Archive for August, 2017


Freedom of speech verses propaganda – Ukrainian PNG policy

August 31, 2017

30th August witnessed the SBU detain and remove Russian journalist Anna Kurbatova persona non grata.  It will be 3 years until she can legally re-enter Ukraine.  Her activities recognised as propaganda rather than journalism by the Ukrainian State.

A few days previously, Antonio Pampliege and Manuel Angel Sastre, two Spanish journalists were also made persona non grata in Ukraine.  They too may legitimately return in 2020.  During 2014 it seems they may have written something that was perceived (and there are perhaps issues of translation leading to miss-perceptions – or not) that managed to get them onto the “Myrotvorets List”.  A list from which they were supposedly later removed – or again perhaps not.

Quite how influential the Myrotvorets entity is, a reader can ponder.  It clearly has a good relationship with certain politicians – who are also supporting Identigraph.   There is also clearly an understanding (of sorts) with the SBU – but then again the SBU has an understanding (of sorts) with InfoNapalm, CyberHunta, Trinity, Falcon’s Flame, RuH8 and others.  It would be remiss of a security service not to have such understandings.  Some political active involvement and/or SBU relationships will be closer than others with such entities – and it does not follow that all such non-State entities have anything to do with each other or necessarily agree with how others operate.

In a time of war, such non-State actors will be allowed some room to operate – but the red lines have to be made clear.  As such a profilakticheskii razgovor making clear where such lines are, and ultimately who sets the rules, may occasionally be required.  (Such conversations also occur on occasion between the political centre and local politicians should they over-step the mark, and naturally with organised crime insomuch as what will be tolerated and what will not.)

However, Myrotorets is not the central point of this entry – and it is understood that it will be a somewhat polarising entity for readers.

The recent spate of journalist expulsions has led to a response from Arlem Desire, the OSCE Representative on Freedom of the Media, calling upon Ukraine not to arrest and persona non grata journalists from Member States.

Unsurprisingly the anticipated negative Kremlin response was no less forthcoming too.

To be absolutely clear, the views of Mr Desire are certainly not shared by the blog.

Objective analysis and/or reporting and/or commentary has no room for “whataboutism”, false moral equivalency, or propaganda.

There is indeed a fundamental right to freedom of expression.  Further a free press is unquestionably a pillar in any robust democracy.  It is understood that “patriot” and “nationalist” appear to be freely interchangeable lexicon in every day conversation in Ukraine – despite those two words having very different meanings in English.  It is accepted that it is a right for an individual (thus politicians, journalists unquestionably included) to shock, disturb, and by extension offend in exercising free speech – but there are limits.

A State must certainly be able to reach the limit of its tolerance.  There are inherent responsibilities that come with freedom of speech, notwithstanding any statutory parameters.   Such freedom is curtailed when used to incite, promote or justify hatred for example.  Numerous laws exist baring certain historical denials being publicly expressed.  Likewise the use or display of certain symbols associated with odious ideologies have been subjected to legislation.

However, assuredly there is no fundamental right to create and promulgate propaganda – and free speech and propaganda are not the same thing at all.

More than 3 years into a war where the Ukrainian fight against the Kremlin is not only kinetic, but also being waged diplomatically, politically, economically, socially, in cyber space and in the information space – and a war where even if the kinetic arena ceases, it will undoubtedly continue across all other fronts – the boundaries of tolerance have long been tested.

As such Ukraine, and any other nation, has the right not to entertain those within its territory that create and promulgate propaganda against it, simply because they happen to a journalist and also from an OSCE Member State as Mr Desire has advocated.

Being a journalist and being a propagandist are not necessarily mutually exclusive.  Ukraine is perhaps also to allow entry to the journalist Dmitry Kiselyov just because he is from an OSCE Member State – despite the fact he is a notorious propagandist?  Clearly not, and none would expect it to be so.

Nevertheless, each and every decision to persona non grata a journalist (OSCE or otherwise) requires individual consideration based upon evidence and perceived intent when balancing with the obligations that Ukraine has made both to itself and internationally.

Criticism of Ukrainian State policy or individual Ukrainians (read politicians), even when unflattering and less than diplomatic, is not for many, sufficient reason to detain and eject a foreign journalist.  It is in fact likely to generate further unflattering and less than diplomatic criticism from a wider base – and thus be amplified to a greater extent in these times of networked social media.

As such, individual persona non grata decisions regarding the media (obnoxious and/or half-arsed as much of it is) require some careful thought.  Do the costs outweigh the benefits?  Has the propaganda bar been set an appropriate level before action is required, and has that level truly been met when action is taken?  Is it self-evident to a “reasonable and unbiased” reader/viewer that a report is deliberately biased and is being used to promote a political cause or point of view that undermines the State (rather than an individual)?  If an individual report fails to meet the bar, do the historical reporting trends collectively meet such a bar relating to propaganda?

Ultimately decisions to PNG are the right of the Ukrainian State.  It may or may not decide to justify its decision.  However, in doing so it would be wise to think carefully about how such justification is worded within whatever framing is used.

How do individual journalists (and decisions thereon) fit into any wider policy of banning certain Russian media?  (Something that occurs not only in Ukraine.)

No doubt many will be keeping an watchful eye upon Ukrainian actions regarding the banning of foreign journalists (notwithstanding any pressure on domestic journalists as the pre-election electioneering slowly grinds on).  Trends may or may not appear, however a reader is reminded that propaganda is not a fundamental right.  They are similarly reminded that a free media is a necessary pillar in democracy.  It would be wise therefore to treat each case on its merits.


Corruption reconstruction? – Tales from the port

August 30, 2017

A few days ago an American acquaintance working with the Ministry of Health in Kyiv contacted the blog seeking a recommendation for an import broker at Odessa Port – a container within which a US car will be arriving and the acquaintance did not want to pay over the odds for its import.

Quite right.

However the blog is unaware of any “honest brokers”.  Also there is a new scheme relating to a “one stop shop” for car imports that may be a better all-in-one solution to consider.

Thus a little poking about around the port, port functionaries, and port “facilitators” was required in order to provide any sort of answer behind which the remotest due diligence had occurred.

The conversations entered into did not tell a particularly welcome tale, albeit private conversation with such individuals contains no small amount of hearsay.  Ergo, what follows will be worded carefully, and a reader is invited to continue reading on the proviso that what is written is a summary of such uncorroborated chit-chat.

When Alexander Vlasov was appointed to head Odessa Customs in April 2017, the blog asked whether it was indeed a Chernomyrdin moment.  A matter of “we wanted to do better, but things turned out as always.”  

That entry was solely occupied with the mystery regarding the swift, opaque and therefore troublesome appointment of Mr Vlasov.  What was the rush with a candidate with a quite reasonable curriculum vitae, a man who would have probably done very well in any real competition for the post?

“A “competition” for the Head of Odessa SFS was launched on 29th March – and by 31st March it became clear that Alexander Vlasov would be appointed with the current “acting” Mr Safonov to be appointed his Number 2.

“Competition” is rightfully encased by inverted comma’s, for transparency and suitable time for applicants to submit their interest and battle for the position via interviews, tests, and be subjected to public scrutiny there was none.

“Competition” thereby can be read as “arbitrary appointment” despite the necessary lip service being given to statute and public alike.  Indeed, while the “competition” was officially announced on 29th March, it was already clear at least a few days before that announcement in both media and social media that Mr Vlasov would “win” the yet to be announced “competition”.

For those wondering about Mr Vlasov’s background, for the first decade of this century he worked within the machinery of the SBU, more recently followed by year or two stints within the Tax Service, and then Economics Ministry.  In 2016 he was the head of the Inter-Regional Management of Operational ATO Support Zone of the SFS (Phantom Unit), with his last position being Chief of the Interdepartmental Center for the Prevention and Detection of Violations of the Law on State of Customs (also known as the “Black Hundreds”).

Prima facie, an impressive resume – so why such a clearly opaque, rigged and rushed “competition”?  At the time of writing there is nothing to suggest (serious) nefariousness by Mr Vlasov historically, nor any noted lapses in integrity.  Perhaps some will surface, perhaps there are none to surface.”

A possible answer was floated during this recent series of chats.  That proposition was that it was not the State that was in a rush, but it was Mr Vlasov who was in need of a quick exit from the Phantom Unit – and Odessa was the immediate and suitable vacancy.

It was offered that when SFS Chief, Roman Nasirov was taken down by NABU in early March 2017, so too was the roof removed over numerous lucrative scams and schemes at the administrative border with the occupied territories of Donbas – scams and schemes in which the Phantom Unit was allegedly involved.

Thus media and criminal investigations, notwithstanding eventual court cases relating to alleged nefarious acts of the Phantom Unit would follow very quickly.   Already corruption schemes relating to Alexander Khalkovsky of the Tax Police, a man associated with Roman Nasirov and Alexander Vlaskov, were media headlines in June of this year relating such acts along the administrative border.

An accurate account of the behind the curtain shuffling?  Well perhaps.

The timeline would fit the tale.  Mr Nasirov taken down on 3rd March, the Odessa “competition” for the Customs post was officially announced on 29th, and Mr Vlasov announced the winner on 31st March.  Blistering speed when there are ministries and also the National Bank that have had acting Ministers in post for years in some cases, many months in others.  There are also numerous large SOEs that remain without CEOs after several years.

Thus speedy appointments raise flags.

Nevertheless there are always many different way to join the dots and deliver a different picture every time – and that presumes all dots are supposed to be joined.

As yet by way of partial corroboration there are no court case results that have delivered any verdicts against the Phantom Unit that the blog has found – albeit that does not mean such investigations are not on-going, nor that cases have not been submitted to the court.  In fact there may even be verdicts that have eluded the search by the blog (though that seems unlikely as the courts are not known for their speed).  Thus prima facie a reader, like the blog, is left to ponder the accuracy of such conversation content.

However, returning to the aforementioned nefarious Alexander Khalkovsky, he has yet to be fired or disciplined or investigated for the allegations of corruption around the occupied territories that made media headlines.   Nevertheless, the Tax Police hierarchy would of course be happy to see him go rather than suffer continued prickly and unwelcome media scrutiny that occurred in June.

Lo, it was claimed, he has apparently instead moved to the SFS following another “competition” – similar to that of Mr Vlasov in speed and opaqueness it appears.  Upon winning a “competition” on 25th July held in Kyiv, Mr Khalkovsky is the head of the Department for the Provision of Technical Protection of Information, and controls the Department for the Protection of State Secrets (or similarly worded department titles).  The conversation left it unclear if the appointment is for a position in Odessa or a central appointment in Kyiv.

Once again a search provides little in the way of information regarding any such “competition”, and by extension any other candidates he would have been in “competition” against – if the “competition” occurred at all.

Nevertheless, if the appointment is to a post in Kyiv, the interlocutors claim he will be transferred to Odessa.   Perhaps corroboration will come swiftly as those spoken with would have it Mr Khalkovsky will take up his appointment in Odessa very soon – a matter of days it was said.

The interlocutors further stated that many old corruption schemes of under-weighing cargo, or over allowing for packing/packaging, and the re-designation of cargo contents has returned – in exchange for an illicit 30% fee for importers.  Once again, without speaking with any importers, corroboration is absent.

Odessa is a city that is mercantile above all else – and long associated with organised criminality, particularly relating to the ports (notwithstanding the political and institutional class if a reader attempt to separate them from organised criminality).

It is also a city that when speaking to those lurking behind the curtain, is full of colourful personalities that will regale a listener with intrigues to which only varying degrees of confidence can be attached.  Thus a reader is once again reminded that this entry is a summary of private conversation and hearsay within.

An obvious question a reader will ask, is why Mr Vlasko, if rapidly decamping the Phantom Unit for Odessa Customs, would consider that position some sort of safe haven?  Likewise Mr Khalkovsky?

The answer given when that question was asked suggested that it was not considered a safe haven, but rather one last location for significant enrichment prior to disappearing before the authorities came knocking – the inference being therefore, forewarning would be given, and also that the authorities are very well aware of what is allegedly going on.

The next question of course, to flee to where?  In the case of Mr Vlasko is was claimed Amsterdam where he has property and his son apparently studies.  No location was offered for Mr Khalkovsky.  Perhaps such friends of the blog such as Hubert Smeets and Laura Starnik will get an interesting little story in The Netherlands if so – not withstanding an eventual extradition request to The Netherlands too perhaps.  Amsterdam however, is probably not the best place to try and avoid any extradition attempt when it comes to Europe.  (Austria would be a far better bet.)

Whatever the case, if there be any merit to any of the intrigues floated and summarised above, serious questions need be asked of the central authorities in Kyiv.

Clearly there would be questionable decisions within the SFS management.  Oversight questions for the Ministry of Finance to which the SFS is subordinate.  Where is the Prosecutor’s Office?  NABU? Police? Rhetorically, and laced with a heavy dose of cynicism and sarcasm in equal measure, where are the concerned statements by the politicians of Odessa (for they too will be very aware of the intrigues as told to the blog)?

With regard to the US acquaintance seeking an “honest broker” to deal with the import of his car, where to find the least dishonest broker in Odessa, and how many similar tales will be listened to during this quest?



All at sea (and that’s where they’ll stay) – Odessa Yacht Club

August 28, 2017

At the end of Odessa pier, just beyond the horrendous carbuncle that is Hotel Odessa, sits a small pontoon harbour rented by Odessa Yacht Club 2009 LLC for well over the past decade.

Naturally many, many $ millions worth of yachts are berthed there (under the most convenient flags to hide ownership as much as is practicable).  A reader might rightly suspect that the mooring costs provide a pretty good return for the lease holder.

The lease to Odessa Yacht Club was granted by the Ukrainian Administration of Seaports, which for quite some time has been trying to force the tenants to actually pay the rent.  That not withstanding engaging in thus far absent maintenance of the floating pontoons.  This, prima facie, due to internal conflict between the Odessa Yacht Club founders spanning a number of years.

Suffice to say that several efforts by the Administration of Seaports (read State) via the courts in Odessa to enforce the lease clauses have gone precisely nowhere.  Since when have the interests of the State ever bettered personal vested interests?

It appears however, that the Administration of Seaports has had enough – and is no longer willing to be held at bay by the nefarious and inefficient judiciary of Odessa.

The Black Sea Cup regatta which occurred a few days ago saw many of the yachts moored at the Odessa Yacht Club either head out to sea to partake, or to watch.  Aside from one or two vessels, the moorings were otherwise entirely vacated for the event.

Once all had headed out to sea, the Ukrainian Administration of Seaports refused to allow any to return.

Just how prepared the yachts were for this eventuality a reader can only guess.

Now, with an almost entirely empty, and therefore hardly profitable asset, it remains to be seen whether the tenant can be coerced into conducting any maintenance or paying any rent by the landlord (read State) in what is likely to be the continued absence of judicial action.

Sooner or later this dispute between owners and/or the dispute between owners and the State seems destined to end in violence in the absence of an unwilling judiciary to robustly deal with the matter.  There is enough revenue at stake to burn cars, lob a hand grenade into somebody’s garden, or inflict a serious beating to encourage a change in an individual’s position.

Nevertheless a little last minute summer colour from Odessa before the more interesting intrigues begin when the political circus returns after the summer break.


Budget 2018

August 27, 2017

It has become the practice in contemporary Ukrainian politics to pass the budget for the forthcoming year as close to, if not upon, the last day of the year – often accompanied by numerous last minute changes and no shortage of nefarious and/or questionable line items being slipped in without the timeliness to allow scrutiny.

However, it appears that the Budget 2018 will be introduced for horse-trading, and/or discussion, and /or ridicule (and perhaps even some sober analysis) on 15th September.  For sure there will be significant horse-trading.

Quite what Budget 2018 will prioritise is currently unclear – as it is of course, as yet unseen other than by a select few.  Nor are the underlying assumptions upon which it is based known yet either.

The priorities when they are identified, will naturally provide some clue as to what draft legislation (be it good, bad, or indifferent) will manage to get through the Verkhovna Rada – and what won’t.  It will also outline electioneering platforms.

Nevertheless, the timeliness of this submission should 15th September become a reality, regardless of budgetary content that may very well change, can only be welcomed.

It may yet prove to be that Budget 2018 will be passed long before the final week of the year – and have undergone some form of reasonable and sensible scrutiny along the way!  Then again, a timely submission on 15th September simply does not equate to a timely adoption of the Budget.



Marshall Plans and EaP Summits – Ukraine

August 25, 2017

Just over a fortnight ago, an entry appeared in which the strongest of hints was dropped regarding the possibility of an EU “Marshall Plan for Ukraine” and the timing of any official discussion – “That said, cynical or not, such invitations are worthy of note regarding timing – and November will bring about formal discussions regarding a Marshall Plan for Ukraine (if or however that Plan actually manifests by way of money (or not), strategy, reform priority, and duration et al).”

It has now been confirmed that the next EU summit for the Eastern Partnership nations will be held on 24th November in Brussels – thus perhaps putting forward a more specific date in November.

Meanwhile in the dimly lit bunkers and boiler rooms of Lithuanian and Ukrainian policy planning, numerous mandarins have been jointly sharpening pencils, thinking creatively (and perhaps somewhat hopefully), creating concepts, frameworks, plans, implementation models, benchmarks, time lines and all manner of bureaucratic structures and processes in a joint effort to arrive at something approaching a “Marshall Plan for Ukraine”.

That work is now complete.

The plan has been formally, if quietly, submitted to, and received by, the European Commission and other EU institutions.

At its core is a plan that would provide Ukraine with €5 billion to support reforms annually.

The blog has not seen the plan.  Ergo over how many years €5 billion is to be annually allocated is unknown.  The expected implementation time table for the EU-Ukraine Association Agreement is a decade.  Unreasonably high expectations a reader will suspect.

Likewise the “Ukrainian Marshall Plan” priorities and/or structure are unknown.

However Ukraine already has a legally binding and obligatory reform plan.  It’s called the EU-Ukraine Association Agreement, and that comes into full and ratified effect on 1st September.

It is an agreement that contains some time frame compliance – and therefore sets some priorities.

Ukraine also has an agreement with the IMF – which has been allowed to slide from the proscribed time lines due to Ukrainian political unwillingness to meet the IMF requirements to allocate tranches on time.  Ukraine certainly has the ability to meet IMF expectations for each programmed tranche, but the political will is not there.

Pension reform will get over the line prior to the year end.  The IMF has allowed the 2017 requirement relating to land reform to slide into 2018 – but not all delayed IMF requirements are so encompassing of society in its entirety.

There are matters such as granting NABU the right to conduct wiretaps that simply garners no political traction – for of course it will be the politicians (among others) that will be wiretapped by NABU.  The IMF is right to require NABU to be able to conduct its own wiretaps.  An independent anti-corruption body should not rely on the far more politically controlled SBU for such evidence gathering.

Obviously the Ukrainian political class currently feels little urgency when it comes to receiving IMF funds – though that may change at some point later in 2018 when the issues of external foreign debt repayment appear once again upon the 2019 horizon.  A requirement to play ball with the IMF once more, depending upon any successful re-entry into the commercial debt markets.

At the time of writing there seems little realistic expectation in any meaningful (and genuine) private finance FDI entering Ukraine following a totally uninspiring judicial reform that has left odious and nefarious judges in office, and the entire structure under presidential influence.

As such the possibility to rule by law, rather than the unerringly independent delivery of rule of law remains.

Ergo it follows that the privatisation programme is unlikely to be a major success when it comes to attracting FDI, or the much required dilution oligarch influence in domestic markets.  For that to occur there is an investor requirement to have faith in the integrity and application of the rule of law.

The end result being any significant incoming FDI will be via international institutions – and not corporations.

So, as Ukraine has long since begun to drag out agreed IMF reform requirements, it follows that  the annual €5 billion in any “Ukrainian Marshall Pla”n cannot simply be an annual electronic transfer in the expectation that either any “Ukrainian Marshall Plan”, or indeed all Association Agreement obligations will be met either fully or within framework timeliness.

Annually throwing €5 billion at Ukraine without an enforceable plan, is as much use as supplying Ukraine with Javelin missiles in 2017 (rather than in 2014/15 when they would have been useful).  What Ukraine needs far more by way of military equipment is EW, AD, and secure comms.

If the current IMF programme be a guide, any “Marshall Plan”and €5 billion per annum, therefore has to be accompanied with a large, pointy and painful EU stick of unforgiving strict conditionality – and a far more thorough and regular auditing by the EU.

There is also the small matter of existing EU and bilateral Member State grants and loans that are overt, together with the less overt costs of innumerable (and probably unnecessarily overlapping) EU missions, advisers, field workers, delegations, monitors, etc that are already in Ukraine and have been for years – delivering both the useful and the pointless.  Are these deductible from the €5 billion or additional costs?

In the absence of a copy of the submitted plan, there is little point in speculation as to its current content.  Perhaps it is replete with large and pointy sticks, strict time lines and unambiguous priorities – perhaps not.

Nevertheless, something nominally called a “Ukrainian Marshall Plan” is now documented and submitted by its co-authors.

More to the point, whatever the contents, it would appear that the EU Commission and other EU institutions will have between now and 24th November to mull over the joint Lithuanian-Ukrainian “Marshall Plan” – for both Lithuania and Ukrainian authors will be expecting some initial comment at such a gathering.


A new border regime for Russians?

August 24, 2017

For a long time battle has waged within the National Security and Defence Council of Ukraine regarding how to enhance its border regime with regard to Russian citizens entering Ukraine.

Quite simply the current system is deemed to be too lapse when it comes to the standard of required documentation.  Specifically old style, easily forged or fraudulently altered passports, combined with no official requirement to ascertain the reason, location, and duration of stay for Russian citizens entering Ukraine is deemed by most as insufficient when at war with Russia.

The discourse within the NSDC has been split between the hardliners (such as NSDC Chairman Olexander Turchynov) who demanded the introduction of a Visa regime for Russian citizens, and those of a more nuanced and thoughtful position (such as Foreign Minister Pavel Klimkin) who sought to tighten borders without going as far as introducing a Visa regime for Russia.

The introduction of a Visa regime would have theoretically presented Ukraine with the opportunity to vet applicants for all manner of nefarious and national security issues – regardless of whether the Russian citizen held a biometric or old style passport, before issuing an entry Visa.  However that would also have required those granting Visas in various embassies and consulates to have access to sensitive SBU information, perhaps beyond any security clearance they may hold.

Notwithstanding that, the probability of leaks from one of many diplomatic outposts relating to such lists of underisrables to the FSB, GRU and SVR would be fairly high.  A leaked list to the Russian secret services could then identify those under their command that were on the list – or not.

The thing about lists is that they inform those who have them of what is known, and what is not, in equal measure.

Further, when rightly insisting upon the non-recognition of Russia’s illegal annexation of Crimea and the coercive regime therein, there is also the internal politically sensitive issue that in introducing a Visa regime with Russia, those Ukrainian citizens in Crimea with little choice to take Russian documentation may well be forced to get a Visa to enter Ukraine – a country that still considers them their own.

Indeed the US directs all Crimean applicants for a US Visa to the US Embassy Kyiv – perhaps fortunately for those applicants considering that the US has significantly reduced its functioning Visa facilities within the Russian Federation due to the personnel cuts demanded by The Kremlin.

So politically sensitive is the Crimean issue that it appears that the hardliners have finally lost the battle within the NSDC regarding the creation and implementation of Visa regime with Russia.

Nevertheless a new and stricter entry regime for Russian citizens is required in an attempt to curtail those of nefarious and/or dubious nature deemed to present a national security threat.

The solution, which may very well be implemented very soon, is that only Russian citizens with biometric passports will be allowed entry into Ukraine – for these are far more difficult to fraudulently alter – even if not particularly difficult for the Russian security services to produce biometric passports for entirely false identities.

Further, it appears that those wishing to enter Ukraine will be required to complete an e-questionnaire that will be hosted by the Ukrainian Foreign Ministry website, providing personal details, profession and place of work, the exact nature of the visit and places to be visited in Ukraine, one month in advance of the visit – presumably to provide time for relevant security checks by the SBU.  (It appears there will be a caveat relating to critical illness and death of family members regarding the required advance warning.)

The e-questionnaire is to be completed in Ukrainian or English only.

Should this come to pass (in the very near future) it remains to be seen whether the Russian response will be symmetrical or asymmetrical.  Some form of reciprocity there will surely be.

So be it.  Many will state that such a move is long overdue.

There then remains the issue of Russians already in Ukraine having entered on old documentation – and of course those that are of the FSB, GRU and (particularly) SVR ilk also already within the country, and sometimes long established.

Lastly there are those Russians in Ukraine that have made a deliberate choice to step outside of the clutches of The Kremlin apparatus, have become vocal and visible critics of it, and whose documents have since expired but (reasonably or otherwise) fear entering a Russian embassy or consulate to obtain new ones, but are not famous enough to garner swift and sympathetic action from the Ukrainian authorities relating to asylum/temporary/permanent leave to remain.

Clearly all issues to be systematically addressed.

Lastly, it should also be noted that if the debate within the NSDC is now settled as it is rumoured to be, and this new entry regime for Russian citizens is to be introduced in the very near future (ie within days as is also rumoured) then it will not come via the Verkhovna Rada – which remains on holiday.  It will have to come via Cabinet or Presidential Decree, or NSDC Resolution.

Something to look out for over the next week though, if rumour be any guide.


Anti-monopoly Committee takes on Euroterminal? – Odessa

August 23, 2017

Ever since the private Euroterminal at Odessa Port came into existence in 2011, it has unsurprisingly been the source of many a nefarious scam and scheme – which is to be entirely expected when the usual nefarious criminality is associated with being among the ultimate beneficiaries (Angert, Trukhanov, Yanukovych, then latterly post 2014 Yatseniuk via Anatoly Amelin etc) – how else would it have come to exist and function?

The schemes and scams are too numerous to list and explain in a short blog entry, however it is sufficient to say that since becoming operational, nothing occurs without an illicit fee and graft of some sort.

Of note to this entry is the simple extortion scam relating to the entry and egress route from the port complex – for so designed was the Euroterminal enterprise scam that it forced all entering and exiting to cross the territory of the privately owned Euroterminal – for which fees were put in place.

Fees of Euro 55 simply to open a barrier – per vehicle – were commonplace.  Not an insignificant return for approximately 3000 vehicles per day.

Thus many, many UAH millions each year were generated from this scam alone – and there were/are many similar scams relating to parking, expedited clearance, weigh bridges etc.  Some serious criminal thought went into scheming and scamming from every activity before the enterprise became operational.

Needless to say, with the change of power in 2014, a change to some end beneficiaries occurred, but the scams remained in place – enabled and actively participated in by State institutions as before.

To be entirely fair to former-Governor Saakashvili, he did manage to roll this particular scheme back – briefly – but as has been said many times in the blog, the only way to deal with corruption in Odessa is to first tackle the ports.  Failure to do so makes little dent in the corruption profile of the city otherwise.

It also goes without saying that since 2011, the Ministry of Infrastructure, and the Anti-Monopoly Committee, the Prosecutor’s Office and City Hall have done very little to tackle what is in effect a deliberately engineered extortion racket, even with something as obvious as entry and egress of Odessa Port.  The reasons for inaction should require no explanation.

That is, perhaps until now.

There is an inherent problem with forcing all port traffic through one revenue generating barrier that simply cannot be hidden or denied – and that is traffic congestion.

Traffic congestion is a particularly problematic issue in Odessa, and even more prominently so when the City is attempting to get funds from the World Bank to solve such issues.  It doesn’t pay to under-sell the issue at hand when wrangling for money.

Unfortunately for those atop City Hall, The World Bank has a habit of requiring due diligence, surveys, studies, plans, frameworks and all those other annoying technical things that would clearly bring to light the traffic issues in Odessa caused by the UAH multi-million extortion racket when funneling all port traffic through Euroterminal – from which some atop City Hall are beneficiaries.

Lo, it has thus come to pass that the “Sustainable mobility for Odessa” project between the World Bank and the Department for Transport, Communications and Traffic Management of Odessa City Hall has indeed noted this as a major problem – for it couldn’t be ignored.

Solving this particular traffic problem would be a priority area for investment.

The most effective answer is to build a new road and entry point into the port bypassing (much of ) the city and thus the Euroterminal entrance and extortion racket – which will not sit well with those beneficiaries (and partners) atop City Hall, organsied criminality, or with certain current beneficiaries in Kyiv either.

Thus Euroterminal have muted the idea of reducing the “fees” for lifting a barrier to cross its territory over the next 5 years, and also building a new road – which should naturally be dismissed as an attempt to kick matters into the long grass while desperate methods to sabotage any such change to the existing scam are found, or ways to create new ones are found on or around any new port infrastructure.

However the World Bank is not about to be complicit in expanding such an obvious extortion racket, and thus eventually the central authorities have been forced to be seen to act.  An investigation by the Anti-Monopoly Committee into Euroterminal’s abuse of its position is under way (6 years after that abuse began) and almost complete.

It will be interesting to see whether the Anti-monopoly Committee actually decides to take on some very powerful vested and criminal interests that sit behind Euroterminal – and if it does, just what


Privatising the unprofitable

August 22, 2017

Over the past week, Rinat Akhmetov, via Ornex which is under the umbrella of his SCM company, acquired the 25% of government shares for sale in Zakhidenergo, Donetskenergo and Kyivenergo – entities in which he previously held shares, and thus the further acquisition comes as no surprise.

It is perhaps also no surprise that there were no other bidders in this public sale via the Innex Stock Exchange.  Such assets have a somewhat limited attraction.

23rd August will see the sale of 25% shares in Sumyoblenergo for which there is an unidentified bidder, and Donbasenergo which, perhaps understandably, appears to have no investor interest.  29th August will see 25% share sales in Odessaoblenergo which currently has also garnered zero interest, and on 31st August 25% shares in Dniprooblenergo and Dniproenergo may yet be sold – once again Mr Akhmetov already holding shares in the latter two.

In short, aside from Mr Akhmetov consolidating his ownership in these companies, there appears to be no other interest – be it foreign or domestic.

Woeful then, appears the outlook for any major privatisation – albeit each and every asset is naturally somewhat unique and therefore will perhaps appeal to some investors while not others – if they have any appeal at all.

Further some economic sectors are profitable and others (currently) not.

“Public goods” by definition are not likely to provide a direct return.  Ergo as such State enterprises, depending upon their role, will not necessarily provide direct returns to the budget – though indirectly they may.  Profitability is therefore not necessarily always the best benchmark for State enterprises.

Needless to say, of the almost 100 State owned companies entirely owned by the State, the banks are doing OK in the banking sector.

One of the other (currently) profitable sectors in which 100% State owned companies operate are oil and gas, and energy and engineering.  In fact these are perhaps the only sectors that make a profit outside of banking.

To be specific, according to Maxim Nefyodov, Deputy Minister for Economic Development & Trade, there are only 5 profitable companies – Naftogaz (UAH 22 billion), AMPU (UAH 4 billion), Ukrenergo (UAH 3 billion), Ukrhydroenergo (UAH 2 billion) and Yuzhny Design Bureau (UAH 4.5 billion).  The other 90+ companies makes losses.  (Figures rounded by the blog)

The other 90+ each do their bit in accumulating total losses of UAH 10 billion between them.

Thus those 5 companies provide a profit of UAH 26.4 billion when offsetting the losses of the rest.

Nevertheless an improvement on the figures of the previous year.

However, official government figures would state the asset value of the aforementioned 90+ State owned enterprises is UAH 1.4 trillion (as decrepit and woefully under-invested in it may be).  Thus a lowly UAH 26.4 billion profit is not exactly the return the State might expect – even accounting for any “public goods” that any of these entities may be involved in delivering.

Further, among the 90+ State entities in question there may be some that are too sensitive and/or of national security/strategic importance that may also be allowed to operate at a loss rather than privatising them or otherwise opening up the market – however a reader might suspect that qualifying bar being far too low to leap when considering the above figures.

A reader may well suspect poor management, lack of fiscal discipline, awful supply chain management, and a generous sprinkling of corruption as contributory causes to losses.  (After all economic indiscipline is not a knew phenomenon for Ukraine – it can’t (or won’t) even collect owed taxes from the oligarchy.)

Thus what to do in a particularly barren investor landscape?  From 90+ such entities, a reader could reasonably expect more than 5 to be profitable.

How many require State investment to provide the technology required to make them more efficient and more likely to be profitable?  Has the State identified those it will and those it won’t invest in?

Thus far changing the management has produced mixed results (with Naftogaz being a major beneficiary, whilst others continue to fail dismally).

Can any simply be closed?  (“Simply” being the operative word.)

Could and should any be put on the market, even if for a $1.00, with the usual contractual clauses relating to investment, employment etc to get continuous losses off the books – whatever the formal asset value?

For those that would part with a solitary Buck, but take on an otherwise very difficult investment and a market that may be anything from almost monopolistic to one that will be thrown wide open, would any investor that turned any of these entities around and thus make them profitable then find themselves on the wrong end of a court decision to reverse matters?

Even though the year’s figures are an improvement on those preceding, they remain very much a sobering snapshot of just how far there is to travel where the State control and management of its enterprises are concerned.

With privatising the unprofitable very unlikely, perhaps next year’s figures will be another improvement, -although the question perhaps should not be answered by UAH profit alone, but rather the profitable width of the base from which it is generated?

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