Archive for December 13th, 2017

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December 13, 2017

Although it would be easy to continue to cover the Saakashvili circus or the fractious NABU environment, it is perhaps time to return to the dull drudgery of building a nation that looks something like the international obligations Ukraine has entered into, and by extension eventually arrive at the outcomes much of the national constituency expect.

After all, as difficult and seemingly unrewarding as those efforts may currently appear to many, this is why this generation of Ukrainians are attempting to plant the acorns from which mighty oaks will hopefully grow, and under which their children and grandchildren will sit – indebted to those that currently toil.

Ukraine knows where it doesn’t want to be, and it knows where it is (albeit glacially) heading – even if at core, it is yet somewhat unclear just what its constituents want or expect it to become in and of itself.

There is a bitter wind blowing in from Ukraine’s northern neighbour that can be used (justifiably or otherwise) to mitigate for failing to meet agreed EU timetables – though to be blunt, only in rare cases can a reasonable argument be made for that to be the case.  That bitter wind from the northern neighbour will continue to blow long into the future.  However, only the most naive or retarded reader would be unaware that many legislative and/or implementation failures are unquestionably simply due to “vested interests” insuring untimely progress for their own continued benefit.

The latest EU Association Implementation Report is not one that suggests all such efforts have met with failure.  It does however note that there are large barren gaps across the landscape where seeds, as formally agreed, should have been planted already but haven’t been – largely due to a political class that is errant in sowing the seeds and tending to some of the saplings that have appeared, despite commitments to do so.

Such are the vulnerabilities of the changes taking root, there is no guarantee that any will consolidate.  Vigilance and care is required to insure some (if not all) policy changes manage to become robust and modernising legislation free from sabotage.

One of the more notable policy changes has been within the energy sector – previously an ever-giving and overflowing font of scams and schemes for oligarchy enrichment.

After a stumble over the past few months, the 13th December would appear to see Naftogaz set itself to get back on the right track and progress toward the 3rd Energy Package commitments (separating gas extraction, transit, storage and end delivery).

To be blunt, 3rd Energy Package or not, Ukraine simply has to deal with its energy sector for reasons of oligarchy State capture in this economic sphere (and all the ills that come with State capture).

After several international and a domestic resignations from the supervisory entity – all unsurprisingly due to claims of lack of political support – those vacancies have now been filled with both international and domestic personnel, and the National Assembly that oversees Naftogaz is once more viable.

That has prompted the Cabinet of Ministers to create a working group under Vice-Prime Minister Vladimir Kistion to go out and seek foreign partnership interest for the gas transport system (GTS).  Naturally an eye remains upon Nord Stream II for any potential partner.

The working group comprises of the Minister of Energy, the State Secretary of the Ministry of Economic Development, a member of the Supervisory Board of Naftogaz of Ukraine,, the Chairman of the Verkhovna Rada Committee on Fuel and Energy Issues, a member of the NCRECU (the energy Regulator – and yes there are on-going issues with the personnel composition within the Regulator), representatives of the European Commission, the Energy Community Secretariat, the US Embassy in Ukraine, and a few others.

Who among potential foreign partners, and how many will be attracted remains to be seen.  Historically the Italian Snam, Dutch Gasunie, and French GRTgaz have shown interest.

Hopefully one or more, (even if it requires a European/national “State insurance scheme” to protect their investment – similar to the EU system used for companies entering African business environments) will get involved.  The way to defeat the oligarchy is to dilute the economic spheres they have captured.  A lesser market share equates to less economic influence.  That in turn may force the oligarchy to concentrate their efforts more on commerce and less on co-opting political parties and “renting” parliamentarians in an effort to prevent market dilution as is currently the case.

All very basic stuff of course – and over the long term it is a policy with a reasonable chance of achieving such aims if sufficient foreign partners and market entrants can be found across the oligarchy captured spheres of the economy.  Certainly diluting the economy, and thus lessening the oligarchy control of it, seems more realistic than fanciful notions that expect them to be jailed or otherwise release their grip on economic monopolies and/or cartels.

Let’s see what happens with Naftogaz in the New Year – progress on unbundling would be a positive.

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