Archive for April, 2018

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A disappointing local election

April 30, 2018

Unfortunately it appears that the 40 local elections (4 cities, 14 towns and 22 rural villages) that occurred on 29th April 2018 have witnessed a return to the worst of electioneering practices by the Ukrainian political class when it comes to (among other things) voter bribery – at least when viewing events (and predicted results) via the fairly respected NGO “CVU” (Committee of Voters in Ukraine) who claim these have been the dirtiest elections held in Ukraine since 2015.

Naturally President Poroshenko’s party, Solidarity, are claiming “victory” having seen more than half of the heads/chairs of these local elections going their way.  Undoubtedly control over “administrative resources” will surely matter in 2019 when it comes to presidential and parliamentary elections.

Yulia Tymoshenko’s party, Batkivshchyna, are claiming “victory” by having had more local deputies elected than any other party (approximately 50 or so more than Solidarity).

Well, perhaps “victory” can be claimed by the septic boils on the arse of democracy that pass for political parties in Ukraine, however the legitimacy of far too many results are somewhat more questionable in such a cancerous political environment.

The CVU claim that despite there only being 40 elections held, they received qualitative information relating to voter bribery in 25 cases (and probably far more allegations of somewhat less verifiable occurrences).

The police have opened proceedings relating to at least 5 oblasts across the nation, and 3 cases of “caught in the act” voter bribery on polling day are among them.  The CVU claim 6 parties are certainly involved in voter bribery.  Perhaps then a dozen or so investigations will occur.

However, a reader will not expect anything much to happen regarding police investigations -and to be fair to the police, prosecutors and courts, the law is weak even if fully and evenly applied.  Can any reader ever once recall anybody going to jail or being heavily fined for voter bribery in the history of (independent) Ukraine?

Worse still, even if found guilty, how many readers believe that the guilty would be permanently expelled from the political party, (or working on its behalf), for whom the guilty were distorting and disfiguring democracy insofar as the electoral processes are concerned?

Putting the incidents of this election day to one side, the CVU was reporting voter bribery and coercion in the weeks prior to polling day.  Systemic schemes aimed at voter bribery.  As always in such a cancerous political environment, polling day is only part of the picture.

Looking past the presidential elections of March 2019 that are subject to a different electoral process to that of these most recent local elections, a reader will perhaps now have very low expectations for the integrity of the elections to the Verkhovna Rada in October 2019 – an electoral process with far more similarities to these latest local elections.

However, a reader can rightly point out that it takes two to tango.  For every successful bribe, there must be a briber and the bribed.

Coercion and threats aside, those who willing to freely sell their vote are also part of the problem are they not?

Of course, when looking at any candidate list in Ukraine many voters will view them as a metaphorical choice between removing their eyes with either a fork or a spoon – for either way, or whoever they vote for – they will not see a worthy candidate elected, for there isn’t one standing.  Why not get something now for electing anybody from a list of candidates who (each and every one) are unlikely to give them any political/social/economic return for their vote during their mandate?

For others in more desperate personal circumstances, a few hundred Hryvnia, a bottle of vodka, a sack of buckwheat, or a few kilos of vegetables or potatoes clearly matter more to them in the immediate future than which particular feckless, self-serving candidate they vote for.  Naturally the candidate offering the most immediate personal necessities has an attraction.

Prima facie the single mandate/first past the post electoral seats offer a very clear opportunity for such corruption.  However, a move to 100% proportional representation is very unlikely when so many of the President’s parliamentarians (about half) are single mandate/first past the post seat winners, vis a vis so many of Ms Tymoshenko’s being a result of proportional representation.

The deployment of LTOs and STOs for the purpose of monitoring the two major 2019 elections are highly unlikely to prevent or deter a return to the worst of electioneering misconduct – albeit it will be the parliamentary elections that will suffer the largest legitimacy crisis when it happens.

Following the 29th April local elections, there appears to be a rather grim outlook for 2019 and the democratic election processes.

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LCIA rules against the interests of Kolomoisky

April 28, 2018

According to the website of Naftfogaz Ukraine, on 27th April 2018, the London Court of International Arbitration (LCIA) has concluded that parts of a particularly biased Ukrnafta contract reached in 2010, significantly in favour of Ihor Kolomoisky (via his companies holding minority shares – Privat Group, Littop Enterprises Ltd, Bridgemont Ventures Ltd, Bordo Managament Ltd, Balliotti Enterprises Ltd, Renalda Investments Ltd) are “not enforceable”.

Mr Kolomoisky via various corporate vehicles controls approximately 43% of Ukrnafta shares.  The State 50 +1% of shares.

Nevertheless, the LCIA found that the contract as a whole was valid, despite some key provisions specifically relating to corporate management being “not subject to execution, as it contradicts the imperative norms of corporate legislation of Ukraine.”

According to Naftogaz, in particular the LCIA took a dim view of part of Article 9 within the contract – “part of Article 9 of the Share Agreement is not enforceable, which stipulates among other things that 6 members of the Supervisory Board of Ukrnafta are selected from among the candidates proposed by Naftogaz, while the Chairman of the Board of Ukrnafta and the other 5 members of the Supervisory Board of Ukrnafta are among the candidates proposed by the companies of I. Kolomoisky, which are minority shareholders of Ukrnafta. Article 9 also stipulates that the personal membership of the Ukrnafta Management Board should be approved by the Supervisory Board of Ukrnafta on the proposal of the Chairman of the Board.”

It was also contractually stated that for effective and binding decisions to occur, a minimum of 8 Board Members were required at a board meeting.

In short, the 2010 contract with which the LCIA took issue relates to the corporate governance of Ukrnafta, a Naftogaz subsidiary of which Mr Kolomoisky is a significant minority shareholder, and who effectively had control over the entire corporate management simply by controlling sufficient numbers of the Supervisory Board to prevent any and all management meetings occurring and making any legal decisions, by instructing those he controlled not to attend – ergo repeatedly insuring that the management quorum contractually required was not met.

Decisions therefore made only upon the terms of Mr Kolomoisky.

Such corporate management nonsense was not limited to Mr Kolomoisky, nor this particular Ukrnafta contract.  Such terms were actively pursued by the oligarchy with their minority stakes in numerous State owned enterprises.

In March 2015, Ukrainian statute was amended providing that simple majorities were sufficient to qualify as a legitimate quorum for management decisions.

Mr Kolomoisky therefore appealed to the LCIA in relation to this particular contract, presumably arguing that the amended Ukrainian statute of 2015, should not be applied retrospectively to the 2010 contract that effectively handed him control of Ukrnaft.

It is as a result of his appeal to the LCIA that this ruling has been reached – although it is perhaps a battle he expected to loose.  The battles within the Ukrnafta Boardroom however, are still there to be won (or perhaps better stated, not lost).

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From Half-life to the afterlife – Chernobyl and beyond (Extending reactor life spans)

April 26, 2018

The 26th April marks the 32nd anniversary of the infamous Chernobyl disaster in (what was then Soviet) Ukraine.

Nuclear power remains a necessity within the Ukrainian energy mix, and will do for the foreseeable future.  That is clearly not without risk, (Chernobyl legacy, crumbling and long ignored infrastructure aside), for there remains something of a dependence upon Russia with regard to fuel and its disposal – albeit Ukraine is trying to minimise/remove Russia from that supply chain for obvious geopolitical reasons.

Nevertheless, the current Ukrainian nuclear power infrastructure is hardly new, and neither is there the significant finance available to build and commission enough plants to take existing nuclear plants originally designed with a 30 year lifespan, off-line.

Currently the Ukrainian authorities are seeking to extend the lifespan of its somewhat aged nuclear power infrastructure – with Unit 3 of the Yuzhnoukrainsk NPP being a timely case in point.

This particular 950 MW pressurised water reactor (VVER V-320) became operational in 1989 with a 30 year design life.

That 30 year design life clearly expires during 2019, so the Ukrainian government is seeking to extend that lifespan by another 10 years subject (at least prima facie) to “safe Long-Term Operation” audits.  While the Ukrainian legislation requires a safety review every 10 years, wisely the government has requested that the International Atomic Energy Agency (IAEA) conduct a peer review of Unit 3 too.

That peer review took place between 11th and 25th April 2018, with the team consisting of experts from Argentina, Bulgaria, China, the Czech Republic, India, Sweden and two members of the IAEA central staff.

The IAEA report will be forwarded to the Ukrainian government and also be made public in about 3 months.  It is clear that the report will recommend Yuzhnoukrainsk NPP adequately preserve equipment qualification status, fully list structures, systems and components within LTO scope (and document the scope setting process), as well as fully implement any LTO implementation programme.  All to be expected.

Obviously the peer review is not only for peace of mind for those that govern Ukraine, but also for its neighbours – who all to vividly recall Chernobyl, and the international community more broadly.  In any worst case scenario, Ukraine will cite the peer review process as mitigation (on the proviso it implements all IAEA recommendations).

It also has to be noted that the IAEA peer review team came away with initial findings that will be circulated around the nuclear industry globally as “best practices” – The plant maintains a catalogue of operational defects in heat exchanging tubes for the VVER reactors.  Since its first operation, the NPP has catalogued safety indicators and failures – including those age related.  It also runs a comprehensive surveillance programme for irradiation embrittlement within the pressure vessel.

Whatever the case, absent a catastrophic IAEA report (which it will not be), the end result will be that Unit 3 will be included within the Ukrainian energy mix until 2029 – 10 years beyond its design life.  However, a decade is not a particularly long time if new reactor units are to replace those reaching – and clearly surpassing – their design lifespan.  To build a new one and connect it to the energy grid would probably take 5 years or more – this discounting the upstream design process.

The question therefore, is after kicking this particular rector can ten years into the future, what will the Ukrainian energy mix look like in 2029?  The plan cannot simply be to extend Unit 3’s lifespan by another decade, almost doubling its original design lifespan – or those of any other reactors with similar design lifespan horizons.

Assuredly there are significant increases in renewable energy across Ukraine that impact the energy mix – a reader need only look at major Chinese alternative/renewable energy projects (just in Odessa Oblast), as well as those of Rinat Akhmetov’s DTEK (and a further much expected large joint venture between them that will eventually manifest).  There are also smaller domestic and international players in the renewable energy market too (including one from the US).

Yet for all the welcome reform progress made within the energy sector, it is noticeable that, for example, such progress has not extended far into the gas and nuclear industries when in comparison to the electricity market or energy efficiency.

Income from the Ukrainian GTS will dramatically reduce, while perhaps incomes from its underground storage abilities may increase – as a recent entry explored.

The real question therefore, is how close is the Ukrainian government, and industry, to fulfilling any officially sanctioned energy mix plans for the next generation – particularly with regard to very expensive hard infrastructure, both in respect of new infrastructure and that which will have to be carefully and safely decomissioned?

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More less than favourable international PR for Mayor Trukhanov

April 25, 2018

Following on seamlessly from the last entry (of many) relating to the nefarious past of the Odessa Mayor, (use the blog search facility for “Minin”, “Angel”, “Zhukov”, “Lampochka”, or Trukhanov), the OCCRP has published a fairly good investigative report to further irk Gennady Trukhanov.

A reader is very much encouraged to look at the links within, from Italy circa 1998, and from the Home Office in 2016.

Much of it is common knowledge to those with a genuine/academic interest in organised crime and/or Ukraine, but for others those links will prove interesting.

 

However the OCCRP report also paints a somewhat unfair picture of Mayor Trukhanov.

It is in fact half the picture.

To provide a full picture, the point of this entry is to remind a reader that the OCCRP report covers only the network surrounding this group and (some of) its activities outside of Ukraine.  What happens within Ukraine, the personal connections and the corporate interests are almost entirely unmentioned.

Further ties surrounding who owns the building the Mayor lives in (Arcadia Palace – “Lampochka” Galanternik), or the Mayor’s neighbours within that building, for example Leonid Moldavsky and their shared ownership of local businesses both overtly and covertly using Mr Moldavsky/Central LLC (and others) as fronts – for ownership of G News/media etc), notwithstanding his relationship with companies such as “Growth” (Pост) and others that do well in “tenders”, or “Angel’s” other known business partners such as Ihor Uchitel and so on, the ease at which “Lampochka” (and others) navigate Odessa City Hall to remove obstacles for “investments” etc, are all obviously missing from the OCCRP picture.

Also missing are the numerous on-going scams and investigations there into.  To be blunt the blog does not cover them all either.  Why mention car parking rackets, when there is no attempt to try and hide brazen multi-million nefarious property schemes?

If we are to give the Mayor his due, then it is necessary to remember his schemes work both home and abroad.

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BBC Panorama – An uncomfortable watch for some, but then what?

April 23, 2018

The evening of 23rd April will host the airing of a BBC Panorama documentary delving into Ukrainian dirty money and organised crime.

It has been some months in the making – for the blog has been exchanging emails with the producer since the beginning of the year, as have other sources that will remain nameless (unless they name themselves).

Just how much information gleaned from the blog and provided by email and telephone will be used – or perhaps that which survives the edit and “BBC legal” remains to be seen (tonight for those readers in the UK).

Undoubtedly Odessa Mayor Trukhanov will feature, as will the activities of some nefarious individuals that surround him (or did, as nature starts to knock them off by natural causes).  Perhaps Messrs Alexander “Angel”Angert, Nikolai Fomichev (the former supposedly dead, and judging by the smoke in the criminal underworld of Odessa it seems likely, and the later certainly dead) will feature.  Mr Angert’s London based daughter (Anechka), “Lampochka” Galanternik, Alexander Zhukov, Leonid Moldavsky, Leonid Minin as well?  At the time of writing the blog doesn’t know.

Perhaps a VPN and iplayer will facilitate the blog viewing from outside the UK, then again perhaps not watching it would save the disappointment of knowing what could have been included but wasn’t.  It would also be interesting to see who was interviewed from the names suggested (and double checked by the BBC “fixer”).

No doubt close to £50 million or more in London property assets will fall under the spotlight – and to be fair the UK is definitely not the only place where the money was invested/laundered.

Boilerplate denials will be forthcoming from any and all involved in what was and remains organised criminality and corruption – for in some circumstances, investigations into several (some very obvious) criminality surrounding the Mayor are on-going.

However, it is the “what happens next?” question for Mayor Trukhanov in particular that will be interesting.

Naturally nobody (or very few) from Odessa will see it – and even if they did, for most it will not be news at all.

However, as those that have spoken with Mayor Trukhanov privately will confirm, he is mindful of his “international reputation” (obviously aware he can do little to undo a mix of decades of local knowledge, myth and legend).  One of his biggest issues with former-Governor Saakashvili was that Misha had no problem trashing Mayor Trukhanov’s reputation before any and all international audiences and visitors to Odessa.

Not only is it a problem for Gennady Trukhanov however.

President Poroshenko/The Bankova have long sought to renegotiate their initial deal with the Mayor from 2014/15.  With the passing of “Angel” Angert and perhaps less fearsome supporting partners now in Messrs Zhukov and Galanternik, both NABU and The Bankova (and “entrepreneurs” of dodgy repute) are in far stronger positions – now that the overblown “separatist” fears of The Bankova in 2014/15 regarding Odessa have now been fully recognised by Kyiv as being just that – overblown.  Thus allowing Mr Trukhanov to become Mayor in a way that excluded Kyiv interference in return for keeping his apparent separatist leanings (looking at the bias of his owned media outlets in 2013/14) under control is no longer essential.

How much international traction the Panorama documentary garners surrounding the Odessa Mayor may or may not change The Bankova calculations – and negotiations.  Certainly it would have been easy to have the (several) NABU investigations into the Mayor hang over him like a Sword of Damocles during 2018/19 and electioneering – not only for presidential and Verkhovna Rada elections, but also the elections for Mayor of Odessa are also due.

This is in part about Bankova control over administrative resources in case they need be used to tilt the electoral playing field, and in part about searching for a candidate that can replace and beat Gennady Trukhanov at the local polls.  (Delivering autocephaly for the Ukrainian Orthodox Church may mitigate any need for a major tilting of the playing field – and it appears evermore likely to happen than not.)

Until recently there was probably no notable candidate that would have Bankova backing, the personal finance for a reasonable local campaign, and also local recognition.

However, over the past few months, “Darth Vader” or Dmitry Golubov, a current Verkhovna Rada MP of the Poroshenko Block (although not party) has very much stepped into the limelight.  Mr Golubov was (and perhaps still is) on the FBI “Wanted” list for cyber-related crime.

He has bought a few local media outlets from other political figures over the past few years.  His fortune has rocketed due to owning a large amount of Bitcoin, and he was/is rumoured to be a potential buyer for Odessa Port Side if the “Firtash debts” can be “dealt with”.

He is fairly closely associated with Alexie Goncharenko (who sits highly within the Poroshenko party national parliamentary machinery) and who is deemed responsible for Mr Golubov getting elected.  Recently Mr Golubov stood personal guarantor for Mayor Trukhanov’s court release/bail, thus theoretically increasing Mr Goncharenko’s power within Odessa City Hall.

Mr Golubov is also on reasonable terms with the Ismail power family – the Urbansky’s – whom he advised to buy Bitcoin some years ago too.

Mr Golubov has begun to do frequent interviews in the media.  He is, unmistakably, raising his public profile in Odessa (and beyond).  Further Mr Golubov is not unknown to the circles of Mayor Trukhanov (either those now recently deceased or still with us).

The question therefore is whether Mr Golubov is raising his profile as never before (in fact it was almost anonymous when playing the political Darth Vader character) to seek Verkhovna Rada reelection as an independent, or whether it is to run as Mayor of Odessa (with perhaps both Bankova and Galanternik/Zhukov backing).

Perhaps part of the answer can be found with the FBI – for being a Verkhovna Rada parliamentarian brings with it absolute immunity (and impunity), whereas being a City Mayor does not.  Is he or is he not still wanted, or is there a sealed indictment somewhere awaiting an opportune moment – or more to the point does Mr Golubov believe there is?  As Mayor of Odessa would he travel outside the relative safety of Ukraine without parliamentary immunity (not that the blog is aware of him traveling outside of Ukraine at all)?  It would be expected of a Mayor to travel.

So, if the Panorama programme gathers international media (and other) traction to the point where Mayor Trukhanov tips the scales within The Bankova to where it then feels obliged to abandon him sooner rather than later for the sake of international PR – or not – remains to be seen.

Such a move would be unlikely unless there is another candidate with which the Bankova has struck a deal, and Mr Golubov is perhaps the only “suitable” local candidate who may be prepared to take on the role.

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Groisman – A (possible) political future

April 19, 2018

Over the past few weeks there have been stories (deliberately) floated and emanating from the presidential party and its orbit regarding the fact there is no requirement to attempt to dismiss Prime Minister Groisman.  A reader will well understand that in the usual perverse political parlance that “complete faith in…..” is code for the sack is about to come.

However, the Prime Minister, while originally deemed a “Poroshenko man”, since the summer of 2017 has been actively and publicly courted and flirted with by Interior Minister Arsen Avakov and former Prime Minister Arseniy Yatseniuk, whose current political party faces almost certain annihilation in the October 2019 Verkhovna Rada elections.

Meanwhile Prime Minister Groisman has been attempting to forge a public persona of being “his own man” and refusing to join any political party.  A position he reiterated on Ukrainian TV on 13th April – “I do not plan to join any political force, I told you that I am not a member of any political party and in my plans, for today, is not to enter one”.

Despite Mr Groisman consistently appearing in opinion polls for the office of President, he has continually stated he will not run for that office, thus breaking a fairly recent political tradition of sitting Prime Minister’s running for the presidency.  It is the opinion of the blog that he will be as good as his word and will not run – he knows very well this is not his time and that there are political points to be scored in not running.

To be blunt with a favourable presidential polling of approximately 4%, that figure will (perhaps) be of more interest to him regarding the Verkhovna Rada elections of October 2019, and the choices he faces there.

It is probably beyond doubt that Mr Groisman would be elected to the Verkhovna Rada having been a very popular Mayor in Vinnytsia.  He need simply stand for one of the majoritarian/first past the post seats in Vinnytsia – whether as a member of a political party or as an independent – and can expect to be elected without any need for shenanigans.

His 4% polling in a presidential election he will not stand in, perhaps does help regarding any plans he may have to enter as head of his own political party – casting aside any pressure from the Poroshenko team and also the Avakov/Yatseniuk courtship.

Even if that figure did not translate to the minimum 5% threshold for political party proportional representation, a gathering of popular majoritarian/single mandate MPs under his flag could still insure a vital voting platform for what will probably be a particularly fragmented Verkhovna Rada post October 2019.

There would probably be 15 or so safe majoritarian MPs who will happy to rally to the Groisman flag, and any successful step over the 5% proportional representation threshold would provide a new party of some influence when fractious coalitions will have to be made of more than the current 2 parties.  Ukraine may be facing a coalition requirement of 4 or more parties post 2019 – and all the instability and in-fighting that will bring.

All of the above is not something that appears to have escaped the notice of Speaker Paruby, who would currently seem to be getting closer and closer to Mr Groisman.

So what to watch for?

With Igor Kononenko, the presidential leg-breaker in the Verkhovna Rada now seemingly charged with “looking after the presidential circle business interests” rather than political matters, it appears that Irina Lutsenko (wife of the Prosecutor General Yuri Lutensko, a man who is clearly now very keen to re-enter politics officially, while unofficially having never left despite his supposed a-political civil service position) will gather in many of the MPs once considered to be in the Kononenko orbit.

Post October 2019, there is no way that the presidential party will retain the number of MPs it currently has – half of which are majoritarian/first past the post parliamentarians, the other half being “party list” parliamentarians.  As already stated the Yatseniuk/Avakov party will be obliterated at the ballot box.

There will be a number of MPs therefore that simply require finding another political home to stand any chance of being returned.

Despite the usual political prostitution of “parliamentarians” when it comes to swapping parties, Ms Tymoshenko is also not going to be able (and in some cases willing) to accommodate them all either – for her party’s polling figures are currently not strong enough to accommodate them either.

Who else will recognise, as Speaker Paruby seemingly has, that Mr Groisman is as likely, if not more likely to create his own party after the presidential elections than he is to join one, remains to be seen.

Thus, although there are other “orbits” within the coalition and within the coalition parties themselves (Gonchaernko etc) it is perhaps wise to watch coalition politicians begin to coalesce primarily around either Mrs Lutsenko or the Prime Minister (and perhaps the Speaker if an alliance be joined).

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Containers and Concessions (Chernomorsk Port)

April 18, 2018

It is widely expected that Hutchinson Ports will build/lease/refurbish a number of terminals at Chernomorsk (Illichovsk to older readers) Port as and when it wins a tender in late May/early June.  The company headquartered in Hong Kong already operates 52 high-tech terminals across 26 nations and is one of the world’s biggest freight/cargo handling companies, handling about 13% of the global market.

It is widely expected to win the forthcoming tender because it makes no secret of its desire to have a Black Sea terminal, or of its involvement in the forthcoming tender.

Being Hong Kong based, it is no surprise that facilitating Chinese exports and imports are a major part of the corporate business, with routes to the EU via its major port hubs in Rotterdam (ECT Delta – an almost entirely automated port) and Barcelona (Euromax – a semi automated port).  Naturally if (or in reality when) it wins the Chernomorsk tender, a third major route for Chinese exports/imports will open up for Ukraine and the southern EU States.

Any which way this arrival is shaken, to either semi, or entirely automate their leased berths at Chernomorsk Port will require significant investment, for each individual European Hutchinson run port dwarfs the number of containers handled compared to the entirety handled by Ukraine.

However, the investment plan submitted by Hutchinson does not seek to match that container handling capability in Ukraine – presumably due to the fact there there are only 6 berths for lease.  It is however, projecting a handling turnover that will add approximately 30% to the national port container handling figures (Hutchinson expect to handle 250,000 containers per annum at the Chernomorsk berths.)

The investment plan over the 49 year lease requires $5 – $10 million investment – excluding investment spent upon berthing infrastructure, capacities and equipment in the first 5 years – and a total investment over the 49 year lease of $75 million.

Jolly good.  The white economy of Odessa will undoubtedly benefit.

However a reader should note that both their ECT Delta and Euromax terminals within the EU received concessions – and the current Ukrainian concession legislation is about to change – or not.

The first reading relating to concessions passed through the Verkhovna Rada some time ago.  Since then it has not seen a sniff of appearing upon the Verkhovna Rada voting agenda for the required second reading.

The draft concessions related legislation seeks to energise FDI – in other words it is designed to provide predictable and solid conditions to create PPP (Public-Private Partnerships).  In the simplest of terms, The State attracts foreign investors to upgrade/refurbish/create or restore long ignored, underfunded and otherwise decaying infrastructure in return for lengthy leases and the corporate ability to use the leased objects/property for (presumably significant, otherwise why get involved as a private investor/corporation) commercial gain.  The lease periods are often so long that the incoming investment would have long since depreciated from the balance sheets of any investor prior to their conclusion.

To be fair, it is a European normative.  For example, between 1990 and 2009 when Hutchinson entered Rotterdam and latterly Barcelona, concession led PPP initiatives across the EU totaled approximately Euro 260 Billion.  Ukraine would be very prudent to follow that tried and tested formula.

Wisely the draft legislation relating to concessions has rather a broad scope regarding legal input – and this is perhaps why there is a delay in the second reading.  Input is not confined to a nefarious and/or often ignorant Ukrainian political class (and their associated corporate/business interests).  Input includes entities like the EIB, EBRD, IBRD etc.  No doubt there is the usual friction between transparency and objectivity when selecting those receiving concessions from the “external side” when it comes to this legal input, and exactly the opposite from the domestic political class intent upon retaining their vested interests.

Ergo it should come as no surprise that currently within the draft text, there are few lines demanding any concessionaire operates from a legal entity in Ukraine (unlike now).  A domestic opportunity to “squeeze” if transparency and objectivity wins out.  That said the draft Bill also provides for arbitration and mediation within a jurisdiction of choice – which in the current climate will invariably not be Ukraine.  (Naturally the draft legislation states that any nation identified as an “aggressor” (read Russia), or company thereof, or company with shareholders thereof, are forbidden from receiving concessions.)

Furthermore private companies will also be able to offer concessions.  It will not remain solely within the State remit.  That in effect will remove the requirement for public tenders allowing for direct negotiations between private companies.

There is of course much, much more – and the devil is always found within the detail, however to be blunt most foreign corporations/investors seeking concessions are going to be looking at major infrastructure – roads, rail, airports, shipping ports, recycling plants, energy, and pharma – so there is little reason to bore a reader with the minutiae of the draft text (which may well change before a second reading in the Verkhovna Rada – if that eventually comes).

In the context of this entry, what matters is the timing of the second and final reading of this draft Bill.

Will the absence of the new concessions law have any major impact upon, if not the Hutchinson lease acquisition, then the timing of the actual investment?  What deals have been cut to allow Hutchinson to otherwise ignore a law that would probably be beneficial to it?  If Europe be any guide, having secured concessions in The Netherlands and Spain, Hutchinson will surely be expecting the same in Ukraine.

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