Archive for the ‘Property – Renting or Buying’ Category


Another good idea but with no clear implementation policy

March 4, 2012

You know how I continually highlight the Ukrainian government spouting numerous good ideas as solutions for numerous obvious problems but failing because would would be effective policy falls short on the means of implementation?

Well here is yet another good idea that will undoubtedly fail through ineffective implementation and result in being a government statement that will be counterproductive.

The Prime Minister has announced that Ukraine will introduce a 30 year mortgage at 10% interest in order to stimulate the housing market.

Now for many readers, you will think there is nothing special about that.  However you should be aware that mortgages spread over 30 years in Ukraine simply do not exist and have never existed.  A Ukrainian would do exceptionally well to find a mortgage that runs over half that time.  More often than not it is for a period of 10 years or less.

The interest rate of 10% is also unbelievably low for Ukraine.  Standard borrowing rates are typically 21% to 27% – I kid you not!

So, how will the Prime Minister, having made this statement, create a system where banks are offering 30 mortgages at 10%?

Create a Freddie Mac or a Fanny Mae?  Forcing private banks such as OTP, Aval, Alpha, Delta, Pump, Privat et al seems very unlikely.

He is undoubtedly right that banks offering such terms would stimulate the housing market and construction industries, but how is he going to achieve them doing so?


Challenging conventional wisdom – Freedom of movement – Ukraine/Russia

December 4, 2011

You know how sometimes it is necessary to play the devil’s advocate or think laterally in order to get a better understanding of something?  At least to see an alternative view when looking through the same lens at the same issue?

Well with the Duma elections today in Russia resulting undoubtedly in a few people my good lady knows retaining their seats and October 2012 in Ukraine having the same result for people she knows in Ukraine also retaining their seat here, one wonders why both Russia and Ukraine are so keen to accomplish an agreement with the EU over freedom of movement (Visa-free) when it would expose their citizens to a far less managed style of democracy than they see at home.

(I will take a moment to say hello to my fellow bloggers, acquaintances and throughly solid citizens,  Charles Crawford and The Democratist who are monitoring said Duma elections in Moscow and Ufa respectively.)

You would think that seeing alternatives to the power vertical, effective and engaged opposition parties with alternative policies (rather than simply saying “no” when those in power say “yes” as is all to often the case in Ukraine, or vice versa), and the rule of law far more evenly applied (although not perfect), the very last thing the current crop of political leaders, both in power and opposition in some cases would want, is to expose their citizens to working alternative models of governance.

Of course both Russian and Ukrainian societies are quite well aware of the European principles and working methods and both societies spend a lot of time in cyberspace where neither Russia nor Ukraine really make any attempt to stop the free flow of information.  Large numbers already travel within the EU for business and tourism despite the Visa hassles.

Why though do these nations want to encourage absolute freedom of travel when it will allow a direct comparison of models in a physical rather than theoretical environment for their citizens in far, far greater numbers?

The USSR indeed stopped such travel to prevent this happening in attempts to avoid any such comparison and enforce the legitimacy of the system that was in place.

Is it not self-defeating to encourage their citizens to see a viable alternative to what they have at home?

These thoughts came to me whilst completing yet another on-line Visa application for a Ukrainian citizen yesterday.  (Maybe I should consider making a business out of it I complete so many.)

After a little contemplation, I decided that conventional wisdom of those within the EU championing Visa-free for the FSU nations, were following a similar thought process as that I outline above.  The more exposure to  the European environment, the more society (rather than ineffectual NGOs) will demand changes.

As I have said before, the current Ukrainian government has not bowed to NGOs in any obvious way but have bowed to public bottom-up A-political protests over issues like the proposed new Tax Code which brought more than 10,000 camping outside the RADA.

So why is it that both ruling Russian and Ukrainian politicians who have an interest in retaining the power vertical, are so keen to have their entire societies free to physically experience (rather than read about) alternative models?

A possible answer came to be via the Visa application I was completing.  Those most likely to experience an alternative structure and recognise its benefits are the students, business people and “middle class”.  They are also those most likely to be capable of organising, publicising  and participating any bottom-up A-political large scale protests for changes in the structure.

These people though are far more likely to be offered work or afford residences outside Russia and Ukraine within Europe and return to their home nations to visit family and friends sporadically.  Thus allowing the free movement of a largely well educated youth to seek further education and employment within Europe, or having the “middle class” have alternative homes outside of Russia and Ukraine where they will spend their time as much as possible, removes a large section of society best placed to challenge the current power vertical in either nation for protracted periods of time.

The pitiful and wholly ineffectual lamenting by the relevant  diaspora have made no difference to the power vertical in either nation.  A larger diaspora is unlikely to make any difference to the current power vertical in either nation as we are dealing with short term, grab what you can politicians when all is said and done.  The long term (25 years from now) is not their concern when it comes to expanding their power or assets in the immediate term.

It therefore pays the current power vertical in either nation to encourage those most likely to challenge it effectively and from the bottom-up, to have them studying, working and living outside the national borders under the guise of championing their rights to travel.

It is incredibly easy to employ the psychological “self” and “other” when it comes to foreign sponsored or completely foreign NGOs.  The current saga of NTV and Golos in Russia is an example.

(My good lady help set up NTV in 1993 and according to her there is a “history” between NTV and Golos dating back to 1995 – That’s another story though.)

Neither opposition in Russia or Ukraine have any real policies to sell to the populous.  Not many sit in the same place on the left to right political spectrum and are therefore unlikely to present a united front against the current majority leaderships.

Ms Tymoshenko’s calls for opposition unity are a waste of time as the Ukrainian opposition parties range from the far right to firmly in the left.  There can be no political unity when there is no shared ideology other than being in opposition to the current ruling majority.  The enemy or my enemy is my friend, does not make for a good government should you win, as Ukrainians discovered with the Yushenko/Tymoshenko debacle.

In effect the opposition is so fractured ideologically, they are ineffectual.  There is also the issue of whether the opposition would be any better.  Nobody really believes Ms Tymoshenko is the champion of democracy she claims to be.  Would her power vertical be any different to the current one in Ukraine?

So in summary, whilst actively seeking to obtain free travel in Europe for Russian and Ukrainian citizens may seem somewhat self-defeating for the current power vertical by exposing it for what it is and allowing the experience of alternatives, also allowing the most effective and dangerous sections of society, (the business/middle class and highly educated students) to spend many years outside the national borders as quasi-diaspora in actual fact may prolong the current arrangements for those in power.

Whereas the USSR policy was to keep external influences out to preserve the system, is the current policy to allow internal influences out to achieve the same ends?

What do you think?  Is it time for me to try an alternative medication or is there some twisted logic in what I have written?


Micro-geopolitics in a macro-geopolitical battle – Crimea

September 18, 2011

The macro-geopolitical battle over Ukraine between the EU and Russia is obvious to anybody. The AA and DCFTA against the Russian led Customs Union is but one example. Cooperation with the CSTO verses NATO is yet another. Ukrainian ability to transport Caspian Sea oil and gas to the EU without Russian involvement is yet another. Almost every part of business and civil society is subjected to an on-going macro-geopolitical tug of war. A tug of war that the EU desperately wants to win for numerous reasons both present and future.

Nowhere is this more concentrated and prima facie than Crimea, the Autonomous Republic gifted to Ukraine back in 1954 by the then USSR leadership.

It is of course home to the Russian Black Sea Fleet, for now at least, and possibly until 2042. There is a very large percentage of the population with Russian heritage. A large number of Crimean citizens hold both Ukrainian and Russian passports despite this being illegal due to Ukrainian laws.

Crimea is incredibly popular with Russians as a holiday location and the city of Moscow, when Yuri Luzhkov was Mayor signed a development program with the Crimean authorities. Alexander Lebedev, owner of the UK’s Independent newspaper (amongst others) has spent $ billions on developments in Crimea.

Only 6 weeks ago I turned down a job to manage the construction of a $250 million complex in Yalta fronted by a very well known and legitimate Austrian company for a development being paid for by an unnamed Russian billionaire.

Russians and Russia have spent literally $ billions and billions over the past 10 years in Crimea and will continue to do so.

This has implications with Ukraine heading towards the EU slowly but surely as Crimea has a historical identity of its own long before being arbitrarily gifted to Ukraine less than 60 years ago. Not only is it already an acknowledged Autonomous Republic with its own constitution, but is has a historical claim that would stand quite firmly against any scrutiny should it seek independence from Ukraine and seek a right to self-determination.

There is also the Tartar issue and links with Turkey.

It could become very messy if the Government of Ukraine and the EU do not keep a watchful eye and try to match the Russian FDI in Crimea with the associated work and rise in living standards this generally produces one way or another.

This, it seems, has dawned on some prominent members of the EU. Stefan Fule, EU Commissioner for Enlargement and European Neighbourhood Policy was in Yalta only a few days ago and obviously has recognised the macro-geopolitical battle exists in a very condensed micro-geopolitical circumstance in Crimea. Quite possibly somebody in the EU is now realising that speaking only to those in Kyiv does not necessarily bring the entire country along with those they speak to. Ukraine is in many ways a system of quasi-federalist fiefdoms and what is said in Kyiv does not always trickle down into the fiefdoms. Something made even more difficult when Crimea has its own constitution and parliament.

Thus Crimea more than any other region of Ukraine must be a cause for on-going concern both in Kyiv and Brussels given the undoubted Russian influence in the numerous forms it takes. That said, as Ukrainian law allows anybody from any nation to by land and property within the nation (less agricultural land) it is quite impossible and also illegal to deny such rights only to Russians.

The only way to stamp any EU message within the Autonomous Republic is to match the Russians by way of FDI.

The EU is now therefore trying to engage with the leadership of Crimea. Whilst in Crimea, Mr Fule addressed the Crimean leadership and stated “The EU is ready to assist the reform launched in the republic and its development. We are interested in the economic and social development of the autonomy, the implementation of infrastructure projects and cooperation with the public. Crimea has a chance to become a priority region in cooperation with the EU.

We are ready to introduce Crimea as an investment platform to the European Union, and assist gradual development of the autonomy’s districts.”

In response the Crimean leadership, who were well courted in a recent visit to Brussels in May, stated “We propose to open a EU visa center in Simferopol in the near future, and we are also ready to find premises for it.

All initiatives are working and realistic. Our interest towards Europe is systematic in many directions: tourism, economy, investments, experience exchange, culture and humanitarian sphere.”

Battle has eventually be joined between the EU and Russia in Crimea, and to be fair it is a more than appropriate microcosm from which to view the eddies and flows of the macro.

Once again, at least publicly, the EU in its glacial and cumbersome movement has been slow to counter the swift and nimble Russian foreign policy. That though is the problem with 27 navigators on only one bus.


The break up of Naftogaz Ukraine

September 3, 2011

Well, it was called for by the EBRD, IMF and no doubt numerous diplomats and governments behind the scenes in order to add weight to the IMF and EBRD voices.

It seems the behemoth that is the State owned Naftogaz Ukraine is going to be broken up and sold off. To what degree it will be broken up remains to be seen, however it seems fairly certain that the gas extraction division will be one of the first to go just as Royal Dutch Shell, PetroBra, BP, Chevron, CPC etc all line up for Black Sea, Sea of Azov and shale gas exploration rights within the next 6 months.

Cynically, my first though was another oligarchy buy off at favourable prices prior to entering some major projects via a rigged and less than transparent bidding process. It would appear however that I would be wrong. I have been unambiguously informed that this division will be subject to an IPO and aims to raise $10 billion.

The question is where the IPO will take place. London, Hong Kong? Nothing has been said as yet.

Should it be successful though you would expect similar IPOs for other divisions of Naftogaz Ukraine. Production, shipping and supplying divisions would all seem to be reasonable bite-sized chunks.

If Naftogaz is to be broken up and subjected to IPOs, one assumes that the oligarchy will turn their attention to acquiring the regional suppliers dependent upon Naftogaz Ukraine. A wise man would keep their eyes on the likes of Odessagaz and corresponding regional entities to see which oligarchs will buy them and for how much.

The next 12 months activities in the regional gas supplier network will be an indication as to whether breakup of Naftogaz Ukraine and the IPO rumours are true.


The next session – Laws to come before the New Year

August 25, 2011

Apologies for my absense.  It is fair to say, should you read the previous post you may be somewhat understanding as to the reasons why even if you are not overly sympathetic.

I did have a far more thought provoking post for today relating to Ukrainian NGOs (and foreign NGOs in Ukraine) however I had written it and saved it over at a different site of mine which conveniently (or not) was suffering like me and went down to an HTTP 500 server error yesterday.  Needless to say you will have to wait for that delight which springs from a somewhat “spirited joust” between the (mostly) retired and largely irrelevant minor ex-diplomats and politicians I spent Independence Day with.

Today however, with the RADA soon to return to work in a week or two, I thought we could have a peer into my fairly usually reliable crystal ball and look at what major legislation is likely to go before the RADA (possibly a few times if subject to Presidential veto and suggested amendments) and become law by the year end.

Pension reform will be tweaked and introduced (even if the start date of reforms conveniently falls after the parliamentary elections in October 2012). 

The budget for 2012 will be passed with relative ease and in plenty of time (although it will be extremely interesting to look at the provisions for pensions and utility subsidies as per IMF demands).

Changes to the laws on both parliamentary and local elections will also hit the parliament between September and January and will also pass.  It will be interesting to see the “critique” from the Vennice Commision and OSCE.

The laws on agricultural land ownership will also be subject to change one has to suspect during this session.

A fairly busy session ahead when it comes to major reforms.

It also remains to be seen, although it is fairly certain, if the DCFTA and AA between Ukraine and the EU get their initialing before going for ratification.  The Russian rhetoric and levers are now visibly being employed in a late bid to change the Ukrainian course.

Notwithstanding when comes in the way of new laws, we will have the implementation of laws passed in the last session, one of the more entertaining of which commences on 10th September with the complete scrapping of the previous 16 Visa types for Ukraine and the introduction from that date of transit, short and long-term Visas only.  A smooth transition?  I will let you know as the tails of woe and frustration mount up (or not) of the Expat forums.

All in all, a particularly interesting 3 months lay ahead notwithstanding any dramatic external influences as yet to appear over the horizon.

Hopefully the server to a different site will have dealt with its HTTP 500 issue (as swiftly as I have dealt with alcohol poisoning) and tomorrow there will be a more thought provoking look at NGOs.


Mortgages to reappear via Ukrainian State owned banks if you are very lucky‏

July 15, 2011

The banks owned by the Ukrainian State will collectively begin to start loaning for mortgages in an effort to stimulate the housing market from August according to Serhiy Podrezov, CEO of Oschadbank.

The anticipated loan rate will be at 14% which will eventually drop to 12%. Blimey! Still a long way above most of the continent although, to be fair, considerably lower than the 27% interest rates pre-crisis.

It is also interesting to note that the mortgage maturity is between 3 and 5 years unlike the 25 – 30 years on the rest of the continent. In effect it is nothing more than a short term real estate loan.

The fund allocated is a mere UAH 35 million, or about $ 4.5 million, which is of course, nothing. In Odessa that will be enough for two or three top end good houses or penthouses, or about 36 reasonable apartments. In a city like Kyiv it will buy even less.

Farcical to think that this will stimulate anything even if, as usual, the potential home owner has to stump up 50% cash and borrow the rest thereby making the financing of 36 Odessa apartments 72 with the additional elasticity to the funds created.

Why I am making comparisons to Odessa is yet another farce as this money will never get out of Kyiv.

Anyway, if you fancy a punt at becoming one of the very few who will soon devour this tiny pot of money within a few days, then the State owned banks to which you should apply are Oschadbank, Ukreximbank, UkrGasBank and Kyiv Bank.

Feeling stimulated? No? Neither will the housing market!


Real estate tax to take effect from H2 2012‏

July 11, 2011

Just a quick post today to state that the real estate tax comes into effect in H2 of 2012.

Why quick? – I have a few bits of real estate I want to sell so will spend the rest of the day looking at the best ways to raise their profile in a still rather stagnant market in an effort to get them sold before the tax kicks in next year.


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