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Property rights or property wrongs

August 20, 2016

Having consistently written regarding the Odessa Port Side privatisation and its predictable failure (planned or otherwise) for all the reasons mentioned, it seems that the Ukrainian government have decided to try once again in October 2016.

This time however, circumstances will have changed somewhat.

The Kolomoisky claim (via his Nortima company) of ownership has been rebuffed by the courts, leaving only two significant issues.  Those significant issues being an alleged gas supply debt to Dmitry Firtash’s Ostchem group of companies (РГК Трейдинга to be precise) of approximately $520 million, and the original and extremely unrealistic opening bid price of $527 million.

As the Firtash debt is a matter of legal proceedings, and the courts having already dealt with the Kolomoiksy claim over the initial attempt to privatise Odessa Port Side many years ago, it leaves the matter of correcting the opening bid price within the remit of Government Ukraine.

This blog having consistently stated that the plant is worth between $300 (fair price) – $400 million (outstanding result) therefore demands that a substantial reduction in opening bid price has to occur.  An initial slashing of 30% from the original price is being discussed – and quite frankly has to happen.

What is decided upon when October arrives remains to be seen, however if there is to be any realistic chance of competitive bidding then slashing the opening bid price by 30% may not be enough.  40% may be necessary to regenerate interest from those such as Norway’s Yara Norge, US-based IBE Trade Corp, Koch Fertilizer LLC, CF Industries Holdings Inc, and Poland’s Ciech S.A who were initially eyeing the asset.

Meanwhile on 19th August Odessa Economics Court issued its judgement regarding Odessa Oil Refinery allegedly “acquired” by Sergei Kurchenko when fronting for the “Yanukovych Family” during the period that the Yanukovych regime was in power.  When “The Family” fled Ukraine, including the wanted Mr Kurchenko, Odessa Oil Refinery was arrested and placed under the “management” of Ukrtransnaftoproduct, a State Owned Enterprise closely associated with Ihor Kolomoisky’s interests.

Property-Rights

Seemingly with very little by way of documentation, the judge nevertheless ruled in favour of two Cypriot owned companies (believed to belong to Mr Kurchenko) and Russia’s VTB Bank acknowledging their claims of UAH 14 Billion – thus opening up the legal route to reclaim approximately $5.5 billion from Ukraine, and perhaps the return of the asset to Mr Kurchenko despite the somewhat lacking and questionable documentation submitted by the claimant.

Naturally strong statements are being made regarding the integrity – or more accurately blunt allegations of corruption – against the judge.  Odessa Economic Court is widely perceived to be the second-most corrupt court in Ukraine after that of Kyiv, and as there has been no significant change of judicial personnel since the “Revolution of Dignity” in 2014, there has been no significant change in the frequency or dubious/corrupt judgements handed down.

Indeed there is perhaps little solace to be found when the removal of judicial immunity finally becomes active on 30th September.  There already exists a draft law that seeks to mitigate that outcome – Ch 2, Art 59 basically provides that a judge must be forewarned of his impending arrest, thus providing ample time to disappear with ill-gotten gains.

This being one of many problematic issues within this draft law submitted by Alexie Filatov, Deputy Head of the Presidential Administration.  So retarded is this draft law that a reader may ponder whether President Poroshenko knows what poor legislation the Deputy Head of his own administration is proposing.

Perhaps he doesn’t.

If he does, the question is therefore why is this legislation likely to go forward?  Is it yet another attempt by the President to mitigate and strike deals within the Ukrainian elite whilst giving the legislative structural impression of reform progress?

If not an attempt to keep all within the elite happy (relatively), then perhaps there is no intention to allow this draft to become law whatsoever, and it is an influence operation being conducted by the Presidential Administration allowing the President publicly and loudly to veto such poor legislation in order to reaffirm (or buy back) his “reform credentials”.  Among many on-going issues, most recently those credentials have suffered both domestically and internationally from the warfare within Yuri Lutsenko’s prosecutor’s empire, and also from the e-declaration farce relating to assets of public figures/servants – a debacle that won’t be fixed for a few weeks, and the resulting “issues” that eventually come to light from this fiasco will begin to appear in a few months from now insuring the matter doesn’t fade swiftly from the headlines.

It’s all rather messy.  Property rights, or property wrongs?  Wronging property rights, or righting property wrongs?

Time, as it invariably does, will tell.

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