Posts Tagged ‘FDI’

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Ukraine begins to lobby DC – professionally

January 7, 2017

Many times it has been written that Ukraine would be wise to lobby Washington DC beyond the abilities of its own diplomatic mission and occasional delegations.

So it comes to pass, and probably due to a Trump presidency almost being upon Ukraine, the national leadership has decided to engage professional lobbyists to champion Ukraine inside “The Beltway”.

That said, whilst Ukraine as a State has taken its time to arrive at this decision, many of the Ukrainian elite have long since lobbied their own causes/interests within DC.

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Ms Tymoshenko outspends all others (despite her meager income according to her e-declaration.)

The Ukrainian State has chosen to spend a seemingly meager sum of $50,000 per month having BGR Group strengthen ties between the USA and Ukraine, and further encourage US investment and/or US investors to look at Ukraine.

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Not before time, and perhaps only because of who the next US president will be, has Ukraine as a State started to spend money where many of its nefarious elites have done so for years.

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The contract would seem to last for the duration of 2017.

Although this is definitely the right policy for the Ukrainian State to engage in – indeed to belatedly engage in – a reader may ponder just what returns can be expected for $600,000 per annum when considering that Ms Tymoshenko spent more than that amount in 2014, that same amount in 2015, and would appear to have very little to show for it – unless her lobbying was intended to insure very little was publicly shown regarding her.

So, what do you get for $600,000 of lobbying inside “The Beltway” (even if leveraged with a cooperative Ukrainian Ambassador and embassy)?  BGR Group and 2017 will provide the answers!

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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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Odessa Port Side shuts down

December 30, 2016

Having twice failed to privatise the Odessa Port Side plant during 2016, and with debts mounting to creditors such as Naftogaz, the decision has been taken to temporarily, or perhaps better stated indefinitely, close the plant down with effect from 30th December.

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Valery Gorbatko, the plant Director since 1986 has resigned – which for any eventual buyer or State operational reshuffle/efficiency/transparency policy for the plant is no bad thing.  Accepting that resignation promptly would be a wise move.

From now the cost to the State will be dramatically reduced to those of maintenance and salaries – minor costs in comparison to running the plant with a (currently) low global demand for product and high gas demands to produce it.

It remains an open question as to when or even if a buyer (or long term leaser) will be found for Odessa Port Side.

Some 2017 national budgetary discipline implemented before 2016 has ended?

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Odessa investment projects – Berezyne – Besarabyazka rail reconstruction

December 25, 2016

Immediately prior to the festive season getting under way, the blog was invited to the Odessa Regional Administration by a friend who is head of the Investment and Tourism Department, Roman Kozlovskyi.

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He and his team can be found on the 6th (top) floor within the rabbit warren that is the Odessa Regional Administration building.  (Thus any investor that enters this labyrinth is effectively at his mercy when it comes to actually finding their way out again.)

The result was a commitment by the blog to highlight some of the best opportunities for investment from a particularly long list.  It will also bring to the attention of certain project initiators some of the worst project offerings.  Some projects should be pushed as they are good projects for all concerned.  Others should be pushed into the rubbish bin of wishful but financially retarded thinking.

As such, ad hoc, entries will appear over the coming weeks relating to the good, the bad (and some ugly) investment projects within the Odessa Oblast

This entry highlights an investment project that seems viable.

In 1999 the rail connection between Berezyne and Besarabyazka was dismantled for reasons that would seem politically rather unclear, if criminally somewhat more understandable.

The 1999 dismantling of this section of railway thus pushed goods moving between Moldova to and from the ports of Odessa via rail to go through the Kremlin sponsored enclave and smuggling haven of Transnistria, an area that falls beyond the direct control of Government Moldova.

As such the reconstruction of the Berezyne – Besarabyazka rail link would provide a goods rail link avoiding Transnistria entirely.

Accordingly any investor could be assured both Governments of Ukraine and Moldova would be very much in favour of using this reconstructed route for commodities such as coal, fertilizers, oil, black metals and iron ore.  Indeed, reading between the lines, it is almost assuredly the case that such commodities would be immediately rerouted once the new track is in place.

Such assurances would naturally bring about numerous obvious methods for generating a return on capital employed for any investor – whichever method is ultimately agreed with the Odessa Regional Administration (there is certainly a degree of flexibility to accommodate any investor within the ORA).

It is hardly a difficult task to monitor the track usage and tonnage transported when only Ukrzaliznytsia and Calea Feratadin Moldova (both State owned rail entities) will use the track.

As is often the case, investors see most risk in the construction phase of any project.  Indeed for really large investments such as PFI schemes it is common practice to refinance a project after the construction phase is completed and that risk is thus removed.

Thus to some basic numbers – for that is what counts for any investor.  (For a full and detailed numbers breakdown a reader/investor is invited to contact Roman Kozlovskyi via the following email:  rkozlovskyi@odessa.gov.ua or the blog can provide his mobile number more privately.)

Clearly there will not be much environmental impact in the reconstruction of a preexisting rail line.  Most of what is required is already there by way of ground works and utilities.  Thus the laying of 21.5 kilometers (20 in Ukraine and 1.5 in Moldova) of track and whatever ground work is required is not an infrastructure project haunted by unknown and unseen technical issues.  The Odessa Regional Administration figures suggest 9 months to complete the project with a team of 30.

The investment sought is UAH 398256930, or about $15.4 million (exchange rate depending).  Hardly a large sum, and in fact perhaps far too small for some investors to consider.  Nevertheless, such is the low risk nature of this infrastructure project and the obvious methodologies provide that return on investment will be fairly swift and attractive, it therefore falls into the category of a good project for consideration.

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Pfeifer & Langen buy Mriya sugar mills – Ukraine

December 2, 2016

Less than 2 months ago an entry appeared regarding the exceptionally murky, decidedly criminal, and mysterious yet unknown top level protection being afforded by those with incredible clout to the investment disaster/horror story surrounding Mriya Agro Holdings in Ukraine.

An on-going and unresolved nightmare of which those at the very top have made no efforts to resolve – despite the situation going from bad to worse and the ugly image the situation projects.  Having re-read the above link, it really is an investment horror show.

Nevertheless, it appears that Germany’s Pfeifer & Langen have bought (or are imminently to do so)  the sugar mills of Mriya Agro from Prominvestbank that took control of these particular assets as collateral for past and defaulted loans.

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To be fair, Pfiefer & Langen are no strangers to Ukraine.  They have been active in the country for a decade via their subsidiary Radekhiv Sugar Ltd.  (Indeed they are active in sugar in half a dozen or more European nations.)

Clearly Pfeifer & Langen will have done their due diligence and therefore feel confident that they will be able to protect their asset – unlike the numerous well known international investors who now own Mriya and look on forlornly as the remains of that agricultural empire are slowly but surely stolen from under their noses piece by piece by previous owner structures with no resulting action by the Ukrainian political elite or law enforcement structures.

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The IMF says “No” to Ukraine – as long predicted it would

December 1, 2016

The IMF in very plain words has refused Ukraine the next allocated tranche of $1.3 billion.  The February $2 billion tranche naturally gets kicked further into the future.

This should come as no surprise whatsoever.

In February, April, June and most recently (and at length) in October, the blog has repeatedly written (and stated at closed door forums) that IMF cooperation would be indefinitely suspended due to the fact that Ukraine would no longer be desperate for the money and therefore the motivation of parliamentarians and implementing institutions alike would simply disappear – until such time as the situation becomes so acute that they are once again forced to act.

“…….meeting the November 2016 and the $1.3 billion IMF tranche requirements appears optimistic, then meeting the obligations for the scheduled February 2017 tranche of $2 billion is perhaps as remote as riding a unicorn naked through the centre of Kyiv without once being snapped by a smartphone.”

A told you so statement – and the long list of issues in the above-linked October entry remain to be solved as do the repercussions it outlines.

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Though the above entry makes forecast of 2017 IMF related issues, it wisely steers clear of any prophecy regarding a return by Ukrainian to its obligations under the IMF agreement – and thus a return to IMF funding.

It is thus time to be foolish and/or reckless and forecast just how long it will before before the Ukrainian situation becomes once again so dire that parliamentarians and implementing institutions are forced to put their ingrained fecklessness to one side and act with the integrity expected of them – but of which they are consistently absent unless truly without any other options.

Short of something akin to force majeure coming from either The Kremlin or Washington DC dramatically changing the environment within which Ukraine finds itself, there is no urgency to address Ukrainian obligations to the IMF in 2017.

(The only other “incentive” would perhaps be the “Firtashisation” – or privately conveyed possibilities thereof – to powerful and influential Ukrainian figures that nefariously control Verkhovna Rada votes and who have “strayed” within the laws of European nations.)

Certainly nothing approaching obligation compliance will begin before Spring 2017 – the constituency will first be allowed to emerge from a winter under radically increased utility pricing and the application of soothing subsidies – which lends to the ability of the current government and majority coalition to survive the increasingly cacophonous noise relating to early Verkhovna Rada elections.

Realistically (in the current environment) it seems highly unlikely that Ukraine will make any great strides toward getting the IMF agreements back on track until Autumn 2017 at the earliest – if at all in 2017.

Thus predictions for the IMF-Ukraine lending agreement to recommence?

Perhaps 2018.

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Chernobyl reactor entombed at last

November 29, 2016

A very short entry to firstly acknowledge a major piece of engineering, and secondly the symbolic entombment of a toxic Soviet legacy within a western funded and built sarcophagus – (Sarcastic readers are now pondering whether the Verkhovna Rada should be next perhaps?)

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The full facts and figures can be found at the EBRD website, together with a video showing the final settling of the sarcophagus in place, outlining what a major feat of engineering the project has been.

Bravo to all concerned.  A truly significant achievement.

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