Archive for the ‘gas’ Category


Treading on the toes of Angels – Odessa machinations

December 26, 2016

The name Alexander Angert also know as Angel to use his mafia name, has appeared in this blog numerous times (a reader may use the search facility if particularly interested).  How could it not?  His links with Mayor Trukhanov and Alexander Zhukov (father of Daria, the current Mrs Roman Abramovich) among others of notoriety and the numerous joint and associated business enterprises that do well out of City Hall and Ukraine more broadly, demand that every now and again his name is mentioned.

Indeed Mr Angert was mentioned so often by Yuri Lutsenko when he was Minister of Interior in the Tymoshenko government it would be difficult to have seen him as anything other than a personal nemesis.  (A reader may ponder why he no longer mentions it now he is Prosecutor General).  Misha Saakashvili as Governor was also not adverse to throwing Mr Angert’s name about when it came to the organised criminality in Odessa.

Mr Angert no longer lives in Odessa – but he does visit when the situation is serious enough to demand he personal participation in a “negotiation”.  His last know place of abode (for many years) is London.  Indeed if asking the personal assistant of Mr Zhukov who also lives in London, messages can apparently reach Mr Angert through that channel.  (It seems that via this route Leonid Minin can be reached in Rome too).

The full extent of Mr Angert’s (business) interests is very difficult to gauge.  In some cases his control is “unofficial”.  Others there are clearly cut outs who are known associates.  There are overtly known long term business partners like Igor Uchitel.  There are even one or two business where Mr Angert’s name actually appears.  Thus quite where all the metaphorical and literal bodies are buried is unknown – but there are definitely both metaphorical and literal bodies buried.

Perhaps the best way to identify the assets controlled by Mr Angert are those in Odessa that were left alone by Viktor Yanukovych and “The Family” from 2010 to 2014.  Former President Yanukovych did indeed meet with Mr Angert in Odessa and whatever was said between them seemingly saved Mr Angert’s interests from the attentions of “The Family” – or perhaps saved “The Family” from a slighted and vengeful “Angel”.


Of the businesses that are transparently associated with Mr Angert, one is Odessagaz.  It is co-owned by Messrs Angert and Uchitel and has been for decades.  Neither oligarchs such as Firtash or Kolomoisky and not former President Yanukovych have ever made an attempt upon Odessagaz, nor interfered as they have with other regional and national gas companies.

Clearly tangling with those behind Odessagaz was not worth the blood and treasure – even for such odious, nefarious and powerful men.

Any regular reader is well aware of the frequent mention of the business appetites (by hook but mostly crook) of Igor Kononenko, President Poroshenko’s long term friend, occasional business partner and parliamentary “leg breaker”.  He is, to be blunt, as bad as they come when it comes to scams, schemes, and coercion.  His current appetites and methodology as to feeding them have hardly gone unnoticed – neither has the completely absent desire of President Poroshenko to rein them in.

It would appear however that Mr Kononenko is about to go not only where angels and oligarchs fear to tread, but indeed is about to stand on Angel’s toes.

Mr Angert, or more precisely Odessagaz, for many, many years has been trying to bring about the insolvency of Odessa CHP (thermal power plant).  Bankruptcy petitions have been made and various internal nefarious financial acts have been “encouraged” of the employees within Odessa CHP by Odessagaz (Mr Angert).  The net result was to engineer the bankruptcy of Odessa CHP beholding of large debts to Odessagaz who would then take Odessa CHP as debt settlement.

Recently however, that plan has quickly been undone via the purchasing of a significant quantity of Odessa CHP debts by Energomerezha.  This company is controlled by the brothers Surkis who are in turn puppets of Igor Kononenko.  In buying up those debts Energomerezha has therefore taken control of Odessa CHP financials that can either prevent Odessa CHP bankruptcy or assume the role of leading creditor thus undoing the plans of Odessagaz (Mr Angert).

In short when Energomerezha decides to allow Odessa CHP to go bankrupt at a time of its chosing it would be the largest creditor with a claim to taking control of the asset as settlement.  Thus that can be expected when all the ducks are lined up to insure the loser would be Odessagaz – and by extension Mr Angert.

(In the meantime as usual there is a scam whereby an agreement has been reached between Odessa CHP and Energomerezha that enables Energomerezha (read the brothers Surkis and Igor Kononenko) to clear UAH 1000 in profit for every thousand cubic meters of gas).

Quite how this situation will play out remains to be seen when even the appetites of Yanukovych, Kolomoisky and Firtash left the machinations of Angel well alone in Odessa.

Perhaps Messrs Kononenko and Angert will come to an agreement amicably.


Or perhaps there will be made an offer than cannot be refused.


Kremlin offers gas at $180 – Ukraine signs a deal with Engie (France)

October 28, 2016

Following President Putin’s very predictable monologue at the Valdai gathering, that day he also made a statement regarding Russian gas prices for Ukraine, should Ukraine decide to buy Russian gas once again.

Nowadays, the price of Ukraine won’t be higher than that for the neighboring states, namely for Poland. I’m not aware of actual prices, but at the moment of our conversation with Ukrainian President Petro Poroshenko, Poland was buying gas at $184-185 per 1,000 cubic meters on contractual terms. We could sell [gas] to Ukraine at $180. I named the price – $180 per 1,000 cubic meters.

We have discussed the issue of gas shipments to Ukraine with the president of Ukraine at his initiative. He asked whether Russia could resume the shipments. Certainly, it could, at any second. Nothing additional is needed – we’ve got a contract and an addenda to it. The only thing required is prepayment.

As far as I know, the price of gas for the ultimate industrial consumer in Ukraine already exceeds $300 per 1,000 cubic meters. We offer a price of $180, but they don’t want to buy from us yet.

Let it be – let them work. The main thing is that they could ensure transit supplies to European countries.

(He also commented upon the “illegalities” of Ukraine buying from western sources “which is a violation of a contract between Gazprom and its western counteragents” and to which Russia “had turned a blind eye.” and inferred to a return of  dubious”middle men” between Ukraine and western suppliers.)



At the same time, Prime Minister Groisman was in France.

During this visit a deal was signed with French energy company Engie regarding supply and the reservation of transport and underground storage facilities operated by UkrTransGaz in Ukraine – the deal commencing this winter.

Since mid-2015 Engie has become a major supplier of gas to Ukraine, predominantly via Naftogaz, delivering approximately 3.5 billion cubic meters of gas.  Indeed Engie intends to open a subsidiary in Ukraine.

Thus far, despite quite significant legislative changes in the Ukrainian energy sector to bring it toward EU Third Energy Package compliance and Association Agreement obligations, the Ukrainian energy market has remained impenetrable to external market players.

The proposed privatisation of Centroenergo in 2017, whilst certainly of interest to dubious Ukrainians such as Igor Kononenko (who seems to be filling key positions within the company with “his people”), presents the best and swiftest opportunity for the energy market to receive a competent foreign entrant assuming control and ownership of assets and production in Ukraine – which will cause waves in the corrupt and opaque trough of Ukrainian energy from which no self-respecting oligarch fails to drink one way or another.

Clearly the Engie subsidiary, unless it becomes more than an “on-site” import management entity requires little investment and negligible risk – unlike the purchase of Centroenergo.

Nevertheless, there is a certain degree of symbolism to the French Engie opening a subsidiary in Ukraine which a reader can expect will be embellished for the purposes of political expediency.  Much more to the point however, is a clear move in the direction of a consolidated and irreversible diversification of energy supply for Ukraine.


Not a question of “why” but “who benefits” – Ukrtransgaz

September 17, 2016

It is no surprise to anybody that Ukraine takes two steps forward and one step backwards having opted for evolutionary rather than revolutionary reform.

Evolutionary by its very definition is a statement of change over time.  Evolutionary also manages to allow for grubby, if perhaps occasionally necessary, deals with those that once held power and/or significant control over the national economy.  Such deals theoretically (and empirically globally) set about the reduction of influence of old elites insuring that they and their patriarchy systems decide not to try and return to power and roll back to old methods in return for avoiding their otherwise deserved comeuppance – or at least the full force of justice.

That thinking perhaps works if the new leaders that come to power, recognising that this option is preferable to other radical and perhaps more risky options presented, are not products of the old system but are unsullied.

The “Revolution of Dignity” offered no such unsullied leaders to Ukraine in its immediate aftermath.  The presidential elections of 2015 essentially offered a choice between Mr Poroshenko and Ms Tymoshenko.  Mr Poroshenko won, which considering the choice facing the nation was the best possible outcome.  Ms Tymoshenko was, is and will forever be a political disaster for Ukraine should she ever hold the office of President, or become Prime Minister again.

Nevertheless, President Poroshenko is far from unsullied and is not a leader.  He is a manager that believes he can do deals with everybody keeping the elite more or less equally (un)happy, which whilst significantly slowing any reform progress, doesn’t actually stop it entirely – and to stop it entirely is simply politically impossible for reasons internal and external of Ukraine.

During the YES conference in Kyiv 16th/17th September, whilst President Poroshenko, Prime Minister Groisman, Prosecutor General Lutsenko and other senior political and institutional figures predictably put a veneer upon reform progress.

To be fair there have been a few reforms that are on balance probably irreversible, albeit most are certainly not irreversible, many are half completed, the majority poorly implemented or otherwise exist on legislative paper but are de facto all form and no tangible substance.

With so many intellectuals, lobbyists, journalists, opinion-shapers, policymakers and otherwise erudite and wise people gathered at the YES conference in Kyiv, a reader may ponder therefore why this time was chosen for an undoubtedly retarded and backward step within the halls of power.


Contrary to agreement with the EBRD, perhaps inadmissible to Ukraine’s obligations to the EU’s 3rd Energy Package (which requires the “unbundling” of energy monopolies), flying in the face of understandings given to the US regarding Ukrainian energy and the font of corruption that it is, Ukrtransgaz was quietly moved from within the Natfogaz empire and transferred to the control of the Ministry of Economic Development for no apparent or justifiable reason.

This despite agreed plans about how to “unbundle” Naftogaz Ukraine with the EBRD prior to the EBRD jumping in to assist Naftogaz to the tune of $300 million.

Clearly the EBRD has expressed its displeasure publicly, and during the YES conference, calling for this retarded decision to be reversed post haste.

Further it jeopardises a World Bank $500 million loan to Naftogaz too.

Naturally given the YES conference circumstance, it does not put President Poroshenko, PM Groisman et al in a particularly good or comfortable light – whether they had any involvement or prior knowledge of the incident or not.

Unsurprisingly it does little for investor confidence if the Ukrainian State breaks its agreements with a major, frequent and reliable inward international investor – particularly when that investor is in the same YES conference room in Kyiv as a leadership telling the world that this government and executive can be trusted to meet its obligations.

In short, whatever decisions are made regarding Naftogaz, Ukrtransgaz etc., they necessarily have to be consistent with existing agreements.

Was such a retarded decision/action timed to deliberately project a poor image of the current leadership?

If complicit, did the current leadership expect the YES conference media noise to drown out or ignore a planned nefarious act?  On balance was it considered a good weekend to bury nefarious news?  If so it failed.

That Ukrtransgaz would be split from Natfogaz to meet the Ukrainian obligations to the 3rd Energy Package is an absolute requirement.  Resolution 496 of the Cabinet of Ministers dated 1st July 2016 clearly plans for this eventuality.  That Resolution calls for the Public Joint Stock Company “Main Pipelines of Ukraine” to be created under the management (temporary or otherwise) of the Ministry of Energy and Coal.  In summary the substance of that Resolution moves Uktransgaz from Naftogaz, renames it – or transfers the assets to be more accurate – to PJSC Main Pipelines of Ukraine which will operate under the Energy and Coal Ministry (at least initially).

This is all to have occurred within 30 days after a currently pending Gazprom v Naftogaz arbitration in Stockholm – but no asset transfer is to occur prior.

Does this decision affect the arbitration process in Stockholm in any way?  If so how?  To the benefit of Gazprom?

Without going too deeply into Resolutions and plans – suffice to say there are publicly available Resolutions and plans about how Ukrtransgaz was to be dealt with as declared by the Cabinet of Ministers – none of which caused angst or ire of the EBRD when published (or since).

It follows that with the current nonsense surrounding Ukrtransgaz, a reader is therefore asking “Why”?

A good question, but perhaps not entirely the right question of “Who”?  Or more precisely “Who benefits?”.

Whenever there is a retarded and backward policy step in Ukraine, the first question that should always be asked before any other is “Who benefits?”.  The next question is then “Why (this way from several possible ways was chosen)?

Recognising that the Ukrtransgaz issue will be resolved to the liking of the EBRD and to try and reduce reputational damage to President Poroshenko, PM Groisman etc., the full question is “who benefits from the fairly short window of opaqueness and unaccountable management decisions in and surrounding Ukrtransgaz during this time?”

For who exactly benefits from what damage can be done/what gains can be made during this time?  Cancelled tenders, or alternatively swiftly awarded tenders will ultimately come to light as will any asset sales, acquisitions, or theft.  The EBRD is not a complainant that the PGO or NABU can ignore when its contractual agreement is with the Ukrainian State.

As yet it is not entirely clear who specifically benefits – but somebody does for such a retarded act to have occurred.  Sooner rather than later it will become clear who benefits (and who clearly believes that any repercussions will be acceptable – as nobody within the elite goes to jail).

In the meantime sadly, as the incompetence of a mere breakdown of communication is rather unlikely, a reader is left to choose between either yet more dirty deeds within the current ruling elite (or at least some of them), and/or a complete lack of government control, or a brazen breach of its obligations.


Firtash/Ostchem repays UAH 3 billion to Naftogaz

December 26, 2015

According to Prime Minister Yatseniuk, Dmitry Firtash, or more precisely one of his companies, Ostchem, has paid a due debt from 2010 of UAH 3 billion.

Jolly good.

A bad debt that should not have been written off – and wasn’t – has been paid, and in full.

That it took the arrest of some of Mr Firtash’s assets in Ukraine to accomplish it was no doubt necessary.  Presumably those assets are no longer subject to arrest now that the debt has been paid – or at least those assets arrested specifically in connection with this particular debt have presumably been released.


A particularly robust and forceful method of credit control and debt recovery has seemingly paid off – Bravo.

However, Prime Minister Yatseniuk is attempting to frame the matter as part of the deoligarchisation of Ukraine and part of the fight against corruption.

Quite how the recovery of a bad debt contributes to the deoligarchisation of Ukraine is somewhat unclear.

The percentage of national GDP controlled by the oligarchy has not reduced due to the repayment of this debt.  The percentage of national employment within oligarch controlled companies has not reduced by the payment of this debt.  The political influence and interference within national politics has not reduced with the payment of this debt.  The “limited access” Ukrainian market place has not become a “free market” with the payment of this debt.

Indeed with the payment of this debt, presuming all arrested assets specifically arrested in connection with this debt will/should now lawfully be returned to the control of Mr Firtash.  Those arrested assets therefore returning to oligarchical control.

There is no denying that the oligarchy have for decades gorged at the public trough through subsidies, recapitalisation of state enterprises in which they hold minority shares, and through bad debt write-offs for debts they created and never intended to pay (knowing there would be State funded recapitilisation and bad debt write-offs).

To be charitable, at a stretch it can be argued that because this debt was not written off (as historically would be the norm), it is a token (and perhaps genuine) gesture toward fighting corruption – against an oligarch that finds himself marooned in Austria due to US desires to subject him to due process over other alleged corrupt activities.

Quite what corruption this has fought (is failing to pay a debt corruption?) and whether the signal it sends will prevent any further corruption amongst the oligarchy or any of the Ukrainian elite remains to be seen.  It is even less clear how Mr Firtash’s Ostchem repaying the debt to release Firtash assets back to his control in any way “deoligarchs” Ukraine.

It is hard to see this as anything more than simply hard-nosed credit control and debt collection of legitimate debt (leaving aside any possible/probable perceived political motivation/persecution, for the debt was indeed due regardless).

To deoligarch Ukraine requires an open free market with numerous competing entities in every market sector, market transparency, a level business and legal playing field – thus ultimately reducing the oligarchy percentage of GDP and national employment to a point where they are simply no longer dominant – but there is no requirement that they be necessarily destroyed for the sake of destruction and remove them from the market place.  It also requires an end to subsidies of State owned companies – indeed it requires the privatising of State owned companies to as many foreign buyers (not shells or fronts) as possible simply to diversify and dilute the national GDP contributers.  Deoligarchisation also requires restrictions upon their odious interference and influence within politics.  Has any of that been accomplished by Ostchem paying a UAH 3 billion debt?

However, deoligarchisation aside, will Naftogaz now go after the other UAH billions that it is owed by numerous other debtors with the same vigorous credit control/debt recovery determination  shown when dealing with Ostchem and Mr Firtash?  Many of those debtors are not oligarch owned entities – but are debtors nonetheless.


Effective implementation? Something of a fail (again)

December 3, 2015

According to Naftogaz Ukraine, with effect from 1st January 2016, some 280,000 Ukrainian homes may be without gas.

This is not due to the Kremlin turning off the gas tap – indeed Ukraine is not buying any Russian gas presently, and it is claimed it has no need to do so for the remainder of the year.

The reason for the gas being cut from these homes relates Ukrainian law and its implementation – or lack of it.

It is not an issue that can be blamed upon Naftogaz Ukraine either – for it is not responsible for the creation and passing of the law, nor is it responsible for the implementation of the law.

It so happens that fairly recent changes in legislation relating to gas supply, specifically for those using gas in the heating of water, required the fitting of individual gas meters in all such Ukrainian homes – a necessary step toward energy efficiency and transparency for customers regarding their gas bills undoubtedly.  The law stated all homes using gas to heat water were to be fitted with gas meters by 31st December 2015.

Thus from 1st January 2016 the inference is that those who are not in compliance with the law will have their gas service terminated – presumably until the relevant meters are fitted and they are in legal compliance.


According to Naftogaz Ukraine, thus far only 75% of the homes that meet the requirements for mandatory gas meters have had them fitted – meaning approximately 280,000 homes are likely to fall foul of the law with effect from New Years Day.

The relevant gas meters are fitted for free by the relevant local/regional gas suppliers, to whom Naftogaz Ukraine supply gas.  Naftogaz Ukraine has no direct contact, contract, or access with end customers.  Naftogaz Ukraine simply supplies gas to the relevant Oblast suppliers that deal with and bill customers.

It is therefore those local/regional suppliers that have failed to fit the required gas meters within the alloted time, that will be turning off the gas to the dwellings they have yet to fit the relevant meters within.

The questions therefore raised are firstly who is responsible for dwellings failing to comply with the law with effect from 1st January 2016, and secondly will the gas be turned off for these unmetered dwellings in compliance with the law, or will the law be broken and temporarily ignored in recognition of (another) implementation failure?

The finger pointing, whichever decision be made, will naturally begin very shortly.  Yet in apportioning responsibility, the problem may lie with either an unrealistic implementation time frame within the law passed, or ineffective implementation by the regional gas supplying companies – or both.

In the meantime, perhaps a formal and legal deadline extension based upon realistic installation completion dates should be made either by Decree or legislative amendment to insure nobody breaks the law unnecessarily?

Once the finger pointing is over however, one wonders whether any lessons will be learned from what will have been a fairly large undertaking, when it comes to national implementation of policy that manifested itself in a very tangible form.  Those lessons, be they learned, would perhaps benefit future energy efficiency implementation projects be they either regional or national in scale.


Naftogaz loses its monopoly (at last) – Ukraine

October 1, 2015

Legally, with effect from 1st October 2015, the opaque, budget burdening behemoth that is Naftogaz Ukrainy loses it monopoly within the Ukrainian gas market – and not before time.

So many are the entries within the blog going back many years calling for the butchering of this monopolistic monstrosity that there are simply too many to link to.  However an entry last year raised the question (again) over the restructuring of Naftogaz Ukrainy vis a vis bankrupting it, and starting again with an entirely new structure that falls squarely within Ukrainian obligations to the EU Third Energy Package.

“Unbundling the gas transport system from the gas production and the end user network is perhaps one way to restructure Naftogaz. In doing so, it may eventually come to light as to just how this massively opaque behemoth actually manages to lose so much money every year – and when Naftogaz deficits can run at anywhere between 3.3% – 7% of GDP per annum, questions really do need to be asked about firstly how they are actually accrued, and secondly why successive governments continue to finance a structure that is simply a lead weight upon any annual budget?

So big, cumbersome, opaque and costly is Naftogaz to the nation, it appears to have become too big not to fail if Ukraine is to survive economically in the current circumstances – and as the saying goes, “never waste a good crisis”.

Therefore, is restructuring Naftogaz a better option than making the most of the current crisis, and taking the opportunity to declare Naftogaz bankrupt – and then restructuring the hard assets into entities that would fall neatly within the EU 3rd Energy Package, whether those entities be entirely or partly State controlled, or indeed privitised entirely?

It could, of course, be incredibly messy. Does anybody actually know who owes what to Naftogaz, or who Naftogaz owes within its opaque internal structures? How many entities have contracts with Naftogaz? Dozens? Hundreds? Thousands? Who are they, What are they?

Naftogaz is now so big, opaque, unwieldy and economically unbearable, restructuring is an absolute requirement. The question presented to any new leadership is therefore whether partial dismantlement or complete obliteration of this behemoth will be the answer they arrive at.”

So where to go from here when 1st October marks a very significant legislative date regarding Ukrainian energy?

Theoretically and legislatively the liberalisation of the energy sector has now begun.  No longer will the State be able to control either prices or allocation.  The corruption that accompanied such practices will face difficulties going forward as long as new entrants step forward and regulators prevent cartels.  Certainly the corruption that occurred via arbitrage and the capping of domestic production via pricing look set to face challenges.


Market based prices will lead to energy efficiency rather than the wanton waste that currently exists.  Market based prices rely upon ending subsidies, bad debt write offs and endless recapitilisation to Naftogaz Ukrainy in order to create an open and free market – and not before time.

Naftogaz Ukrainy is Ukraine’s largest vertically integrated state-owned oil and gas producer, whose companies provide for more than 97% of domestic production of oil and gas.  Naftogaz Ukrainy is engaged in mining, oil and gas extraction, transportation and sale of petroleum products through its own network of filling stations.  Some clear and obvious dismemberment presents itself that would serve to fulfill the Ukrainian obligations to the EU’s Third Energy Package.

Firstly there is no alternative to separating the transit companies within Naftogaz Ukrainy from the rest of its subsidiaries.  Thus Ukrtransnefta (oil pipelines) and Ukrtransgaz (gas transit) legislatively and corporately are required to stand alone, no longer subservient nor part of Naftogaz Ukrainy, and legislatively proscribed to allow guaranteed transparent and equal access to their transport systems for all market players.  If the government of Ukraine continues to believe that the transit systems are jewels in the State crown and not to be sold, then it will be necessary to create an independent operator per the Third Energy Package.

Alternatively, the government of Ukraine should privatise these entities (which seems unlikely given the deep-seated belief within the political elite that the transit systems are a matter of national security).

Clearly the petrol stations owned by Naftogaz Ukrainy can and should be sold of – as should the trading subsidiaries of Naftogaz Ukrainy.

Is there any need to have a State gas producer having opened the gas market?  Probably not, so the privatisation of subsidiaries such as Ukrgazvydobuvannia (which would undoubtedly sell for many $ billions in and of itself) would be entirely in line with butchering this State monster.  A similar line is desirable within the oil subsidiaries of the Naftogaz Ukrainy.

However, as yesterday’s entry made clear, selling minority shares in these entities is not enough – in fact it could well be a backward step – “Quite simply, aside from other sovereign governments, or those eilite large companies with close relationships and direct channels within their governments, who is going to buy a minority share in entities that will be at the directional whim of the Ukrainian government of the day?

The answer is only those that can directly influence the Ukrainian government of the day – and that remains the existing oligarchy!

As foreign governments and large foreign corporations are not likely to be excited about buying minority shares ranging from 5% to 46% in Ukrainian State owned companies with the major shareholder (Government of Ukraine) being historically either unpredictable or predatory or both (and there is nothing to suppose that cannot return with any election) it seems likely that only an oligarchy that already influences the government will have any serious interest in buying minority shares in State owned enterprises.

After all, holding minority shares in State owned enterprises is nothing new for the oligarchy – and neither is using their influence within the Verkhovna Rada to insure that their interests overrule the interests of the State majority shareholder.”

At the very least, if the State is intent on retaining shares in any of the severed and dismembered parts of Natfogaz Ukrainy, then the State should hold a (significantly) minority share.

Of course, if Ukraine does not provide the right tax stimuli for producers and effective recourse for suppliers when buyers will not/cannot pay, then a legislative end to the Naftogaz Ukrainy monopoly is not going to create an active and vibrant Ukrainian energy market – de facto the monopoly will continue due to lack of competition.

“On October 1, the Law of Ukraine on the gas market will come into force, and it will radically change the system of coordinates and the gas market itself. Naftogaz Ukrainy will lose its monopoly both for the supplies and the sale of natural gas. In fact, we are building a fully European non-monopolized system of the natural gas market, when the supplier may personally determine to whom and where to sell, and when the buyer may personally decide from whom he wishes to buy” – Prime Minister Yatseniuk.

Let’s hope he is proven to be correct, if it is to be so then there are many necessary privatisation and taxation issues to be addressed to support any new market – together with statute guaranteeing any market entrant use of State retained transport systems.


Energy – Who’s responsible?

September 16, 2015

Following on from the last entry relating to the energy sector and subsidising corruption, comes this statement – “The government doesn’t control the situation in the energy sector… The reason for that might be an objective one, but it’s more of a subjective plan – six orders of the Prime Minister and four of my orders to the Energy Minister remained unanswered properly.” – Deputy Prime Minister Valeriy Voschevsky.


He went on to say “the reason for the situation was the economy being controlled from two centers simultaneously – the president’s and the prime minister’s.”

To be blunt, nobody would be surprised – the harmonious and seamless workings of the office of president and that of prime minister/cabinet of ministers is as rare as rocking horse sh*t in Ukraine.  The inability to remain within the constitutional boundaries offered to certain office has been a recurring historical issue within Ukrainian governance at the very top – and these are exceptional times in Ukraine unlikely to stop the historical trend.

Constitutionally, the president, aside from specific political appointments and dismissals, in broad policy brush strokes is responsible for foreign policy, defence and upholding the constitution.  Everything else, using equally broad brush strokes, is the responsibility of the government.

Ergo energy is the responsibility of the energy ministry, the cabinet of ministers, and ultimately the prime minister according to the allocation of power by the constitution.

Except – is not energy and energy security also a foreign policy and defence policy issue too?

Which nations these days do not consider energy security as a national security issue?

As it is certainly a national security issue for Ukraine, it therefore falls within the presidential remit.  Thus the presidential administration, particularly in the current circumstances Ukraine finds itself, can make a legitimate claim to involvement within the energy sector of Ukraine without any legislative/power overreach any otherwise would-be justification for overstepping constitutional boundaries perhaps would have needed.

Nevertheless, energy policy also remains a governmental responsibility according to the legislation too.

Therefore the two branches of political power both have legitimate and constitutional rights to be meddling with energy policy, and viewing it through slightly different lenses too.  Is it therefore any wonder that control has been lost?  Into that chaos (or perhaps void) assuredly further corruption, inefficiency and oligarchical interests will seep.

If the oligarchy are to be confronted, and at the very least legitimate limits placed upon their drinking from the currently corrupt energy font, then such actions are more easily taken whilst the oligarchy are currently weakened.  They will not remain weak for long unless major reforms are taken soon.

How easily any reforms can be implemented with two different centers of power meddling within the same ministry and tinkering within the same policy domain remains to be seen.  A dreamy two-step or two left feet?


Ukrainian Oil & Gas to get international management?

March 30, 2015

After all the unnecessarily public shenanigans that played out last week between the majority and minority shareholders of Ukrnafta – the State and Igor Kolomoiski – and other potential confrontations, such as Uktransnafta, Prime Minister Arseney Yatseniuk has announced that a change of management, which had a great deal to do with the unnecessarily public collision between State and Igor Kolomoiski, will occur.

It will occur with international management being brought in to insure transparency for all stakeholders.

“A new approach to the state of public companies – Ukrnafta, Ukrtransnafta, and all others, Ukrtatnafta – The state recovers its management, we respect the rights of other shareholders, receive and distribute dividends, and we put in place a new high-quality foreign management.”

First and foremost, a reasonable compromise in light of the aforementioned public spat.  Indeed, perhaps a way to combat corruption at the top of many State owned entities, from energy to the defence entities and beyond.

Naturally to attract the best international industry specific senior professionals, the State and other shareholders will have to pay the commensurate international remuneration (plus perks, and possibly “golden hello’s” and/or “contractually assured “golden handshakes” too) for such management.  That said, it will probably still save the State (and shareholders) a small fortune in losses due to gargantuan corruption by doing so.

The Prime Minister went on to state that “The new leadership will Ukrnefti, it must be selected by an international audit, through professional people with serious international reputation.  “We, the government, decided that now all heads of state companies have elected only in open competition, publicly, live, and no longer can there be inserted a godfather, brother or matchmaker.

Fair enough.

However, the issue will be whether the senior industry specific professionals with a “serious international reputation” can be attracted – and the remuneration + package, is not going to be enough to do that on its own.

As any professional “headhunter” knows, money and perks have to be attractive, but the actual challenge of the job on offer also has to appeal.

Those that have previously been “headhunted” will attest to this being undoubtedly true.  Indeed, your author attests to it being true.

The question therefore arises as to the professional challenges that appeal to these specific international professionals – for the challenges that the Ukrainian companies face will not appeal to all who may be approached, dependent upon the parameters of the job role.


What is the aim of changing the management?  To insure more transparent dividends for the shareholders and nothing more?

How much of a free hand will any new senior international professionals have to restructure the businesses?  A restructuring that is drastically required.

Can they go through the supply chain like the proverbial dose of salts, reducing or increasing access to the supply chain, whilst undoubtedly annoying a few vested interests in doing so?  Is the supply chain “tiered”, similar to BP for example?  How broad should Tier 1, 2 or 3 be?  Is there a requirement of oversight for any subcontractors/suppliers to those appointed Tier 1, 2 or 3 suppliers regarding quality assurance?

Are they equally at liberty to go through the existing employees with the same proverbial dose of salts, considering many have been placed there through nepotism, rather than on merit?

Whilst corruption and transparency will undoubtedly be atop of the agenda for any new international management, is there scope for corporate expansion during their tenure?  Is there a need for reduction to core competencies?  Perhaps there is a desire to become more of a global player, and more actively tender/bid for international opportunities in due course?  Does the desire exist to act as a (minority or majority) partner in any global opportunities?

It would be foolish to waste the global relationships that senior international industry professionals bring with them, as there is much to be said for personal relationships and the opportunities they can (and generally do) bring.  Would the shareholders want to make that leap as and when such opportunities present themselves?

Whilst it may appear from Mr Yatseniuk’s words above, that Ukraine would be interviewing any serious professional international candidate, it would be rather naive to think of it that way.  The truth be told, it is very much vice versa – Ukraine will be interviewed by the candidates in line with their (primarily managerial) expectations, if they are to make the move from their current positions to those that are on offer.

To be very blunt, there will not be many serious international industry professionals interested in a managerial role confined to insuring that dividends are transparent and duly paid to shareholders.

If, however, the gauntlet is thrown down to turn these State entities into respected and competitive industry players, with a (more or less) free managerial hand to accomplish that, then top quality global candidates there most certainly will be – for the challenge presented would then certainly appeal to many.

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