up in prison

Where the people voting for the last option indulging in wishful thinking?