Posts Tagged ‘import and export’

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31 candidates to replace Misha Saakashvili as Governor of Odessa. Who’s who?

December 16, 2016

Although most readers will not be particularly interested in the replacement for Misha Saakashvili as Governor of Odessa, having written an occasional  few lines on the subject as potential candidates expressed interest, a full list therefore follows now that candidate applications are closed.

Surprisingly Pavel Zhebrivskyi, the former head of the Donetsk military and civil administration is not listed.  Sadly, for his eccentricity, flamboyance, questionably effeminate nature, and pure entertainment value Garik Korogodski is also absent.

Those successfully registering their candidacy are as follows (and appear in no particular order):

Igor Romanenko, Alexandr Vashenko, Alexandr Ostapenko, Sergei Pomazan, Elizabeth Pyshko-Tsibylyak, Volodymyr Levitskyi, Artem Vaschilenko, Vladislav Grigorchyk, Gennady Chekita, Dmitry Sokolyanskyi, Roman Saromaga, Anatoli Vorohaev, Volodymyr Gavrish, Yulia Melnik, Vasily Horbal, Igor Smirnov, Alexandr Tymoshenko, Valeri Stepanov, Dmitry Spivak, Maxim Berdnik, Oksana Tomchuk, Maxim Stepanov, Alexandr Vinglovskyi, Igor Skosar, Sergei Mazur, Petro Lykyanchuk, Hanna Trifan, Yevgene Chernvonenko and Yuri Chizhmar.

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The most (in)famous among the candidates was the first to throw his hat into the ring, Yevgene Chernovenko – a member of Tymoshenko’s first government and also a former Governor.  A man that if allowed to emerge the winner will have clearly have had to strike a deal with The Bankova to do so as his loyalty to the president is not exactly robust historically.

Gennady Chekita may have no loyalty issues as far as The Bankova is concerned (he is the MP for the Malinovsky district elected under Block Poroshenko and Verkhovna Rada Economics Committee member) but it is questionable if he will to be allowed to emerge the winner as it would mean a by-election for his single mandate seat – which may not go the way of Block Poroshenko.

Another current MP in the Verkhovna Rada is Yuri Chizhmar of the Radical Party – and therefore unlikely to get the tacit nod from The Bankova to emerge as the top candidate for a region as strategic as Odessa (both geographically and by way of large, healthy, illicit money channels).

The current Mayor of Balta, Sergei Mazur is also a candidate.

Also among those holding local governance office previously are former Governor Vasliy Horbal, former Vice-Mayor Anatoly Vorohaev, a former chairman of a Regional State Administration, Volodymyr Gavrish and former City Deputy Dmitry Spivak.  Also former Deputy Governor of Luhansk Elizabeth Pyshko-Tsibylyak.   Last but by no means least from the civil service , former Odessa Deputy Governor and Deputy of the Tax Administration Maxim Stepanov.  Also former Deputy Chief of Staff Lieutenant General Ihor Romanenko is noted for his inclusion, and before leaving matters military, “Cyborg” (Donetsk Airport veteran) Alexandr Tymoshenko also appears.

There are also several candidates from the current Odessa Regional Administration, Sergei Pomazan, Yulia Melnik and Volodymyr Levitskyi.

Of the remaining names of any note (without any research) Chairman of the Ukrainian Business Support Centers (and “widows son”) Artem Vaschilenko then leaves but one.

The last name is Alexandr Ostapenko a former City Deputy and former Deputy Head of the Regional State Administration.  Of all the names, prima facie, Mr Ostapenko is perhaps the individual most easily identified as suited to the methodical, systematic, bureaucratic, boring work associated with the office of a regional governor.

Nevertheless, who ever emerges from the “competition” to replace Misha Saakashvili will be ranked first and foremost by their loyalty to the president.  Any dubious history and their ability to do the job will be of secondary importance.  There is simply no way an oblast like Odessa will be allowed to have a governor that is not loyal to the president first and foremost.

All hats are now thrown in the ring and therefore a reader may perhaps tentatively decide to rank them by way of loyalty to the president, overt party affiliation (if any), and latterly ability, for within that scoring matrix is any real competition for the post.

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A tangled web – The Ukrainian MIC

November 28, 2016

There are many (in)famous Ukrainian politicians, “businessmen” and recognised organised criminals historically associated with gun running and the defence industry/MIC of Ukraine.

In entries past, the names of Semyon Mogilevich, Leonid Minin, Sergei Mikhailov, Leonid Wulf, Alexander Zhukov, Vadim Rabinovych, Leonid Lebedev, Mark Garber, Kuzma Medanich, Andrey Vazhnik, and Anatoliy Fedorenko, are to name but a few “headliners”.

Since those gun running 1990s/2000 decades have passed, in recent years the Ukrainian military and MIC have been forced to undergo radical changes and retooling – nothing spurs such action as a confined yet nevertheless hot war with Russia in the eastern regions.  Also, no longer do trains loaded with armaments sat on rail sidings at Odessa Port go without more than a few photographs and a questions by both public and media alike.

That is not to say that whilst the hollowed out military is by no means hollow anymore, that the endemic corruption that enabled the gun running of the 1990s/00s has been systemically and comprehensively addressed.  Indeed now large lumps of GDP are heading to the military and MIC, and will continue to do so for years to come,  the eyes of the “rent seekers” so attuned to guzzling from the teat of State subsidies and embezzlement of State funds will naturally seek opportunities therein.

So too, it has to be said, will the Kremlin seek to infiltrate further such MIC structures.

Putting the military to one side, the Ukrainian MIC which is still predominantly State rather than private in its composition, will at some point surely be subjected to some form of scrutiny when it comes to the abilities and loyalties of those working within.  With more than 100 State MIC subsidiaries operating under the State Ukrboronprom umbrella there are a lot of managers with access to information that “others” may find “useful” and some skill sets that are clearly not optimal for their roles.

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Ukrboronprom is currently headed by Roman Romanov (a former car dealer who led the presidential election campaign for Petro Poroshenko in Kharkiv).  Beneath him spreads a large organagram of managers across the one hundred plus SOE subsidiaries.  Whether Mr Romanov has been either tasked or is even able to assess the professional competency and patriotic leanings of the management of those companies which collectively form the Ukrainian MIC is unknown.  A “single sweep” would be far from effective if that is all that results anyway.

Among the management of such subsidiaries certain names catch the eye being from Odessa – for example, Alexander Volkov.

Mr Volkov is currently acting head of Promoboroneksport – a subsidiary that has been busy with BMPs in Jordan and MiG 24V helicopters to Uganda throughout 2016.  All appears to have contractually gone well, and thus it seems very likely that Mr Volkov will become the substantive head of Promoborneksport.

Mr Volkov is best known is Odessa as being the long standing regional party chairman of the Social Democratic Party of Ukraine (united) – or SDPU(u) – and his work at the ports and roads industry.

The SDPU(u) is a party long and closely associated with the nationally loathed Viktor Medvedchuk (Godfather to one of President Putin’s children).

Promoboroneksport is a subsidiary of Ukrspetsexport, which is in turn a subsidiary of Ukrboronprom.

Ukrspetsexport is also headed by a native of Odessa, Pavel Barbul.

Mr Barbul is better understood by his father’s associations.

Alexie Barbul has long been associated with roadworks.  He once headed the roads department at Odessa City Hall, thus not only making him a close acquaintance of Mayor Turkhanov (who is well acquainted with several names listed at the beginning of this entry) but he is also with the company “Growth” (winner of many Odessa tenders) associated with Mayor Trukhanov, the aforementioned Alexander Zhukov, and Odessa’s most (in)famous mafia Don, Alexander (Angel) Angert.  The involvement in road infrastructure also meant that Alexie Barbul was well acquainted with Mr Volkov, who now heads a subsidiary subservient to that Pavel Barbul now controls.

Thus looking at recent, current and future appointments within a clearly tangles web, a reader may come to one of two conclusions – though neither are in fact mutually exclusive.

The first, with names such as Medvedchuk, Trukhanov, Zhukov, Angert nestling behind Messrs Volkov and Barbul, is that the Ukrainian MIC is subtly (or not so subtly) “zoned” – with the Odessa controlled “zone” being that of export, whether or not that export actually leaves from Odessa is irrelevant – this is to do with regional structures of power/influence, and probable sources of hierarchy in rent seeking and embezzlement arrangements.  (A look at the “Kharkiv names” would suggest that the “Kharkiv zone” will be far more production orientated – the same rules applying).

The second conclusion a reader may reach, considering the curriculum vitaes of many of the old names and their associations with organised crime, gun running historically, and with many a very questionable definition of “patriotism”, is that more of the same old schemes may well blight the international headlines in the years hence to the detriment of Ukraine.

A reader may also decide to keep a watchful eye upon the centres of R&D that fall within current university specialised departments.  Would any be surprised to see such centers, boffin brains and facilities included, somehow removed from the university and entirely (yet quietly) privatised, or subjected to a PPP arrangement where the private, rather than the public, in any partnership would seize control and almost all profit – with the Ukrainian taxpayer assuming all investment costs and/or loses?

How clear the horizon for such State-Private initiatives such as UaRpa at the forefront of military tech R&D?  Whose “zone” will it fall into, and when?

A reader may ponder given the direct involvement of several sovereign nations, notwithstanding NATO, in the development of the Ukrainian military and MIC whether they too are viewing managerial appointments within the MIC with the same cynicism as displayed within this entry – or not.  And if not, why not?  They have been active in Ukraine now long enough to spot a bad seed germinating, and currently still have the leverage to nip such dubious, yet increasingly obvious internal structuring in the bud.

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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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Odessa Port Side privatisation – Group DF (predictably) raises its bidding head

September 16, 2016

During the 13th YES conference in Kyiv, President Poroshenko repeated once again the intention of Ukraine to privatise many State Owned Enterprises (SOEs) (most of which are a drain upon the State through subsidies and corruption).

The first on the list is Odessa Port Side (OPS), which Ukraine has already once tried and failed to privatise a few months ago due to lack of interest.  As stated many times by the blog, considering the outstanding debt to oligarch in exile Dmitry Firtash of $251 million, the best possible sale price would be between $350 – $400 million and nothing like the ridiculous starting bid price of $527 million the Ukrainian State initially put forward.

OPS will undergo a second attempt at privatisation very soon – this time the Ukrainian State opening bid price is a dramatically $150 million, a figure that is likely to see something like competitive interest occur – and possibly reach the $350 million(ish) the blog notionally qualified OPS asset worth at so very long ago.

The claims of Ihor Kolomoisky regarding OPS ownership via a previously quashed privatisation have been dismissed by the courts, leaving the major issues as the debt to Mr Firtash and the clauses within any purchase regarding asset investment, workforce etc for any potential bidders.

OPS has long been a State asset that both Ihor Kolomoisky and Dmitry Firtash covet, neither having been shy about their desire to own it historically.

Of the foreign interest muted, Norway’s Yara Norge, US-based IBE Trade Corp, Koch Fertilizer LLC, CF Industries Holdings Inc, and Poland’s Ciech S.A etc, missing any mention has been Dmitry Firtash’s Group DF, or Ostchem, (significant among the and other subsidiaries under the Group DF umbrella).  Perhaps with Mr Firtash being an (in)famous Ukrainian oligarch he is/was seen as a potential domestic bidder regardless of the long-standing foreign homes of his corporate machinery.

Indeed little is mentioned of Mr Firtash since he became marooned in Austria following a US attempt to extradite him following an indictment against him being opened in 2014.  Having checked with people within the State Department only a few weeks ago, US policy toward Mr Firtash remains unchanged, thus Vienna looks likely to remain home for some time.

Boris Krasnyansky

Boris Krasnyansky

Nevertheless, it has become clear via Boris Krasnyansky of Group DF during the YES conference, that there remains a real interest in purchasing OPS.  “For our business in the production of mineral fertilizers it is a logical asset for the completion of the corporate structure and is therefore definitely interesting.”

No surprise.

Perhaps even less of a surprise when Group DF can write off the $251 million it is owed should it become the owner of OPS which owes it.  Internal write-offs happen all the time, particularly within somewhat opaque accounting structures.

Few would doubt Mr Firtash can afford it too?  He is a $ billionaire oligarch after all.

Well maybe he can, and maybe he can’t.  There is a significant difference between asset worth and cash flow/cash on hand.  There is also a question over what Mr Firtash owes others too.

In making his $155 million/€125 million bail in Austria, that available cash came via Vasily Anisimov (Chairman of the Russian Judo Association) – “I have known Mr. Firtash for a number of years, though he is neither my friend nor business partner.  I confirm that I loaned 125 million euros to him. This was a purely business transaction.

Undoubtedly a reader is now considering President Putin’s affection for Judo, and how and why the Chairman of the Russian Judo Association would lend “neither a friend nor business partner” so much cash, and the contractual details of this “purely business transaction“.

Whatever the case, Mr Firtash was clearly unable to raise that cash sum himself back in 2014.

Perhaps cash on hand issues have improved since then, but if not, where will anywhere between $150 and $400 million come from to buy OPS, and can the gas debt simply be written off within the Group DF structure if it owes money elsewhere?

Who would it owe money to?

Where has Group DF and Ostchem found its money before?

Historically it has come from Gazprombank whilst directly/indirectly under the control of Yuri Kovalchuk (currently under western sanctions) and euphemistically known as “Putin’s personal banker”.  Gazprombank has a reputation of being the “collective Putin” pocket bank.  That bank has had at peak, somewhere between $7 – $12 billion in lines of credit open to Mr Firtash’s business empire.  In 2011, for example, Mr Firtash owed Gazprombank $2.08 billion but it went on to lend another $2.2 billion (about 25% of the bank’s total capital.)

Perhaps those debts have been repaid – perhaps not.  It is rumoured that Mr Firtash’s gas intermediary business made between $1 and $2 billion per annum, but assuredly that money was not all his.  In such deals, there are outstretch hands – and everybody’s got to eat.

The question therefore is where and who the money comes from for any Group DF (or Ostchem) bid regarding OPS if the apparent cash flow issues surrounding 2014 bail payments have not been overcome?

As those recognised by the Ukrainian State as “aggressors” will not be allowed to compete and win in any (strategic) asset privatisation (read Russia), how will Group DF be viewed legally, politically and economically as a corporation if still in hock to Gazprombank for $ billions – even if a different lender provides credit for any OPS purchase?

If Group DF is now with more than enough cash on hand without lines of credit or loan borrowing, how would the Ukrainian constituency react to selling OPS to a man widely known to have close Kremlin associations, pro-Kremlin views, and perceived to have been involved in numerous nefarious schemes?  Currently he personally is out of sight and therefore, for the most part, out of mind – even if his business partners and rented politicians are less fortunate when it comes to continued public scrutiny.

Fortunately for Ukraine, even if holding the most transparent OPS privatisation, being the highest bidder does not mean automatically becoming the owner – there is thus significant wiggle room to avoid that outcome if necessary.  Further, it is not as though OPS has to be privatised at any cost, whether that cost be counted in $ or political points (albeit understandable to get it off the government books when it requires so much modernisation and subject to management that is perhaps not the best available).

The end of September will see the second attempt to privatise OPS begin when interested parties will have to declare their interest.  By the middle of November, OPS may well have a new owner.  It probably won’t be Mr Firtash – but never say never.

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Yushni grain terminal funding approved

September 8, 2016

It has been more than a year since the last entry relating to the plans (and ubiquitous intrigues surrounding those plans) for a grain terminal at Yushni Port.

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(Needless to say those intrigues regarding Cargill, Delta Bank, dredging of what is already the deepest port on the Black Sea etc remain.)

Regardless, plans and financing for a new grain terminal at the port now appear to have been finalised by all parties according to the Facebook page of Artem Chevalier, a former Deputy Minister of Finance – “The Council of Directors of the Bank has just approved a loan of $ 37 million (in addition to the same loan from the IFC – International Finance Corporation), which will focus on the construction of a grain terminal in the port of “Yushni”with a maximum capacity of up to 5 million tons of grain year.  

This project has everything.. An active and transparent Ukrainian investor, a major international player, support from the government, the participation of international financial institutions, environmental audits, energy efficiency, etc.”

To be clear the EBRD finally approved a loan of $37 million, matched by the IFC, with about $100 million from Cargill (which is approximately the same figure the Ministry of Finance allowed Cargill to reclaim from Delta Bank before winding up the bank and leaving the Ukrainian tax payer with the Statutory Insurance bill to pay to depositors) .

As the above link stated more than a year ago, Cargill was also to acquire a controlling 51% stake in MV Cargo, the major operator at Yushni.  (MV Cargo, unsurprisingly, is owned by Cypriot company – Kornleks Impex Limited.)

A new grain terminal capable of dealing with 5 million tonnes per annum will (fairly) soon grace the dockside a Yushni.

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The imminent changes at the top occurred – Now what?

August 29, 2016

A few days ago an entry appeared forewarning of changes at the top within the Ukrainian political and civil service elite – forecasting that Boris Lozhkin would move on from Head of the Presidential Administration (as he has been trying to do for some time, wanting to return to the business world) and that in all probability Igor Rainin would cease to act as Head of Kharkiv Regional Administration and replace Mr Lozhkin (due to Mr Rainin being the least controversial choice for those that will be remaining within the Presidential Administration – and also the easiest to replace holding an Oblast level position).

It went on further to suggest Mr Lozhkin would not be completely released from the Presidential grasp/circle but could very well be appointed head of the newly invigorated National Investment Council.

Lo, all such predictions came to pass on 29th August – with the minor deviation of Mr Lozhkin assuming the position of Secretary to the National Investment Council.  (Nevertheless, hopefully most readers would agree the predictions made were close enough for a free to read blog.)

Mr Rainin will be a competent, adequately discreet (and fairly discrete) safe pair of hands as Head of the Presidential Administration.  Shocks to the system he will not cause.

Mr Lozhkin thereby leaves the Civil Service (prior to e-declarations going live with effect from 1st September) yet remains within the Presidential grasp and therefore presidential team no matter how indirectly it may appear.  Regardless of title and position, his unofficial “shadow rank” within the elite of the Ukrainian elite firmly keeps him within the inner sanctum of trusted Presidential advisers with easy access to the body (President).

He is now therefore free to return to the business world without annoying e-declarations and other such bureaucratic requirements, whilst also promoting (and to be blunt he will be driving) the National Investment Council.

Presumably the existing Investment Support Office will be rapidly (although probably not officially) subordinated to the NIC – and by extension to Mr Lozhkin.  Reading between the lines of Prime Minister Groysman’s statement regarding Mr Lozhkin’s new position such inference can certainly be drawn.

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A reader may ponder who Mr Lozhkin will attract to the newly invigorated National Investment Council as he is very well though of internally and externally of Ukraine – and it was he that invited and convinced the foreigners that formed part of the Yatseniuk Cabinet.  Ergo it would be no surprise to see some very competent people appear as leading lights within the NIC.

Clearly with Ukrainian GDP growing at about 1.5% per annum that is not enough to provide a “feel good” factor among the electorate to return President Poroshenko (and parliamentary team) to power when elections arrive.  Annual growth of approximately 5% however could well (and probably would) do so as long as elections can be kept to their projected timelines per statute and not forced to arrive early.

Although it may be wishful thinking, 2.5 years with GDP growth of 5% (or more) consecutively wins a lot of votes – especially in mercantile cities like Odessa.

Mr Lozhkin will therefore be faced with the same existing statute that prevents significant FDI that has frustrated Governor Saakashvili, whose long list of legislation that requires repealing and/or amending has seen no traction within the Verkhovna Rada.

It seems unlikely that Mr Lozhkin will succeed without forcing some (if not the majority) of the very same statutory and de-regulatory issues already raised and submitted to the Verkhovna Rada by the Odessa Governor.  The question therefore is whether Mr Lozhkin can gather Verkhovna Rada momentum swiftly in order to give himself a chance of changing the economic fortunes in time to support the president by the time elections come around?

Further where is FDI going to be most effective when it comes to national development (and no doubt also in his mind, winning the Poroshenko political entities votes)?

The days of mining and metals as economy leaders, and with both being major employers (and exporters) are on the wain.  Road and rail infrastructure projects, of which there are innumerable, are potentially significant employers.

The necessity to bring the Ukrainian Military Industrial Complex to the modern day also presents significant opportunity.

The IT industry which suffers no oligarchy market capture, and boasts a significantly high proportion of globally recognised qualified people, simply has to be left to do its innovative thing – with support where necessary/possible, but otherwise unobstructed or interfered with.

Agriculture is and will remain a major economic driver (and should any reader have $150 million(ish) for investment in a 230 hectare, high tech farming corporation – this blog is aware of one discreetly for sale “off market”).  Thus the agro-industrial complex will have to be a top priority for FDI if the sector is to become more efficient.

The Ukrainian aerospace industry appears to be doing fairly well, but can do much better with some smart investment and a “harder” sales initiative.

The continuing clean-up of the banking sector by the NBU presents an ever-improving market place for entry (and if a reader has $40 million(ish) the blog is aware of a particularly healthy bank for sale “off market”).

There is of course the impoverished yet potentially massive tourism industry (perhaps with the “added incentive” of legalised gambling returning one day).  The blog is aware of numerous experienced international gambling entities waiting to enter Ukraine – Turkey, Israel, Georgia etc have all contacted the blog regarding legislative updates and visited potential locations for casinos in the past 9 months.  FDI money for this there is – legislation prevents.  (Should a reader have $12 million(ish) the blog is aware of a small gated and profitable beach front resort for sale “off market”).

There is also the expansion of the existing pharmaceutical and chemical industry that should not be overlooked – neither should energy extraction/production/infrastructure.

(Getting out of the way of SME’s wherever possible will also bring about swift local economy benefits, but clearly this falls outside of the competence of a National Investment Council charged with finding and protecting big money investment.)

Thus it is not only going to be a question of how many $ billions Mr Lozhkin can attract (and protect) by way of FDI (and in what time scale), but also what areas are deemed a governmental priority and his ability to nudge investors that way.  Investors can be strange creatures and want to invest in areas that are not governmental priorities – unsurprisingly.  Some have no interest in PPP, others only in PPP.  Some are quite rigid in their internal governance and expectations, EBRD etc., where as others, for example “Investment Fund X”, may be far more flexible.

Having now written all this, a reader may perhaps ponder just how much time Mr Lozhkin will have to return to his own businesses, and the business world – which was the reason for his wanting to leave the Presidential Administration in the first place.

(As an aside – Teasers for the “off market” assets mentioned (and others) are available for investors subject to the usual NDA/contractual requirements.)

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State Fiscal Service – A much tighter leash required?

August 24, 2016

Last week the blog had a chat with an old friend not seen in several years – The Chatham House Rule applies.

This friends also happens to be an acquaintance of Roman Nasirov the Head of the State Fiscal Service – and the man responsible for 4 (and counting) reprimands issued to Yulia Marushevska, Head of Odessa Customs – and thorn in the side of long-standing nefarious and criminal schemes therein.

There is open warfare between Ms Marushevska (representing something approaching transparency and progress) and Mr Nasirov (representing the retarded, cancerous and corrupt old system).  Their Facebook diplomacy is bitter and barbed – as their timelines unambiguously document.

Ad hoc commentary regarding this on-going battle can be found sprinkled throughout historical entries of the blog – just use the “Search” option on the “Home Page” if interested.

Anyway, the chat revealed a Roman Nasirov that is incredibly bright, was a very good  and high earning professional in the private sector, and generally a reasonable and reliable individual – that is until he was offered and accepted the role as head of the State Fiscal Service where upon the blog’s acquaintance says of Mr Nasirov that he has become an entirely different and thoroughly odious person.  The conclusion being that he has sold his soul (for a lot of money) and continues to do so.

It happens.

Mr Nasirov is not the problem, but is the current face of the problem.  Those to whom his soul was sold are the problem.  That is not to excuse Mr Nasirov of his crimes (literally) whilst doing the bidding of others.  He is entirely responsible for the choices he has made, and continues to make.

There are of course many “interests” that would like to see Ms Marushevska sacked, yet thus far Mr Nasirov has not had the courage to do so.  To be fair, in doing so the ire of the very active activists, (not to mention militants) within the civil society of Odessa would certainly result.  The US, which is very supportive of the anti-corruption efforts made by the team led by Ms Marushevska, would also be far from impressed to see those reformist gains rolled back following any sacking.  The EU would also raise a concerned eyebrow should progress be reversed.

However the SFS under Mr Nasirov’s control is naturally not entirely focused on ousting Ms Marushevska – especially as for the time being it can, and is, circumventing her.  The ports of Odessa are also not the only area in which the SFS has a particularly cancerous touch and from where fortunes can be solicited.

The issuance – or not – of VAT is a major problem for those that have to deal with the SFS seeking legitimate refund, and also a major source of corruption for those that abuse the VAT system.

A simple example of such abuse regularly occurs within agriculture.  A “farmer” harvests 5000 tonnes of grain – although nobody ever checks – so he claims to have harvested 25,000 tonnes of grain.  This grain is placed in a number of silos and exported as part of a much larger quantity.  VAT is claimed for the 25,000 tonnes of grain that was not harvested and duly refunded to the “farmer” – with the corrupt farmer and accomplice SFS officials making millions from the fraudulent VAT returns.  A very simple method from among many far more complex schemes.

For those much larger entities, particularly reliant e-VAT systems, failure to insure the SFS gets “its share” results in being targeted by the SFS as occurred in Odessa on 23rd August – prima facie running against the current agreement between Government UA and the major taxpayers in the nation.

When the declared policy of the government is to redirect the Ukrainian economy toward the drivers of IT, and agriculture, the SFS pressuring IT and agriculture would seem to be entirely counterproductive to government policy – yet that is clearly beginning to occur.

nasirov

A reader may ponder why Mr Nasirov is not sacked considering his orchestrated efforts to frustrate any form of transparency or adhere to the governmental policy line  – as sacked he most definitely should be.

Indeed he has been “called out” numerous times by business, diplomats and civil society for his lies and nefariousness both publicly and privately, so why is he still running the SFS?  The answer naturally lies behind the grubby political curtain in Kyiv.  Not only do the corrupt in Kyiv do very, very well from the continuing corrupt money channels of Odessa, but the retaining of Mr Nasirov as head of the SFS was apparently a requirement of the Will of the People Party (an Ihor Kolomoisky production) to vote in line with the slim majority of the current coalition when it matters.

A reader may wait in excited anticipation for Mr Nasirov’s e-declaration submission of assets on 1st September (when the e-system is supposedly back “on-line” having stupidly been activated before it was fit for purpose).  Most will anticipate a work of science fiction – perhaps rightly – equal only in its plausibility to the limp excuses Mr Nasirov offers when caught actively obstructing both transparency and actual government policy.

Whatever the case it seems unlikely that Mr Nasirov can yet be removed from office despite the fact that the SFS remains an entirely unreformed and a thoroughly cancerous State institution which is seemingly out of control under the leadership of Mr Nasirov.  It remains to be seen how Prime Minister Groisman will manage to “manage” a man clearly tasked with undermining reform and prolonging the old scams.

As the very disillusioned friend stated, it was that in the private sector when shaking hands with Mr Nasirov, a deal was done – now however it seems that when shaking hands with him in the public sector, it is necessary to check to see whether you still have your watch.   Power corrupts etc.

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