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10 political parties adhere to the State funding requirements – Ukraine

July 27, 2016

There are some questionable issues relating to the current (and forever changing) electoral laws of Ukraine, particularly now when it comes to the introduction of State funding for electioneering.

The current laws for example, allocate State funding only for those parties that have passed the 5% threshold to enter the Verkhovna Rada under the proportional representation part of the (current) electoral system.

As such, those parties that are new, for example Khvylya, or are not such as the Civic Platform or Dem Alliance that gathered 2 or 3% in the last election, get nothing for their forthcoming electioneering campaigns from the State – despite the fact that two, or perhaps all three, will very likely pass the 5% threshold as a result of the next elections thus entering parliament via proportional representation (and not withstanding any single mandate victories).

As such new and/or small and/or developing parties are generally without, or hardly benefit from, oligarchy interest and sponsoring – ergo they are poor – and neither do they currently count among their ranks and friends unaffiliated media moguls that will donate large amounts of air time to their electoral campaigns for free/cheap – unlike most that will get State electioneering funding – it would appear to some a rather unfair situation.

That said, a line has to be drawn somewhere, lest this blog create a party with no hope of winning anything, simply to obtain State electoral funding and subsequently pocket most of it rather employ it for its intended and legitimate use.

That the law is extremely poor comes as no surprise.  Many laws in Ukraine are extremely poor.  Only on rare occasions does well written legislation pass through the Verkhovna Rada.

It also has to be said that the State electoral funding is not going to cover all electioneering costs for national campaigns – it is not even close to sufficient.  The system of funding currently works by providing the most popular parties via the proportional representation voting within a sitting parliament a Hryvnia value based upon the last electoral vote.

It follows that although the People’s Front is currently the most unpopular political party in the current parliament and is unlikely to pass the 5% threshold at the next elections (as of the time of writing), being the largest single party in the current parliament via the proportional representation part of the (current) electoral system, it therefore gets the most in State electioneering funding for the next election – closely followed by the President’s party – and funding works its way down the proportional representation voting percentages of the previous election accordingly.

To be fair, the $5 million or so that both People’s Front and the President’s party will get, gets nowhere near to covering the actual sums spent during their last electioneering campaigns.  No matter what the State funding will be for any party currently within the Verkhovna Rada, it will be significantly less than the financing of the previous election that put them there.

The (rhetorical in many cases) questions are therefore how these political parties are funded and by whom?

In order to qualify for the newly designed State electoral funding, aside from actually being a party that currently sits within the Verkhovna Rada having garnered more than 5% of the proportional vote in the last election, with effect from 1st July 2016, it is also required that quarterly reporting of party income and expenditure are submitted.

The first ever submissions are required to be submitted by 29th July.  (Needless to say that if a political party that qualifies for State funding but does not want said State electoral funding, there is no requirement to submit quarterly income and expenditure reports.)

As of 27th June, according to Natalia Korczak, head of the National Agency for the Prevention of Corruption, 10 qualifying political parties have submitted the relevant quarterly reports to the NAPC.  (Those quarterly reports are then registered with the Ministry of Justice.)

Well bravo – prima facie a step in the right direction for political party transparency.

Unfortunately at the time of writing, which 10 political parties have submitted quarterly income and expenditure reports, and what those income and expenditure reports declare is unknown.  (In the meantime, parties like the Dem Alliance despite not qualifying for State election funding voluntarily publish their party funding on-line for public inspection and digestion.)

BK

Questions presents themselves however – whether the quarterly returns make it to the public domain or not.

Will these quarterly reports actually in any way relate to the real quarterly income and expenditure of any particular party.?  If “Party X” declares UAH 200 in expenditures for a service/function that clearly costs UAH 200,000 – is anybody formally tasked with verifying the expenditures?  If so what can or will they do about it?  The removal of a paltry sum in State electoral funding as punishment is hardly enough to correct their opaque and wicked ways.

How to check the validity (and integrity) of incoming donations?  Are they subject to scrutiny?  If so by whom, when, and under what circumstances?

What of those that simply decide not to pursue State electoral funding preferring to keep party incomes and expenditures from official scrutiny, or parties that simply do not qualify for State electoral funding but are subsequently elected to the national parliament?  No checks (meaningful or otherwise) upon party funding whatsoever in such circumstances?

When declared income and expenditure simply don’t add up to empirical evidence – as will assuredly be the case for most – and the inference is that there is a party “chornaya kassa” and/or secondary black book of dark magic funding, how then to pursue it – if it can be pursued at all?

Who will ultimately be held accountable for any fraudulent party quarterly submissions?  A random, anonymous and inconsequential minor party functionary who is clearly only submitting what they were given to submit?

With any fraudulent submission, there may exist the possibility of political accountability before the electorate – or not – but otherwise the returns will be deemed a collective responsibility, thus avoiding any of the party elite being individually held accountable (in any way).

It is a time honored custom within the wiser senior Ukrainian political ranks to have their decisions made (read agreed to) by “committee” with any subsequent official documentation signed off by lesser mortals.

It was a habit of Mr Yatseniuk, and it is the reason that Yuri Boiko (of Boiko towers infamy) is very unlikely to be successfully prosecuted by NABU.  All his nefarious decisions were made (read agreed to) by “committee” and generally signed off on official documentation by underlings.  Ergo collective responsibility and no personal accountability by way of signature.

All of this said, it would nevertheless be interesting to read and poke around within the smudged lines and erroneous figures submitted in the 10 submitted party quarterly income and expenditure statements.

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Zhittya – Rabinovych rebrands

July 27, 2016

In mid-May an entry appeared relating to the less than harmonious departure of Vadim Rabinovych and his “Centre Party” which formed part of, and exited the Oppo Block Party.  Indeed to say it was less than harmonious is to be charitable, with Mr Rabinovych and Mykola Skoryk trading very public, barbed and acrimonious statements.

The “Centre Party” is now no more.  It was renamed and re-branded on 26th July.  It is now called Zhittya (meaning Life in Ukrainian).

The “new” (renamed) political entity will pursue a platform of a neutral Ukraine with pragmatic relations with its neighbours, focusing upon transforming the national economy to one led by agriculture, IT/Hi-Tech, and banking – which is very much the transitional economic trajectory Ukraine is already on.  Ergo no change in the priorities for economic and market development.

The usual declarations of a serious fight against corruption, the defence of human rights, and a splash of populism regarding “extortionate rates” are needless to say also part of the party manifesto and rhetoric.

The party will also court the SME and entrepreneurial votes that are definitely the target demographic of the Dem Alliance and Khvylya too.  It will be a very congested contest for this demographic it seems, and despite the fact that Mr Rabinovich is a sly, prickly, entertaining, certainly not stupid, long-standing politician, it is somewhat questionable as to whether he will gather significant traction within his target voter base.

rabinovich

He is wealthy, but not wealthy enough to finance and promote a new/re-branded political party.  Thus this is either a particularly brave political move, which is doubtful for a politician as long in the tooth as he, or a backer for the Zhittya Party has been secured with sufficient money and influence to promote the party in a forthcoming election that will feature several new and/or invigorated parties.

Mr Rabinovych has already been joined by another (until 3rd June when he left) Oppo Block faction parliamentarian, Evgen Muraev, owner of NewsOne media, who arrived in parliament as an independent.  However, even together it seems unlikely they can fund an effective political campaign without further backing from somewhere, or somebody (probably from behind the curtain).

How many parliamentarians are Zhittya expecting/hoping to have elected when the next elections arrive?  Which seats will it contest, for it is unlikely to pass the 5% proportional representation threshold if standing and financing entirely unsupported by “others”.

If reduced to single seat mandates its electoral successes will be very limited indeed even if its energy draws several frustrated Oppo Block parliamentarians to it who are tired of doing very little in the comatose ranks of the Oppo Block.

Whatever the case its chances of implementing any of its declared political manifesto are naturally zero if alone, and extremely limited as part of a larger vehicle unless there is policy overlap.

Therefore, to which political faction would it gravitate and join?  Will it return to the Oppo Block Party fold as a constituent part despite a fairly fractious recent history – or the more encompassing yet looser association of the Oppo Block faction  – or will Mr Rabinovych head away from his traditional “Regionaires” comfort zone?

Numerous ex-regionaires  feature in Nash Krai.  They also do within Block Poroshenko.  Potential political faction resting places perhaps?  Nash Krai would seem the most obvious alternative to the Oppo Block, but would they want Zhittya and Mr Rabinovych even if he wanted them?

Maybe the issue has already been sorted out prior to the re-branding and it will be from these unknown quarters that sufficient electoral funds and backing will come – with faction membership following thereafter.

Whatever the case, it is always rather fun, albeit occasionally a distasteful experience,  to follow the exploits of Mr Rabinovych – perhaps more so now he will wish to give Zhittya a bit of a PR lift post re-branding.

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Projection and messaging – A stiffening Sea Breeze

July 25, 2016

Prior to the active phase of Sea Breeze 2016, the 24th July saw the USS Ross take its turn in hosting a gathering of Ukrainian politicians (both national and local), a diverse collection of diplomats, military people from assorted international commands, think tankers et al.

Sea Breeze is a long standing exercise in the Black Sea involving the Ukrainian Navy.

It has become an annual event that a US naval vessel hosts canapes and drinkies whilst docked in Odessa during Sea Breeze exercises.  This blog is now a long standing annual Sea Breeze attendee having attended similar functions on the Donald Cook, USS Porter etc (once on a State Dept “distro list” there’s no getting off – fortunately as far as this blog is concerned for the “distro list” is not restricted to Sea Breeze invitations).

Thus having attended such events often it is easy to become somewhat nonchalant about the messaging US military hardware being docked in Odessa and conducting various drills at sea sends.  Military projection is part of the messaging of course – all Sea Breeze exercises are, notwithstanding their training and interoperability mission.

Nevertheless it can become much of a muchness if care is not taken to remind oneself of the necessity of the message being sent.  Employing a rather poor metaphor, the pitch, the tone and the volume historically being somewhat consistent around these exercises it is easy to become accustomed to it like the background noise of the television or radio.

This year however things feel different.

Indeed this year things are different.

Instead of one US naval ship docked in Odessa, there are two – for the first time.

The USS Ross is moored along side the USS Whidbey Island, forming part of a 14 nation, 26 vessel, 20 plane and helicopter, 50 military “equipment unit” and 4,000 soldier exercise.

Stern/aft of the USS Whidbey Island

Stern/aft of the USS Whidbey Island

This year is different because the USS Whidbey Island is a landing craft – and on Wednesday 27th Ukrainian and American troops will indeed be making amphibious landings, together with parachute drops together.

A somewhat significantly different message is being sent than the usual sub tracking/chasing, mine clearing etc exercises of past Sea Breezes – necessary as those exercises are.

Moreover, of all the considerable coastline Odessa has to offer to practice the joint US/Ukrainian amphibious landings and parachute drops, the chosen part of the coastline is that of the southwest of the Oblast – “Bessarabia” – immediately adjacent to the Kremlin controlled enclave of Transnistria in Moldova.

Amphibious landings in, and significant parachute drops on “Bessarabia” will send messages to several different recipients – as it is clearly designed to do.

There is the obvious and clear messaging to those within Transnistria – and beyond to the Kremlin – in deliberately choosing the “Bessarabian” coastline.

A reader can only ponder what MP (and uncrowned Tsar of Bessarabia) Anton Kisse thinks of such events occurring on what is very much perceived as his undisputed fiefdom – a fiefdom over which many in 2014 had serious “separatist” (read Kremlin instigated and supported) concerns.  Be those concerns unwarranted or otherwise, in some quarters those concerns are yet to abate.  A wily politician may, if inclined, see an unhealthy leverage in such circumstances.

It is perhaps worth pondering whether or not the simultaneously running exercise “South Wind”, aimed at testing the planning and management capabilities in case of Martial Law is running in parallel, or as a “bolt on” (officially or otherwise), or is an entirely unconnected affair.  There would be numerous message recipients internal and external of Ukraine if there became a perception of a link – real or otherwise – between the two simultaneously timed exercises.

Whatever the case, having experienced the chit chat and atmosphere circulating among the canapes and drinkies of many historical Sea Breeze exercises, it is quite clear that this year is different.  This year is very much about messaging – and messaging several recipients at different levels.

The messaging is meant to be blunt, clear and unambiguous – and is very likely to be received that way.

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In a contested history is there room for inclusive commemoration?

July 23, 2016

Ukrainian history is a very sensitive and contested subject – both internally and externally of Ukraine.

Unsurprising when the nation, or parts of the nation, have at various times, and sometimes simultaneously, been ruled by external powers more often than not at a very bloody and detrimental cost to the people of Ukraine.

Very few, if any major or significant grim incidents within its past are without contesting points of view – particularly when academic historical research is cast aside and emotion is played expertly to further political interests.

There are also issues relating to the difference between nationalism and patriotism that many seem unable or unwilling to recognise that lead to less than objective consideration.

To rake over all the atrocities that Ukraine has suffered, including some self-inflicted to one degree or another, is not the theme of this entry.  What matters is that Ukraine has yet to honestly confront its history and recognise the wrongs done to it, and also the wrongs it too has committed.  If and when it does, how will the nation commemorate the good, the bad, and the ugly?

What seems a long time ago, this blog wrote an entry pondering a Stolpersteine styled project for the identified Holodomor victims.  It was of course a thought exercise rather than an expectation that it would ever be seriously considered – nevertheless it was an entry that seemed to capture the imagination  of many within social media causing a significant spike in the readership figures compared to other entries.

Whether or not, publicly or privately a reader considers Holodomor genocide or not, whether or not a reader recognises Volhynia as genocide as Poland has done in the last few days, whether or not a reader recognises the mass extermination of the Odessan Jewry by the Romanians part of a larger genocide, whether or not a reader recognises the mass deportation of the Tatar from Crimea under Stalin as ethnic cleansing, and whether or not a reader recognises the massive losses of WWII suffered by Ukraine at the hands of both Hitler and Stalin, (to name fairly contemporary examples), there are incontestable commonalities to all of those events.

All occurred and continues to occur within the current internationally recognised territory of Ukraine, and they all had victims – thousands and thousands of victims at the lower end of the scale, and millions upon millions at the upper end of that truly awful gradation.

Indeed a reader may ponder further where within the “captured State” that was and is Ukraine since independence, where the victims end?  For example, are not the thousands upon thousands of Ukrainians that die unnecessarily due to poor medial care and lack of medicines not victims of the various elites that continually raped and pillaged the health budget for their personal enrichment to the tune of $ millions and millions?

As Ukraine today fights the Kremlin in its east, victims continue to mount among the civilian communities on either side of the “contact line” and fatalities among the military ranks continue on a daily basis.

All historical incidents have naturally resulted in numerous monuments, large and small as time has moves on – with many of these monuments as contested as the incidents that are responsible for their being.

Clearly the removal of any such contested monuments to contested memory events will be contested – as few would contest.

Odessa has more than 2000 monuments (including one to Steve Jobs and one to Darth Vader) and yet an empirical perception is that there are very few to commemorate victims, or indeed “the fallen”, in comparison to “victory”.

Perhaps a little odd for a nation that has so often been the victim – even if on occasion simultaneously having been on the victorious side.

Scul

With a contested history around many a corner if and when Ukraine honestly, humbly and bravely addresses its past, and perhaps an equally contested future to which monuments will yet be built, how then to honestly, somberly and inclusively address the issue of monuments around which future generations, whatever their personal views and/or emotional bias will prove to be, will be able to commemorate without creating internal moral issues that fester, but rather creating a new holistic identity capable of managing and tolerating differing historical views ?

Can the answer be as simple as the creation of future monuments to “victims” – all victims – however and whomever those commemorating define a “victim” within their own moral system?  Similarly, can all monuments to “the fallen” – to all those who have “fallen”, whenever and where ever they fell – be a solution, however and whomever those commemorating decide to categorise “the fallen”?

Is that perhaps just too bland, or too elastic, or too inclusive to have any meaning at all for those that would commemorate?

A reader may of course consider this a small detail in light of the enormous issues and challenges currently facing Ukraine – and certainly not one that would seem a priority – but when attempting to create a Ukrainian nation of a new cloth, the stitching can be just as important as the pattern.

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A summer of friction among the Odessa elite?

July 22, 2016

Odessa is a small city of just over 1 million people.  Indeed the Oblast has only just over two million people despite being a geographical area larger than Belgium.  Like everywhere however, it is in truth a small village when it comes to those of importance.

A few days ago, a list of the top 100 influential people within Odessa Oblast was released.  Though the blog may question the positioning of those upon the list, the content seems about right.  It is fair to say that more than half are friends or are friendly with this blog in the top 10 alone.  Almost 70 of the 100 listed are on friendly terms or at least of cordial acquaintance.  A few can be classed as trusted friends, some seen daily – often for hours at a time.

Of those that have never sat at the same table, and are thus unknown personally, as stated, Odessa is a small village where it counts.  If the blog doesn’t know the remainder, friends of it do and introductions can be made if there was ever a need (unlikely as it is that a need would arise).

Such networks are the same the world over.  There is nothing new regarding the above outline.

Historically whatever friction occurs within this circle of the elite rarely, if ever, makes its way into the public domain in Odessa – at least in the pre-Governor Saakashvili days.  Traditionally, even during the most bitter and blackest of election campaigns involving some upon the above list, those involved have refrained from the publicising of the most murky and personal affairs of those whom they confront.

A few days ago, the latest in a string of entries relating to Mayor Trukhanov and the current issues surrounding him was published.

In summary, it noted the 70 parliamentary signatures upon a new Verkhovna Rada Resolution calling for new mayoral elections in Odessa – of which none of the 16 parliamentarians from Odessa are signatories.

It also highlighted quite specifically a feud that is forever dripping details of an unfolding scandal into the media of Odessa between the Mayor and Adnan Kivan – Numbers 1 and 4 atop the list of the Odessa elite – “Perhaps his biggest threat comes from an ever-bubbling feud with the Syrian billionaire owner of Kadorr Group, Adnan Kivan, (who was/is close to the infamous Odessa MP Sergei Kivalov) and the continued leaking of nefarious detail to the media regarding behind their curtain dealings.

The entry concluding that – “Indeed it appears that Mr Kivan is making efforts to associate/ingratiate himself with President Poroshenko (particularly noticeable on Navy Day when President Poroshenko was in Odessa and met with Mr Kivan), perhaps acknowledging a degree of precariousness regarding his own position – not that Mayor Trukhanov can really afford to be seen to shaft a prominent and major foreign investor in Odessa (albeit his wife Olga and children may dilute the category of “foreign” somewhat).”

It went further to state “However, discounting the feud with Mr Kivan, of the aforementioned issues that may take longer to dissipate that most, is the issue relating to the holding of a Russian passport/citizenship.  Mayor Trukhanov, with his owned and aligned media were hardly supporters of the current direction Ukraine has taken during the turmoil of late 2013/early 2014 – quite the opposite.  That together with his (alleged) citizenship of Russia naturally will take some time to become a background issue for many who simply do not like, nor trust, the cut of his patriotic jib.”

The cut of Mayor Turkhanov’s “patriotic jib“, notwithstanding the quietly submitted Verkhovna Rada Resolution, has been very publicly raised in an uncompromising public statement by Governor Saakashvili a few days ago – “Nobody doubts….Trukhanov is a classic separatist.  This is a Russian officer, he has Russian citizenship and I am absolutely sure that if we delay, he will create enormous problems of Ukrainian state without the Odessa region Ukrainian government will be like without two legs.”

To twist the knife further, Governor Saakashvili publicly raised the association of Mayor Trukhanov with serious and organised crime – once again.  Past associations the Mayor does not deny, unlike any on-going active interaction, which he does.

Nevertheless, a reader may perhaps question the denials of his current interaction when those known associations are doing rather well since Mr Trukhanov became Mayor.  Indeed one such associate, Vladimir Galanternik (aka Lamposhka) now sits 3rd upon the elite list of Odessa – above Adnan Kivan who is by far the city’s most prominent source of FDI throughout recent years.

friction

It appears that the occasional friction that traditionally occurred thoroughly veiled by the “curtain” will become a public brawl between the Mayor, Mr Kivan and the Governor.

Indeed the Mayor appears to be using the regional institutions of State and City Hall to put increasing pressure upon Mr Kivan’s businesses, assets and on-going projects – a typically homo sovieticus response, but one that is at least some way short of the direct “persuasive tactics” employed when he was “hands on” within organised crime.

However, notwithstanding efforts to get close to President Poroshenko, Mr Kivan owns the fairly popular Channel 7 television station in Odessa.  It is a channel that has become noticeably far more “pro-presidential” and “pro-Ukrainian” since the issues between Messrs Kivan and Trukhanov began to spill into the public domain.

Governor Saakashvili has no local media platform of his own – unlike Mr Kivan or Mayor Trukhanov.  Depending upon the owners of local media, depends upon his air time (if any) or how his words and/or actions will be framed in print to suit the bias of any particular owner.

There is very little objectivity or qualitative analysis within the local media when it comes to politics or policy – a sign of media issues more globally perhaps.

There is no reason to believe that either Mr Kivan nor Governor Saakashvili will adopt an “enemy of my enemy is my friend” mentality, yet there is also no reason to discount it either.  Certainly, in the broadest terms, the editorial direction being undertaken at Channel 7 would become one fairly comfortable for the Governor should that editorial trajectory continue to manifest and consolidate – time will tell.  Should it do so, it seems likely that there will become sufficient room for some sort of “understanding” between the two – particularly if the Trukhanov owned media, misuse of State institutions and political bullying continues unabated toward Mr Kivan.

Perhaps the best seller and box office hit in Odessa this summer  will not be born of the 7th Annual Odessa Film Festival, but will be a Trukhanov, Kivan, Saakashvili production in serial format across the local news channels.  A local political sitcom/tragicomedy/farce/satirical exposé upon the local TV channels would certainly bring alternative entertainment to that of the re-runs of Versailles, Game of Thrones and CSI!

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Mid-term election results Ukraine – What do they mean?

July 21, 2016

It is perhaps time, now that all of last week’s 7 mid-term election results have been declared in Ukraine, to ponder what, if anything, the election results reflect.

Who are the winners, and who are the losers in the big, and perhaps slightly nefarious and opaque picture?

Yulia Tymoshenko’s Batkivshchyna Party took two of the 7 contests seats, and thus have two more parliamentarians within the Verkhovna Rada.  Not enough to make any difference to party successes – or more accurately stated party failures – within the current Verkhovna Rada.

Alone, and outside the majority coalition it remains an impotent political force within the national legislature, with few other “democratic opposition” parties keen to ally with Yulia Tymoshenko, or alternatively, with Yulia Tymoshenko unwilling to ally with other “democratic opposition” parties.

The result does however, perhaps point to a significant improvement in the Batkivshchyna Party fortunes as and when the next Verkhovna Rada elections occur (be they early or scheduled in nature).  Nevertheless, there would be few genuinely willing political parties keen to join a coalition under Yulia Tymoshenko coming out of the other side of any forthcoming Verkhovna Rada elections.  There is far more to Ukrainian politics than simply winning parliamentary seats – successful coalition building is a requirement on the way to power.

A win for Batkivshchyna, though perhaps of limited current or future use.  What it will do is increase the on-going efforts of Batkivshchyna centre, to find and market future regional candidates early via the party provincial offices.

It was, if not a prima facie good result for the Presidential Administration and presidential parliamentary party, not an especially bad result either.

Irina Konstankevich and Victor Shevchenko, winners in Volyn and Carpathia, regardless of the party label under which they were elected are very close to people who are very close to Ihor Kolomoiski.

So small is the current coalition majority within the existing Verkhovna Rada, it has become apparent that when votes that really matter occur, the Kolomoisky backed “Will of the People” often vote along coalition lines – even if his other political parties and “owned/rented” parliamentarians don’t.

The inference being a grubby deal has struck between President Poroshenko and Mr Kolomoisky behind the curtain to provide “enough” votes when it truly matters.  A reader can only speculate upon the exact nature and scope regarding the reward Mr Kolomoisky gets in return.

Ergo, there will be few that will be surprised if these new, closely Kolomoisky associated parliamentarians vote with the government on crucial issues per grubby Poroshenko-Kolomoisky deals behind the curtain.

Thus far, Ms Tymoshenko is up 2, Ihor Kolomoisky is up 2, and President Poroshenko can perhaps borrow 2 under certain conditions.

Maksym Mykytas and Tetyana Rychkova also won seats running as “independents” with perhaps more than the tacit backing of the Presidential Administration – a clear indication of where their vote will go far more often than not.

Further, Serhiy Shakhov of Nash Krai took Luhansk.  Nash Krai was created by the Presidential Administration as a party of ex-Regionaires that will be reasonably supportive, take the presidential line on crucial votes, and is also a party created to split the old Party of Regions voter base with the intention of preventing it consolidating behind the “Opposition Block” that limply crawled from the ashes of Party of Regions immediately following the ousting of Viktor Yanukovych.

In short, if not by transparent hook, then by an opaque and perhaps grubby hook, the president and his party have not done badly at all.  Through smoke and mirrors they are up 3, with the possibility of borrowing 2 in a crisis.

Which brings about the losers,

The unambiguous loser has been the Opposition Block who traditionally could have expected to win 3 of the regional seats up for grabs where they historically held very safe seats in the nation’s south and east as the former Party of Regions.

Indeed these elections are perhaps most notable not for the electoral gains, be those gains direct or indirect, nor for any shift in power within the national legislature, but for the loses within traditional Party of Regions/Opposition Block political turf.

toxic

Opposition Block therefore, perhaps can be perceived to be down 3 – and remain toxic.

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Odessa Port Side – A privatisation flop?

July 19, 2016

The deadline of 1800 hours on 18th July for interested bidders to make known their formal interest in the privatisation of Odessa Port Side has now past.

A consolidated list of formal by 1800 hours on 18th July was to precede the privisation event on 26th July, hopefully resulting in the successful, transparent and seamless privatisation of the first major State Owned Enterprise (SOE) under the current Ukrainian leadership.

However the 18th July deadline has now passed – with absolutely no bidders whatsoever formally registering their interest.

It therefore follows that Odessa Port Side will not be privatised on 26th July as the government planned.

Having mentioned the privatisation of Odessa Port Side twice in the past month, two major issues with the privatisation were raised – “Before mentioning a few of those (numerous) terms, there is first the issue of the opening bid price – $527 million.

Is Odessa Port Side worth that?

To be honest, probably not when later considering the contractual obligations any buyer will have”

The other issues related to outstanding litigation against the asset for sale – “The biggest risks for any new owner is perhaps the outstanding and separate litigation by two (in)famous and competing oligarchs.

Mr Firtash makes legal claim over alleged gas debts owed to his РГК Трейдинга company.  A debt figure some state of UAH1.237 billion in relation to 217 million cubic meters of gas is claimed – plus interest.

Igor Kolomoisky claims rightful ownership of Odessa Port Side having once partaken in a previous privatisation of the plant almost 10 years ago which he won.  It was then scuppered by the government of the day, he claims because he won and it was not the desired result.  His legal claim is one of rightful ownership and thus the plant should not be sold.”

The upshot of the asset being over-priced and under litigation from two of Ukraine’s most prickly oligarchs, perhaps unsurprisingly managed to kill all formal interest – despite quite a lot of interest informally both domestic and international (Norway’s Yara Norge, US-based IBE Trade Corp, Koch Fertilizer LLC, CF Industries Holdings Inc, and Poland’s Ciech S.A. among those muted).

The government has now responded to the lack of interest by stating another attempt to privatise this asset will occur in September.

The government claim the lack of interest was due to the high asking price and the debt to Dmitry Firtash – Shock!

fail

So why was it done so badly?  What is to be done now?

The government have now clarified that the debt (as far as they are concerned) to Dmitry Firtash is actually UAH 3,18 billion – or $520 million.

It is now offering to reduce the opening asking price – by a whopping 30%!

That will reduce the original opening asking price of $527 million to approximately $369 million – plus presumably settling the Firtash debt and notwithstanding a serious 5 year investment clause/obligation into the plant within the sale contract.

Having previously been asked for a personal opinion privately on several occasions regarding the worth of Odessa Port Side, and each time stating “between $350 – $400 million, no more and no less”, a new opening bid price of approximately $369 million seems far more realistic – particularly when considering the investment obligations and employee welfare clauses within the sales contract – and not withstanding the asset related litigation of the oligarchs.

A reader may ponder therefore, now that the government opening price (if indeed reduced by 30%) falls within the valuation this blog stated to those parties that asked, just why it attempted to sell the asset for a minimum $527 million – with such a spectacular failure as a result?  Absolutely no formal interest after such asset promotion and privatisation hype is indeed a spectacular failure isn’t it?  Or is it?

The answer is one of public perception.

The Ukrainian government were and remain mindful of the wrongful perception held by the Ukrainian constituency over the worth of Odessa Port Side (and other SOEs) – which overvalues these assets (or liabilities in most cases) considerably in the collective psyche.

There was a very real concern that the government would be perceived as selling off the family jewels to foreign owners at a fraction of its wrongly perceived worth.  The same perception issues applied for an oligarchy purchase and the inferred grubby dealing that would undoubtedly have followed.

This overvaluation, if confronted by a “selling the family jewels at bargain basement prices” perception would certainly have been stoked by the empty populist political shells such as Yulia Tymoshenko for cheap political points.

Ergo the decision was made within government to set a (very) high opening bid price to mitigate these issues.

The result is such a spectacular failure, bringing absolutely no domestic nor international interest at $527 million, that it may now provide for a shift in the public perception regarding the real worth of Odessa Port Side – and also other SOEs slated for privatisation, whilst also put a pin-prick into the rabble-rousing hot air balloon of the populist politicians too.

The question therefore is whether the July scheduled privatisation of Odessa Port Side was indeed a failure – or whether it was a political success domestically?  The answer will perhaps only be known in September when this asset is subject to another privatisation attempt at a far more realistic price.

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