Archive for the ‘Oligarchy’ Category

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Good business, bad politics. Tigipko

January 2, 2017

Having written about Viktor Pinchuk in the previous entry, this post concentrates on another Dnipro Clan oligarch and long time acquaintance, Sergei Tigipko, who has been spending money recently.

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Mr Tigipko it has to be said is an interesting soul whose business activities are somewhat difficult to keep an all-seeing eye upon.

Perhaps he is fated to be that way, for ever since birth Mr Tigipko has not been what he appears to be.  Mr Tigipko was actually born on 13th February 1960 – officially, but in fact he was born in the early hours of 14th February.  Due to a bureaucratic mix up between medical night shift and morning shift workers the wrong date was officially recorded.  It is claimed, similar to Queen Elizabeth II, he therefore has two birthdays, an official one and a real one.

Fair enough – surely all oligarchs can afford to have two birthdays.

In the late 1970’s the family moved from Moldova to Odessa and Mr Tigipko then headed to Dnepropetrovsk and the Metallurgy Institute where (perhaps with the help of a well placed step-father) he became a member of the Komsomol Committee.  In true Marxist-Leninist adherence he busied himself with organising discos and supplying the evils of western decadence – Pepsi.  It appears that a disco-loving Ihor Kolomoisky was a regular and that they became good friends.

(As an aside Mr Tigipko, or more precisely Mrs Tigipko, retain their interest in Odessa in an act philanthropy annually organising and sponsoring the Odessa International Film Festival – which is actually a very good event.)

Indeed Mr Tigipko has had good fortune in meeting business acquaintances, whilst suffering an equally poor fortune in the world of politics.

A few years of questionable military service and teaching intervene before Mr Tigipko lands the role of chief of psyops/reflexive control when he became the Second Secretary of the (Communist) party and Komsomol committees in Dnipro.  Propaganda and agitation commonly being the role of the Second Secretary – a role he was destined to fail at with the date being 1989 and the implosion of the Soviet system only 2 years away.

Nevertheless, having already forged a friendship with Ihor Kolomoisky, it is within the regional Komsomol committee he also meets Olexandr Turchynov (the current head of the Ukrainian national security apparatus and once upon a time, an ardent Tymoshenko ally).

When the Soviet nonsense all eventually crashed, Mr Tigipko had become First Secretary and in charge of the regional Komsomol cash box.  He was also by then known to Gennady Tymoshenko who was head of ideological manipulation for the Kirov District.  Gennady is the father of Alexander Tymoshenko – the unfortunate husband of Yulia.  Indeed it is rumoured that Mr Tigipko played a role in funding Ms Tymoshenko’s video empire back in the day – presumably with Komsomol cash.  Controlling that cash, he also came to the attention of Dnepro Regional Council Chairman, the infamous Pavel Lazerenko.  He had also made direct acquaintance with (soon to be President) Leonid Kuchma and Viktor Pinchuk.

A reader can now literally see the Dnipro Clan forming.

As the Komsomol system was collapsing Mr Tigipko was swiftly given a senior position within Dnipro Bank – no doubt moving to the position along with the Komsomol regional cash.  (There is no reason to believe that events in Dnipro would be any different than those elsewhere in Ukraine at the time when it comes to moving regional Komsomol cash).

Within a year the bank owners were far from getting along well and Mr Tigipko set up PrivatBank with Ihor Kolomoisky, Gennady Bogolyubov, the late Leonid Miloslavsky and Alexie Martynov.  From 1992 – 97 Mr Tigipko was Chairman of the Board of PrivatBank – although what share holding he had will probably never been known.  What is known is that the initial shareholding was not equal.  How much Komsomol/Dnipro Bank cash was used in the creation of Privat is somewhat unclear – and will undoubtedly remain that way.

Meanwhile Mr Kuchma became President Kuchma and Pavel Lazarenko became Prime Minister – leading to a split within the Dnipro Clan and President Kuchma using Mr Tigipko to keep an eye on the out-sized and out of control criminal appetites of Pavel Lazarenko.  He becomes Vice Prime Minister for Economic Reforms in order to carry out that task.

(This move obviously ruffled feathers and PrivatBank came under scrutiny for laundering money via its Riga branch.  Some things don’t change.)

Whilst in post, Mr Tigipko acted as “roof” for the French cement company Lafarge who then had a few issues with assets in Ukraine.  As Bernadette Chirac (wife of Jacques) then sat on the Lafarge board it is perhaps no surprise that Mr Tigipko was awarded French honours personally by Mrs Chirac in 1997.

By 2000 Mr Tigipko wisely quit as the conflict of interests of those around him in the Kuchma government were in all probability intractable at best and very bad for the health at worst.

By 2001 whatever shares in Privat he had were sold for a figure unknown, and he set up on his own with the TAS brand containing banking, insurance, and numerous other interests held under the usual Cypriot holding company  – which today is a beast of many tentacles – and is in fact the reason for this entry.  (Indeed Mr Tigipko sold one of his banks to Swedbank pre 2008 crisis for $735 million via TAS Overseas Investments (Cyprus)).

If business has been good, politics has not been.

Politically Mr Tigipko did not fare well under Viktor Yushenko and Yulia Tymoshenko.  Having chosen the Kuchma side of the Dnipro Clan split, thus backing Yanukovych in 2004/5 elections, that clearly did not sit well with the new “Orange” president, nor a Prime Minister that chose the Lazarenko side of the Dnipro Clan split.

Further when Yanukovych eventually became president in 2010, despite initially welcoming him into the fold, he very clearly and publicly shafted by Mr Tigipko politically.

Lo, tax avoidance aside, it clearly pays in a business sense to hold your assets offshore and in a different legal jurisdiction in a predatory political environment like Ukraine.  It is simply far easier to defend and retain your assets.

Under the current president Mr Tigipko has kept his head down making no discernible political moves and very few business moves.

However, in the past few months Mr Tigipko appears to be going on a spending spree domestically.  Having recently bought another insurance company and rolled it into his TAS insurance entities, it appears he is now entering the hotel business too.

Not only is he entering the hotel business his seems to be doing getting good deals.  For a mere $10 million Mr Tigipko has bought the Radisson Hotel in Kyiv from the Russian owners who for a long time have desperate to sell.

Now a reader may think that the hotel business in Ukraine is not one where returns will be swift – and they’d be right too.  There are no swift returns with anything to do with hotels in Ukraine.  That said, the price paid for this asset being so low, it is possible he will see a 7 year ROI.

However, it may also be that Mr Tigipko has some insider knowledge regarding the return of licensed gambling in Ukraine and any amended parameters regarding what premises can host casinos – and which can’t.   It may well be that the absolute nonsense proposed a year ago for the return of gambling has now had a more sensible eye cast upon it – or is about to have a more sensible eye take a look.

If so, then the Radisson in Kyiv would have additional potential – and a far swifter ROI.  As Mr Tigipko has a knack for good business and poor politics, then who would be surprised if that will ultimately prove to be the case?

More generally, does Mr Tigipko now think that the bottom has now been reached and that the small economic bounce is likely to continue in an upward trend, so now is the time to buy?

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Pinchuk & the WSJ

January 1, 2017

It has to be said that Viktor Pinchuk of all the Ukrainian oligarchy has always been the most intriguing for this blog.

Firstly, compared to the others, Mr Pinchuk is actually a clever guy.  He had managed to become a multi-millionaire through his engineering creativity before marrying the daughter of former President Kuchma – and thereafter leveraging that marriage during the Kuchma epoch to move from being a multi-millionaire to a billionaire.

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His time directly (rather than indirectly) in Ukrainian political life as a parliamentarian was really rather brief and began in the same year as his marriage to former President Kuchma’s daughter in 2002 and ended with the “Orange Revolution” of 2004/5 with Mr Pinchuk having backed Viktor Yanukovych.  Despite easily being able to buy his way into any parliament, he chose not to do so.

Since then his political influence has been indirect insofar as manifesting via parliamentarians both national and local that are loyal to him.  It should also be noted that “his people” are generally far more subtle than the drones of Kolomoisky, Firtash or Akhmetov.

He also has a penchant for collecting famous friends – The Clintons, Damien Hirst, Elton John etc.

In fact, aside from feeding from the State subsidy trough and self-interest indirect political machinations, Mr Pinchuk set about rehabilitating his image through philanthropy and his own foundation from 2006 onward with very little domestic public oratory or prose.

The annual YES conference is a Pinchuk brainchild that he funds – which in 2016 notably saw Mr Pinchuk pay Donald Trump to speak at (albeit a speech lacking in clarity and not without technical problems) via a video link despite his association with (and donations to) the Clintons for many years.

Perhaps a lesser known fact was that during the “Revolution of Dignity”, Mr Pinchuk funded the provision of medical supplies to treat the injured.

Aside from a few historical legal battles, most notably with Ihor Kolomoisky over assets, Mr Pinchuk rarely features in the news – unlike many of his peer oligarchs.  There is in fact very little that can be attributed to him personally by way of public statements or on the record oratory.  Clearly a deliberate policy on his part.

It was something of a surprise therefore when an article appeared in the WSJ, authored by, or ghost written and then attributed to, Viktor Pinchuk.  The article has ruffled many Ukrainian feathers, both political and societal, being prima facie interpreted as a plan for capitulation to The Kremlin.

In a nutshell he spoke (wrote) out in favour of elections in the “DNR” and “LNR” by politely forgetting about Crimea if it meant an end to the deaths in the occupied Donbas, the abandoning of any thoughts of joining NATO and the creation of a formal understanding that Ukraine would not be joining the EU any time soon.

Now to be fair, there are those on the Crimea Committee of the Verkhovna Rada, even of patriotic leaning, that have privately told the blog that they foresee Crimea returning to Ukraine only if the Russian Federation implodes in similar fashion to that of the USSR – and if that be so then the returning of Crimea will be an issue dwarfed by the ramifications of such an implosion for Ukraine more generally.

That said, there is none on the said committee that would advocate anything other than “Crimea is Ukraine” as a domestic and international policy – quite rightly.

With regard to the EU, as previously written the Association Agreement (and DCFTA) is not an instrument that takes Ukraine into the EU.  Only the completion of the Aquis Communautaire can do that – and that is a process Ukraine has not even asked to commence.  The simplest way to view the Association Agreement is as a document that brings “European norms” to Ukraine at a speed at which Ukraine can achieve them – ie it brings “Europe” to Ukraine at a speed and in chunks that Ukraine can handle/digest.  For Ukraine to go to the EU, an entirely different thing, then it is the Aquis that is the only route – a route more demanding than anything within the Association Agreement.

Likewise, whatever Ukraine may or may not do with NATO, it is currently a long way from being at a civilian and military standard by which it could join.

In short, Ukraine is decades away from meeting the requirements of the Aquis for EU accession – if it ever applies.  It is probably about a decade away from fully meeting the civilian and military standards required for NATO entry – should it ever ask to join.

Those are the bureaucratic realities and limitations of Ukrainian reformation and their speed – notwithstanding political limitations of those that would have to agree to any Ukrainian accession.  None of this is a secret.  The respective institutions know it.  The Kremlin knows it.  Ukraine knows it.  And Mr Pinchuk knows it.

The domestic angst naturally, insofar as NATO and the EU is concerned, comes from his call for codification of such matters and the legislative boundaries they would place upon Ukraine for at best, uncertain and ill-defined “gains”.  Peace at any cost does not bring peace – it brings an armistice fated to fail at some undetermined point in the future.

Why then, has Mr Pinchuk who rarely makes public statements, decided now is the time to make such a statement and one that is guaranteed to irk the public, the political class, and paint him as a Kremlin stooge domestically and among many of Ukraine’s “friends” abroad?

Is it a reaction to witnessing fellow oligarch Dmitry Firtash exiled to Vienna, or Ihor Kolomoisky lose PrivatBank to nationalisation, or seeing all oligarchs with fingers in high energy usage industries (including Mr Pinchuk) now subject to energy pricing that sees an end to subsidies/most favoured user status?  It seems somewhat unlikely.

Will the oligarchy now find common ground for a robust fightback against the government in 2017, and this is somehow Mr Pinchuk declaring unity?  Also somewhat unlikely.

Has Mr Pinchuk simply decided that giving in to The Kremlin is the only way to undo the current deadlock?  Maybe, maybe not.

Has he been bought off or manipulated by Moscow somehow?

As the chances of any of his WSJ points being implemented are currently very slim at best, and will make him extremely unpopular at home, how does Mr Pinchuk benefit from his unusual public intervention?

All questions to be asked.

Also to be asked are why make such statements now, and why chose the WSJ to do it in?

The answer may be that the article was written and published in the WSJ specifically for one reader.  That reader being Donald Trump.

It may well be that Mr Pinchuk has little belief that what he has written will become policy and be implemented.

He may well not believe that this is the right policy either.

However, just as with voting at the UN, it is not that uncommon to see some nations prima facie voting against their own interests in order to curry favour with others – in the full knowledge that the vote will be vetoed by yet another.

Maybe it was written to defend the business interests of Mr Pinchuk in the USA?

Perhaps the end result here, considering Mr Pinchuk’s penchant for collecting “friends” like the Clintons, Damien Hirst and Elton John etc, is that Mr Pinchuk may be seeking to become the Ukrainian “name” most liked and granted most access by Donald Trump – no differently than Nigel Farage is angling to get (and may succeed) more personal interaction with Donald Trump than UK Prime Minister Theresa May.

 

If Mr Pinchuk can achieve a personal status that grants him more access to Donald Trump (and a kinder ear) than President Porosehnko simply by writing something he believes Mr Trump would read agreeably within the WSJ, then he may feel it a gamble worth taking with the repercussions among Ukrainian domestic politics a prize worth chasing.

Perhaps a lens through which to view Mr Pinchuk’s rare public prose?  Perhaps all it takes is being a billionaire, a few well chosen (if never implemented) words in the WSJ agreeable to a personality like Mr Trump and suddenly Mr Pinchuk becomes “Don’s man in Ukraine”.

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Privat nationalisation and political weight loss

December 19, 2016

Ukraine has eventually taken the decision to nationalise Ihor Kolomoisky’s (and others) Privat Bank.

In some ways it is a surprise that the will to do so was actually found, despite that for more than 2 years everybody and anybody with any knowledge of Privat Bank has hardly been shy in opining that it presented serious risk to the Ukrainian economy and had it not been systemically vital to the Ukrainian banking system it would otherwise have been closed.

To a man/woman, of those spoken to one to one by the blog, be they politicians, economists, diplomats or international bankers, all recognised that the Privat problem had to be addressed and that nationalising it was the better of the options available – if the will could be found to do so.

Lo it has come to pass that 100% of Privat shares are now owned by the State.

How grubby the deal struck between Ihor Kolomoisky and The State is, remains unknown.  For a man like Ihor Kolomoisky to “voluntarily”  “sell” his shares to the State in what has been a significant political and financial lever over the State for him for many years with no gains to him pushes the boundaries of belief.  With the ability to simply put the Ukrainian banking sector into melt down, there is presumably a quid pro quo no matter how small yet favourable that may be in return for the “voluntary” handing over of all shares.

So be it.

Questions will undoubtedly be asked regarding the large amount of PrivatBank loans to its owners (Mr Kolomoisky and friends), other companies with the same owners, and to those associated with the owners, that have consistently been taken out with no intention of repaying them.

What is the exact cash figure these nefarious loans amount to?  What are the chances of those loans now being serviced and eventually repaid by those that took them and who are extremely skilled at historically saddling the State with their debts?

On balance, should a reader accept that those loans will probably not be repaid, thus in assuming these non-performing loans (debts) in however many $ billion they amount to, is that still a price worth paying to insure that PrivatBank can no longer collapse the entire Ukrainian banking system?

Even if agreements have been reached to now begin to repay these loans, the question is then over what period of time (in the unlikely event they will be repaid in full and in the spirit of any agreements made)?

The question presented is therefore one of short term (debt assumption leading probable loses when loans are not repaid) verses the medium/longer term view of what price is put upon insuring the entire national banking system will not collapse due to Prvat?

Financial issues aside, there is of course politics to consider.

The last time the nationalisation of Privat was mentioned by the blog in September, the politics were “Tymoshenko orientated”.  Mrs Tymoshenko is not in favour of the nationalisation of Privat as it doesn’t really work to her advantage.

Ms Tymoshenko aside, broader questions need now be asked about how the nationalisation of Privat changes the political and/or oligarch power dynamics with a major Kolomoisky lever now surrendered.

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Mr Kolomoisky can no longer use Privat as a personal piggy bank.  How does it change his ability to buy parliamentary votes for hire and/or buy entire political parties?  Will it effect any future voting outcomes?  To mitigate, will key voting personnel previously simply bought, now start to appear in Kolomoisky business structures instead for the purpose of leverage over their vote?

In short, just how much political weight loss has been incurred by Mr Kolomoisky – if any?

Without the “ace up the sleeve” of a persistent ability to cause national banking melt down, how does that effect the Kolomoisky position when negotiating how next to screw the State?

How will the rest of the oligarchy class react?  Will they make peace with the State or solidify around a common cause yet further in screwing it over?

How will this effect a poor presidential poll rating if he is perceived to have engineered the right thing for the country, or alternatively is perceived as having used his position to weaken yet another oligarch to his own advantage?  The two are not mutually exclusive, but that is how it will be presented.

Can Mr Kolomoisky now be certain that in what appears prima facie to be a weakened position, he will now not be called to account for innumerable scams and schemes over the years?  Was a de facto arrangement made that in effect grants amnesty via a promise of non-prosecution as part of the deal?  Are there other “compensatory” arrangements reached that will filter into the system over time that will be beneficial to Mr Kolomoisky’s other interests?

The repercussions of this nationalisation financially are on balance likely to be beneficial for Ukraine and the least worst option that could have been taken.  As long as Privat is managed prudently henceforth over the medium term this act is the most sensible option available.  In the long term, it would be wise to eventually return Privat to the private sector – once its systemic and internal risks have been mitigated against.

What is far less clear are the political and oligarchy/power behind the curtain repercussions.  It may be some time before those become fully evident.

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The Firtash star falls yet further – Ukraine

November 27, 2016

Whilst all eyes will be upon Mikhail Saakashvili and the inaugural gathering of his newly minted “Rukh New Forces” in Kyiv on 27th November, and its possible political rise – not to be confused with the old “Rukh” political party which may well see a revival simply and deliberately to insure confusion on any ballot paper – the political/influential decline of Dmitry Firtash continues apace.

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As previously mentioned in historical entries, Mr Firtash once powerful within the Party of Regions machinery has seen his influence significantly reduced since its collapse.  More so than any of the other oligarchs associated with PoR, such as Rinat Akhmetov or Sergei Liovochkin etc.

He finds himself marooned in Austria following a thus far unsuccessful US attempt to extradite him over corruption accusations.

Though extradition from Austria may have failed, he remains wanted by the US.  Indeed in June, inquiries were made following a request by one close to him, via back channels, regarding any possibility of a change of US policy toward him.  The answer a definitive – No.  Those close to him again last week requested that inquiries be made via the same back channels regarding the possibility of an out-going Obama Presidential Pardon, resulting in another definitive – No.  (A reader would infer that any “pardon” must also relate to an admission of guilt – for how otherwise to pardon somebody who claims to have done no wrong?)

Matters will not improve for Mr Firtash – they will actually deteriorate further.

Mr Firtash has come to light in a German bribery case.

There is a matter of €500,000 cash being provided to ex-Stasi officer Nina Vilkening to facilitate desired outcomes via the Chief Commissioner of the Criminal Police Mecklenburg-Vorpommern, who received €300,000.

No doubt inquiries will continue and as none of the defendants are particularly youthful, it is not beyond the realms of probability that a deal can and/or will be cut with defendants in order to bring to light the full extent of Mr Firtash’s active involvement in bribery among the German institutions.

Thus it may yet prove only to be a matter of time before Mr Firtash is wanted by Germany – an extradition request that will not be denied by Austria.

Whilst this may now be appearing upon the horizon, the Spanish are far ahead of the Germans.

Spain has admirably been pursuing “Slavic” organsied crime for several years.  Russia has publicly decried Spanish investigations, reports and arrest requests for several years.  Ukraine is not exempt.  Only recently a number of Ukrainians, including the son (Stepan Chernovetsky), of the former Mayor of Kyiv, have been arrested for organised criminality and money laundering in Spain.

Bravo Spain – an example for Austrian and UK (in particular) banking and organsied crime investigative bodies to follow.

Mr Firtash, and two other as yet unidentified Ukrainian businessmen, have now fallen foul of Spanish investigations.  Judge Ignacio Sánchez García-Porrero leading the Spanish inquiry seeks Mr Firtash and the two as yet unidentified Ukrainian businessmen’s delivery to a courtroom in Spain.  The are suspected of leading a major money laundering racket in and via Spain (centered in Barcelona and Marbella).

(With the allegations specifically relating to money laundering presumably it is either the UCO within the Guard Civil and/or the UDEF doing investigative the leg-work rather than the broader Spanish organised crime institutions.)

Whether all the dirty money belongs to Mr Firtash, or whether some is from associates will perhaps become apparent as and when he is brought before a Spanish court.

With known associates ranging from Semyon Mogilevych the Russian “Don of Dons”, through the entire former Cabinet of Viktor Yanukovych’s ousted government, a debt and thus beholding to Russia’s Gazprombank of between $4 and $5 billion, and by extension a beholding to Yuri Kovalchuk (who is very close to President Putin) who personally arranged such loans, just whose dirty money Mr Firtash is suspected of laundering is unclear at this stage.

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There will be layer upon layer of shell companies, nominal directors, fictitious entities and front men to wade through to find and identify the eventual beneficiaries (ultimately based in the usual offshore havens undoubtedly).

Nevertheless, the Spanish have been diligently working upon the misuse of their territory and legislation for several years when it comes to Slavic organised naughtiness.  Clearly Judge Ignacio Sánchez García-Porrero believes all is now sufficiently clear to officially go after Dmitry Firtash (and the two other as yet unidentified Ukrainian businessmen).

Extradition to Spain, no differently than the possibly forthcoming extradition request to Germany, when received by Austria will be a far smoother, almost seamlessly slick affair compared to the request from the US – as all such matters within the EU Member States are.  That is the entire point of the EU Arrest Warrant and the EU Convention on Mutual Assistance in Criminal Matters.

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Therefore, whilst a reader may be caught up with the hype surrounding a possibly rising political party headed by Mikhail Saakashvili, the continued fall of the Firtash star may well become a very messy, public and revealing fall indeed.

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Once within Spanish jurisdiction, even if the Spanish case ultimately fails, by that time there will be the existing US request and a probable German case that the Spanish can extradite him to.

The outlook for Mr Firtash currently looks rather bleak – a lesson for Ukrainian kings and pawns alike.

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Who is Vadim Novinsky? (To answer a reader’s question)

November 4, 2016

Following yesterday’s entry relating to the coincidences – or not – of current wriggling within the Opposition Block, a question has been asked by a reader about the importance of Vadim Novinsky in the Ukrainian arena.

There has been a lot written about him in Ukrainian and Russian, but little in English, so a brief glossary follows.  (He is perhaps best known to the English speaking reader for his recent Guardian piece – or at least a piece that was published naming him as the author even though he wasn’t)

Before doing so however, as stated in the link above to yesterday’s entry, Mr Novinsky did indeed leave Ukraine today for Greece for a visit to Mount Athos, apparently spending time in the company of some senior Orthodox clergy.  Also, the request by the Prosecutor General to lift the parliamentary immunity of Mr Novinsky has indeed arrived at the Verkhovna Rada and has been passed to the Procedural Committee of the Verkhovna Rada by Speaker Paruby.

The relevant committee will mull the Prosecutor General’s request next week.

Vadim Novinsky

Vadim Novinsky

So to the question of how important is Vadim Novinsky within the Ukrainian arena?  (Aside from being a leading and very wealthy Opposition Block parliamentary personality and extremely conservative member of the Russian Orthodoxy.)

Vadim Novinsky is a Russian “businessman” who was granted Ukrainian citizenship in 2012 by former-President Yanukovych.  Despite calls for that citizenship to be revoked due to Mr Novinsky’s very pro-Russian stance (and alleged pro-Kremlin actions), thus far President Poroshenko has refused to do so.  It remains to be seen whether that position will change in the future.

Mr Novinsky is perhaps best known in Ukraine as a junior partner of Rinat Akhmetov via shares in Mr Akhmetov’s MetInvest.  The deal in 2006/7 involved Mr Akhmetov assuming control of a plethora of Mr Novinsky’s mining and metallurgical companies held under the umbrella of Mr Novinsky’s infamous Smart Group (and latterly Smart Holdings), in exchange for a junior share in MetInvest.  (To be blunt neither Smart Group nor Smart Holdings have anything approaching a good business reputation – consistently in the orbit of numerous scandals.)

The outcome of the MetInvest 2006/7 deal was that this gave Mr Novinsky “access all areas” within the Ukrainian political elite – which he clearly wanted.  (The benefits for Mr Akhmetov will not be dealt with in this entry.)

It is necessary however to briefly describe how Mr Novinsky first managed to acquire the ability to own numerous mining and metallurgy assets in both Russia and Ukraine, why he came to Ukraine buying such assets during the 1990s/2000s when all assets worth holding were subject to bloody wars between the Donetsk and Dnipropetrovsk clans.

Ukraine at this time was not a place for the faint hearted making acquisitions without a significant influential “roof” (guarantor) that could insure property rights in the absence of a predictable rule of law.

Without going into the minutiae of his early business career in Russia, it is sufficient to note that very early on he managed to secure the patronage of Russian oligarch Alisher Usmanov, influential Russian politician Viktor Chernomyrdin, and alleged Tambov mafia gang associate Andrei Klyamko.  The later Mr Klyamko for several decades has been a consistent business partner of Mr Novinsky – a formal business divorce occurring in March 2014 in the immediate aftermath of “The Revolution of Dignity”.

A reader would probably understand that official business divorce to be little more than a facade dictated by circumstances at the time to mitigate volatile public perception.  (Indeed it is rumoured by reliable sources that Mr Novinsky’s name originally appeared in the Spanish Tambov mafia investigations – until Kremlin intervention managed to have his name removed before reports were published.)

Quite how such planets aligned for an engineering management systems graduate from Leningrad who came to Ukraine with Lukoil a reader is left to ponder.

Considering the extremely volatile and bloody warfare between the political and business clans of Donetsk and Dnepropetrovsk during the 1990’s/2000s, it is perhaps fair to speculate that Mr Novinsky’s entry into Ukrainian assets at that time (and many were physically within the Dnepro/Donbas geography) occurred via the friendship/association of then President Kuchma with Viktor Chernomyrdin.  That is not to infer that President Kuchma had any special relationship with Mr Novinsky other than by extension to that from Mr Chernomyrdin.

President Yushenko who followed however, perhaps can be viewed as far more accessible following Mr Novinsky’s arrival as a junior partner at MetInvest – and this access was further enabled by Mr Novinsky funding a few “pet projects” of President Yushenko.  (Disclosure – it was at about this time Mr Novinsky started rubbing shoulders with acquaintances of this blog – both Ukrainian and foreign.)

The rise to power of President Yanukovych naturally suited Mr Novinsky’s ideology far more than did President Yushenko’s.  Mr Novinsky already close to “The Family” due to business arrangements with Mr Akhmetov quickly went into business with Alexander Yanukovych with several ventures.  It is during this period that the alleged offences of unlawful imprisonment of a member of the Orthodox clergy occurred for which he is now under investigation.  It is also stated that aside from the alleged crime, the goal was to change the leadership of the Orthodoxy in Ukraine and in this he (apparently) played a robust role.

Since then Mr Novinsky has continued his support of the Russian Orthodox Church and the Ukrainian Moscow Patriarchy zealously whilst allegedly simultaneously continuing to exert pressure (and it is also alleged threats) toward the Kyiv Patriarchy.  Indeed, it is no secret that Mr Novinsky was significant in the organisation and financing of what was widely perceived as a Kremlin influence operation during a “peace march” by the Moscow Patriarchy for the celebrations for the baptism of Vladymyr in July.

More locally for Odessa, he is also supposed to be part/”supportive” of the “Odessa Network” of politicians (and a few businessmen) with what are for many constituents particularly questionable definitions of patriotism.

Considering his nationality of birth, circumstances surrounding the evolution of his business career and the 3 wise men that nurtured it from the Russian oligarchy, political and mafia classes, Mr Novinsky is unquestionably trusted far more by The Kremlin, and the wider Russian political, business, religious and organsied criminal classes than the usual suspects such as Messrs Medvedchuk and Firtash – despite their robust connections.

A cynical reader, as well as a few counterintelligence bods, will by now perhaps be questioning the true role of Mr Novinsky, and whether Mr Novinsky is an independent actor with agency – or something else operating for “others”?  Was he in fact propelled into Ukraine quite deliberately so swiftly after it became independent with the long game task of getting access to the body of whomever is president of the day, whilst simultaneously gaining control of GDP and employment percentages within the Ukrainian economy – or has he (willingly or otherwise) simply been co-opted by The Kremlin along the way due to his access to whomever is president and his personal control over Ukrainian GDP and employment percentages – or has he simply volunteered those services, acting as an asset for The Kremlin, considering his ideological alignment?

Although it is possible to continue, the question relating to the importance of Mr Novinsky in the Ukrainian arena has probably been answered sufficiently well for a reader to draw their own conclusions.

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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.)

 

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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.

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Populist political guns aim at Gontareva (and the NBU)

October 17, 2016

With Ukraine no longer being dependent upon the IMF, and with international debts to be serviced more than manageable in 2017, it is perhaps no surprise that the current head of the National Bank of Ukraine (NBU) is now a legitimate political target when it comes to taking a scalp from the President.

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Thus, during the week 6 – 10 October at a meeting of the IMF and World Bank in Washington DC, a brochure was circulated with the clear intention of undermining Ms Gontareva as head of the National Bank of Ukraine.

Behind the brochure sits Sergei Taruta – Verkhovna Rada parliamentarian, businessman and oligarch.

To be entirely blunt, having only recently met with senior people within these institutions in Ukraine, if the intention was to undermine Ms Gontareva (and/or the NBU policies) then it was sure to find little if any traction at the meeting of these international institutional lenders.

Whilst neither institution support specific politicians or institutional appointees (like Ms Gontareva), instead supporting State institutions and internal processes, quite clearly both fully recognise what they consider to be very positive change within the NBU under her leadership.  It seems unlikely that there would be any private conversation that would encourage her removal from office until the changes she has brought are far more consolidated and (perhaps) irreversible.

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It is therefore difficult to believe that Sergei Taruta could seriously expect that a brochure clearly designed to undermine the head of the NBU would find traction among the IMF and WB elite in Washington DC.

If he did then he has a truly woeful understanding of the relationship between the current NBU management and that of the IMF and WB in Ukraine.

Needless to say, the brochure brought with it no result at the IMF and WB gathering in DC that was in any way helpful for Mr Taruta – perhaps the opposite.

Nevertheless on 14th October Mr Taruta decided to pursue to resignation of Ms Gontareva through the machinery of the Verkhovna Rada, declaring on his intentions on his Facebook page together with accusations of incompetence and corruption.

That same day the NBU website questioned the allegations, the framing of his claims, and the motivations of Mr Taruta.  Indeed the NBU requested that such machinations be scrutinised by the Ukrainian law enforcement entities.

A reader will now rightly note the true audience – that of the Ukrainian constituency.

Not to be left on the periphery, on 17th October, the ever populist Yulia Tymoshenko pushed Batkivshchyna to the fore as a rallying point for Verkhovna Rada Deputies to coalesce around to force the removal of Ms Gontareva.  Ms Tymoshenko’s main charge being that Ms Gontareva is in charge of the destruction of the State at the behest of President Poroshenko.

Her secondary charge, and clearly she has noted the real reason for Sergei Taruta’s attack on the NBU, was that the free-floating (more or less) of the Ukrainian currency has caused all those with foreign currency loans to struggle and/or default as the currency weakened significantly when finding its true market value.

Thus Mr Taruta’s attempt to attract struggling SME’s and entrepreneurs to the Taruta political sphere is now duly challenged by Ms Tymoshenko’s act – whilst both simultaneously attempt to remove a presidential appointed (Verkhovna Rada approved) scalp who is now fair play having completed many of the most unpopular IMF reforms.

Perhaps Ms Gontaerva is incompetent and/or corrupt as Mr Taruta claims.  Perhaps she is President Poroshenko’s tool for the destruction of the State as Ms Tymoshenko orates.  If so however, neither Ms Tymoshenko nor Mr Taruta have the moral high ground nor are particularly concerned about it considering the company they keep and the activities of those within their orbit – both business and political.

It is far more likely that they both simply see the IMF as now expendable and thus Ms Gontareva as no longer essential/untouchable – and therefore she is nothing more than a possible scalp for a populist “win”.

If they managed to remove her, would State policy change?  Probably not.

 

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