Archive for October, 2016


Proportionate responses to events in Moldova – Ukraine

October 31, 2016

Following polling on 30th October, the Moldavian presidential elections will go to a second round – this time a head to head between pro-EU Maya Sandu and Kremlin friendly Igor Dodon.

Mr Dodon received 48.7% of the votes in the first round, with Ms Sandu garnering 37.96% – by far the highest percentage of the pro-EU contenders.

The electoral questions now presented are whether the pro-EU votes that went to other candidates will consolidate around Ms Sandu or not, and also the extent of voter turnout for the second round.

The first round demographics displayed a notably higher turnout of both grey-haired and also female voters.  Ms Sandu is more likely to benefit from a far higher turn out of young men than Mr Dodon, if they can be encouraged to vote (either in Moldova or abroad where so many work).

During his campaigning Mr Dodon has made comment regarding Crimea – noting that de jure it may be part of Ukraine as far as international recognition goes, but de facto it is Russia.

Igor Dodon

Igor Dodon

Such statements calling into question the territorial integrity of another nation, and a neighbour, may or may not be campaign rhetoric – and a reader may well ponder the response of Mr Dodon should a campaigning/electioneering Ukrainian politician state that de jure Transnistria may be part of Moldova as far as international recognition is concerned, but de facto it is Russia.

Needless to say such comment entering the public realm by a presidential candidate of a neighbouring nation has not gone unnoticed by either the Ukrainian leadership or the Ukrainian media.

The Ukrainian Foreign Ministry duly summonsed its Moldavian Ambassador to Kyiv  “for consultations”.

Meanwhile, Moldavian Deputy Prime Minister Andrei Galbur made a very clear apology “I would not like to comment on the statements of the participants of the election campaign.  At the same time, referring to this specific case, I would like to express regret to our partners in Kyiv, our Ukrainian partners, to all citizens of this country, including those who live in our country, who have Ukrainian origin.  The expressed position does not correspond to the official position of the Republic of Moldova. We clearly recognize the territorial integrity and sovereignty of neighboring Ukraine within the borders recognized at the international level, do not recognize the annexation of all territories, regardless of whether we are talking about Ukraine or other countries.  Such a situation we have in Georgia.  Moreover, we too are suffering from a serious territorial crisis.  I do not know, therefore, those who made such a declaration, if would be nice to hear from officials from Ukraine, Transnistria belongs to the Russian Federation? I’m just sorry.”

So be it.  We currently suffer a public arena in which there is seemingly no limit to the amount of spurious, or misleading, or absolute bollocks that can be uttered by the political class in attempts to sway public opinion – public apologies will probably become more and more necessary, albeit they probably will not come when owed.  Kudos therefore to Andrei Galbur for such a swift and clear statement on behalf of the Moldavian State.

But what if Mr Dodon wins and becomes President Dodon – which he very well might?

There are mutterings within the Ukrainian media that Ivan Hnatsyhyn, the Ukrainian Ambassador to Moldova should be recalled.

So should he?

Clearly the recalling of the Ukrainian Ambassador to the Russian Federation in 2014 was very much in order.  That a temporary Charges d’Affairs now heads the diplomatic missions of Ukraine within Russia is quite right, for it signals a formal downgrading of diplomatic ties.  Nevertheless Ukrainian diplomatic missions throughout the Russian Federation continue to function – and so they should for embassies and consulates do not exist simply to hand out consular assistance to its citizenry, nor for Ambassadors to enjoy erudite chats over canapes and “drinkies” on an organised and revolving hosting calendar sponsored by turn-taking national taxpayers.

Even as President Dodon, and even if he maintains his position publicly regarding his statements about Crimea, that is still not the official position of Moldova.  Moldova is a parliamentary democracy by constitution.  It is therefore parliament that adopts the official Moldavian position.  (That said, Ukraine is a parliamentary-presidential democracy, though a reader (and a citizen) could be forgiven if they perceived matters the other way around.)

Having a controversial and problematic individual as President is survivable – as the Czech Republic clearly displays.

Therefore if a Kremlin friendly President Dodon is the fate awaiting Moldova, does it pay to recall the Ukrainian Ambassador, downgrading the diplomatic mission there to that of a temporary Charges d’Affairs as occurred with Russia over his personal comment/position?

Perhaps – but removing emotion from the equation, with a very Kremlin friendly President Dodon, does it not pay to have an Ambassador in Moldova to “manage things” as they inevitably become far more “testy” and ‘prickly” – not to mention probably witnessing an increase in covert action too?

To be sure the Romanians and the SIE are hardly likely to lessen their interest in matters Moldavian under a President Dodon – quite the opposite.

Ergo, with a longer term and less emotional view, (and the game is indeed long) rather than retreating from Moldova if a President Dodon does come to pass, no differently than the predictable Romanian response, is it not wise to retain as much presence and influence “on plot” as there currently is?  (Perhaps even increase it – one way or another).

If a President Dodon begins to become problematic – which he very well may – there will be a lot of Moldavian “people” wanting to “talk” privately and discreetly to neighbours and western “friends”.

“Drinkies” and canapes, official appointments/visits (and “unofficial” chats) provide for a top level communication channel directly to the MFA (unlike the spooks naturally).  Recalling the Ukrainian Ambassador and downgrading relations to that of a temporary Charge d’Affair may well see many of those anticipated communications and “chats” being held with others instead.

Thus, on balance, if a President Dodon is soon upon us, then unless the official Moldavian position shifts significantly and adopts his personal and current electioneering rhetoric, it is perhaps not only disproportionate, but indeed foolish to recall the Ukrainian Ambassador.  There are other levers to employ when showing displeasure.

The inauguration of a President Dodon, it that is what is to be, probably requires a greater rather than lesser presence.


Soviet ICBMs no more – Ukraine

October 30, 2016

For the past 20 years Ukraine has slowly – very slowly funding depending – been disposing of its inherited SS24 (PC22) intercontinental ballistic missiles.

The process is still not complete.

Thus far the Scientific Production Association (a State SOE) operating out of Pavlograd Chemical Plant has disposed of 54 third stages and 54 second stages of the missiles.


It doesn’t take a rocket scientist to realise that 54 solid fuel first stages remain.

The SPA states it is working on 50% funding, and as the dismantling is part US funded, a cynical reader will presume that the 50% funding it receives is the US funding and that which is historically “inconsistent” will be the Ukrainian funding.

According to the SPA, with full funding the process will be complete in 2 years and the Ukrainian SS24 ICBM Soviet legacy will finally have been dealt with per the obligations Ukraine entered into more than two decades ago.  (That said, there are now no longer any (even theoretically) functional SS24’s left with all 2nd and 3rd stages of the missiles disposed of.)

Thus working on the assumption that funding will remain “inconsistent”, and certainly a low priority as far as budgetary commitments for the current government are concerned, a prudent forecast for this project to finally see completion will be 5 years hence – 2021/22.


E-declarations Ukraine – The cash issue

October 29, 2016

The end of October sees the deadline for tens of thousands of Ukrainian politicians, civil servants and other assorted holders of high public office to submit their e-declaration returns relating to their wealth (and as previously inferred, perhaps in far too much detail available to all and sundry – transparency is not necessarily the same thing as unrestricted public accessibility).

On the whole it is nevertheless a law behind which there is the right spirit of transparency and accountability despite its shortcomings (as expected with any Ukrainian law, it is not perfect), and of vital importance is the criminal liability carried with regard to deliberately misleading and/or recklessly erroneous statements.  (No reader would expect any serious attempt at diligently completing such an e-declaration without criminal responsibility when considering those required to complete it.)

To be fair, with little over 24 hours to go (at the time of writing) before the mandatory submission date expires, there are no major surprises forthcoming from the declarations submitted.  There are some very rich people running and managing the country.  It would be needlessly shallow to pretend to be shocked by the accumulated wealth of either politicians or leading civil servants, or heads of State Owned Enterprises.

Indeed some would appear poorer than “collective wisdom” rated their wealth to be – albeit there are certainly areas within the declarations that can be massaged upward or downward as those completing such declarations see fit.

Whatever the case, and regardless of the systems legislative short-comings, the as yet unproven ability to provide evidence for prosecutions, or alternatively to allow for the legalisation of questionable assets, there is notably a lot of physical cash (in numerous currencies) outside of the banking system held by almost every individual required to make e-declarations.


It has to be acknowledged that the vast majority of Ukrainians, be they billionaires, millionaires, the average Joe, or paupers, historically have very little faith in the domestic banking system.  It also has to be acknowledged Ukraine remains very much a cash economy – much of it grey/black in nature.  The net result is a very large percentage of the population, what ever the scale of their fiscal wealth, physically hold, and physically hide, their cash rather than use the banks or have it officially recognised somewhere in the system as being held.

It is somewhat pointless in trying to guess where some very large sums of cash have come from, whether a reader chooses to believe it has accumulated over time or is the result of a big “under the radar” transaction.  To be blunt, it is perhaps Utopian to think that NABU will have the time, energy, or finances to investigate all but the most questionable.

For most, the legalisation of these large cash sums, whatever its provenance, will be the result.  If so, perhaps having legalised it, these large sums may then enter the banking system for there is no longer a requirement to hide it.

Indeed, a reader may consider that a soldier fighting the war in the east, expected to defend the nation and perhaps die doing so for about $300 per month, notwithstanding the organised crime groups, may seek to relieve some of those making public declarations of such large cash holdings outside the banking system.  Personal security firms may now see a further uplift in business not only around dwellings of the affluent public office holders, but also around family members – for kidnapping and ransom would appear to become an increased possibility.

As previously inferred, if the bodged introduction of the e-declaration system does prove to prevent prosecutions then the entire event may prove to be the biggest, albeit one-off, government sponsored (and internationally backed) money laundering operation in memory.  Something akin to an unspoken “drawing a line in the sand”, ergo forgiving and legalising many past misdeeds but clearly laying down that henceforth there will be far less room for accommodation of such nefarious and criminal shenanigans.

Such an outcome is certainly not ideal, but is arguably better that continuing with the existing status quo where internally and externally of Ukraine it is expected that some major figures will be jailed for corruption – and yet thus far none have been.  Many readers are used to the wheels of justice turning slowly – yet the anti-corruption wheels of justice in Ukraine are clearly approaching glacial.

All of that said, just because a lot of cash is held by an individual far beyond their official salary (and other declared incomes), it does not mean it was (all) acquired through the dirty deeds – those dirty deeds have to be proven to have occurred.

For example, when the buying and selling of houses and cars historically has occurred in cash (in $ six figures frequently) – and that can still occur despite legislation that now seeks to makes such high value asset purchases electronic transactions – it is still necessary to prove not only that the cash isn’t the result of a land/house/asset sale in 2003 and the proceeds were retained in cash because the recipient didn’t trust the banking system then, and doesn’t trust the banking system now, but also to prove they are the proceeds of a criminal act.

It is a matter of what can be proven – and not a matter of what is perceived or asserted.

Looking forward, if Mr/Mrs X declares $500,000 in cash for this e-declaration period, and $750,000 in cash at a subsequently required declaration what is to be done – if anything?

As money in the bank and other hard assets will become increasingly less difficult (albeit still not easy) to trace, it follows therefore that one significant question going forward is how to account for the large amounts cash in hand (quite literally) when it comes to those individuals holding public office if the giving and/or receiving of bribes, or the otherwise facilitation of corruption via cash, is to be managed far more effectively?


Kremlin offers gas at $180 – Ukraine signs a deal with Engie (France)

October 28, 2016

Following President Putin’s very predictable monologue at the Valdai gathering, that day he also made a statement regarding Russian gas prices for Ukraine, should Ukraine decide to buy Russian gas once again.

Nowadays, the price of Ukraine won’t be higher than that for the neighboring states, namely for Poland. I’m not aware of actual prices, but at the moment of our conversation with Ukrainian President Petro Poroshenko, Poland was buying gas at $184-185 per 1,000 cubic meters on contractual terms. We could sell [gas] to Ukraine at $180. I named the price – $180 per 1,000 cubic meters.

We have discussed the issue of gas shipments to Ukraine with the president of Ukraine at his initiative. He asked whether Russia could resume the shipments. Certainly, it could, at any second. Nothing additional is needed – we’ve got a contract and an addenda to it. The only thing required is prepayment.

As far as I know, the price of gas for the ultimate industrial consumer in Ukraine already exceeds $300 per 1,000 cubic meters. We offer a price of $180, but they don’t want to buy from us yet.

Let it be – let them work. The main thing is that they could ensure transit supplies to European countries.

(He also commented upon the “illegalities” of Ukraine buying from western sources “which is a violation of a contract between Gazprom and its western counteragents” and to which Russia “had turned a blind eye.” and inferred to a return of  dubious”middle men” between Ukraine and western suppliers.)



At the same time, Prime Minister Groisman was in France.

During this visit a deal was signed with French energy company Engie regarding supply and the reservation of transport and underground storage facilities operated by UkrTransGaz in Ukraine – the deal commencing this winter.

Since mid-2015 Engie has become a major supplier of gas to Ukraine, predominantly via Naftogaz, delivering approximately 3.5 billion cubic meters of gas.  Indeed Engie intends to open a subsidiary in Ukraine.

Thus far, despite quite significant legislative changes in the Ukrainian energy sector to bring it toward EU Third Energy Package compliance and Association Agreement obligations, the Ukrainian energy market has remained impenetrable to external market players.

The proposed privatisation of Centroenergo in 2017, whilst certainly of interest to dubious Ukrainians such as Igor Kononenko (who seems to be filling key positions within the company with “his people”), presents the best and swiftest opportunity for the energy market to receive a competent foreign entrant assuming control and ownership of assets and production in Ukraine – which will cause waves in the corrupt and opaque trough of Ukrainian energy from which no self-respecting oligarch fails to drink one way or another.

Clearly the Engie subsidiary, unless it becomes more than an “on-site” import management entity requires little investment and negligible risk – unlike the purchase of Centroenergo.

Nevertheless, there is a certain degree of symbolism to the French Engie opening a subsidiary in Ukraine which a reader can expect will be embellished for the purposes of political expediency.  Much more to the point however, is a clear move in the direction of a consolidated and irreversible diversification of energy supply for Ukraine.


Time for the annual tax tinkering – Ukraine

October 26, 2016

Certain things are traditional in Ukraine when it comes to the New Year.  Among those perennials are changes to the tax system.  Indeed “с новым годом” could be a secret code for inevitable tax system tinkering.

(For example 1st January 2015 brought about changes to the Tax Code as required by the IMF when Ukraine was desperate for money.  As it no longer is IMF dependent, clearly it can be expected that the political will to further meet IMF requirements will evaporate within the Verkhovna Rada – though not necessarily within the Cabinet or Presidential Administration.  The February 2017 tranche may never arrive.)


This year Draft Laws 4117 and 3357 submitted by Chairwoman of the Verkhovna Rada Tax and Customs Committee Nina Uzjanina look set to try and (radically) change the tax system once again.

Naturally there is nothing wrong with policy (and any associated legislative) change as long as that policy is will be effective rather than ineffective – and certainly not counterproductive.  In this particular case, to be blunt, if these drafts laws are passed then for them to be effective there would ideally be a period of education as to what the system is, how it works, and the responsibilities of taxpayer and State within it.

Hence 1st January may traditionally be an ideal time to adopt a new Tax Code or amendments to it, but attempts at changing that Tax Code in November with so little time for “education” is probably not such a wise move.  This is perhaps particularly the case when part of the draft legislation effects a move from a “paper” tax administration to “e-tax” administration for commerce across the entire nation.

There is no need to go into any of the proposals within the draft legislation in detail when there are some fundamental questions to ask first.

A reader will perhaps be reminded of the still on-going debacle that is the e-declaration for the higher echelons of those holding public office.  (Although it is a good bet that almost all those required to make such e-declarations will do so, it is what follows thereafter regarding system functionability, legality, security, and those repercussions upon criminal liability that are far less certain.)

The most obvious question regarding a national e-commerce tax system is whether the entirety of its commercial entities have access to “e”, or rather the Internet.  Not only with regard to Internet coverage but also access to the hardware to actually comply with any e-commerce tax declaration.

(Who pays for the hardware will become a very prickly social/business issue too – especially for the very small business outlets.)

The next question, on the presumption the entire nation is “on-line” and possesses the relevant hardware, is whether they will actually understand the e-commerce system, and if they do, will their customers who may require (or simply) want “paper” as a result of their transaction?

Also, no differently from the e-declaration system, there will be big questions relating to data security, system integrity and reliability, and in this case actual tax payment confirmation – or not.

If the system is compromised due to poor security, how to insure the data only not missued but also is not wiped by those that nefariously enter?  How much tax would be lost between the time of the last system back-up and eventually getting it back on line?  Is Ms Uzjanina proposing a “high side” system used by literally millions of “low side” users in such a system?  Not an impossibility of course, but it would require a filter that prevented “high side” being sucked out through “low side” as the IoT is becoming quite a hazardous place when it comes to defending system integrity.

How much would all this cost?  Undoubtedly Ukraine will adopt such a system sooner or later – as it should – but is it a priority?

Arguably it could be said it will assist in bringing the black/grey economy into the white – if the system infrastructure (both hard and soft), policing, and the business will is there to facilitate it.  If that were the case the argument is that it would therefore swiftly pay for itself.  It would also remove a lot of person to person interaction with the tax authorities thus theoretically reducing opportunities for corruption.

Nevertheless, societal perceptions count, and many will ask if there are more pressing priorities for the limited budgetary funds that have to be met in the immediate term?

Needless to say if these draft laws are adopted (despite some questionable detail deliberately omitted here)  it would certainly be wise to allow for the parallel running of both paper and e-systems for a (fairly lengthy) transitional period  – not only for technical reasons, nor the fact that not all commercial enterprises will have the ability to comply with an e-system, but also for business and societal familiarity to occur.  In fact is there a reason that both systems could not or should not run?  Would it be prudent to run both?

As usual New Year approaches and Ukrainians have come to see tax legislation as inevitable as socks, aftershave and style-less jumpers/cardigans as part of the festive season.  This year is clearly no different.


The CyberJunta hack – How will the populists respond?

October 24, 2016

CyberJunta, one of the Ukrainian hacking groups has apparently (and unsurprisingly) targeted Vladislav Surkov and an email address purported to be used by him under the pseudonym Nikolay Pavlov.

Also compromised was an email address of a Surkov associate/underling used by Pavel Karpov.

Within the documents thus far released in two pdf files file-1 and file-2 – 17.4 MB in total (with more to come undoubtedly) it has to be said there are absolutely no surprises when it comes to the tactics and instruments to be used in undermining Ukraine beyond the occupied Donbas.

Neither would the suggested time frame between November 2016 to March 2017 for implementation of destabilisation within Ukraine come as a surprise to many.  Events both external and internal of Ukraine would dictate this period as being optimal.

Clearly fermenting social unrest during the heating season when tariffs have risen so sharply requires little tactical thinking within the Kremlin when Ms Tymoshenko long-since grasped that opportunity – and she has been banging the social unrest drum for several months over the issue.

Forcing/encouraging new Verkhovna Rada elections in Spring 2017, something long anticipated, is another goal that would fit the Opposition Block, Batkivshchyna/Tymoshenko, and possibly Radical Party design.  As all are populist, if they cannot force early elections following the hardship many will face during a heating season of high tariffs then they will probably never manage to force early elections.

Plans attempting to bring about calls for a “federal Transcarpathia” are an obvious alternative to the failed Novorossiya project.  (Although not specifically mentioned, how great a role Viktor Orban would/could play in agitating the Hungarian diaspora is unknown.)

What is perhaps most informative about the documents is that Mr Surkov aka Pavlov (if the email address is genuinely one of Surkov’s pseudo-email addresses) is that it is not the most Kremlin friendly Opposition Block that is identified as the critical political machinery to push the Kremlin active measures within the Ukrainian constituency.  Neither is it the Radicals.


The main focus was/is to concentrate upon the Batshchivyna (Ms Tymoshenko’s) Party.  This because it has the best outreach/network throughout Ukraine of the 3 political parties identified that would/could dance to the Kremlin tune – wittingly or unwittingly.  It is indeed true that of the Oppo Block, Radicals and Batkivshchyna, the latter has by far the widest regional networks.

The obvious question is whether Ms Tymoshenko would willingly allow her (and it is hers and nobody else’s) party to be used to further Kremlin active measures?

If so, wittingly or unwittingly?  (And would it matter either way when it comes to issues of implementation?)

A reader is left to ponder the morality (or not) of Ms Tymoshenko and the integrity (or not) of Batkivshchyna in pursuit of its vision for Ukraine even if it meant becoming a covertly willing accomplice of Mr Surkov/The Kremlin.

To be blunt, that Batkivshchyna vision probably goes no further than Ms Tymoshenko ruling Ukraine, for there is nothing whatsoever offered by way of detailed policy (as a reader would expect from a populist) and to be frank during her nearly 20 years in Ukrainian politics, meaningful and credible policy is not something that Ms Tymoshenko has ever actually offered (let alone delivered).  Her political judgement is also somewhat suspect, for despite many years involved in grubby deals with The Kremlin/Gazprom whilst in control of UESU and Somoli Ent, she still managed to hand Ukraine the most punitive gas deal in its history in 2009.

Whatever the case, how does Ms Tymoshenko and Batkivshchyna, (notwithstanding the Radicals and to a lesser extent the Opposition Block of whom such cooperation would be expected) mitigate the revelations within the apparently hacked emails detailing Kremlin plans as authored by Mr Surkov/Pavlov?

If denying (perhaps rightly) any political activity coordinated, or even useful to The Kremlin, the fact of having been identified as the political parties most likely to further Kremlin active measures to undermine Ukraine is a rather damning frame to be placed within.

Ms Tymoshenko/Bakivshchyna (and the others) may try to label CyberJunta a presidential provocation, but that carries risks – particularly if it is not, for hacker retribution is unlikely to be kind.  Batkivshchyna (or other named parties) emails becoming public is probably not a something that would be appreciated (unless you are employed within the Presidential Administration or are a Deputy of the People’s Front), nor is it likely to contain nothing but wholesome morally upstanding text and thoughtful policy alternatives.  Scams and scheming may well dominate any correspondence, be it party or personal in nature.

To be effectively labeled The Kremlin’s best ally/option in destabilising Ukraine, wittingly or unwittingly, within allegedly Kremlin designed active measures takes some explaining even if the entire incident is a fake – for unfortunately for Ms Tymoshenko and Batkivshchyna (and more or less the entirety of the political class more broadly), anonymous pro-Ukrainian hackers probably have as much, if not more credibility with the constituency than she does.

How to respond with the minimum of political damage sustained?

If it is a fake (or parts therein are fake), then who is responsible?  The Bankova or People’s Front?  It is doubtful it was a joint project.  If not either of those two, who else benefits?


Saakashvili’s Khvylya Party begins to take shape?

October 21, 2016

On 18th July an entry appeared regarding the creation of the Khvylya (Wave) Party which had Odessa Governor Saakashvili’s finger prints all over it (even if he is not formally a member thereof).

Not much has been written about it since.  In part due to the fact that Governor Saakashvili has had one eye on recent electoral events in Georgia little has happened overtly.

Those Georgian electoral events now (almost) over and clearly Governor Saakashvili will remain in Ukraine as a result.

Therefore perhaps time presents itself to formulate the party structure both nationally and regionally to prepare Khvylya for any forthcoming elections.  Although it will still to be work in progress, something resembling leadership for the Odessa branch of the party seems to be forming.


Perhaps most surprisingly is the apparent defection from Samopomich of Anna Pozdnyakov (currently Secretary for the parliamentary faction).

Among the names floating in the wind, the most obviously leader of the Odessa branch would be the extremely competent and talented Salome Bobrovskaya.

Of the usual suspects, Teimuraz Nishianidze (head of fund/charity “For Odessa”) and Ivan Liptuga (current head of the Department of Tourism) seem likely to be part of the Khvylya regional party set-up.

From civil society/activist roots come Vadim Labas (Oberig), Harvard Grad Vladimir Shemaev, Grigory Kozma, and Alexie Prokopenko (New Generation).

Historical local governance experience arrives via Andrei Karpenko, and of local SME’s, CEO of TIS Alexander Stavinster’s name is rumoured.

Certainly a team capable of building a reasonable regional political party administration – particularly if Ms Bobrovskaya does lead it.  However, as the entry of 18th July makes clear “With Misha Saakashvili named atop the Khvylya party list, nationally 10% or more of the constituency may well have voted for it.  Without his name atop, what percentage?  3%?  5%?  Will the party cross the political threshold to enter the Verkhovna Rada via the proportional representation vote at all?”

There will be a lot of hard work for these people to do even to gain a solid foundation from which to build in the oblast where the unofficial party leader is Governor.  That said, none of the alternative political parties are especially appealing either (for one reason or another) and work in progress may yet produce something surprising (albeit not earth moving).  Time will tell.


Old feuds – Odessa Airport

October 20, 2016

In 2011 when “The Family” Yanukovych was taking a tribute from anything and everything it didn’t actually steal, raid or otherwise take control of, Odessa Airport a hitherto publicly owned asset was “privatised”.


The City entered into an agreement with “Odessa Airport development”, taking a 25% stake in the special purpose vehicle “International Airport Odessa”.

This SPV was used to attract investment of $90 million – of which the City put up 25%.  The remaining 75% supposedly to come from the other investors.

Those other investors were Viktor Levchenko, Alexander Kirichenko, Mikhail Chernetsky, Sergei Borodin, Sergei Korotkov, Alexander Shabalin, Oleg Gonchar, and Igor Posuhovskogo – notwithstanding two of Odessa’s most notorious businessmen Boris Koufman and Alexander Granovsky (whose political star is currently very much on the rise in Kyiv).

In 2001, the current Mayor of Odessa was merely the regional leader of Party of Regions (among his other activities as nefarious “businessman”).  For whatever reason Gennady Trukhanov was very much against the privatisation of Odessa Airport.  It may be that it was simply due to the fact he was not invited/asked to be a private partner, or it may be that the privatisation of the airport somehow interfered with his business activities and/or increased the cost of doing business.  He is, after all, very capable of a good scam as yesterday’s entry makes very clear.

Nevertheless, former President Yanukovych was insistent and thus Mr Trukhanov as Party of Regions leader was forced to lobby for something that he was actually against.  A reader should note that “investors” Messrs Koufman and Granovsky were very close to Alexander Yanukovych at that time.  (Indeed Mr Granovssky’s FINBANK was allegedly used to launder money for “The Family” frequently.)

A reader should also note that none of the “private investors” have ever ranked highly on Mayor Trukhanov’s Christmas Card list.  None are in his orbit.  To be blunt, he doesn’t particularly like any of them.

Since Gennady Trukhanov became Mayor he has sought to remove City Hall from the airport special purpose vehicle and re-nationalise it.  Several attempts have failed.  October 2015 witnessed a formal settlement between partners and City Hall to settle the feud.  It appears now to have been no more than an armistice.

Within that armistice/settlement there was a booby trap set by Mayor Trukhanov.

  • International airport” Odessa “pledged to July 1, 2016 to complete the construction of a new passenger terminal area of 29 thousand square meters with a capacity of 3-3.5 million passengers per year., And put it into operation no later than September 30, 2016 year.

Clearly 30th September has long since passed and the new terminal is not in operation.  In fact it is nowhere near being ready for use with no internal fit out whatsoever.  It is not ready, in part because City Hall “put a (covert) squeeze” on the construction work.

NABU has also opened a criminal investigation into the “privatisation” during the Yanukovych term.  Criminal Case 52016000000000214 was opened in late June of this year.

Without going into too much detail, on 19th October Mayor Turkhanov managed to steer City Hall through a vote to remove the City from “International Airport Odessa” SPV.  The City’s capital investment will now requiring returning – except, unsurprisingly, the other “partners” have not actually “invested” (yet) other than in a commitment to do so.

Perhaps then, in the absence of any capital return, a 25% stake in the new terminal on the terms of City Hall (rather than old Yanukovych diktats) will be the outcome.  Time will tell whether Messrs Kaufman and Granovsky will be accommodating (one way or another).  Mayor Trukhanov would consider the return of the airport to public ownership and a City Hall stake of 25% in the new private terminal something of a good outcome.

There will probably be numerous court cases regarding the re-nationalisation – or prevention thereof -despite the “investors” having never fulfilled their commitments to the existing and operating Odessa Airport.  It seems probable that City Hall will win and the current Odessa Airport will return to public ownership.  It will be a political and possibly very personal win for Mayor Trukhanov whose motivation for this, at least in part, is principled revenge over an issue he has always been against.

If Mayor Trukhanov is successful, and it appears he will be, then he too will have to be wary of revenge from the likes of Messrs Kaufman and Granovsky.  Another little local war behind the curtain may just have begun.

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