Archive for December, 2017


Zhevago takes control of Espreso TV

December 31, 2017

With elections 15 months away, as previous stated by the blog, it is now worth keeping a watchful eye over the Ukrainian media – national and local.

The oligarchy and local vested interests will, by the summer of 2018, have cast their lots – with many of the oligarchy backing several candidates for president (albeit it is in parliament they can do the most damage).

Akhmetov’s Perviy may well get behind President Poroshenko, so too Mr Pinchuk’s ICTV.  Depending upon the conversation in The Netherlands between Prosecutor General Lutsenko and Ihor Kolomoiswky, 1+1 (and others) of the Kolomoisky media empire may also get behind the President (and the PrivatBank issue suddenly be resolved, or the legal ball deliberately dropped post elections).  But who else will they back?

If Mr Zakarchuk runs, (and that will become clear during summer 2018), do they back him too?  Which oligarchs and/or minigarchs will he accept backing from?  (His natural orientation would suggest a bias toward Samopomich and Dem Alliance – perhaps even the Georgians.)

Maybe if Mr Firtash’s business interests suddenly become “easier”, Inter may also be less critical of the President – or perhaps Ms Tymoshenko’s Vienna visit during the summer of 2017 has sealed a deal already?

What of the current Zik media environment?

When Rabinovych fails, will NewsOne be the Tymoshenko platform?  Which media owners will side with whom – and why?

And so it goes on.

When the wives of Messrs Yatseniuk, Knyazhytsky, and Avakov bought Espreso TV in August 2017, a reader would have perhaps understood the purchase to be a TV/media outlet for the promotion of their political futures, or to act as an irritant for the political futures of others.

Media ownership by the political and/or vested business interests both before and behind the curtain in Ukraine is par for the course – as was hiding assets among relatives (and trusted school friends) prior to public e-declarations.

Naturally the usual chain of companies remain involved in any acquisition (sometimes for good reason, sometimes for nefarious reason).

For example, Mr Yatseniuk acquired his shares in Espreso TV via Goldbury LLC, which is owned by Astra Finance.  Astra Finance has Mr Yatseniuk (30%), Mrs Avakov (40%) and Mrs Knazhytskya (7.5%) among the shareholders.  A particularly “People’s Front” orientated business entity.

However, it appears that after 5 months of ownership, Astra Finance has sold 77.5% of the shares in Espreso TV (the shares of Avakov and Yatseniuk) to Atmosphere Entertainment Inc.  The remaining 22.5% of Espreso TV remaining with Mrs Knazhytskya – for now.

Behind Atmosphere Entertainment Inc sits Ivan Zhevago – who ultimately now owns 77.5% of Espreso TV.

Ivan Zhevago is the son of Russian born, Ukrainian oligarch Konstantin Zhevago.

Konstantin Zhevago owns in part or in full, among other things (via “Finance and Credit Group”) – Ferrexpo, Poltova GOK, Kremenchug AutoKraz, CISC Rosava, Omega Insurance, “Salute Hotel” Kyiv,  pert of Yushni Port, “Kievsoyuzdorproekt”, “Biloterkovna teploelektrotsentral”, Ukrenerhosbyt, Odessaoblenerho, Ukrainian-German “Mega-motors”, Luhanskoblenerho, “Kremenchug Factory of Technical Carbon”, Stakhanov Factory of Technical Carbon, LTD. “Ukrtekhuglerod”, Zatisnyansk Chemical Factory, Uzhgorod “Turbogaz”, Kharkov Instrumental Factory, Stakhanov Carriage Works, Berdychiv machine-shop “Progress”, Poltava machine unit factory, Zaliv Shipbuilding, “Kyiv shipbuilding and reconstruction factory”, Skopski Legury (ferro-alloys), electro-metallurgical plant “Vorskla Steel”, electro-metallurgical factory “Vorskla steel Denmark”, “Kievmedpreparat”, “Gemoplast”, “Galichfarm”. and “Kremenchuk Yaso”.

The blog may have missed a few companies, and the now bankrupted Finance and Credit bank was deliberately omitted.  RasGas, an entirely unclear deal involving Qatar, has also been omitted precisely because it is unclear as to the extent of involvement, or whether any agreement is even on-going.

Konstantin Zhevago has, since the 1990s, been actively involved in politics too, beginning in local politics in Poltova and becoming a Yulia Tymoshenko ally upon the national stage – although currently he is in bed with The Radical Party.

In summary Mr Zhevago (Senior) is in politics, chemicals, finance and insurance, real estate, energy, engineering, shipbuilding, food, metals, and pharma – but not media.

It has to be said that as Konstantin Zhevago benefited from a well placed father, so too may his son Ivan.

There is nothing to directly connect Atmosphere Entertainment Inc to Ivan’s father Konstantin (other than a blood relationship – and probably, directly or indirectly, the purchase capital required).

Nevertheless Espreso TV is hardly a major media outlet.  It is certainly not a major revenue provider.  When the Yatseniuk-Avakov-Knyazhytsky (People’s Front) bought it, there was perhaps a fairly clear political rationale for doing so when President Poroshenko (and the then new owners) will need all the “friendly” media he can find in 2019.

It would/could have also acted as a platform for any re-branded reincarnation of the People’s Front (which will be otherwise slaughtered at the ballot box).

The plans for Expreso TV under Mr Zhevago Jr (or Snr) therefore seem somewhat unclear, albeit there is certainly capital to invest in the station.  Nevertheless a challenger to Kolomoisky’s 1+1, Firtash’s Inter, or Pinchuk’s ICTV, is unlikely to be realised any time soon.  It probably won’t even reach the status of Muraev’s (Rabinovych-centric) NewsOne before 2019.

That said, some serious expenditure on licencing for Game of Thrones, The Americans, and whatever else is currently “en vogue” TV, may well rapidly grow audience numbers despite the losses incurred.  Media in Ukraine is not necessarily owned to make money – for often it doesn’t.  It is owned for political reasons.

Is this a matter of Espreso TV no longer being “People’s Front TV” and becoming “Radical TV”?

If so why would (albeit fractious) coalition partners of President Poroshenko sell their TV station before the elections into The Radicals orbit?  After all, where will all those (significant) current People’s Front parliamentarians go if not to Poroshenko’s Solidarity Party (in the absence of creating a new brand, which is probably now too late, less a Groisman factor is included in a new party)?

How does selling a TV station into the sphere of influence of a populist prima donna (and otherwise entirely empty shell) like Oleh Lyashko assist the current coalition prior to 2019?

The answer perhaps, is that swivel-eyed populists Oleh Lyashko and Yulia Tymoshenko fight for the same rural populism-receptive voting constituency.  The thinking perhaps is that every vote Mr Lyashko takes from this community is one less for Ms Tymoshenko – and one which President Poroshenko would probably not have won anyway.

Crudely put, the better Mr Lyashko does in the countryside, the worse Ms Tymoshenko will do – so why not sell a TV channel owned by the coalition to those within his orbit?  At present, President Poroshenko would certainly prefer to face Mr Lyashko rather than Ms Tymoshenko in any second round of presidential voting – so why not add to the Lyashko arsenal?

Time will tell fairly swiftly the true nature behind the sale and purchase of Espreso TV.  It may well be that Ivan Zhevago simply fancies the idea of owning a TV station as a “rich kid’s play thing” – or not.


Prisoners with “added value”

December 28, 2017

A few weeks ago an entry appeared relating to the 2nd May 2014 tragedy in Odessa and the “prisoner swap” that occurred on 27th December 2017 – “Of the two most prominent Russian citizens, Sergei Dolzhenkov has either refused to partake in the prisoner swap or has inexplicably been omitted from the list, but Evgeni Mefedov appears set to return to Russia.

A further 4 Afghan veterans who attempted to create the “People’s Republic of Odessa”, as well as  Igor Makhinenko and former City Councillor Alexander Lutsenko also appear to be heading to Russia or the occupied Donbas in exchange for Ukrainian prisoners in the captured in the East.

Adding to that list heading to East is Vladimir Dorogokupets, Semen Boitsov and Maxim Genko (although not Miroslav Melnyk who appears not to be on the list for exchange).  Finally Alexei and Elena Vlasenko will also leave (government controlled) Ukraine too.

The exchange will mean that numerous cases (but not quite all) relating to 2nd May 2014 will effectively close.  Also cases of espionage, terrorist recruitment, conspiracy to murder (in fact a conspiracy to commit a political assassination), and a car bombing among others effectively shut too.”

While the nominated prisoners all headed east in preparation for the exchange, the Russian citizens upon the list were subsequently removed prior to the exchange.

Nevertheless 74 Ukrainians, the majority of which were not those who fought on the front lines, were released in exchange for 237 individuals prepared to enter the occupied Donbas.  (A further 40 were simply released rather than exchanged, and 29 at the last moment decided that Ukrainian detention was preferable to heading into the occupied Donbas.)

If not an “all for all” exchange, then 74 returning is still 74.  A tremendous result.

There remain well over 100 Ukrainians still in captivity in the occupied Donbas, plus those in Russian and annexed Crimean prisons.  Negotiations over another 29 Ukrainians are already underway.

So why, having been transported to Sviatohirsk in preparation for exchange, was Yevgeny Mefedov (a Russian participant in the 2nd May tragedy) struck from the list (together with Igor Kimakovsky, Olga Kovalis, Pavel Chernykh, Hajiyev Ruslan and several other Russian citizens)?

It is very clear that the courts and prosecutors office in Odessa would happily see him returned to Russia and the case, effectively closed, stamped “Prisoner Swap” (or similar).

Preparations for his exchange had been on-going since the entry linked above several weeks ago.

What changed?  And when?  And why did the other side accept it?

According to Valantin Rybin, Mr Mefedov’s lawyer, that Russian citizens had been struck from the list only became known very shortly before the exchange.  Yet despite the “This looks like a blatant deception” rhetoric of Mr Rybin – was it?

It appears that prisoners who hold the citizenship of the Russian Federation are to have, or are perceived to have “added value”, and that Ukraine intends to hold them and exchange them only for Ukrainians held in Russian and annexed Crimean jails.

So be it.  A dullard can see the perceived additional leverage/strengthened negotiating position in adopting such a stance in relation to such exchanges.

Perhaps the question is why was such “added value” seemingly recognised so late in the day?

Moscow has always taken pride in making every effort, often successfully, to get their citizens home.  Kyiv too will take pride in doing so – and it will certainly boost a potential defence and national security platform President Poroshenko may choose for reelection.

Quid pro quo?  Well perhaps.  If so it may well fall under the long shadow of politically expedient timing.  If that shadow prove very long, then Ukrainian due process will have to continue rather than sit in suspended animation – to the almost certain angst of the prosecutors and courts of Odessa.

More interestingly is when Moscow accepted that this was to be the case.  Or did it propose it?

One way or another both Ukraine and Russia had to buy into, or sell, no exchanges of Russian citizens relating to the occupied Donbas, yet allow other exchanges to occur.

The exchange of the 27th December occurred.  No last minute spanners were thrown into the works.  No cries of deception from either side have been made (lawyers for Russian individuals aside).

Does this separation of Russian prisoners allow The Kremlin to continue its farcical claim (even if only it believes anybody else believes) of non-involvement in the occupied Donbas?  A deliberate separation of Russian prisoners from any grubby exchanges related to the occupied Donbas, for the consumption of the domestic audience or the objectively retarded, hardly hinders such (threadbare) fiction.

Whatever the case, The Kremlin allowed the exchange to go ahead (let us not pretend the “Republics” have that sort of agency as an actor on the stage).  There is no reason to doubt the next prisoner exchange will occur – and perhaps reasonably swiftly.  It seems unlikely it will consist of any Russian citizens however – lest they lose their “added value”.


Court is adjourned (for as long as possible)

December 27, 2017

As anticipated, before the year end President Poroshenko submitted to the Verkhovna Rada Draft Bill 7440 relating to the creation of an Anti-Corruption Court, in order to complete the independent NABU and SAP anti-corruption structure – the day after the final plenary session of the year concluded.

The Draft Bill, according to The Bankova, takes into account the “Opinion” of the Venice Commission of 9th October 2017.

Except of course, Draft Bill 7440 does not accommodate all the recommendations of the Venice Commission – as many wise readers would have expected.

Naturally there is a requirement for any anti-corruption judge to have a professionally high qualifying bar.  Draft Law 7440 sets the bar thus – “…..must have considerable experience in conducting professional legal activities in international intergovernmental organizations, or international judicial institutions abroad in the field of counteraction and combating corruption, and have knowledge and practical skills in the application of modern international anti-corruption standards and the world’s best practices in the field of countermeasures and struggle against corruption, the practice of the European Court of Human Rights.”

A particularly Utopian high bar.  Indeed, how many Ukrainian judges can meet such requirements?  In short, too exclusive, rather than inclusive enough.  A slightly lower, more inclusive bar, with more emphasis upon individual integrity is surely a preferred set of parameters.

For an institution created specifically to sit atop the NABU and SAP anti-corruption architecture, the Draft Law does not facilitate the anti-corruption court with jurisdiction over all anti-corruption investigations existing within the statutory mandates of NABU and the SAP to investigate and prosecute.  To be blunt, the entire raison d’être for the anti-corruption court is to hear and adjudicate all the cases of NABU and the SAP.

Further the Draft Law mandates the court with jurisdiction over matters that are not the statutory remit of NABU and the SAP.  Investigations that will fall under the purview of the State Bureau of Investigation and the National Police seemingly will also be heard by the new anti-corruption court.

Clearly not only is there an increased potential for a bottleneck and delays of NABU and SAP cases appearing before the court, but (rhetorical) questions must obviously be asked as to why certain NABU and SAP criminal categories have been deliberately excluded from the purview of the anti-corruption court.

Another issue that will certainly irk the domestic civil society and the international supporters of Ukraine will be the Draft Law’s procedures for the selection of the judges – and rightly so following the farce of the Supreme Court selection process.  A process that not only witnessed a large number of judges of questionable wealth and dubious verdicts succeed, but also maintained presidential influence over the court – albeit via a different route than that which previously existed.

President Poroshenko, like all Ukrainian presidents before him, and in all likelihood whomever will follow him, is simply unable to surrender the prosecutors and judiciary and allow true independence.

The Venice Commission recommended giving international organizations and donors a decisive role in the process of selecting judges has been replaced with “advisory role“.   Thus a farcical Supreme Court selection process “Part Deux” beckons.

All of that said, the Venice Commission “Opinion” and “recommendations” therein, are not binding upon any government that asks for, and receives said “Opinion”.  Ukraine is at liberty to incorporate all, some, or none of those “recommendations” as it sees fit and without penalty.

So be it.

Except that Ukraine is not sufficiently strong to ignore its “international supporters”, who will undoubtedly have reservations over Draft Law 7440 – especially the exclusion of some NABU and SAP investigation categories from the anti-corruption court competency.

The Bankova will have been very much aware of this when Draft Law 7440 was drafted – and it has been deliberately drafted thus just the same.  It will perhaps be expecting another diplomatic collision.  Many readers will be anticipating such a collision too – when the time for another public collision arrives.

However, there is a game to be played before any such collision occurs publicly.  No doubt a few “private words” have been exchanged already.

Lest a reader forget, The Bankova goal is to delay (if unable to prevent) a fully operational and genuinely independent anti-corruption court before the presidential and Verkhovna Rada elections of 2019.  All must be allowed to assume their electorally mandated roles with the associated immunity and impunity before any such court functions.

However, having submitted Draft Bill 7440, The Bankova has kept its word, albeit hardly overflowing with “goodwill”, in submitting a Draft Law to create the Anti-Corruption Court before the end of 2017.

That it is not entirely inclusive of the Venice Commission “Opinion” is no surprise.  Civil society will now be forced to decry the deliberate shortfalls within the Draft Law.  There are no real options open to it other than to demand the Draft Law be withdrawn, amended to correct the above, and resubmitted.

That may take several months, as The Bankova will be in no hurry.

Alternatively, The Bankova may decide to allow the Verkhovna Rada to vote on the Draft Bill as it currently stands.  It will very much irk civil society, and indeed create a required public response from the “international supporters” and diplomatic community of Ukraine.

If it is voted down, then a new Draft Law will have to be crafted and submitted, which will take a month or so.

Should it pass as currently written, the first reading of a Bill hardly ever remains the same as what passes into statute.  The bureaucratic process of amendments will then occur.  As will more “public consultations”.  This too will take several months.

More external diplomatic energy will be expended – although President Poroshenko will have to be particularly careful not to lose his “least worst option” label among the “friends of Ukraine”.  (It is a label he is perhaps closer to losing than he thinks – during Summer 2018 it will become clear whether he has lost it).

Regardless, however Draft Bill 7440 reads today, it is very unlikely to be the final text that creates an independent (or “independent”) anti-corruption court in Ukraine.  That is has been deliberately so written as to be clearly problematic to civil society and the “international friends of Ukraine” infers that it has been done with the intent to buy electoral time through generating as many bureaucratic delays as possible, while being seen to be doing something, rather than being a draft statute with any expectation that the legislative text will survive without (perhaps serious) repercussion.

Eventually, however, some form of anti-corruption court law will become statute – then for a deliberately slow candidate selection process.


Monument to Boris Derevyanko (and de facto the longest trial in Ukrainian history)

December 25, 2017

As a growing number of Ukrainians are expressing their ire by way of protest at a 4-year suspended sentence for hooliganism handed down to Yuriy Krysin for his admitted role in the murder of journalist Vyacheslav Veremiy during Euromaidan in 2014, Odessa will witness the creation of a memorial to Boris Derevyanko, the assassinated editor-in-chief of Evening Odessa (Vechernaya Odessa).

The memorial will appear at Gvozdichny 3, where Mr Derevyanko lived prior to his assassination in August 1997, and marks a victory for the Odessa branch of the National Union of Journalists of Ukraine.

A cynical reader will also understand that in signing the order, Mayor Trukhanov will also be hoping for a slightly friendlier media (insofar as local media not owned by himself).  Elections are only just over a year hence.

The assassination of Mr Derevyanko has already been commemorated by the renaming of his place of assassination to that of Derevyanko Square.

The assassin, Alexander Glek was indeed caught and sentenced to death – a sentence commuted into a life term.

Although Mr Glek never stated who ordered the assassination he carried out, it became clear that the customer was Vasily Mariyanchuk – aka Vasya Chechen or The Accountant.

Vasya Chechen managed to assemble a formidable crime group in the 1990s, numbering somewhere between 50 and 70 former servicemen, police, and “sportsmen”.  It is claimed it was an organisation that ran in a similar way to an “agency” – with dedicated internal intelligence and counterintelligence abilities, as well as wetwork personnel.

Well perhaps.  Within every legend is an element of truth.  Whatever the case it was clearly not an invincible or impenitrable, for Mr Mariyanchuk took refuge in Hungary when a “hit” was put out on him by others.

Two years after the assassination of Mr Derevyanko in Odessa, The Accountant was arrested in Hungary on behalf of Ukraine.

Thus a reader may start the trial/due process clock as of August 1999.

Mr Derevyanko was not the only victim of The Accountant and his organisation.

Among numerous other assassinations attributed are Boris Vikhrov, chairman of the Arbitration Court, Arkady Tabachnyk, President of the Bipa-Mode company, two close associates of former-Mayor Hurvitz, Messrs Sergei Varlamov and Igor Svoboda, notwithstanding Valery Kravchenko, the director general of the ARC Antarctica, in 2002.

Needless to say, those involved in the trial were also prone to death and disappearance.  In 2000, gang member (and former Police Captain) Oleg Yakimenko “vanished”.  In 2001, another member, Mr Ryaboshapko died in rather suspect circumstances in pre-trial detention.  Mr Volodin, another witness was shot, swiftly followed by the “disappearance” of Mr Gusak who was also due to give evidence.  In 2002 two other witnesses, Messrs Pashin and Biryuch also died.

If being a witness, or seeking a “deal” with the authorities was not bad for the health, then several defenders and prosecutors also died – for example defence council Ivan Melnik apparently committed suicide after being accused of passing assassination instructions between the imprisoned “Accountant” and his gang at large.

Clearly, given the nature of the judicial system in Odessa, both then and now, every excuse was found not to hear the case, or to delay it, in order not to hand down a verdict and pass sentence.

So it went on until March 2012 when the Supreme Court transferred the case to Mykolaiv – at which point the accused Mr Mariyanchuk claimed to be too ill to attend court (the politicians favored due process stalling maneuver).  Thus far, The Accountant had spent 13 years behind bars as suspect and not convict.

It was finally, in April 2014, that due process ran its full course – a full 15 years after his incarceration – that Vasily Mariyanchuk (aka Vasya Chechen or The Accountant) received a life sentence.

This due process lasting 15 years remains the record in independent Ukraine – although a cynical reader may wonder whether that record will last.


Lethal US weaponry in Ukraine – now what?

December 23, 2017

It appears that the US has finally decided to provide Ukraine with lethal defensive weaponry.

To be entirely blunt, what Ukraine needs most is EW equipment.  And then more EW equipment.  It also needs secure communications.  Air defence capabilities are lacking.  More counter-battery radar would be useful too.

Nevertheless, despite Ukraine producing two types of ATGW missile of its own, attention will be drawn to the supply of Javelin anti-tank missiles due more to the political rhetoric surrounding the system, rather than the Javelin system abilities.

Rumour has it something like 210 anti-tank missiles and 35 launch systems are heading toward Ukraine.

The Javelin, albeit better than the two Ukrainian ATGMs due to its successes with “attack from the top” has become more of a symbol due to political rhetoric than an absolute military necessity.  The Ukrainian ATGMs have successfully knocked out Russian tanks since 2014 after all.  The Javelin “kill ratio” is simply better, mostly due to the attack from the top ability.

That said, aside from the symbolism, it may be a moral lift for those on the Ukrainian side front line – even if the Javelin is unlikely to feature often on the front line.  A reader might suspect that the supply of such weapons comes with a caveat that this defensive weaponry is to be applied to a defensive posture.

As such it should perhaps be expected that the Javelin will more likely appear in Sumy, Kharkiv, Dnripro, Zaporozhny and Odessa, as well as some distance from the front line in Donetsk and Luhansk – rather than as a permanent feature at the front line itself.  (That naturally would require a rapid means of deployment when they are required.)

That said, once the weaponry is in Ukraine and the training has been given, a reader should expect one or two Javelin engagements on the front line should the opportunity to send a message to the opposing tanks crews present itself.

The Kremlin, when all is said and done, hasn’t really tried to redraw the current line of engagement with tanks since Debaltseve in 2015.  Thus among the political bluster, probable temporary kinetic uptick on the front line to show Kremlin dismay, and screeching of the commentariat, the supply of Javelin may theoretically force a Russian military re-think to any plans to engage in an armoured advance – of which there has been no sign since 2015.

The Kremlin is engaged in a political and societal war of exhaustion rather than a war to militarily take and control more Ukrainian territory after all.  What is there to be gained by an armoured assault to take land that won;t change The Kremlin negotiating position?

Thus aside from a kinetic uptick, albeit temporary, on the front line, any Kremlin response is likely to be asymmetric – both for Ukraine and the US.  And both will withstand it.

When all is said and done, a reader is perhaps rightly skeptical about the military advantage Javelins would give Ukraine compared to other military needs.  There are other needs that would provide greater advantage as stated at the start.  Perhaps too much historical rhetoric requires a sacrifice of other military priorities.

There is also an entire MIC that really could use serious external assistance and/or partnership.

Nevertheless while Javelin may grab the headlines, it is perhaps about the bigger picture.  Ukraine is under no weapons embargo, yet Lithuania is the only nation to (officially) be currently supplying lethal weapons to Ukraine.  The US move may now encourage other nations to find their spine – or at least allow their own MIC to benefit from Ukrainian misfortune.

Whatever the case, it will be everything other than Javelin on the US supply list that will be interesting.

(The cynics are already placing bets as to how long it will be before a Javelin system appears on the other side of the contact line, and the method of its arrival there.)


Home and abroad – A good day in the courts

December 22, 2017

It appears that the Stockholm Court of Arbitration has ruled in favour of Naftogaz in its case against Gazprom – at least for the most part.

At the time of writing the decision of the Stockholm Court was unseen, but Naftogaz claims that the court rejected the requirements of Gazprom on the “take or pay” for $ 56 billion in 2009-2017 in its entirety.

In addition, Naftogaz has reduced the amount of future mandatory annual volumes more than 10 times, and in accordance with its actual gas import requirements.

Further, the price of gas received by Naftogaz in the second quarter of 2014 was reduced by 27% from $485 to $352 per thousand cubic meters.  Naftogaz also states due to the revision of the contract price it saved approximately $1.8 billion on gas purchased in 2014-2015.

In short, the outrageously onerous gas deal Yulia Tymoshenko signed Ukraine up to in 2009 has been mitigated by the Stockholm Court of Arbitration to “save” up to $75 billion over the course of that 10 year Tymoshenko “negotiated” contract.

However, it is also apparent that the court denied Naftogaz the right to review the gas price for the period from May 2011 to April 2014 and to recover any over payment for gas for the period from May 2011 to April 26, 2014.  (Approximately $14 billion.)

Numbers and bottom lines aside however, perhaps most politically unpalatable outcome is that Naftogaz is obliged to “take and pay” Gazprom for 5 billion cubic meters of gas annually from 2018 until contract expiration in 2019.  After several years without purchasing any gas from Russia whatsoever. a couple of years of contractually enforced purchases will severely irk in some Ukrainian political and societal quarters.

Lastly it should be noted that the issues of gas transport also subject to arbitration, appear to remain without a court judgement.

This is important as the current gas transport contract across Ukraine to Europe is between Gazprom and Naftogaz.  Ergo this transportation contract will prevent the unbundling of Naftogaz per the 3rd Energy Package obligations (a requirement to separate production, transport, domestic supply and storage) until 2019 when that contract ends.

Nonetheless, undeniably a good day for Naftogaz, and a particularly poor day when assessing the judgement and negotiation abilities of Yulia Tymoshenko.

Domestically the Constitutional Court struck a blow to the leaders of all Ukrainian political parties, ruling that articles within Law 3700, effective from 27th February 2017, are unconstitutional.

In summary Law 3700 allowed party leaders to swap out electoral candidates following elections and prior to CEC recognition of electoral results per party list candidates.

In sum, a voter may have voted for X Party in the belief that party member Y would enter the Verkhovna Rada, to suddenly find the party leader didn’t particularly like party member Y and swapped them with another more preferred party member.  The constituency is used to not getting what they vote for due to the fecklessness of the political elite, but not getting who they vote for due to the fecklessness of the political elite clearly takes matters a little too far.

In a ruling that cannot be appealed, the Constitutional Court stated that this law “is contrary to the principles of democracy, legal certainty and legitimate expectations as an integral part of the rule of law, freedom of political activity, free elections and the free expression of the will of the voters; a free parliamentary mandate……….the provisions of the law violate the right of Ukrainian citizens to freely elect and be elected to bodies of state power and local self-government …..make it possible for the party to deny the political will of the electorate, embodied in the results of voting in the elections of people’s deputies of Ukraine, and contradict the principles of the constitutional order Ukraine.”

Ergo it now follows that party leaders will have to be a little more careful in their selection of party candidates and their placement/ranking upon the party list – lest a favorite fails and an irksome candidate gets over the party list finishing line.  The possibility of swapping two such candidates has now been crushed.

Time will tell whether the Draft Law that forces fully open party lists will manage to pass through its second reading in the Verkhovna Rada – or not.  It managed to gain the minimum 226 votes on its first vote – which was a surprise, and particularly so for the party leaders no doubt.  Some, several, or all of the party leaders clearly took their eye of the ball when that vote occurred.

As almost all Ukrainian political parties are nothing more a vehicle for the leader, the leader’s ego, and the money of “vested interests” behind them, clearly ideology and/or policy position is set by the mood of the leader on any particular morning when they wake, or by the business needs of the money behind the curtain.

Ukrainian political party leaders are used to having absolute control over their parties, and the parties are used to having absolutely no control over their leaders.

At the very least, in the absence of a successful reading of the draft law relating to full open party lists, the Constitutional Court ruling now makes it a little more difficult for any party leader to immediately ignore the will of the electorate moment the ballot box closes.

All in all, Lady Justice for once has smiled upon the Ukrainian constituency – mitigating the folly (gas deal) and smiting the nefariousness (Law 3700) of the political class.


High profile arrests and seizures – Yezhov (Espionage) and Kolomoisky and Bogolyubov (PrivatBank)

December 21, 2017

Perhaps the news of the arrest of Stanislav Yezhov for espionage on behalf of the Russian Federation would be the most notable incident of 21st December in Ukraine on any normal day (if there is such a thing as a normal day) – particularly so as Mr Yezhov was/is a prominent assistant to Prime Minister Groisman attending almost all his foreign trips.

Further Mr Yezhov had worked within The Bankova (Presidential Administration) and also at the US Embassy in Washington DC.

Naturally all positions in which sensitive information will have been accessed and passed on to Russia – although sensitive does not necessarily equate to highly classified.

It should be noted however, that the arrest does not come as a complete surprise.

Mr Yezhov has long since been a “blip” upon the SBU radar due to the fact his wife is a Russian citizen employed part time for a Russian company working in Washington DC.  That withstanding that his asset declarations for the couple submitted per legislation, displayed over $270,000 held in various Sberbank (Russian) accounts between them.

It is known that for quite some time the SBU have actively investigated him as a person of interest – and for many months Prime Minister Groisman had been aware of that.  Presumably the FBI in Washington DC were also aware of the couple’s Russian secret services involvement too.

The most pertinent question is perhaps not why Mr Yazhov has been arrested – but why now?

For at least a year, probably longer, the SBU will have been quite aware of his activities.  Just because he is known to be an agent of the Russian secret services does not automatically mean arrest is immediate.  Sometimes arrest is never forthcoming – only when any benefits no longer outweigh the negatives

Presumably the SBU feel there is nothing further that can be learned from watching Mr Yazhov and/or the arrest of Mr Yazhov now is required prior to certain events now appearing upon the Ukrainian and/or Groisman and/or Yazhov personal calendar.

Clearly the loss of Mr Yezhov’s services will be felt by the Russian secret services, for few agents will be privy to almost all of the Ukrainian Prime Minister’s private conversations whilst abroad.  How significant that loss is however, is a different question.

The Russian secret services should be assumed to still be deeply infiltrated into every single Ukrainian institution –  from top to bottom.  Ukraine, if sensible, will be working under the impression that it has no secrets (for long).  No doubt the Ukrainian CI team is overwhelmed with persons of interest to investigate and monitor by far too few personnel and a budget that is restrictive.  Counterintelligence the world over will complain of the same issues.

If the SBU CI Department is sensible, it will be working upon the premise that it too is also infiltrated.

The arrest of Mr Yezhov is therefore something of an achievement – owing to the fact he was arrested rather than being tipped off and mysteriously appearing in Belarus or Russia ne’er to return to Ukraine.  A definite “Bravo!” for the counterintelligence unit is in order – and also for Prime Minister Groisman who, having known of the SBU involvement into is aide, did not, through actions or words, unintentionally give the game away.

An incident of significance for Ukraine undoubtedly, but perhaps not the most significant event of 21st December.

The 21st December also witnessed the High Court in London seize and freeze approximately $2.5 billion of assets owned or under the control of Ihor Kolomoisky and  Gennady Bogolyubov during the on-going claims and counter-claims between these men and Ukraine (NBU) surrounding the nationalisation of PrivatBank.

The cynic would perhaps be inclined to believe the “by chance” meeting of Prosecutor General Yuri Lutsenko and Ihor Kolomoisky in Amsterdam in late November will be related to the PrivatBank affair – at least in part.  It is still unclear which presidential candidates Mr Kolomoisky will back – and whether among Kolomoisky backed candidates if President Poroshenko will be one of that number.  There were perhaps a few matters to discuss.

Nevertheless, despite the Prosecutor General’s public claim that the meeting was “by chance”, that a Ukrainian oligarch and the Ukrainian Prosecutor General just happen to “bump into each other by chance” in a city of 1.1 million residents – of which neither is a resident – in the same place, at the same time, and on the same day, is about as believable as Oleg Lyashko’s claim to have won the Ukrainian lottery three times when accounting for his wealth.

Such meetings almost never occur by chance – even if it may appear to one party that it is indeed a chance meeting (or more precisely an unplanned meeting).  Given the location of this meeting, neither party would be naive enough to believe the meeting occurred by chance.  One or the other, or both, arranged for this “chance encounter”.  A pointless lie to pretend otherwise.

Whatever the case, the current situation leaves the Ukrainian courts considering all the Kolomoisky efforts to stop the NBU investigations into the circumstances surrounding PrivatBank nationalisation, and the UK Courts seizing assets slightly above the value of the money the NBU alleges was removed from PrivatBank immediately before the Ukrainian State nationalised it.

While the $2.5 billion of assets temporarily frozen by the UK courts may catch the eye, the issue here is not just the money.  Indeed with presidential elections in March 2019, the issue here is the relationship between Ihor Kolomoisky and President Poroshenko.  Either grubby deals are in the works, or one of these two oligarch will receive some serious wounds come March 2019 outcomes.

This too however, while equally entitled to grab the Ukrainian headlines of 21st November, is not the issue of the day.

The most important political, economic and national security issue addressed on 21st December was the withdrawal of Draft Bill 6011 that relates to the creation of the Anti-Corruption Court.

To be fair, there is nothing majorly wrong with Draft Bill 6011.  The Venice Commission “Opinion” does suggest some text changes – or text deletions in some cases.  It also questions certain lines of thinking, but overall is supportive of the vast majority of the Draft 6011 content.

The removal of this Draft Bill from the Verkhovna Rada agenda was supported by 235 parliamentarians, thus paving the way for a new Draft Bill to be submitted which takes into consideration the Venice Commission Opinion while retaining the bulk of Draft 6011 that easily passed muster – at least that is what is hopefully going to be the case.

No doubt the Bankova and the two majority coalition parliamentary parties still recall the events of the evening of 6th December – and the aftermath.  That however, does not necessarily mean that what will be submitted for consideration instead of Draft 6011 will meet the expectations of the Ukrainian people, civil society, or external supporters of Ukraine.  Generally, if far more political energy was spent it meeting those expectations rather than the political energy spent trying to mitigate, sabotage or subordinate them, Ukraine would have progressed somewhat further than it has these past few years.

The question is now whether any replacement Bill from The Bankova will be submitted prior to the end of the last plenary session of the year – or not?

If it is, and it is voted upon successfully, assuredly most parliamentarians will not have read it, or if they have, will not understand the implications of it – but the holidays beckon.

However, neither vested interests, The Bankova, nor a particular section of the Verkhovna Rada want an independent Anti-Corruption Court – for obvious reasons.  Therefore every opportunity to slow the process down will be taken.

A last moment submission with insufficient time to consider a replacement Bill until mid January 2018 at the earliest would come as no surprise.

This court cannot be fully functioning before the 2019 elections for politically expedient reasons among the Ukrainian elite.  Thus every plenary session missed is time gained.  Likewise the selection process of judges will not be swift (and to be blunt, haste rather than speed is the desired gear to be selected – although “crawler” is almost inevitable).

As is always the case, institutional structure and process, boring as it is, will prove to be far more beneficial to Ukraine than the 21st December excitement of Russian agents being caught for espionage within the Prime Minister’s people, or the prospects of Kolomoisky shenanigans appearing in Ukrainian and London courts simultaneously.


Security and Defence Reform – The Poroshenko election platform?

December 19, 2017

As Ukraine enters 2018, and with presidential elections in March 2019 and Verkhovna Rada elections in October 2019, the pre-election electioneering has already begun.  In truth it began to take shape in the summer of 2017 and became obvious by October 2017.  Little now happens within the political class without one eye being upon 2019.

As has been written here many times already – all the low hanging reform fruit has long since been picked.  The requirement to cede to external pressure at the expense of domestic “vested interests” has also subsided – for now.  The wiggle room for the President to avoid further infringing upon those “vested interests” has radically reduced, as had the scope to “compensate for losses incurred” through other means.

Hence both sabotage (or attempts thereof) of existing reforms and policy from across the political spectrum, together with blunt attacks upon institutions beyond Bankova influence via institutions that are subordinate to it, reflect the more limited room to maneuver and also attempts not to rock the domestic “vested interests” boat prior to elections – for the majority of those “vested interests” will expect “assurances” if they are to get behind the current leadership.

As such reform and policy change (not the same thing) have slowed to the point of glacial whilst trying not to rock the domestic “vested interests” boat, and yet simultaneously to do enough to remain “the least worst option” for external supporters of Ukraine.

Not an easy balancing act to accomplish when also trying to gather sufficient votes to be reelected – and later sew together a majority coalition that is at the very least sympathetic toward The Bankova after the Verkhovna Rada elections.

It seems improbable that President Poroshenko can deliver all the promises made during his previous election campaign prior to 2019 even if he wanted to – for to do so will not sit well with the “vested interests”.  Some promises made have been delivered.  Others are nowhere near to delivery nor even on the agenda beyond rhetoric.

It is of course always easier to be in opposition.  There is no pressure to deliver policy or reform.  Currently few if any opposition figures give any hope of being any better than the current incumbent – some would certainly be worse.  The usual tired names offer the same wearisome outcomes – 6 or 9 months of progress following election, followed by a return to insuring “vested interests” are serviced and illicit cash flows are redirected.  That, and naturally then a period of political (and thus business) “score settling”.  So goes the unofficial political timetable following elections.

The opposition presidential candidates will do little more than point to the promises unfulfilled – and make promises to fulfill them for the most part – as well as engage in the usual political intrigues and “scandals”.  There is likely to be very little new, creative, or imaginative reform proposals or policy gems forthcoming from them – and what does come forth will probably be flapdoodle for the most part.  Ukraine is already obligated to the Association Agreement.  There is already a ratified and binding plan.  The choice is to meet those obligations – or not.

Yet there will have to be a theme for the presidential election for the incumbent.  One that draws attention from failures and deliberately slow progress in certain areas, but that will yet capture the attention of the voting constituency relating to perhaps themed past successes, future trajectory, and that which is actually deliverable without rocking the “vested interests”, yet meet with broad public approval.

It will not be enough for The Bankova to point to past successes (and perhaps foolish to point to those it is on occasion widely perceived to have tried to undo).  It is also time to relegate distractions like Misha Saakashvili to the status of exactly that – distractions.  Some of what has seemingly passed as “strategic thinking” within The Bankova over the past few months has been nothing short of counterproductive.

Further it will not be enough to measure the successes there have been, against the historical failures of other candidates when they held high office.  To state Ms Tymoshenko has only ever delivered an entirely onerous gas deal in 20+ years of politics will fall somewhat flat.  To claim Yuri Boiko was a top, Kremlin friendly, Yanukovych apparatchik also has limited impact.  Contemporary Ukrainian political figures and their past misdeeds, fecklessness, and biases are already known.  Thus although reminders there will be, the level of voter impact minimal.

Nobody will take any statements by any such presidential candidate relating to combating the oligarchy by stripping assets or investigating them and throwing them in jail with any seriousness (and the way to combat them is to throw open the economy, protect external investors and thus dilute their grip upon it – sector by sector if necessary, even if that prolongs and protects certain “vested interests” by adopting such a sectoral approach).

As there is no desire to have a fully functioning anti-corruption court prior to elections in 2019, progress will be thus timed.  But progress, slow as it will be, shall be visible.  Nevertheless, judicial reform has not exactly been the high watermark legislatively, and is yet to show any significant results either.  Perhaps not the best campaign platform – at least as of the time of writing.

Other reforms and policies, if effectively implemented (consistently the biggest failure of Ukraine) may begin to bear fruit in a tangible sense at the right time politically (education, health, plus the usual political bribes of minimum wage and pension increases etc) – so are the best laid plans.

Perhaps the simplest and safest theme for The Bankova presidential campaign is one of security and defence.

Yes there is continued corruption within the MoD and MIC, and naturally that does no favours for the nation and those defending it, but there has been, and is visible progress within military reform – and the military currently tops the “most trusted” of State entities as far as the public is concerned.  Nevertheless, despite continued corruption, and albeit with eternal assistance, Ukraine has managed to hold the line and defend itself insofar as the current kinetic warfare in and around the occupied Donbas is concerned.  The price is high in blood and treasure – such is the nature of war.  The price of capitulation or appeasement is higher.

When all is said and done however, Ukraine is heading in the right direction when it comes to defence policy, spending, and national capabilities.  That is not to say (nukes aside) it can match an aggressive Russia in an all-out slugging competition, but the point is to make such an all-out slugging competition prohibitively expensive in Russian blood and treasure.  There is still some way to go before a prohibitive defensive resilience on land, sea, air and cyber can be said to have been achieved, but progress is undeniable.

Defence therefore is seemingly fairly solid political ground, and thus a reasonable election platform – except that defence goes hand in hand with national security.

With regard to national security, just over a month ago the blog raised the issue of SBU reform – or indeed the profound lack of it – and pondered the possible reasons why reform has not been forthcoming when it is so clearly required.

The 18th December witnessed a statement from Alexander Vinnikov, the Ukrainian Head of Delegation to NATO, in which he stated 2018 would be the year that a civilian Minister of Defence would be appointed (per NATO normative), national security legislation would be introduced, and reform of the SBU would occur.

So will playing with the nuts and bolts of the SBU, a focusing on what it should be doing, and equally what it should be doing far less of, together with statutory changes in 2018, make defence and national security a solid election platform containing far less political booby traps than other reform and policy areas for March 2019?

The answer is perhaps.

The potential problem with national security as a reelection platform is that it addresses both external and internal threats – and one such major internal threat is corruption.  It is for good reason that corruption has long been recognised as a national security issue by many nations.

Corruption weakens the State, its institutions, its politics, its economy, and its society.  All become less resilient – and that returns the Ukrainian constituency to Article 3 of the Washington Treaty, and focuses upon an area where any presidential reelection campaign would prefer not to go – corruption and the fact no big fish have gone to jail, and “vested interests” remain just as “vested” and as entrenched.

All that said, the SBU, and national security more broadly is in dire need of reform – so whether or not defence and national security is to become the presidential reelection platform (in the absence of better alternatives), is not to detract from the envisaged 2018 reform (on the presumption that reform is meaningful and beneficial, and not just a paper exercise).  National security reform is long overdue.

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