Archive for March, 2018


Lutsenko asks for the sacking of SAP Nazar Kholodnitsky (as expected)

March 30, 2018

It is claimed that when asked what blows governments off course, Harold MacMillan answered “Events my dear boy, events”.  Whether or not Mr MacMillan ever said that overworked quote matters little, for there are events that politicians are subjected too, and there are events that politicians engineer.

As such some events are predictable, and one such predictable event is the request by Prosecutor General Yuri Lutesnko to remove Special Anti-Corruption Prosecutor Nasir Kholodnitsky from office – as forecast some weeks ago.  As the entry made clear, a situational alliance between NABU and the Prosecutor General, notwithstanding the bugging of the SAP office, made it very unlikely that the SAP could continue.  His choice was to resign or be sacked.

With Mr Kholodnitsky seemingly choosing the later, perhaps more light will be shed upon the often fractious relationship between NABU and SAP.  Let it not be said that a seamless relationship between the anti-corruption institutions exist – at least insofar as the current leadership is concerned.

It is also common for sensitive political decisions (and the Yuri Lutsenko is a politician and not an a-political civil servant despite his official position) to be made immediately prior to holidays and/or weekends, or when other significant events are grabbing the headlines – as Jo Moore said of the US Twin Tower tragedy, it was “a good day to bury bad news”.

Ergo, as foreseen it should come as no surprise that Mr Lutsenko has now officially called for the sacking of Mr Kholodnitsky, and neither should the “Good Friday” timing be a surprise either.

As the link above concluded, there are some potentially serious issues to now ponder on the presumption the Prosecutor General will be successful in ousting the current SAP – “Yet others will be concerned that friction between the two existing parts of the anti-corruption structure is effectively weakening both – an undesirable situation in the continuing absence of a dedicated anti-corruption court.

Whatever the case, should Mr Kholodnitsky resign (or otherwise be forced out) a new public competition for his position will be required by law, perhaps further slowing anti-corruption prosecutions as that process occurs.

As usual, who would fulfill his role on an acting basis is unclear – presumably it will be either the very political Prosecutor General Yuri Lutsenko, or Mr Kholodnitsky’s direct subordinate Deputy SAP, Maksym Hryshchuk (with whom it is rumoured NABU have a reasonable relationship).

A cynical reader knows which one to expect.”

Eyes then upon the swiftness of the removal of the current SAP, and in particular a very sharp eye turned upon who takes on his role on an acting basis until a new public competition occurs and a permanent replacement is both found and appointed.  Naturally this will take many months, even with some haste, if the process is to be carried out properly.

With presidential elections less than a year away, should Yuri Lutsenko take on the acting role of SAP (rather than Maksym Hryshchuk the Deputy SAP) this move will be perceived as a political event created by The Bankova – and thus any decisions to (or indeed not to) prosecute individuals will take on a virulent political tone (whether or not there actually is one).  Thus should Mr Lutsenko take on the acting SAP role, the longer it takes to openly select a replacement, the worse the optics may become as the presidential election nears.

Care is very much required by The Bankova in handling this affair – for there is the potential for some very real and serious blow-back both at the ballot box and from the external supporters of Ukraine.

As such events do not occur within an institutional or political vacuum, readers may also decide to focus upon Volodymyr Hutsulyak.  Mr Hutsulyak is understood to be the “head of the Kononenko-Granovsky department” – a non-entity unofficially charged with dealing with/influencing/interfering in particularly sensitive political cases for The Bankova.


The EU cries foul – Poroshenko insists

March 28, 2018

An unusually terse public message was delivered on 28th March 2018 by EU Commissioner Hahn relating to the failure of Ukrainian legislators to undo legislation requiring anti-corruption NGOs to abide by the same law as that of public officials – and declare incomes/funding.

“On 1 April, the deadline for submission of the asset declarations for civil society activists will lapse. The Ukrainian authorities have not lived up to their commitment. The failure to repeal the extension of this obligation from public officials also to civic activists is contrary to Ukraine’s European aspirations. It is contrary to the strong recommendations given by Ukraine’s international partners, including the EU (also in the context of monitoring Ukraine’s continued implementation of commitments in the visa liberalisation process), the Venice Commission and the OSCE/ODIHR.

Civil society has been doing an important and courageous work and must be able to play its proper role without undue obstacles and interference. The purpose of the asset declaration system is to help prevent corruption by public officials by exposing potentially unjustified wealth of public officials. Civil society members are not public officials and imposing asset declarations upon them only puts unacceptable and undue burden and pressure on them and will play into the hands of those keen to destroy Ukraine’s efforts to fight corruption effectively.

The EU’s relationship with Ukraine is based on common values. Both sides have agreed that respect for democratic principles, human rights and fundamental freedoms constitute the essential elements of the Association Agreement.

Ukraine has made remarkable progress over the past years. It is important not to create setbacks and undermine the progress that has been made. Ukraine’s parliament should revert to the issue and lift asset declaration obligations on civil society activists and limit these to public officials as soon as possible. The EU stands ready to provide further support and advice.”

Naturally a reader will ponder that if the president is capable of “insisting” this be removed by the Verkhovna Rada now and then achieves it, then was he not capable of insisting it was not included ex ante?  He was surely capable of not signing the legislation into law at the time as is his prerogative as President.
The presidential argument at the time (27th March 2017) was that the law had to be signed to relieve military personnel from e-declaration requirements, (and clearly he could not or would not veto the offending clauses).  However Canada, the USA, EU and others had long called for the legislators to remove the NGO requirements before the Verkhovna Rada vote.  That the requirements remained within despite a cacophony of very public “western” objections was therefore a conscious decision.
Thereafter the President submitted a relevant Bill to amend and rectify this situation during the summer of 2017.  However the question is whether between then and until now, he has been without the political capital within the Verkhovna Rada to “insist” as he now does?  In short why was it not rectified long ago?
If this is simply political theatre and/or intrigue whereby the Tsar finally brings those unruly Verkhovna Rada boyars into line at the last moment to save the day, and civil society, the constituency, and external supporters are all meant to dutifully acknowledge the benevolence and/or power and/or effort to rectify the problem by the personal intervention of the Tsar, was it really necessary to insure such a prickly, indeed barbed statement from the EU first?
Is the loss of political points in allowing the circumstances to arise for such an EU statement, to be exceeded by the political points gained by being seen to put it right?  Probably not.  This will be a case where the political cost will exceed the political gain.
Was it therefore something of a surprise to The Bankova when during the last plenary session (ending 22nd March) that despite several attempts, the Verkhovna Rada failed to vote in favour of any of the draft laws (№6271, №8120 and №8120-1) that would have resolved matters prior to 1st April from whence civil society actors are legally obliged to identify sources of income/funding?
Then again, was, and is the political plan to rectify the legislative situation only after civil society has carried out its (current) lawful obligations and identified sources of income?
Naturally there is nothing wrong with civil society and NGOs being transparent in their funding/incomes (not only those involved with anti-corruption activities) – it just happens that this is not the law with which to do so, as made clear when it was initially passed.  This law was intended to deal with public officials and wealth that appears to go far beyond their legitimate incomes – for it is they who govern, and/or lead institutions and policy implementation therein, and/or sit in judgement in a court of law.
Civil society naturally does none of those things and has none of those powers regardless of income sources – for if it did any of those things, or held any such powers, it would cease to be civil society.
(Let it be known that if there were any grants and external support for this blog, not only would that funding be made transparent, the logo of the grant giver/philanthropist would appear as a fixture upon the Home Page – unfortunately there is no such need to do so, and neither has there ever been such an approach.)
That said, a security service worth its salt will know who sponsors/funds which NGO, particularly when the Ukrainian civil society space is not lacking in Trojan Horse entities and actors funded by sources that are perhaps to be deemed “hostile”.
There is an argument therefore, that due to a deliberately polluted civil society environment, the Ukrainian constituency has a right to know who funds which civil society organisation.  Whether separate legislation is required for NGOs, NFPs, charities et al (and it should be separate from that dealing with public officials and not a “bolt on”), or whether a voluntary transparency code among civil society actors is a better solution (and the constituency free to draw inference from those that deny transparency in their funding), is something for a reader to ponder.
Whatever the case, clearly the 1st April will arrive with current legislative e-declaration requirements for anti-corruption NGOs – unless there is an extraordinary Verkhovna Rada session within the next 72 hours.
Anti-corruption civil society is therefore presented with the dilemma of adhering to the law, or defying it until the necessary amendments are made to remove such a requirement from them – whenever that will actually occur.
The next plenary session begins 6th April.  Ergo in the absence of an extraordinary Verkhovna Rada vote, for at least 5 days those that do not submit e-declarations are breaking the law.  There is then the question as to whether any amendments will be retrospective removing the legal requirements from 1st April?

Prima facie, it’s all a bit messy – and it will ultimately cost President Poroshenko unnecessary political points.


Estonia shutters Versobank

March 27, 2018

The 27th March 2018 witnessed the announcement that the Central European Bank had withdrawn the banking licences of Versobank in Estonia upon the recommendation of the Financial Supervision Authority of Estonia.

The bank, owned by Ukrainians Vadim Ermoleav and Stanislav Velinsky had raised flags over repeated failure to combat money laundering.  According to the Head of the Financial Inspectorate Keilar Kessler Versobank AS has 5,600 customers, of which only 2 thousand are residents of Estonia.  It is one of the smallest lending institutions in Estonia, the closure of which will have no negative consequences for the Estonian financial system, which is why the bank did not initiate a sanction procedure. The satisfaction of depositors’ demands in Versobank is sufficient.

For cynical readers it really won’t come as much of a surprise that the majority of the bank’s customers were not Estonian – however not all the foreign clients were Ukrainian (or Ukrainians hiding behind offshores) – it is claimed that Moldavian oligarch Vladimir Plahotniuc was also a client at one point.  The bank’s purpose was clearly not to service the banking needs of Estonians, but the nefarious needs of the majority of its other customers by getting their money into the western banking system.

These Ukrainian owners are hardly unknown in Ukraine – particularly to those from Dnipro and who are of Jewish lineage.  Mr Ermolaev in particular can be lumped into an influential group with Ihor Kolomoisky, Gennady Bogolyubov, Gennady Korban etc. from that city.

During the mid-90s Messrs Velinsky and Ermoleav began their “import and export” business via an entity called Alef – mostly dealing in household cleaning products and Bulgarian wine.  Due to an uncanny knack of “customs resolutions”, business appears to have been very good – and subsidiaries sprouted.  Naturally a nod was required regarding the underworld, and this initially occurred via Boris “Grey” Chertok, Messrs Shuvaev, Opryshko and ultimately, via the usual smoke and mirrors, to Sasha “Narik” Petrovsky-Nalakreshvili who then ran the city illegal money exchanges – or so it is said.  (“Narik” it is claimed, also had some kind of “arrangement with Chechen villain Umar Jabrailov).

By the early naughties (2000’s) a deal with the Turks had been struck and the Gala cleaning brand aggressively entered Ukraine.

Without wishing to bore a reader, suffice to say wineries and factories were acquired and questionable arrangements with RNCB bank were reached – at least until the first Velsinky-Ermolaev banking enterprise came into existence – Agrobank.  Among a myriad of scams, schemes and scandals relating to “import and export”, questionable loans and even more questionable loan repayment enforcement, and a blind eye to the legitimacy of transactions, other banks were created or bought or sold; Atkabank, Aktobebank and Estonian Marfin and Agro Bank etc.  Marfin eventually being renamed the now shuttered Versobank.

This is, of course, not an isolated instance.

A reader may recall a few lines written relating to Ivan Fursin when rumours were floating that Paul Manafort owed him $9.9 million in 2017.  Briefly mentioning some dubious Ukrainian banking practices, what that entry did not say was that Mr Fursin, together with Igor Buimister (and in all probability Dmitry Firtash) were owners of Trasta Komercbanka in Latvia, a bank created for exactly the same purpose – to accept dubious payments and enter that cash into the western banking system with a clean bill of health.

(Indeed Trasta Komercbanka was allegedly one of the banks used to move the Russian $230 million involved in the Sergei Magnitsky case.)

Trasta Komercbanka was shuttered by the Latvians for money laundering in 2016.  27th March 2018 has witnessed Estonia eventually shutter Versobank for the same reason.

More banks situated within the EU that are owned by (in)famous Ukrainians will eventually follow – for they were only ever created, or bought, or merged, or rebranded to serve one purpose – and that purpose was not to service the banking needs of the domestic population in which the bank was situated.

A the cynical reader would argue that simply by auditing the ownership of banks and the discovery of any Ukrainian name, after nothing more than a quick “Google” on those individuals, would result in the raising of sufficient flags to have domestic financial inspectors target almost every such bank.

A reader would further question those nations that would grant banking licences to (in)famous Ukrainians (and there are a few such banking licence applications pending) to those where no more than a “Google” would raise sufficient due diligence and “responsible person” issues to consider refusal.  For example, a particularly inquisitive eye might look to nations such as Montenegro, (FYROM) Macedonia and perhaps Albania which seem the most likely to see a manageable entry to the EU – for does it not make sense to open in these nations now and await entry into the EU via that eventual expansion?


NATO Ambitions

March 26, 2018

As mass Russian “diplomatic” (spooks with diplomatic cover) expulsions occur in a surprisingly coordinated manner across the US and EU nation states (plus a few other nations too), the headlines will rightly focus thereon – despite the fact that no nation has expelled anywhere near enough to seriously hinder Kremlin intelligence gathering in any nation for long, or cause a lack of continuity/agent legacy management due to the number of “diplomats” left in post, and now also faced with having to identify all the replacements and carry out the usual CI work for each, the blog will look at an issue that won’t grab the headlines.

Suffice to see whether the guaranteed Kremlin reciprocity will be symmetrical or asymmetrical, or both, in response – as and when it assuredly comes.  Despite the clear message sent, a reader may ponder whether each expelling nation would have caused far more problems within, and for The Kremlin, had they targeted Russian money instead/also.

To the point of this entry however.  Having recently commented upon President Poroshenko’s more than hopeful comments that Ukraine would join the EU in a matter of years, and a blog rebuttle simply by using EU budgetary cycles as a reason to doubt that to be true, there are also very recent presidential claims relating to Ukrainian NATO membership within the decade.

Putting to one side issues surrounding contested borders and on-going hostilities that will be enough to justify several current NATO members having objections to Ukrainian membership, and thus concentrating entirely upon the internal factors for Ukraine, President Poroshenko may not be mistaken that the Ukrainian military will be of NATO standard if not within the decade, then certainly 10 years hence.

For example, those that follow Special Operations Forces (SOF) will all be very aware that in 2019 it is heavily rumoured (via the right mouths) that Kyiv will host the Global SOF Foundation Symposium – whereat it is expected that the Ukrainian SOF will be signed off as NATO capable and compatible.  There are those within the UASOF who expect to be deployed within NATO SOF operations around the globe in 2020.  Thus very shortly that deployment within NATO SOF will either come to pass – or not.  Regardless 2019 is almost assured to officially certify UASOF as NATO capable and compatible.  When that occurs it will be increasingly difficult to deny real, tangible NATO integration is happening.

The military, despite some still rather Soviet thinking among some of the senior leadership, an outdated reliance upon the officer corps whereas commissioned Major and below, plus NCO ranks dominate tactical operation decision making in NATO, will also not be far from meeting NATO standards 10 years from now.

The annual Sea Breeze exercise held around the coast of Odessa and in the Black Sea is no longer the breeze it used to be.  They have become progressively more tactically challenging.  It has to be said that there is still, once again, a Soviet legacy of too much shore command and control and not enough discretion for the vessel commanders at sea – but that too is visibly being addressed.  The Ukrainian Navy is likely to be there or thereabouts a decade from now.

NATO activity in Ukraine is unlikely to decrease.

Also Ukraine is still active in other theatres other than its own war with Russia.  Ukrainian helicopters and pilots are still in Seirra Leone as part of a UN mission, and have been for years.  Indeed on 19th January 2015, Ukrainian helicopters opened fire in the DRC while on UN duty.  Ukraine is a provider of peacekeepers to numerous UN missions.

Ultimately there should be no surprise that the Ukrainian military personnel will meet NATO standards 10 years hence.  It may well be that all (or the majority of) their equipment will also meet NATO standards – land, sea, air and cyber.

However it is not only military capability, compatibility and interoperability that dictates the meeting of NATO standards and a route to membership.  There are clearly some very serious issues within the Ukrainian Military Complex – not only with corruption, but with the entire structure of Ukrboronprom, the State monopoly therein.  It seems unlikely that there will be the political will to tackle this problem effectively within 10 years.

Ukraine would be wise to set a goal of becoming part of the NATO supply chain, and NATO members becoming part of its own and/or partners with a reformed MIC.  A project that will take more than 10 years to realise in any meaningful way.

Yet this too is not necessarily the biggest internal stumbling block.  Article 3 of the Washington Treaty is entirely devoted to “resilience”.  While undoubtedly the Ukrainian military will meet the Article 3 requirements for resilience, the scope of “resilience” is not confined to military capabilities within Article 3.

“Resilience” is also political, economic and societal – and while it is perhaps natural to view that resilience through a “Russia lens”, that looking glass is simply focused too narrowly.

Politically Ukraine would have to prove to be a consolidated and fully functioning democracy.  Democracy is about far more than simply holding elections where the outcomes are not predetermined.  There are matters of rule of law, functioning institutions with a reasonable level of public trust therein etc.

That is not to say that President Poroshenko’s desire to enshrine NATO and EU Membership as the ultimate aim of Ukraine within the nation’s Constitution is purely electioneering rhetoric.  He may well be able to gather the 300 votes required to achieve it.  If so, then it seems very unlikely that for a generation 300 votes to subsequently remove that goal will be found.  This is not simply about short term electioneering.  However, what would be deemed as undermining NATO and EU Membership by the Constitutional Court remains to be seen.  For example, how many grubby deals within the oligarchy captured arenas of the Ukrainian economy could be interpreted as undermining those goals, and could therefore be deemed unconstitutional?

The increased muttering within the EU over its foreign policy, and a possible move away from unanimous decisions in favour of majority decisions (perhaps unfortunately for Ukraine, it is likely that unanimity would still be required for EU enlargement) may also provide opportunity for Ukraine to further its cause.  As part of the Association Agreement with the EU, Ukraine undertook to support and be active with regard to the EU’s Common Security and Defence Policy.

Economically is perhaps where Ukraine would struggle the most to be anything like “resilient” for the purposes of Article 3 within, or in 10 years from now.  Those areas of the Ukrainian economy that suffer from oligarchy capture will remain captured.  The only way to release them from oligarchy and/or State capture is to specifically and forcefully open those areas of the economy to external actors in order to dilute the relevant market with new entrants.  Jailing the oligarchs is not the answer, and neither is stripping of their assets to simply witness them “reassigned”, thus creating different oligarchs.  Dilution is the only sensible cure.

There are really only two ways to dilute oligarchy captured spheres of the economy.  The first is to provide would-be market entrants with a legal playing field that is both consistent and trustworthy – and that perception will take time to manifest, perhaps longer than a decade.

The second, if Ukraine’s foreign partners simply do not see the domestic political will, is for those partners to encourage their market players to enter Ukraine while making guarantees against any losses they may incur due to nefarious actions by and/or within Ukraine.  Whether those losses would then be subtracted from loans/grants/aid otherwise intended for Ukraine, or depending upon the nation involved, whether Ukraine would have the desire to irk it by shafting the market entrants that held foreign government guarantees, is a matter to ponder.

Whatever the case, the Ukrainian economy, or certainly some important sectors of it, is simply not resilient – nor can it be while captured by the oligarchy.  Add to that organised crime, a national security issue in and of itself, and a decade seems simply unrealistic.

That Ukrainian society is resilient is now perhaps not in question – at least insofar as the (re)discovery of a genuine patriotism toward the nation for the vast majority.  However, creating societal resilience toward injustice, corruption, populism, economic shocks et al, is not simply a flag for civil society to wave, but a matter for each individual to address for themselves.  The times they are a-changing, the younger generation perhaps a little more inclined to show resilience in the face of the temptations and/or needs of that which is aging.  Perhaps demographics may well assist Ukraine in achieving something like societal resilience across a broad social spectrum of societal issues – and that will in turn fully meet Article 3 ten years hence?

Whether that society would want to join NATO if the opportunity arose is of course a very different question.

In sum, within 10 years the Ukrainian military will almost certainly meet NATO standards, and here President Poroshenko will be proven right.  Society too may well easily cross that line depending upon how “resilience” is measured.  Unfortunately looking at the immediate political horizon it seems very likely that it will be 2024 at the earliest when a political environment remotely capable of doing what is necessary regarding the structure of the nation’s economics will be in place to truly make that economy “resilient”.

Thus if Article 3 be the guide for NATO Membership, then just as with the presidential comments on EU membership, he will be proven to be somewhat off with his time scale.


Public Council for Integrity withdraws from the judicial vetting process

March 25, 2018

It has been a while since the Public Council for Integrity was last mentioned by the blog.

The PCI is a body designed to have input into the selection of the judiciary that will function after judicial “reform” is completed.

It’s self declared purpose was to prevent the reappointment of Ukraine’s most odious, corrupt, and inept judges – those involved in unlawful “EuroMaidan/Revolution of Dignity” decisions, those that live well beyond their means and who cannot reasonably account for their wealth, and those that have a history of decisions which have ultimately led to ECfHR rulings against Ukraine.

In short an irksome body for many within the judiciary, and also for those that seek to retain enough control over the judicial system when “desired outcomes” are required.

Nevertheless, whilst “perfect” was never going to be the outcome of its endeavours, the good (namely a transitional step where the majority of judges passed the “societal sniff test”) should not be thrown out in that pursuit – even if the legislation designed to reform the judiciary did little more than reform the route and methodology of political control over the judiciary.

It seems however, that even a good (transitional) outcome is believed to be beyond realisation according to the PCI.

On 26th March, the PCI will officially announce its withdrawal from the judicial appointment process, calling the current system employed by the High Council of Judges nothing more than a “conveyor belt” with the aim of reappointing 5000 judges as soon as possible in order to report back that the process is complete.

This announcement when it is officially made, and in anticipation of some prickly and barbed oratory, will not bode particularly well for the current authorities or the judicial body when trust in institutions and the current leadership is on a seemingly never-ending decline.

Quite how the foreign institutions and nations that have for years financed and spent a good deal of political energy upon the reform of the judiciary in Ukraine will react remains to be seen – beyond any disappointment that the PCI body has withdrawn from the process may bring.

The PCI may or may not have its own flaws, but a reader will draw obvious conclusions about the negative Ukrainian societal perceptions that will manifest when the PCI withdraws from the process.


Adnan Kivan buys the Kyiv Post

March 21, 2018

Mohammad Zahoor today announced the sale of the Kyiv Post to well known Odessa businessman Adnan Kivan.  Since then the blog email has swelled with inquiries about Mr Kivan.  Ergo a singular response is probably the easiest solution.

The activities of his well known construction group Kadorr are easily found on the internet.  To be fair it produces quality assets.  Perhaps the only regular complaint is that there never seems to be enough car parking spaces for the number of apartments.   Naturally there will be questions about his regular habit of acquiring prime construction land – but that is a question asked of many businessmen in Odessa.  Inferences may be drawn by a discerning reader as to just how Kadorr so successfully manages to get the land it has and still manages to obtain.

Suffice to say there is great competition for such land – Mayor Trukhanov’s mafia partner from bygone days Volodymyr (Lamposhka) Galanternik, Yuri Kruk and Ruslan Tarpan among a fairly long and well connected but fractious list that vies for prime development land.

Mr Kivan is responsible for the construction of the Islamic Centre in Odessa.  It is a fairly well run and fairly well attended centre.  The only complaints perhaps coming from the Shia Muslim community due to a perception of bias within the centre toward Sunni.  Nevertheless in the cosmopolitan and mercantile environment that is Odessa, the centre fills a social need as well as making a statement by Mr Kivan to the Muslim community..

Written along the side of the building are salutations from Mr Kivan himself.

Further the Kyiv Post will not be Mr Kivan’s first media purchase.  He owns TV Channel 7 in Odessa and looking at a list over over 60 companies he has had or still has, there are several other media companies among that number.  However, Channel 7 since a serious disagreement with Mayor Trukhanov just over 18 months ago has not been particularly friendly toward the Mayor in its coverage.  The purchase of the Kyiv Post will not fill Mayor Trukhanov with glee to say the least.

The nature of the disagreement with Mayor Trukhanov relates to the building of a “European Hospital” to be donated to the city in return for development rights upon the Russiya Sanatorium site and alleged reneging upon obligations.  A complex tale of accusations of fraud, deception, and theft from a long association and numerous interactions with City Hall officials past and present.

All accusations and counter accusations can be found in the local media and court documents of recent years.

Perhaps yet more irksome to Mayor Trukhanov however, and a source of the personal feud, was that Mr Kivan gave then Governor Saakashvili a regular platform on his Channel 7 TV, and whilst Misha was in favour with President Poroshenko, Mr Kivan made a point of appearing with the President when he was in Odessa.  Perhaps President Poroshenko (or somebody within The Bankova) now plays the role once played by Abdel Halim Haddam in Syria for the Kivan’s.

Now for some history.

Mr Kivan is Syrian – his clan being Sunni Muslim.  Whether or not Mr Kivan is particularly religious is unknown, however into a Sunni Muslim clan he was apparently born.  In order to get on, many of that clan were also members of the Baath Party, and it is claimed that several family members gained high positions in the Dar’a and Ydlib regions predominantly in oil and gas.

Persistent gossip would also have it that those relations were also involved in smuggling and “resolving local problems”.

It is said that in Alawite ruled Syria, the Sunni Kivan clan sought protection (a roof) for their interests.

That roof allegedly being the former Syrian Foreign Minister Abdel Halim Haddam, a man then very close to the then President Assad – father to the current Syrian President.  Indeed it is alleged that the Kivan clan became part of Haddam’s Syrian Sunni corruption pyramid.

The death of President Assad (Senior) and the coming to power of the current President Assad apparently did not bode well for Abdel Ahlim Haddam – and therefore not well for his pyramid of corruption either.  It is said that between 2005 and 2010 the Kivan clan’s assets were squeezed by the Syrian courts and some entities actually closed.

That may perhaps explain a somewhat barren period in the Ukrainian adventure – cash flow problems.

The early years of Mr Kivan’s Odessa/Ukrainian tale are somewhat unclear.  Caution must be taken with what follows for it is based upon rumour and gossip in part.

It would appear that Mr Kivan arrived in Soviet Ukraine in the late 1980s and studied at the Odessa Institute of Food Technology.  A reader will note that there was something of a war with Lebanon at the time, so perhaps Mr Kivan and his brother were sent to Ukraine to study to avoid military service – what parents with influence would not try to do such a thing for their offspring?

Mr Kivan remained in Odessa after graduation and married his wife Olga (Pavlova) with whom he has a son, Ruslan, and daughter, Diana.

Needless to say with the clan business then doing well in Syria, when the USSR collapsed and those with access to money stood to do well in Ukraine, Mr Kivan was well placed.

Rumour has it he started with scrap metal, and found no shortage of buyers in Turkey due to his Syrian clan’s connections.  Thus “Kivan United Co” was founded by the Kivan brothers in the early 1990s – but if old Odessa media is to be believed (and it may not be) it also closed some years later due to an inferred scam regarding the Sheraton Hotel chain.  No doubt a branding/intellectual property rights issue relating to an early Kivan construction project.

The Arab Culture Centre was started and completed immediately after that “scandal”.

There are other rumours of the time relating to President Kuchma and then Odessa power-player Ruslan Bodelan (connected to mafia Don Alexander “Angel” Angert).  Those rumours, depending upon which a reader may choose to believe (if any) relate to approaching Mr Kivan about sales of tanks to Syria, or indeed that Mr Kivan was a Russian agent from Syria.  Odessa is a city that runs on intrigues and rumour – caution is advised!

Nevertheless the latter is a rumour that has no doubt been used as a platform to spread perhaps spurious accusations of support for the separatist regions of Ukraine by Kadorr Group.  At the time of the rumours it has to be noted that Messrs Trukhanov and Kivan were particularly prickly toward one another.  Dark and otherwise unfounded arts may well have been used – and Mayor Trukhanov is not without those that would say his Russian connections are beyond unhealthy.

Anyway, the first Kadorr named entity was born in Ukraine around 2005 – at a time when another Syrian, Hares Youseff was also doing OK for himself around Dmitry Firtash and President Yushenko.

Full disclosure the blog is acquainted with Mr Yousef, and has met Mr Kivan.

The blog however has never inquired whether they know each other, but both are men that would help their friends and associates and the Syrian world in Ukraine is quite insular – so perhaps they did during the 2000s.

Since then, as stated more than 60 companies have been formed by or with Mr Kivan.  Most are construction related and project specific to avoid liabilities effecting other projects.  Any that have co-ownerships, looking at the names, appear to be co-owned with Ukrainians, mostly from Odessa.  Some companies are media related, others health and/or fitness, some import and export, mostly grain and tobacco, etc. Mr Kivan also owns shares in at least 3 of his brothers companies too.

How will his purchase of the Kyiv Post affect the Kyiv Post?  That remains to be seen.  Will the blog occasionally still feature at the Kyiv Post?  That also remains to be seen.  However, as an individual, Mr Kivan came across as a very nice guy socially and without much of an agenda outside his business empire.  Perhaps it will remain that – or perhaps Mr Kivan sees political opportunity (or perhaps necessity) with elections arriving in 2019 and a local Odessa political (and criminal) scene in a state of flux and uncertainty.

Meanwhile he will have to be deft of touch with matters Syrian if the clan business is to avoid the wrath of President Assad in Syria, and also back the right horse in Ukraine.


SAP Changes? Ukrainian Anti-Corruption Architecture

March 21, 2018

The Special Anti-Corruption Prosecutor Nazar Kholodnitsky, it is rumoured, is about to resign.

He is currently in Brussels with NABU Chief Artem Sytnyk holding a series of meeting until the weekend.

It is no secret that there has been some friction between the SAP and NABU leadership, with NABU accusing Mr Kholodnitsky of being slow to sign off on high profile investigations and case submissions.  Mr Kholodnitsky in turn has been critical of NABU and its engagement in PR and politics, notwithstanding investigative shortcomings.

Perhaps both have a point – at least to some degree.

There are however several rumours circulating relating to the reason for any possible resignation by Mr Kholodnitsky.

The first, and neatest by way of institutional relationships and avoiding ugly headlines, is that of Mr Kholodnitsky’s ill-health.  It is widely understood that he has heart problems apparently diagnosed during a short hospitalisation at the end of 2017.

Well maybe.  No doubt there are pressures of office, (and from external offices) that are not conducive to a heart condition.

There are also rumours, without much by way of substantiation, that when Yuri Lutsenko eventually leaves his role as Prosecutor General (and that is likely to be well before the presidential election campaign officially begins to facilitate his return to politics as a politician), Mr Kholodnitsky has been maneuvering to become Prosecutor General.  A matter of lobbying friendly foreign capitals while discussing the anti-corruption fight in private meetings.

A somewhat less convincing reason for resignation perhaps, when considering the mechanics of being so appointed – Presidenital nomination and Verkhovna Rada approval.  Neither would be particularly keen.

However, there is also the matter of Mr Kholodnitsky’s office being bugged for several weeks – the listening device apparently attached to a fish tank near his desk.  What was said, who heard it, how has that been disseminated around the elite of the Ukrainian political elite, and to what end?

Was there enough for coercion or blackmail to provide for a more “understanding” line toward the elite?  Was there enough to force a resignation?  Is resignation and falling upon his own sword a moral preference to being coerced by the elite for Mr Kholodnitsky?

It appears that the bugging of his office was actually carried out by NABU, with the able assistance of Volodymyr Hutsulyak.  Mr Hutsulyak is understood to be the “head of the Kononenko-Granovsky department” – a non-entity unofficially charged with dealing with/influencing/interfering in particularly sensitive political cases for The Bankova.

Exactly who within NABU was doing the listening will perhaps become known in the fullness of time.  Presumably the only way such eavesdropping could have been authorised was because NABU suspected the SAP of collusion with the elite political class.  All else would fall outside of NABU’s remit.

Whatever the case, many will see a prima facie case of a situational alliance between either NABU and the Prosecutor General to replace Mr Kholodnitsky as the SAP. or between NABU and The Bankova more directly.  Neither may be true, but perceptions are a personal thing.

Yet others will be concerned that friction between the two existing parts of the anti-corruption structure is effectively weakening both – an undesirable situation in the continuing absence of a dedicated anti-corruption court.

Whatever the case, should Mr Kholodnitsky resign (or otherwise be forced out) a new public competition for his position will be required by law, perhaps further slowing anti-corruption prosecutions as that process occurs.

As usual, who would fulfill his role on an acting basis is unclear – presumably it will be either the very political Prosecutor General Yuri Lutsenko, or Mr Kholodnitsky’s direct subordinate Deputy SAP, Maksym Hryshchuk (with whom it is rumoured NABU have a reasonable relationship).

A cynical reader knows which one to expect.

In the meantime, all await a decision by Mr Kholodnitsky on his future.


Odessaoblenergo – A good buy?

March 19, 2018

On 19th March 2018 the State Property Fund (SPF) seemingly canceled the sale of State shares in Odessaolenergo and Sumyoblenergo.

An apparent last minute decision with Odessaolbenergo shares due for sale via the Ukrainian exchange on 20th March, and Sumyoblenergo scheduled to be sold on 30th March.

In August 2017 the 25% of Odessaoblenergo and Sumyoblenergo for sale were given the starting price of UAH 631.3 million and UAH 370.32 million respectively, and managed to attract no bidders whatsoever.

It was thus decided to drastically reduce the price and in February 2018 the SPF announced the sale at auction of the 25% stake in Odesaoblenergo at a starting price of UAH 149.081 million, and Sumyoblenergo for UAH 106.275 million – about 25% of the original valuation/starting bid price in the case of Odessaoblenergo, and about 30% of the opening bid price for Sumyoblenergo.

Not for the first time have SPF auctions seen zero interest due to questionable initial valuations – the still unsold Odessa Port Side is a prime example.

The reason given for this last minute decision to cancel the bids is not for a lack of bidders, but that the sale of the State 25% shares should occur via the recently amended/updated laws on privatisation.

So, a reader may ponder, are there in fact bidders now that the opening bid prices have been so dramatically reduced?

Is Odessaoblenergo any more attractive as an asset now that UAH 631.3 million has dropped to UAH 149.081 million?

In the case of Odessaoblenergo, almost 70% is owned by Arthur Altbergs, Valts Vigants, Vilis Dambins, Oleg Sizerman and Marina Yaroslavskaya – mostly German and Latvian citizens.

However for many, many years, the locals of Odessa have been steadfast in stating that these people are in fact a front for VS Energy.  VS Energy has shares in numerous Ukrainian businesses and is owned by (former Russian Duma Deputy) Alexandr Babakov.

Mr Babakov most recently in the local news headlines in Odessa when the roof of a hotel on Fransuski Boulevard collapsed of which he is also reported to be the ultimate owner behind the facade of others.

Ergo any purchaser of the 25% State shares for sale will be, according to steadfast local gossip, shareholders with Mr Babakov – and all that may entail.

In July 2017 an entry appeared pondering RAB tariffs and their use and misuse in the proposed application to Oblastenergos across the nation.

The misuse of the tariffs will relate significantly to the valuation of assets – click the above link for detail.

Naturally in order to prepare for privatisation, Odessaoblenergo assets were necessarily valued by the SPF.  They were however valued at almost 25 less than that of the proposed RAB tariff valuation of UAH 15.4 billion by the energy regulator.

How can the SFS value Odessaoblenergo assets for privatisation at 25 times less than the NKRECU regulator that is involved with RAB tariffs?

How, if at all, does this affect the attractiveness (or otherwise) of the Odessaolbenergo 25% share the State is selling?

Some very simple (perhaps too simple) math – The proposed RAB tariff rate per the above link from July 2017 was 12.5%.  At the time of writing that has not changed as far as the NKRECU regulator is concerned.

So to the numbers – 12.5% annual tariff return on assets of UAH 15.4 billion provides for approximately UAH 1.925 billion.

Whomever purchases the 25% State shares will therefore be entitled to 25% of that – UAH 481 million.

However, those shareholders will only have the right to withdraw 50% of that as dividends – the other 50% to be reinvested in infrastructure upgrade per the RAB requirements.

Thus whomever purchases the 25% State share will actually only be able to take out UAH 241 million as cash profit.

UAH 241 million dividend withdrawal for a UAH 149 purchase price (if sold at the opening bid price) on year 1 of an investment?  Almost double your money in a year?

Further, this before the RAB tariffs actually provide the Oblenergos with the ability to forecast and collect some very attractive profits under that system year on year.

No wonder this time the privatisation has not been canceled through a lack of potential bidders!

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