Import limitations – Ministry of Energy & Coal Ukraine

UKTVED 2701 12 10 00 – UKTVED 2701 12 90 00 – UKTVED 2701 19 00 00.

What am I on about?

No my computer is not making some form of public code error.  No it is not some form of SEO optimisation effort.  And no, whilst some will consider me a sandwich or two short of a full picnic, this is not a sign of any mental disorder on my part.

These are the codes, similar to GOST codes for oil, relating to types coking coal now subject to import restrictions in Ukraine as announced by the Energy & Coal Ministry of Ukraine on their website.

There is now an annual importation limit of 7.7 million tons.

To give this figure some kind of perspective, in 2009 Ukraine imported 7.5 millions tons, in 2010 9.1 million, in 2011 10.7 million, and in 2012 just over 12 million tons.

And?

Well, Ukraine now has huge quantities of domestically produced coking coal stockpiled – stockpiled to the point where it is running out of storage space.  All in all, including all types of coal currently stockpiled in Ukrainian warehouses, there sits about 2.5 million tons of coal.

2.5 million tons of coal not only takes up a lot of space, but coking coal can be rather combustible and can spontaneously ignite on occasion.

That together with the ever decreasing storage space generates problems of where to put the continuously produced coal from the Ukrainian mines – not to mention the diversion of capital to external economies when importing other nation’s coking coal.

The question then is why, with so much domestically produced coking coal (and coal in general) is Ukraine importing it at all?  The answer is not necessarily one of price as many will automatically assume, but of chemical composition of the coking coal itself.

Quite simply, Ukrainian coking coal, and coal in general, has a far higher than internationally (and domestically in some cases) desired sulphur content – and low ash, low sulphur coking coal is what blast furnace operators desire to prevent the sulphur transferring to the pig iron in the smelting process.

Thus, it is becomes obvious to even the most simple of readers, that when Ukrainian metal producers are competing with global metal producers, not only on price but quality, high sulphur content domestically produced coking coal is less desirable than imported low sulphur coking coal.

Quite how the actions of the Ministry of Energy & Coal are going to sit with the metal producing oligarchy such as Messrs Akhmetov and Pinchuk (to name but two) we will see.  Perhaps they will get the entirety of the imported coking coal and the smaller producers will be forced to use the domestically produced high sulpher coking coal – and be forced to deal with the sulphur migration to their pig iron in the blast furnace process.

Maybe it is just a method to monopolise the import of low sulphur coking coal? – After all Mr Akhmetov does own a production plant in Kazakhstan that produces a product that meets the usual specifications of the international community relating to sulphur content.

It remains to be seen what impact this decision will have on the metal producers in Ukraine – as well as the coal miners.

Another hydrocarbon claim against Ukraine to be ruled upon in March

Way back in 2007, Tatneft filed a claim against Ukraine for $520 million – a figure that has subsequently been increased to $2.5 billion.

The issue revolves around a company called Ukrtatneft which owns and operates the Kremenchuk oil refinery in Poltova – a situation created back in 1994 by the then Presidents of Ukraine and Tartastan.

Of course things are not as transparent as they appear.  The stake in the Kremenchuk refinery was owned by companies “close to Tatneft” to the size of 18.3%, the Property Ministry of Tartarstan owned 28.8% and Tatneft itself directly owned 8.5%.

Naturally Tatneft is not entirely owned by those in Tartarstan either.  Gazprom does, or did, have a significant stake in Tatneft, and who knows who owns what amongst the shareholders of the companies that are “close to Tatneft”.

It came to pass that through litigation in and around 2005/6/7, the Tatneft shares were all-but reduced to being worthless and Privat Group assumed their stakeholder position.  The ownership of Privat Group naturally contains some of Ukraine’s richest oligarchs – predominantly the Jewish ones such as Bolholyubov, Martynov and of course Ihor Kolomoyskyi.

Yes indeed, more hydrocarbon shenanigans, this time under the Yushenko/Tymoshenko governance – a political reward for Kolomoyskyi’s backing them throughout the 2004/5 disputed presidential elections possibly?

Anyway, this matter is due before the International Court of Arbitration in the Hague between 18th and 28th March.  One has to suspect another large bill heading Ukraine’s way over historically bad practice in the energy arena combined with political patriarchal expediency once again.

Whether it will get much, if any, media coverage remains to be seen.

Ukrainian media and the rule of law – International Commentary

28th January was a bit of a strange day for Ukrainian media and the rule of law in the nation with regards to international commentary.

In what was an absolutely foregone ruling, Aleksie Pukash was quite rightly jailed for life for his part in the murder of Gregory Gongadze – something hailed as a “milestone toward justice” by the New York based Committee to Protect Journalists.

I have to say “milestone towards justice” seems a little overenthusiastic when it comes to metaphors, considering those who gave instruction to Pukash to carry out this heinous act remain free and were not implicated in the Pukash court ruling.  Plus, as I say, the verdict was never in doubt.

On the same day, the Parliamentary Assembly of the Council of Europe (PACE) issued its “State of Media Freedom in Europe” report in which there are significant issues concerning Russia, Turkey, Armenia, Azerbaijan, the UK, Bulgaria, Belarus, Greece, Hungary, Italy, Romania, Serbia, FYR Macedonia and of course Ukraine.

“Ukraine

82. Regarding the investigations of the murder in 2000 of Georgiy Gongadze, an investigative journalist
and founder of the Ukrainska Pravda (Ukraine Truth) website, the trial began in April 2011 against Olexiy
Pukach, a former Interior Ministry official, who had reportedly confessed to playing a direct part in the murder
of Gongadze. As journalists and other members of the public have been barred from the proceedings, the
Committee to Protect Journalists (CPJ) described the secrecy and irregularities in the Pukach trial and the
previous failures to deliver prompt and impartial justice as significant setbacks in the fight against impunity.
The CPJ reported that in 2011 journalists in Ukraine continued to face persistent danger from threats and
physical attacks, and suffered censorship.

83. In March 2010, Vasyl Demyaniv, the editor of independent newspaper Kolomoyiskiy Vestnyk, suffered
a fractured skull and knee injuries when he was attacked in a public street. Two defendants were convicted
and the motive was said to have been robbery, but Demyaniv stated that the two convicted men were
innocent and that he had been attacked in retaliation for critical reporting on local government issues.

84. The Institute of Mass Information, a Kiev-based media monitoring organisation, reported that at least
25 physical assaults took place against journalists because of their work during the period from 2010 to
2011. The IMI disputes a claim by the Interior Minister that the great majority of those attacks against
journalists are unrelated to their work. The IMI says that in at least ten cases the perpetrators were law
enforcement agents or other public officials.

85. In Ukraine, the presidential election of January and February 2010 was marred by blatantly partisan
coverage by various media favouring one or other of the two main rival candidates, Viktor Yanukovich and
Yulia Tymoshenko. TV channels allowed candidates to pay to appear and to place pre-recoded material on
news and current affairs programmes, undermining the principle of media independence and objectivity. The
ODIHR election observation mission noted that regional media consistently showed a bias in favour of the
regional party or parties in power in each case. ODIHR recommended that rules on coverage of government
ministers or others holding public office should forbid broadcasters from giving them privileged treatment in
coverage during campaign periods. It also called for the state National Television Company of Ukraine to be
transformed into a public service broadcaster. The government has initiated moves to do so and every effort
should be made to implement the proposal without delay and in line with Council of Europe standards on
impartiality and independence.“

Not much surprising in any of that – other than how little content there actually is relating to Ukraine.

Will any of what was written about Ukraine by the CPJ or PACE change the way media operates in Ukraine despite their encouragement?  Of course not.  What will change the way media operates in Ukraine is the split of the oligarchy from “the family” within the Party of Regions when it comes to media manipulation – at least for the time being.

As the 2015 presidential elections get closer, you have to foresee a situation where “the family” will be forced into the backseat once again in favour of the oligarchy media assets as fas as President Yanukovych is concerned – thus their inclusion back to the inner, inner circle is likely to begin in 2014.

Hopefully by that time, the oligarchy will have been left out in the cold slightly too long and will have  found a horse they prefer to back other than Yanukovych.

Time will tell.

Integration, assimilation or ideological identity (where it exists) – Ukrainian Opposition

A few days ago, Yulia Tymoshenko made the following statement calling for the opposition parties to unite.

“The ideal scenario would be further integration processes among opposition forces and the creation of a united party because the steam roller of the Regions Party can be stopped only by a powerful opposition force, which will enjoy unquestionable support in society. A merger of opposition forces and society will accelerate the death of this colossus on clay feet, in other words the Yanukovych regime“.   At least that is what her Batkivschnaya Party website quotes her as saying.

On 24th January, Vitali Klitschko, leader of the UDAR party promptly rejected such a call stating, “We have different programs, different political platforms, different ideologies, and, consequently, different voters. It’s more efficient when there are several [political] forces. This has been proved by the latest elections; the opposition ran separately and three parties scored more than if they have been a political association.”

He has a very valid point – but I would say that, as on 26th April 2011, I wrote the following when ruminating at the time of a possible opposition merger – or not:

“It makes more sense, at least if we are to consider issues as adults, for the opposition parties to act in unison on issues they agree upon and where they differ from the current government, rather than to try and force together a united opposition party that is not based on a shared ideology other than the enemy of my enemy is my friend.”

Whilst there may be issues to be concerned with within Svoboda ideology, it at least has a clear and identifiable political ideology – even if it is one that doesn’t sit well with many within UDAR for example.  UDAR too seems to have an identifiable ideology which is located in a far more central part of the political spectrum.

The ideology (narcissistic and autocratic as it is) of personality politics with the associated grab power and keep it mentality, which is shared by both PoR and Batkivschnaya parties – certainly amongst the leaderships of both in equal measure – is most certainly going to fail eventually.  Sooner rather than later one hopes.

There are other issues that both Klitschko and Tymoshenko will undoubtedly be aware of relating to external influences that will affect their futures.

Foremost amongst them is the noticeable desertion of many oligarchs (and ergo their money and media assets) from the PoR conclaves.  They have now been replaced by trusted family and friends of the current President.  If the oligarchy needs are not met for the most part, having been removed from the inner santum, there is every chance their money and media assets will seek to back another horse – any horse other than Tymoshenko.

Seemingly the best fit would currently be UDAR – either overtly or covertly.

With enough oligarchy money and media time behind UDAR, there can be little doubt that unless Klitschko seriously stains his copy-book before the next Presidential elections, the run off would be between him and the current incumbent as things stand today.  Something both he and the ego of Tymoshenko will be aware of and something that Tymoshenko is all too aware she can do nothing about (whether in jail or not) short of assimilating him.

It is therefore understandable, as this realisation (amongst many) looms, that she is calling for a single opposition party to take on the PoR.  A party that should it be formed now, would have a majority of her MPs and thus possibly propel her back to the pinnacle of Ukrainian politics if/when she is ever released.

Bugger ideology, the enemy of my enemy should be my friend as her public mantra – if not her personal driver – that driver being the same as it always has been, personal power for power’s sake – no different from Yanukovych.

Thus the entry of real ideology into Ukrainian politics (rather than wafer thin ideological rhetoric), the disillusionment of some of the oligarchy with the PoR and a probable need for them to find a better horse to bet upon should their needs fail to be met by the current majority, and the emergence of those within her own party using her absence to further their own future political prospects (namely replacing her) would make it seem natural for her to use the veneer of a single opposition party to protect her own interests whilst she still remains with sufficient support within her party to reinstall her as head honcho should she be released.

As time passes, all her concerns are going to become realities, thus consigning her to the political minor league upon her eventual release – even within her own party.

Klitschko however, needs only to continue to do what he is doing, avoid any major media scandals, stick to his party ideology and keep his own and his party’s identity separate from Tymoshenko and her Batkivschaya Party (and others for that matter).  In the long game of politics, ideology will eventually beat personality politics – and fortunately that means both Yanukovych and Tymoshenko will be consigned to the dustbin of Ukrainian public life within the next decade – and not a moment too soon.

One wonders just how much time will pass before Tymoshenko takes a very public swipe at UDAR and Klitschko out of desperation, just as she has did Yatseniuk in 2009/2010.  A few weeks, a few months, a year?  Place your bets!

A purging of the pro-EU Ministers or a significant ideological split?

Smart readers will recall I wrote this at the beginning of November relating to “Who’s in and who’s out?” – It was aimed specifically at Valery Khoroshkhovsky and Poroshenko.

By 16th December, Khoroshkhovsky resigned from the Ukrainian government as I had predicted, citing the returning of Mykola Azarov to the position of Prime Minister as the reason.

As I wrote in that post “For now it is Khoroshkovsky and Poroshenko to keep a watchful eye on…..” – and that remains the case – but also we should now look to those close to Khoroshkovsky in the year ahead as well.

A quiet, much needed, slow burning. internal revolution within the PoR may just have started!”

Well, over the weekend, Sergiy Tigipko has stated he will also not be part of the new Cabinet of Ministers although will remain an MP.

Both Khoroshkovsky and Tigipko are very much front and centre pro-EU Party of Regions heavyweights and very “EU orientated” reformists.

The question is, as a new Cabinet of Ministers is due to be announced within the next 48 hours, will there be many, if any, such “EU orientated” heavyweight reformists left within the next Cabinet of Ministers?

If the likes of Poroshenko also state their desire to leave the cabinet, or are simply not reappointed, the pointed, jabbing internal finger within the Party of Regions relating to all things EU will be severely blunted.

Returning to my point about a “much needed, slow burning, internal revolution withing the PoR”, then it may very well have been quite accurate.

Tigipko’s reasoning for not wanting to remain in the Cabinet of Ministers, as stated by him live on national television is “Now it’s very important for the Regions Party to deal with ideology.”

It seems that the pro-EU and pro-Russian elements within the Party of Regions are about to lock horns in what may be a very slow, painful and ultimately disastrous battle for the PoR  – the pro-EU heavyweight reformists making their positions quite clear by removing themselves from the highest offices in the land, one by one.

It could be quite an interesting year ahead should genuine ideology catch on within the Party of Regions.  Two very distinct camps will emerge, both with some serious money and very public figures within them championing their respective causes!

Valery Khoroshkovsky quits government – As I predicted at the beginning of November

Valery Khoroshkovsky has quit the Ukrainian government and seemingly will not be returning.

That should be no surprise to readers of this blog.  I explicitly forecast this happening on 4th November having watched his disillusionment with certain figures within the PoR hierarchy grow for many months prior to writing that entry.

What will now be interesting is any visible change in attitude of his influential media empire towards a government he will no longer be in – and longer term how and if he positions himself for a Presidential run.

As I wrote back then relating to the cracks appearing within the PoR ranks “…..For now it is Khoroshkovsky and Poroshenko to keep a watchful eye on…..” – and that remains the case – but also we should now look to those close to Khoroshkovsky in the year ahead as well.

A quiet, much needed, slow burning. internal revolution within the PoR may just have started!

Who’s in and who’s out?

“Who’s in and who’s out” is a conversation many embassy staff have in embassies around the world from time to time relating to the nations to which they are posted and the political personalities of that nation.

It may sound a little childish to play such games, and indeed it may not always turn out to be entirely accurate, but it is a part of diplomatic and political life.

It can occasionally be muddled, but most of the time, the results of such discussions are there or there abouts when it comes to who is “in” and who is “out”.

When talking of the “in’s” and the “out’s”, we are not talking about the obvious cases of those getting sacked.  The world, lest we forget is not so black and white – especially so when it comes to Ukraine.

There are a lot of people that cannot be allowed to be “out” lest they are powerful enough to undermine the structure, but also and just as equally cannot afford to be allowed all the way “in” as either their loyalty is doubted or their vision of the future does not exactly fit with the picture of others.

The “in’s” and “out’s” tend to fluctuate.

The “in’s” and “out’s” are important.  Especially so when sending a message you want heard either by those who are “in” – but also to those who appear “in” but are actually “out”.

The two most obvious “in’s” that are actually “out” – at least currently in Ukraine – are Deputy First Prime Minister Valeriy Khoroshkovsky and Petro Poroshenko the Minister for Trade and Economic Development.  There are others but not as well known or powerful in their own right – as well as Viktor Pinchuk who blows “in” and “out” although he is never really “in” or “out”.

Both men due to their positions will sit on numerous boards and on numerous committees along side their official titles.  To judge just how far “out” these “in’s” are, it is necessary to look at events such as this, where Khoroshkovsky has been removed from a State board of little significants as far as public profile is concerned,  for no apparent reason.  The more events of this nature, the further “out” these “in’s” are – quite obviously.

This may seem a bit “so what?”, but which “in’s” are “out” as the presidential elections in 2015 get closer is significant – particularly when “outs” like Khoroshkovsky and Poroshenko own some of the most watched national TV channels in Ukraine.

Thus how far “out” these necessary “in’s” can be pushed is a fine art.- particularly if your current policies are contrary to their business interests.

Should Poroshenko run for President and Khoroshkovsky back him, then Yanukovych has a serious problem both in terms of financial ability, media coverage/ownership and public profile.  Lest we forget, Poroshenko is not a member of the Party of Regions but an independent.

If that were to happen, then the noises from men such as Boris Kolesnikov, Deputy Prime Minister and Rinat Akhmetov’s most loyal top dog in parliament are indeed necessary to heed – for that would display where Akhmetov himself is placing his bets.

It is a little too early to speculate upon who will run for President in 2015, especially as the “in’s” and “out’s” may very well change between now and when runners and riders will declare their participation, but there are currently  fault lines within the Party of Regions, normally known for its discipline, that cannot be ignored.

What western and eastern diplomats will do with the obvious fault lines in the run up to presidential elections, how and if they will be exploited or encouraged, remains to be seen.  But opportunity presents itself nonetheless – and unlike the armchair pundits and media, the international diplomatic corps will not limit itself to the view that it is Yanukovych or somebody from the opposition parties.  If there is a viable alternative to Yanukovych from within the Party of Regions set up, such an option will not be dismissed out of hand.

For now it is Khoroshkovsky and Poroshenko to keep a watchful eye on, (and their media outlets), not only by how Yanukovych treats them and their reactions to their treatment, but also by way of what discrete international overtures come their way by those hoping to exploit any perceived differences.

18 months from now, who is “in” and who is “out” may have significant internal ramifications within the Party of Regions relating to candidates for the presidential elections.

As it is, already from the opposition ranks, both Yatseniuk and Klitschko seem have one eye on this race – which may not bode well for a less than united opposition before the personality contest that is the presidential election.

Combined Heating and Power plant privitisation – Ukraine

This year, the combined heating and power plants (CHP’s) for Odessa, Kharkiv, Dnepropetrovsk and Kherson are all due to be privatised.

None of which seems likely between now and the end of the year due to the tender process and the clauses within the tenders.

Amongst the clauses are the conversion of the plants from being gas fired to coal fueled.   There are also requirements to increase output, in some cases quite considerably, within 3 years, as well as to overhaul and modernise the plants.

Not withstanding that, any purchaser must also repay all overdue debts within 6 months of acquisition.

Any purchaser must produce a feasibility study, and build, new heating networks relating to the region in  some cases.

If that was not enough, any entity taking part in the tenders must have a license for subsoil production in Ukraine which holds a minimum of 1 billion cubic meters of gas reserves – insuring (and committing to) sufficient gas reserves pending conversion to coal.

If that has not put off or disqualified most interested parties, there is then the tender costs to consider with the initial bid cost at UAH 3.5 million and a starting full purchase price for each CHP of about UAH 330 million – discounting the hidden costs of putting together feasibility studies and tenders themselves etc – which is very expensive in and of itself.

Immediately one tends to think of Dmitry Firtash as the most likely to go for this, but it appears he doesn’t really know what’s what – yet.

“I didn’t know that CHPs would be sold. Therefore, I can’t say anything now. If there was a sale, we would definitely take part. But it should be understood what will be tendered and what will be sold. There’s no sense in only buying. You have to know what it is.”

If what he says is true, and he doesn’t know what’s what – then it is a foregone conclusion nobody else will.  Thus I have serious doubts any CHPs will manage to be privatised before the end of 2012.