Tuesday, January 31, 2006

Some more allegations

This is from the January 25th issue of Zavtra:

Back in autumn of 2005, Yanukovich and Timoshenko reached an agreement on
everything with the Kremlin. By February of 2006, the gas crisis had to reach its apogee including empty underground reservoirs, dead plants and mines, infuriated
Ukrainian people and fuel Maidan brandishing pieces of the sacred gas pipeline. At that moment opposition leaders had to come to the stage undertaking a high intermediary mission and reaching a happy agreement on everything. This meant
that they would win the parliamentary elections scheduled for March 26 easily.

Whereas Yanukovich claimed mostly political mediation Timoshenko was also going to become a gas master establishing a new market operator to replace RosUkrEnergo that had grown old. In alliance with semi-forgotten ITERA (this company was allied with former CEO of Gazprom Rem Vyakhirev and had friendly relations with Timoshenko back in the mid-1990s when the future orange princess was head of the trader company United Energy Systems of Ukraine) the former Prime Minister of Ukraine was going to supply Central Asian gas to Ukraine at
$115-120. The generous Kremlin promised to arrange reliable transit. This was not incidental that all criminal proceedings were dropped when the gas crisis was in full swing because there was no need for legal actions anymore.

So not only are there allegations about Yuschenko's brother but there are also allegations about Tymoshenko and the gas deal. It is important however to remember that these are allegations that must be proven.

Politics is a dirty business here in Ukraine as it is in Russia. Anything is possible and any kind of evidence may surface against anyone and anything has been used here to influence politicians up to and including murder. (Ukrainian politicians have had the highest rate of automobile deaths in the world--a for instance. Explanation? An expertise on the part of the security services in car accidents. Would apply to retirees and moonlighters. "Situation Wanted: Have car, will travel.") So about anything is possible.

So why do we include these allegations here? Because they do have an affect on the political atmosphere here at the very least and they can end up influencing policies and elections even if they later prove to be untrue. So they are important in their own right. But they should be taken with a degree of skepticism until they are proven. And that might take some time here given the political nature of the courts. (The passage of time without any further information coming out is an indicator now that the press is free.)

Of course they might end up being true too. And some are more credible than others are. But we'll wait for the evidence before saying anything definitive about it.

Monday, January 30, 2006

Under-the-table gas deals

On 1st January 2006, the day Russia turned off gas valves supplying Ukraine with its gas, Ukraine's Ministry of Foreign affairs [MFA] issued the uncompromisingly strongly worded "Statement of the MFA of Ukraine on Co-operation in Gas Sphere"

Some quotes:

"On the first day of 2006, the Russian Side, violating its contractual obligations started to decrease the volume of gas supply to Ukraine and
EU member-states..

In such a way, a scenario was launched, with the aim to exert economic pressure, blackmail, and, ultimately, destabilize the Ukrainian economy and disrupt Russia’s gas supplies to consumers in EU countries...

The regrettable facts of demonstrative neglect of the contract in force and decreasing the volume of gas supply display the existence of certain forces in Moscow that spur the country on the way of unpredictability and blackmailing in regard of consumers in all countries...

The intimidations sounded by the statement of the MFA of the Russian Federation of January 1, 2006, are merely intended for poorly informed Russian citizens.."
On 3rd January 2006 Presidents' Yuschenko of Ukraine and Voronin of Moldova issued a statement: Again, some quotes:

"Although terms of gas supplies to Ukraine and Moldova differ, we believe this is a premeditated scenario of energy pressure and blackmail which is intent to undermine economic development and cause social destabilization in our countries.

Ukraine and Russia had signed several bilateral agreements and contracts that clearly stipulate principles of cooperation in the gas sector until 2013.

Ukraine and Moldova call on the European Union to help our countries:
1.resume talks with Russia with the participation of international experts;
2.gradually phase in market principles of cooperation;
3. use European pricing methods to set a price for Russian gas;
4. invoke a moratorium on gas prices before the completion of talks;
5. continue transiting gas to European consumers in accordance with existing bilateral documents

Just a day later, all differences between Russia and Ukraine were indecently quickly resolved, and the ambiguous and vague 4th January agreement cobbled together and signed by Alexei Miller of Gazprom and Oleksiy Ivchenko of Naftogaz Ukrainy in Moscow. Murky RosUkrEnergo was to be the monopolistic provider of all natural gas to Ukraine.

Why did it all happen so suddenly?

Well, an article in the Kyiv weekly 'Svoboda', reveals that on 3rd January, a few hours before the signing of the agreement, $53m were transferred by RosUkrEnergo via Raiffeisen Bank, to the account of Petrogaz, a company registered in the United Arab Emirates. Petrogaz is owned by Viktor Yuschenko's brother, Petro, a parliamentary deputy candidate in the NSNU Party led by Yuriy Yekhanurov, according to information circulating in the Ukrainian parliament. Copies of bank payment slips have come to light on the WWW.

URA-Inform Website posted information last Tuesday that on 31st March 2005 Oleksiy Ivchenko, head of Naftogaz Ukrainy, signed two agreements enabling Petrogaz to purchase 215Mcu of Turkmen gas at $28/Tcm..
[Current EU gas price is $200+]

On Tuesday night/early Wednesday morning URA-Inform' s offices were gutted in a fire...

[Source: http://www.svoboda.com.ua/]

More proposal

Actually, I think the better title for the series would be "Ask Victor Yanukovych." So here goes:

Pictures of the people on the square, babushkas smiling their shiny-faced smiles, flag wavers and the rest. Some music of the Maidan is played.

Narrator: "Beginning Novermber 21st, people began to gather on the square in numbers that would quickly reach the hundreds of thousands. They gathered on the Maidan to protest a fraudulent election and a corrupt regime. They gathered to take back their rights..."

Cue the sound of tanks (or maybe the sound of a number of marching boots...maybe that won't play well in the east...maybe wouldn't want it to play in the east...haven't thought this out...)

Narrator: "...But on November 28th, while the square was filled with people, the government ordered military units from outside of Kiev to converge on the Maidan. Those units were on the move and were only stopped at the last minute by the actions of a group of patriot Ukrainians.

"What were those troops going to Maidan for?

Ask Victor Yanukovych."

A commenter asks if these would be played on TV stations owned by some of the eastern interests? Maybe not but I don't think they would be useful in the east. Many there would simply say, "Well, those who stopped them weren't patriots and they should have cleared the whole CIA supported crowd off the square."

This can be laid at Yuschenko's feet and should be. That there haven't been any kinds of attempts to bring the east into the fold at all is a real serious failing of Yuschenko and his government. And this is after his perfect pitch during the revolution. "I ask the PM to bring in more people from the east. We will feed them and make them warm and tell what this is all about," is the kind of thing he said.

So they wouldn't be effective in the east anyway.

Saturday, January 28, 2006

A modest proposal

While the negotiations are ongoing--or not, depending--on LEvko's sensible proposal, I have a more modest proposition, one that might happen a lot faster. I propose that Yuschenko and Yulia's parties, NSNU and BYuT, respectively, join together in an ad campaign directed at Yanukovych. You don't have to join hands and sing of peace and reconciliation to do this, guys. Just join forces to fire as they bear.

And I have an idea for a series of commercials to get the gears moving. Call them, "Did you know?" Unfortunately, I don't have time to go into it until Monday. I'll post it then.

Friday, January 27, 2006

Orange coalitions and the resurgent Party of Regions

The Russia-Ukraine gas crisis is diverting attention from what should be uppermost in Ukrainian politicians' minds - the looming 26th March Parliamentary elections. A lot of bad blood exists between former orange partners NSNU and BYuT, but expendiency will override personal animosities [if only temporarily] and a coalition will be cobbled together quite soon. I'm not sure whether this will repair damage done to orange partners' overall ratings since Tymoshenko's sacking last September.

It is becoming more apparent that Yanukovych's Partiya Regioniv [PR] will be the largest single party by a significant margin in the newly-elected VR. In the event of a PR-NSNU or PR-BYuT coalition, then PR would dominate any new cabinet and the direction of its policies - the orange portion of the coalition would be a mere make-weight. There is a strong likelyhood that some deputies of NSNU or BYuT in any such coalition in the newly-elected VR would soon defect to the remaining orange opposition party and the ruling coalition would soon disintegrate. The orange partners may well loose even more support in any repeat elections caused by the inability of a sustainable majority to be formed in the VR.

So for Yush and Yulia, an abbreviation used by Margaret Thatcher may be applied: "TINA" - 'There Is No Alternative' - but to come together again.

As Scott mentioned in an earlier posting, Party of the Regions is certainly a target-rich environment. Many of its members are drawn from the power elites of the Donetsk region who won the battles for domination and influence of companies and assets in the early years of post-Soviet Ukraine. These battles included grave crimes including extortions and murders. When Yanukovych became governor of the Donetsk oblast in1997, the struggles between various factions became more ordered and 'civilized,' and violent crime declined somewhat.

PR is primarily funded by Ukraine's richest oligarch, Rinat Akhmetov, whose business empire employs hundreds of thousands of Ukrainians. Its March 2006 Parliamentary election party list reads like a rogue's gallery of Ukrainian politics, and warrants closer scrutiny. Of its top hundred names, two-thirds represent just two east Ukrainian oblasts or regions - Donetsk and Lugansk oblasts, [out of a total of 24 oblasts in Ukraine]. One commentator calls them: "the political fist of just one region." A significant portion of the remainder are from Kharkiv oblast.

Fifteen of the hundred are close business associates of Akhmetov, who himself is #7 on the list. Six persons are closely associated with top soccer club Shakhtar Donetsk, which he owns. Some have joked that had the club's players had Ukrainian citizenship, then they would have been on the list too. [Many are foreign imports]. Akhmetov's personal 'head of security' is on the list, as is his personal lawyer, and a 'driver'. Another on the list declares his profession as 'accordionist'.

Yanukovych, #1 on the list, spent 3 1/2 years in prison as a youth. Although the sentences against him were annulled at a later date, these annulments it seems were fraudulent too, and are currently being investigated. On the list are the organizers of the attempted 2004 Presidential election steal, Andriy Kluyev and disgraced former Central Electoral Commission head Sergiy Kivalov. There are sons or spouses of persons that are being sought by law enforcement agencies, or are in hiding abroad. These include Voldymyr Scherban - under house arrest in the USA, and Anatoliy Zasukha - believed to be living in Moscow, Suspected kidnappers, and fraudsters etc. are there too.

Leaders who publicly demanded that Eastern Ukraine split from the rest of the country during the 2004 Presidential elections, and the disgraced bungling former Prosecutor-General Svyatoslav Piskun who not long ago was 'trying' to prosecute those same leaders and fellow list members, are there also.

Voters want and hope their elected leaders be honest and be upright members of society, that's why the Orange Revolution took place. The orange leadership's political incompetence since the Orange Revolution has resulted, to a large extent, in the resurgence PR - now the major single political force in Ukrainian politics.

Ukraine takes gas

Ouch. Ukrainian officials have admitted they have been taking more gas than they should here.

In Kiev, a spokesman for Naftogaz Ukrainy, Dmitry Marunich, admitted that Ukraine had been taking more gas than it should have done, and said the Ukrainian government, which is trying to crack down on customers who use too much, could face sanctions from Gazprom. "Under intergovernmental agreements, we might have to pay more for this gas," Marunich said.

This is an admission that what Russia has been saying is right. The government really needs a better strategy on how to deal with this. Maybe admitting it is the right thing to do but they have just given a reason to believe the Kremlin on what it has always said about Ukraine. The truth is a good thing but it must be put in context. It is effective with context. But here there is none. "We took it and we should pay for it," is the position. The context of it though should be supplied. More of this won't sit well with the Europeans, I can tell you. The Europeans already have paid for it in their minds. It is theirs. Someone needs to step up and take this thing in hand. No one is though. Ukraine is leaking credibility and it could become a flood if someone isn't careful.

The article goes on to make it clear that the Europeans are looking for other alternatives. That cannot be in the interests of Gazprom or in the interests of the Russian people. But those interests have not been paramount with the Kremlin. That is one thing that's clear from all of this.

LEvko comments: You're right Scott, Ukraine is leaking credibility by admitting siphoning off someone else's gas without giving any credible explanation. If the gas transportation system cannot cope with high demands - this should be made clear.

But here's what one expert says:
Ukraine holds most of the storage capacity of the Soviet Union, and most of that is in the westernmost [regions]. Storage capacity is important in the gas business, as demand is seasonal (there is more in winter for heating) and can almost triple in Europe between summer and winter. If you can pre-position your gas near the markets when transport capacity becomes strained, you can extract a lot more value from that seasonality. The storage facilities near the Hungarian and Slovak borders were ideal for Soviet exports, but now they are in Ukrainian hands, and thus Russia must have a minimum of technical cooperation from the Ukrainians, who physically control and operate these facilities, not to lose a lot of money in their export. Source: http://www.eurotrib.com/story/2005/12/30/173336/17

I suspect these massive underground storage facilities are being kept nicely topped up - better than money in the bank. Ukraine is buying at $95/Tcm but the price further down the line is $250+/Tcm.

Even in Great Britain which is largely self-sufficient in gas [for the time being], we have been told that in the event of a severe winter there could be shortages, but that industry would be the first to have to carry the burden of delivery shortfalls - domestic and municipal consumers would not be affected.

Ukrainian industrial magnates are powerful enough to pressure Ukrainian authorities and demand that they get their full quota. According to the figures I have, Ukrainian industry consumes 1/3 of Ukraine's total gas consumption, but most of this imported. Gas consumed by households, and municipal heating etc. is largely satisfied by domestically extracted gas.

But most likely Ukrainian authorities just like letting everyone else know, that it is they who have a controlling hand on the pipelines. They shouldn't push it too far..

Thursday, January 26, 2006

A cold synopsis

Here's a pretty good synopsis of what the cold is doing here. Add this:

----The schools have been closed for a week. They call it a quarantine closure but it's because of the cold. (Those happen every year for flu reasons.) But knowing what kind of a strain has been put on the power grid, it just might be a way to lower the power drain by keeping a large number of public buildings--the schools--closed.

----There are shortages that I reported. The milk shortages are being blamed now on the fact that Russia has prohibited Ukrainian dairy imports for phytosanitary reasons, that jewel of an all-purpose category used as cover for policy decisions or retaliation. The Russians have done this and it threatens the industry here with losses of around $30 million. It doesn't seem like much but every little bit counts for some of these industries. (It has been reported that some producers will have to shut down because of it.) But it seems to me that the Russian action ought to leave more production here for sale which would keep prices down and increase the supply. My wife thinks that we are getting better cheese at a lower price, at least, and there is no shortage of that. But milk has been short in some stores.

----There was a picture last night on TV of a boiler in a building that leaked water like a sieve-- literally like a sieve. (The gas flame could be seen behind a curtain of water droplets.) And the water was hot water. That's a problem with a number of these old buildings. They're supposed to be kept up by the city but they aren't. The city workers either don't do the upkeep--it interferes with other things they've got going on in their lives-- or have to be bribed to do it and the tenants don't have the money for that, or there is no money for the extensive repairs and replacements that are needed in the budget. So energy flows down the drain--also quite literally.

----It would be interesting to see how all this slowdown caused by the cold will affect the economy. I suspect not all that much because it is small and not too specialized. This sort of thing would be felt much harder in the US. But I'll let the economists have their say and step back into my own comfortable little world.

Wednesday, January 25, 2006

British TV video clip on RUE [nobody knows nothin'..]

Interesting 10 minute video from British 'Channel 4 News' entitled "Ukraine's gas deal for Europe, by Jonathan Miller at


It includes brief interviews with Yulia and Yush, who looks rather baffled and bemused when asked about RosUkrEnergo. Also short interview with an evasive Chernomyrdin.

Thursday update:
It's Davos World Economic Forum time again. Last year it was Yuschenko who was 'belle of the ball'. This year 'the great and good' will be in the corridors discussing reliability of gas supplies for the present, and energy policies for the future. Ukraine will be mentioned in different tones than before.

Maybe that's part of Ukraine's plan - to stall on signing finalized contracts and try to embarass the Kremlin with [non] exposure of the folks behind RosUkrEnergo, who nobody, apparently, can identify. As my dear mum used to say: "Nikhto nichoho ne znaye - til'ky did i baba, i tsila hromada." [Nobody knows nothing - except grandad, grandma, and the whole community.]

Tuesday, January 24, 2006

International co-operation on gas

The Vice-speaker of the Russian Duma Vladimir Pekhtin told journalists today that: "European countries, not only Russia and Ukraine, should take part in negotiations concerning provision of full quotas of gas to western countries, [and they should] indicate non acceptability of theft of gas."

Comments in general, on Russia-Ukraine gas problems are becoming more measured and 'grown-up'. FT today reports that Russia has made special efforts to pump gas via lengthy alternative routes to ensure Georgia gets some gas as quickly as possible, even before the blown-up pipes are repaired - possibly some 'behind the scenes' PR work going on here. Ukrainian spokesmen have put their hand up and owned up to 'dipping' too, but have promised that delivery quotas will, nevertheless be adhered to. [I've not heard the ubiquitous and frequently-encountered 'Closed for technical reasons,' or 'Remont' excuse used, for explaining away the delivery shortfalls.]

It would seem sensible that for the benefit of everyone, that the system for transit of gas, from source to end-user should be in the hands of some multi-national institution of company, not subject to political manipulation of one country.

In an address to Ukrainians yesterday Yuschenko unequivocally said: "Ukraine is receiving Europe's cheapest fuel, while its gas transportation system remains in state ownership. There can be no discussion of its transfer to some other country or group of countries." PM Yekhanurov, said much the same, more wittily, in a recent TV interview: "He who gives up his gas transport system will have to dance to music played to him on a balalaika". He did however encourage and invite foreign partners to co-operate in developing any new pipelines through Ukraine. Both these statements were no doubt made with one eye on March's parliamentary elections.

In March 2004 President Yushchenko proposed the creation of an international consortium to build, own, and operate a new large-capacity gas pipeline from Turkmenistan via Kazakhstan and Russia to Ukraine and on to Western Europe, but it came to nothing because, as I wrote in an earlier posting: "this would have challenged Putin's plan of a Eurasian producers' cartel which would enable Russia to monopolize supply and dictate the price of gas delivered to European customers." Any possible foreign co-owners of Russian gas transportation systems would surely insist that Russian domestic consumers also contribute a fair price to system costs too.

So perhaps for Europeans it will be difficult to gain any control of existing pipelines, but for future pipeline projects between Russian gas fields and European markets, [which certainly will be required] they should collectively demand some input and control. A good place to start would be to ask Germany to have a rethink and cancel its planned expensive underwater Baltic pipeline, which bypasses Poland and the Baltic countries. For the same money a shiny new overland pipeline could be constructed direct from the gas fields to end users. Sadly I don't think it will happen, not while every player is just thinking of their own self-interest. So we can expect more of the same in Europe, in the cold winters to come.

ps I wonder if the finalized Ukraine-Russia gas deal really will be signed tomorrow. If it is, then maybe the whole affair will 'cool down' and the political players will 'chill-out'. [sorry]

Update: Just as I suspected, Ukraine and Russia have not been able to come to agreement on the creation of a JV [RosUkrEnergo] to provide Ukraine's gas requirements. It looks as if no signings will take place today.

5-iy Kanal report: 'The non signature of the agreements was explained as being due again to technical reasons.'

Still cold

It is still cold here. The reported temperature is more or less the same as it has been. (That is around -30 C.) Our apartment is cool even with the radiators hot. And walking outside in the daytime with the sun shining down on the face, the hair still freezes to the inside of the nose when inhaling. That is the nasal hair for those who want the particulars. It unfreezes on the exhale so you walk along with a sticking, unsticking, sticking, unsticking kind of thing going on in the old schnozzola.

The other thing here is that there are shortages of some food items. The bread kiosk near our house is closed. It is a small kind of a shed-sized little building on the sidewalk that takes delivery from the bakeries and sells bread from morning to later in the evening. But that is closed we think to keep the worker from being out in the cold but we aren't sure. The fact that the local supermarket a block or so down doesn't have bread either suggests that maybe something else here is at work. Are the bakeries not working? Have they shut down to keep the employees from coming to work in the cold?

Eggs have been harder to find too. It can't be the avian flu problem because not that many birds and farms have been affected relatively speaking. Is it the same problem? Same thing with milk. It's not that you can't find any of these but you might have to go to a couple of different locations to get them. Maybe it's hoarding that has done it. Who knows.

Anyway, we're all wrapped up with nowhere to go.

"Excuse me, was this yours?"

One of the things you find in this area of the world is a tendency for people to do something they need to do and to be heedless of any kind of burden doing that thing places on others. That what the person is doing may put a real significant burden on someone else or on society in general is none of their concern. That they need to do what they are doing is the only thing that matters. That is true for oligarchs and for the Mercedes and BMW drivers on the road but it is also true to some extent of everybody else.

So now at least some in the know are admitting that Ukraine is siphoning off gas meant for Europe. (All the news programs here said the same thing last night.) And Russia is not pointing a finger and is not threatening to shut down the pipe.

Earlier on Monday, Russia's state-owned Gazprom monopoly admitted for the first time that it was not entirely fulfilling its contractual obligations to clients abroad because Ukraine was retaining some of the exports.

"You can call it withholding or taking, legal or illegal -- call it whatever you like," Gazprom's deputy chief Alexander Medvedev said in an interview with Russian television networks, extracts of which were broadcast Monday evening.

"But what is happening is that gas is remaining in Ukraine at higher volumes than envisioned. This prevents us from fully fulfilling our obligations to our foreign customers," he said.

Somebody at Gazprom or the Kremlin or both has gotten some sense because that is the right kind of tone to set to allow the Europeans to get a sense of the problem. And that sense means a finger pointed at Ukraine--a finger not pointed by Russia.

Somebody is going to have to explain this and do a good job of it. Ignoring something that shifts the burden onto someone else or onto some other country else is not going to cut it for long. Europeans will want their gas and all the friendliness that they might feel for Ukraine won't hold much water in the end if they don't get it. (And besides, aren't the Ukrainians themselves fed up with the Orange Revolution too?) And Ukraine needs all the friends it can get.

So someone ought to do some talking about this and do it now. And it needs to make sense.

Monday, January 23, 2006

The pipeline blast

USA Today is reporting that bomb residue was found near the destroyed pipelines in southern Russia. If true, it's not infrastructure at all but sabotage. Chechens are suspected.

This presents another delivery risk for Russian gas. Of course, the argument will be made by some that the Russian blew them up themselves. Why would they do this? To provide contnued justification for the fighting in Chechnya. You kill two birds by taking out Georgian gas. This is the kind of argument that was made in the Moscow apartment building explosions of a couple of years back. It is still pushed by Beresovsky, I think. But allegations aren't proof of anything.

LEvko comments: Ukraine was supposed to sign finalized gas contracts, including the setting up of a JV, with Russia on Saturday 21st January, but this has been postponed until the 25th. According to 'Ukr Pravda' Yekhanurov claimed that the Ukrainian side, 'hadn't prepared the documents in time.'Maybe the blowing of the pipes was just a reminder: 'Don't mess us about..'Or maybe we are both just thinking like Russians and looking for angles..

Blame for blowing up of Georgia gas pipe

The blowing up of the gas pipeline cutting off supplies to Georgia and Armenia, may, according to some reports, leave those countries with no gas supplies for a week at a time when they are experiencing the coldest weather in 20 years. President Saakashvili has unequivocally blamed Russia: "This was a brutal attempt by Russia to force Georgia to give up its gas pipelines."

Even though no evidence has yet been presented, blame is already being apportioned for these outrages. The next few days will be no joke for the citizens of Georgia, but for some reason it all reminded me of a joke I heard in Poland many years ago, about passengers in a train compartment.

In the compartment are an attractive young Polish girl, an old peasant woman, a Russian soldier, and a Polish patriot. The train goes through a tunnel. In the pitch darkness is heard a scuffle, a kiss..and then a slap.

The train emerges into daylight, everyone is sitting as they were, but now glaring at one another. The Russian soldier has a bright red cheek.

The old woman thinks that the awful Russian soldier must have kissed the girl, who hit him back... The girl thinks that the Russian soldier must have tried to kiss her, but stumbled and kissed the old woman in the darkness, who then slapped him...
The soldier, a perfectly decent sort, figures that the Polish patriot kissed the girl, she swung and missed, and must have hit him...But the Polish patriot knows that he kissed his hand, then gave the soldier a smack in the mouth...

Scott comments: Levko, they have a variation of that one around here too. And it is a funny one.

It looks like Georgia thinks it can pile on with this one even though Russia may be innnocent in this, at least to the extent they didn't do it intentionally. Though if it is infrastructure problems, which would be most likely, it just confirms what we have been talking about for the past few days. And it highlights how shortsighted the Kremlin has been on this whole thing. Maybe the money was on the table and they just couldn't resist especially when it came to poking Yuschenko and "our Ukrainian brothers" in the eye. But it sure ain't no way to run a business. Is it all that clear that Gasprom investors are going to be very happy with these events starting Jan. 1st and ending with the blown up pipeline? Is Europe? Gazprom and the Kremlin just might have succeeded single handedly in reversing the tide of history in Europe on nuclear energy.

It reminds me of the old lawyer joke about a man on trial for murder. His attorney thinks he can't fight on the facts so he pays a juror to persuade his fellow jurors to vote for manslaughter, a lesser included offense.

Sure enough when the verdict comes in it's manslaughter. Reporting back to the lawyer, the juror said, "It was real tough but I did it. When they took the first vote, it was 11 to 1 for acquittal..."

Saturday, January 21, 2006

Yanukovych's Yordan





Let he who is without sin cast the first egg?

It's cold here

Last night it was around -30º C. That translates to around -8º F. That's pretty cold.

My wife and I went out for a walk last night. Bad idea. It was impossible to go more than a few feet without pain in the lungs and a frozen nose and cheeks--literally frozen. We ended up going to the little store about forty paces from the front door to get something so that we could say our trip out was not in vain. Cold, cold, cold.

It still is today though maybe slightly warmer, slightly. We walked out in it to go to the store. Not many people were out on the sidewalks or near the bus stops. But there were a lot of people in the store. It might have been that it was Saturday, although it hasn't been that full on Saturdays before-- or it might have been the fact that the open air market near here was closed. (People shop for food in these.) Or maybe people were just stocking up thinking we all might have to hunker down against the cold. Whichever it was, we ended up waiting about forty minutes in the check-out line.

The rumor is that the open air markets here are all closed to keep workers from sitting out there in the cold and freezing to death. The one near our house is closed we know. And some businesses are closed to prevent people from traveling in the cold to get to work.

The local junior high equivalent had only about 200 of the 500 students there on Friday. The kids ended up not doing much work at all. If we had known that, they would have stayed home. But our kids dutifully went to school.

What this will do to the gas situation is anybody's guess. All of this though ought to stimulate some kind of movement to have an energy policy here. That probably won't happen before the election and, if the polls are right and Yanuk gets in, it probably won't happen after the elections either. And there are some serious obstacles to any policy that would require conservation anyway. Any number of commentators have talked about spending the winter in Kiev with their windows open to cool down their super-heated apartment. Too true, too true. But it is not enough to tell people to turn down the heat. It can't be turned down in individual apartments in these older buildings. It all comes from a central station.

But this is for another post. We will keep wrapped up, LEvko--thank you-- when we go out. Our little square piece of air is warm enough these days. The hot water is flowing nicely through the radiators. So we are fine.

We won't though be going out for a stroll any time soon.

Friday, January 20, 2006

Russia's gas pipeline infrastructure

Scott, you're is absolutely right. The cutting of off gas on Jan 1st to Ukraine and subsequent knock-on effects, and now gas delivery shortfalls due to bad weather in Russia has got us Europeans really worried, Gulp!

What about the Russian delivery infrastructure, surely that's still in reasonable shape?

Well, the news here is not much better either, according to a remarkably prescient paper 'The Russian Energy Strategy and Energy Policy: Pipeline Diplomacy or Mutual Dependence?' September 2005 [British Ministry of Defence Academy] by Michael Fredholm, which I can wholeheartedly recommend it to anyone interested in this subject.

Just a couple of quotes:
"[Russian] domestic prices are far too low to cover more than present production costs, and do not allow investments in exploration, gas-field development,and domestic infrastructure." [Look out Russian domestic consumers.... ]

More importantly, "In addition, the export infrastructure remains a bottleneck for the entire gas industry. The transport and distribution networks are in urgent need of investment. Over 70% of Russia's high-pressure gas pipelines were commissioned before 1985, the average age of Gazprom trunk pipelines being nearly 22 years, and an estimated 14% of the pipelines are beyond their anticipated lifespans causing substantial losses...According to some estimates Gazprom will by 2008 not be able to pump all gas extracted due to the limited capacity of the firm's pipelines."

The paper also includes details of internal struggles between Gazprom and Rosneft, analysis of the Yukos affair, and how Putin has increased his grip on state monopolies by appointing members of his administration to influential business posts:

"..it is clear that not only is Putin strengthening state control over the natural monopolies, he is also strengthening direct presidential control. This is true for the energy sector.."

Ukraine imports about 1/2 its gas requirements via one sole Central Asia-Centre (CAC) pipeline, on which it is horribly dependent, from Turkmenistan, where the human rights situation is described in a recent Amnesty International report as being 'grave' and 'appalling.' The current status of this vital pipeline is considered 'existing but aged'.

So, a large portion Europe's gas supplies is controlled by a tight-knit group of ex-KGB spooks, [who in the words of Rutgers prof. Alexander Motyl in a top-class article: 'threaten[ed] a neigbour [by] depriving it of a vital natural resource.."] and is delivered by means of just a few clapped out pipelines running though countries which are likely to tap into their contents at the drop of a hat.

Oh well, Spring will soon be here..

Gazprom cuts it again

During the gas crisis with Ukraine, one analyst said that Russia could cut supplies to Europe once without suffering any long-term consequences. This was at the generous end of the analytical spectrum on what Russia risked by cutting off supplies to Ukraine.

But it looks like they've cut it again--Cold Forces Further Cut in Europe's Gas Supplies.

The cold snap deepened on Thursday and forced gas monopoly Gazprom to further trim supplies to Europe, which analysts said highlighted Europe's risks of relying heavily on one major supplier.

With temperatures in Moscow plunging overnight to minus 30 degrees Celsius and to minus 50 C in parts of oil-producing Siberia, Gazprom has been forced to crank up supplies to domestic consumers.

The third straight day of freezing weather in Russia has seen deliveries to some of Gazprom's European customers, including Italy, Hungary and Croatia, fall 10 percent to 25 percent below volumes requested.

It just reinforces the view that the Kremlin doesn't think in terms other than it's narrow prerogatives. "But they couldn't foresee the coldest weather in 90 some odd years! This isn't their fault." Yeah, but this reduction would be understandable and forgivable. It is after all beyond the control of the Russians and the Kremlin. Take thsi one together with the original cut-off that was entirely within the control of the Kremlin and you've got Europe hanging out there blowing in a real chill wind subject to political calculations of the Kremlin and to the vagaries of the Russian winter. What other risk is left? Problems with infrastructure? How good is Russia really going to appear as a supplier if Europe looks real, real close at it right now? And isn't that going to be just what they do?

By the way, Ukraine is going to have to explain any gas it took this time and not allow the Kremlin to occupy the field with their spin. Europe may be more patient with Ukraine than with Russia but that patience is not going to survive continued threats to their gas supply by a Ukraine siphoning off. They have to explain it and it has to be justified or Ukraine risks losing support in Europe. That would not be a good thing.

So come out an hold a press conference guys and do it quick.

Thursday, January 19, 2006

Yushchenko takes a dip..

Today Yushchenko was supposed to attend an hostile Parliamentary session to try and sort out the constitutional crisis. Speaker Lytvyn hinted to journalists that his reception may even turn out to be physical - flying fists and scuffles are not unknown in the Ukrainian Parliament. When asked from what quarter the attacks may emanate, he enigmatically replied: "Just check out the deputies that aren't wearing ties..."

At this time of year Russian and Ukrainian Orthodox Christians have a tradition of celebrating the Twelfth-Night, the Eve of the Epiphany, by swimming in ice-holes symbolizing the baptism of Jesus in the river Jordan.

Rather than attend the show-down in Parliament, Yushchenko, his PM, several ministers and the Mayor of Kyiv boosted their macho image in a different manner. Despite the unseasonably cold weather they all attended a church service, then followed the President for a dip in an icy park lake.

I wonder if there was a cardiac resuscitation unit nearby, just in case. [Source: 'Ohlyadach']

While I'm at it, here's one from my 'funny file'. I can't think up a suitable caption yet.

Scott comments---How about this caption: “…I was all kinked up like this until I took the cure some of the guys from the Central Asia section told me about. You first need to find a camel. Now, not any camel will do. It has to be a pregnant camel…"

Wednesday, January 18, 2006

RosUkrEnergo: a tidy earner for the chosen few..

"We are moving from gray schemes, and for the first time going over to an absolutely transparent, equal relationship," said Putin a few days ago when he met Yuschenko and was asked about the resolution of the recent gas crisis. "Healthy compromises were achieved... a brilliant result," echoed Yushchenko.

These quotes are from a detailed article entitled "Who's left on the pipeline? - the Presidents and their associates personally control the sale of oil and gas," on the Ukrainian 'Obozrevatel' website and originally published on 16th January in the Russian 'Novaya Gazeta.' Its author has compiled what they claim is a complete plan of the entire current RosUkrEnergo financial structure. I include a version below. [The print versions in source articles are more legible].

The tangled web includes companies in Austria, Italy, and Israel, as well as off-shore outfits in Cyprus, Liechtenstein, and the Caribbean Islands. Ariel Sharon's son, a close friend of Italian PM Sylvio Berlusconi, and associates of Putin from his St Petersburg and KGB days are amongst those involved in the mega-scheme. 'Forbes' magazine claims that Ukrainian oligarchs Viktor Pinchuk and Rinat Akmetov, may also be involved on the Ukrainian side of the Swiss-registered company.

The Chief Economist at US SigmaBleyzer estimates that RUE will make a mind-boggling profit of $1.78Bn this year for arranging supply of mainly Russian and Turkmen gas to Ukraine through Gazprom's pipelines. That's it, that's all this shady multi-national structure has to do to make this money for its secret beneficiaries.. Is anyone going to close it down?

Ukraine's fuel and energy Minister Ivan Plachkov has stated that signing of all gas contracts and the creation of a new joint venture for supplying gas to Ukraine is planned for this Saturday. Dare we hope that the scheme below is to be scrapped? Maybe in our dreams..

Avian flu

More poultry has been killed in the Crimea in an attempt to prevent the spread of avian flu. There have been no reported cases of human infection but the government has moved aggressively to prevent the spread to other bird populations.

It was also reported yesterday that the government is refusing to compensate the growers for the value of the destroyed birds. One poultry farm owner, a small businessman whose birds were destroyed by the government, said that he would likely go out of business.

These poultry growers might be in trouble for more market related reasons though. It was reported yesterday that the sales of poultry in Ukraine are down 20%. That can't be good for any industry, especially one with large numbers of small producers.

But more than business might be at stake. As a result of this government policy, poultry growers in the affected areas in the Crimea are reported to be getting rid of their inventories as fast as they are able to avoid any possibility of detection of the flu and the destruction of their birds. Though it wasn't stated, it would seem as if a refusal to report any sick birds would also be likely.

Meanwhile, back in Kiev, the Clark family has sworn off of poultry. Cutletas anyone?

Akhmetov and Pinchuk Behind Murky Gas Deal?

In June 2004 the huge state-owned Kryvorizhstal plant was jointly sold to Dnipropetrovsk oligarch Viktor Pinchuk and rival Donetsk oligarch Rinat Akhmetov, for a ridiculously low knock-down price. Kuchma was President of Ukraine at the time, and Yanukovych his PM. The sale was annulled last year, and the plant resold in auction for six times more than was paid by Pinchuk and Akhmetov.

Now Forbes magazine reports that Pinchuk and Akhmetov may be behind the now infamous RosUkrEnergo, which was formed in July 2004 following discussions between Russian President Vladimir Putin and Leonid Kuchma, and just one month after the initial Kryvorizhstal sale, to handle Turkmen gas exports to Ukraine.

The Forbes story reveals,
"Back in June 2005, as part of a criminal case launched against Rosukrenergo, the former head of Ukraine's Security Service, Alexander Turchinov, stated the a part of the non-Russian shares of RUE were controlled personally by former President Leonid Kuchma and former Prime Minister Victor Yanukovich, and that the managers of the shares were respectively, Pinchuk and Akhmetov. The billionaires supported Yanukovich in his losing bid against now President Victor Yushchenko. Turchinov later said that Kuchma and Yanukovich had resold their shares to Gazprom, but also indicted he had information that the shares were resold to their managers via Cyprus, Hungarian and Swiss offshore entities. The investigation abruptly ended in mid-August 2005 and Turchinov was removed from his post".

The boys at the top certainly didn't hold back when it came to grabbing what they could for themselves in the months before the 2004 Presidential elections. Yanukovych said recently that he considers Akhmetov a realistic candidate for President. What a country...

Tuesday, January 17, 2006

Dissenters and compromises

Blu-tacked over my desk is a faded postage stamp-sized newspaper cutting. It says:

All change in history, all advance, comes from non conformity, wrote
the historian A.J.P. Taylor. "If there had been no troublemakers,
no dissenters, we would still be living in caves." - wise words.

So, having a different point of view is OK by me. I'm sure you agree, Scott.

I've just finished reading "Ukraine's Orange Revolution," by Andrew Wilson, [Yale University Press], which I can heartily recommend, especially for anyone who followed and fretted over, and wants to re-live the events of late Autumn 2004. It's an excellent reference to the 'runners and riders' of the Ukrainian political scene, most of whom are still in business, and a chilling reminder of how corrupt and immoral some of these guys are and what a swamp Ukrainian politics can be.

Three horse political races like the approaching VR elections, are very difficult to call, because it's difficult to predict who will take votes off who. What is worrying is the increasing animosity between the NSNU and BYuT camps. Today's 5-iy Kanal TV reports of Yushchenko supporters being beaten at a Tymoshenko rally attended by 6000 people in Chernivtsi, Western Ukraine. Let's hope that this is just an isolated incident. If this continues, all Regiony have to do is sit back, relax, and enjoy the bun-fight.

Yulia on her website claims she wants to "abolish the taboo on negotiations with NSNU", the existence of which is "not the fault of our political party". NSNU and BYuT should be starting to get their act together and directing their combined fire at Partiya Regioniv. As Scott posted previously, there is plenty to attack - a lot of it is in Andrew Wilson's book.

p.s. Partiya Regioniv campaign chief Yevhen Kushnaryov rather sheepishly admitted to employing spin-meisters from various countries, including the USA, but only as part of an 'international team' of political technologists, of course, in a recent 5-iy Kanal TV interview.

Yanukovych campaign good news?

The Wall Street Journal reports:

In a hush-hush deal, longtime Republican lobbyist Paul Manafort signs on as a behind-the-scenes campaign adviser for the much-maligned Ukrainian opposition figure and close friend of the Kremlin, Viktor Yanukovych, who earned the scorn of the White House during the 2004 Orange Revolution that brought his opponent to power in Kiev. (Via the Action Ukraine Report.)

Maybe this is good news. Bob Dole's campaign for president didn't impress anybody as being particularly effective. It obviously didn't impress enough voters in the end. He lost.

So maybe good things in store?

Why is it all "hush-hush"? Well, for one, Yanukovych has made a lot about Yuschenko's support from the US. He has played on some anti-American sentiment here before. And he seems to get "CIA" in every so often to spice it up.

There is also that meltdown by his wife during the OR that proved to be the gift that kept on giving. (The word "ridicule" doesn't quite describe the response.) She was the one who made the claim that the people on Maidan were being supplied by the US with boots and that they all had oranges spiked with drugs. So it was an orgy on the square in US-supplied boots.

Your babushka wore combat boots.

So hush-hush it has to be.

Monday, January 16, 2006

Re: Yulia

LEvko can, of course, speak for himself here on anything he posts. I asked him to co-blog with me because his analysis is solid. And I am looking for others who similarly have a point to make and who can make it persuasively to join our happy band.

It is likely that others who post here will not agree with everything I have to say. That is what happens when people don't share a brain. This means that opinions may differ here on any number of things. From my perspective, so long as that difference is respectful and thought out, it should add to the blog not detract from it. It will allow people who read here to be informed about the issues.

When anyone posts or writes about anything, they stake out a position on that thing. But the validity of that position is a result of how closely that position mirrors what is actually happening. Does what is being said actually correspond to the facts on the ground? That is the test for any assertion that is made anywhere, whether it be the pages of the New York Times, the halls of the Pentagon and the White House, the boardrooms of the Fortune 500 or the pages of this humble blog. If it does not reflect what is actually happening on the ground, it should be disregarded regardless of where it came from. And a focus on the brand or on academic credentials or on the fact that a trendsetter in business or anywhere else said it, are not substitutes for good analysis though they are always used precisely for that. Good analysis is good analysis wherever it comes from and from whomever it comes.

But some things cannot be known for certain when they are argued. That is one reason to have all the sides presented on an issue and that those sides be reasoned out and presented the best they possibly can be. The people themselves can then decide. (And they may even leave a comment when they do. We will post those too.)

My views on Yulia are clear to anyone who has been reading this blog for anything over a couple of days. I think she was a disaster here and Yuschenko should have pulled the trigger on her a lot sooner than he did. But maybe using the word "disaster" to describe her government is too much. It leaves not many other words to describe what might happen with a Yanukovych back in power. This is the point I made in my last post on the subject. It might be the worst case, but the risk of that worst case is real.

Politics in a democracy is really the science of the possible. Right now, Yanukovych is ascendant. Yuschenko hasn't gotten much movement at all. Any support for Yulia could cut into support for Yanukovych especially because of her populist appeal. And that would be a good thing. Some sort of rapprochement between Tymoshneko and Yuschenko, though not ideal in terms of what I would absolutely prefer, is inevitable and is to be preferred under the current circumstances, if the good of the country is taken into account at all. The point is that dealing with Tymoshenko is a lot better than having to deal with a Yanukovych in power. Both Yuschenko and Tymoshenko will follow the rules. Yanukovych would not.

The "come, let us reason together" of the Bible seems like good advice. We'll try to do that here.

Advice for Yulia

A recent Opinion Poll on the 'Korespondent' internet site [a staid and reliable source of information] asked readers for their opinion of the gas crisis compromise.

  • 19% thought it was a victory for Ukraine
  • 20% a victory for Russia,
  • 10% a compromise for both sides,
  • 12% a forced step for both sides,
  • 20% a staged stunt, and
  • 19% said time will tell.

In other words the Ukrainian electorate's opinions are split, and they are as confused as everyone else. Readers are currently being asked if they support the sacking of PM Yekhanurov,

  • 19% say yes,
  • 72% say no,
  • 9% are indifferent.

Although not scientific, these OP results should be noted immediately by Yulia T and BYuT, and acted upon. Unfortunately "bringing down" Yekhanurov and his Cabinet in the VR was a big mistake, which cannot now be repaired. But they should leave the gas question for now, set up an investigative commission, anything, but leave it. There is no political mileage to be gained pursuing the matter further. They should focus on trying to win an election, not solve the gas problem - this can only be done when in power. Election campaigns have to be paced, like a long distance race, and won by telling people what they want to hear.

Yulia has often been accused of being a populist, she should start behaving like one, or she'll slip further in the ratings.

The official BYuT site quotes a seasoned party member Volodymyr Yavorivskyi as saying, during a visit to the town of Lutsk today , "We were perfectly aware that our rating after this vote [in the VR to dismiss the PM and cabinet] will dip. We consciously took this step because to us national interests are far more important than our personal ratings."

"We thought to demand one thing - the denounciation of this cabbalistic [gas] agreement, but not the dismissal of the Cabinet of Ministers."

But surely getting into power is paramount, because you can't change anything if you're not in power...

Saturday, January 14, 2006

TV and the Ukrainian Parliamentary election campaign

In the last few days the main players in Ukrainian politics have taken part in quite lengthy TV interviews. These can be seen via the Internet as follows: Tymoshenko and Yekhanurov here, and Yushchenko here . Yanukovych appeared on NTN TV - file 1137143820.wmv, but the interview it seems, has been 'pulled' after just one day.

For the first time in Ukraine's history the main protagonists' access to TV in March's VR elections will be equal, so presentations and performances in this medium will be critical. During the 2004 Presidential election campaign Yushchenko and the Orange movement were virtually shut out - this time it's different.

Perceptions of a Ukrainian viewer may be totally different from that of a casual Western viewer, like me, but nevertheless, for anyone interested in political presentation, PR, or even body language, these clips may be worth watching. My humble opinions of them are as follows:

Considering how little time Yekhanurov has spent in the political limelight, he strikes me as a self-confident, eloquent, intelligent, and charming performer. He looks as if he enjoys being interviewed - he's clearly a major asset for the NSNU, whose party list he leads. His Ukrainian is virtually perfect, even though he was born in the the Russian Federation, and is an ethnic Buryat, hence the oriental physiognomy. Yekhanurov seems a master of his brief, and, I imagine, would be difficult to wrongfoot in any debate - not at all the grey, technocrat he was made out to be.

As everyone already knows, Tymoshenko is impressive on TV, very eloquent in both Russian and Ukrainian, highly intelligent, and has a highly charged emotional and forthright manner. She dominates any conversation, frequently interrupting her interviewer, and 'handbagging' anyone who doesn't subscribe to her point of view. [Very reminiscent of Margaret Thatcher in her pomp - a French PM described her as having the lips of Marilyn Monroe...and the eyes of Caligula]. Just like a western politician, she knows the message she intends to present during the interview, and delivers it no matter what.

Yanukovych, in contrast, does not look at all comfortable in a TV studio. His replies to questions appear laboured, and his lack of fluency both is Russian and Ukrainian, all too apparent. He's for sure no 'proffessor'.

Yushchenko has the demeanour of a university tutor in conversation with undergrad students. In his interview he strikes me as being level-headed and confident, but possibly a little bored. His manner is presidential but I'm not sure whether he is capable of delivering destructive verbal blows to any political opponent.

There is quite a way to go before the March 26th elections - with everything to play for. The campaign, I'm sure will be lively, and primarily fought, as in most democratic countries, on TV screens.

Yanukovych leads

Some new polling figures are out and they show that Yuschenko did not benefit from the gas crisis with Russia at all. The figures are roughly

Yanukovych’s bloc –31%
Tymoshenko’s bloc—16%
Yuschenko’s bloc—13%

Yuschenko’s Our Ukraine is where it had been before the gas crisis. Tymoshenko has climbed up to pass him, them. Yanukovych, you might say, has surged. He has lapped Our Ukraine.

Yanukovych was smiling last night on TV. Looks like he has a lot to smile about. In an interview broadcast last night, he said that Akhmetov would make a good president. A good president for whom? Maybe he’ll appoint him if he becomes PM? Akhmetov, the über-oligarch from the east, is the real power behind Yanukovych and his Party of the Regions. It’s his money bankrolling it.

I made the argument a few weeks back to some friends that Yanukovych as PM would not be the threat he was because things have changed so much in Ukraine. I have my doubts about that now. Maybe because I am not so confident anymore things have really changed all that much. All it would take is for Yanukovych to fire everybody put in by Yuschenko’s government, bring back the cronies and you’ve got what you had before. The press is not so docile now, of course, but they also haven’t been leaned on in the past year. What would happen if they were? Would they cave? Say that inquiries are being made into the licenses of a number of stations—have you really been operating in the public interest?—send the tax police to the rest and they all might think again about their newfound liberty.

Would people put up with it? Some wouldn’t, but if the PM looked like he were doing things and especially if he stepped in to reduce prices, that would keep most people mollified and justify their vote for him. He might not have the cooperation of Moscow like he did last time to keep the whole economic Potemkin village standing, but he might point to the Yuschenko crew as the reason behind all the economic problems. Then again, he might just have the cooperation of the Kremlin. They seem to like Lukashenko in Belarus. But they ought to know that Russian business will not fare well in the crony capitalist climate that will come with Yanukovych. He might favor relations with Russia but not if it gets in the way of sweet deals to the faithful.

The point is a Yanukovych PMship could bring back the dark age. And it would eventually bring with it more economic problems. You cannot prop up economies with state control as has been the case in the past. It will not work. Tymoshenko’s stint should have shown that.

And it will bring back more oligarchic control over business and the economy, except there will be limited numbers of oligarchs involved this time—unless, of course, others are made from the new dole. Does anyone really believe that the great chasm between the rich and everyone else here is going to be bridged by Yanukovych? If we have a more affordable chicken in the pot, it doesn’t matter? That is understandable, but it isn’t wise. What will the country look like in the next few years as a result of the decisions made today? Ukrainians thought about big issues during the Orange Revolution. These issues are still there and need the people to be engaged with them. Democracy does not go by default. And it is not the default setting of government. It takes a vigilance to maintain it especially in this area of the world.

People ought to be listening and they ought to be remembering. Unfortunately, I think people have become so disenchanted with Yuschenko that they aren’t. It may all come down to pocketbook issues. Yuschenko and his government missed opportunities to have a positive effect there. The biggest problem though, I think, is that Yuschenko has not communicated with the people as he ought to have. I think they would have put up with a lot if he had told them how what they were experiencing would redound to their benefit eventually. And, if he made mistakes, he should have talked to them about that too. He tried in the OR celebration, but he got the script reversed and talked about the good he had done before he talked with them about the problems. They tuned out during the first part. It didn’t correspond to their experience. And by then it was a little late anyway.

It could be that they are remembering. He is down quite a bit from the 47% he had in the last election. Maybe that means the people are engaged and know. The problem is that he could have the most seats in the Rada even so. And that could mean being PM. It looks like déjà vu all over again. Make anybody else feel sick?

I, for the life of me, though, do not understand why no one is taking Yanukovych on. He is a man with the same defects he had before. Add to that the whole election theft and you’ve got someone who should be unelectable. But no one is taking him on.  How about now?

Putin shores up Yuschenko?

If this article is right--PUTIN OFFERS TO SHORE UP A WEAKENED YUSHCHENKO--I wonder why Putin would do that. (Hat tip Cyber Cossack.)

Russian President Vladimir Putin is shifting tactics toward Ukraine. Following the "gas attack" designed to produce regime change in Ukraine at the upcoming parliamentary elections, Putin is now apparently moving to reach an understanding with the severely weakened President Viktor Yushchenko. The January 4 signing of the gas agreement presaged this tactical shift, and the two presidents' meeting on January 11 brings it into the open.

In essence, Putin now offers to rescue a crisis-plagued Yushchenko presidency, on the apparent calculation that the president can be induced to countenance a return to a dual-vector orientation of Ukraine in the post-election period. Apparently, Moscow anticipates an uneasy coexistence of weak pro-presidential groups and relatively strong Russia-oriented forces in
Ukraine's post-election government.

I don't know what a "dual-vector orientation" would look like, but, if true, this would be a reversal of policy by the Kremlin. They want to shore up Yuschenko now? Why? They might get a Yanukovych in March. He talks about being the one to bring Ukraine back to Russia. Why wouldn't the Kremlin want to make sure he is the man in power here?

One thing is certain, though, the meetings between Putin and Yuschenko would have the results the article suggests. The very odd thing about Russian approaches to Ukraine after the Orange Revolution is that Russian businesses benefit from reform here and that reform has come from Yuschenko. And it is more likely to continue with Yuschenko than it is with the crony capitalism of Yankovych and Akhmetov. Maybe the Kremlin and Putin have finally recognized this.

Could it be that some sense has crept into the Kremlin? Considering what has gone on to date in Russia's dealings with Ukraine, if it has, it must have come in unawares.

Friday, January 13, 2006

Other means? Possibly not

Notwithstanding calls by some, including me, that he take the government in hand, Yuschenko looks like he is working through institutions to get things done--Yushchenko takes steps to restore authority. That headline should read "legal" steps to be more accurate.

Love him or hate him, you've got to respect that. He isn't taking on the legislature but giving them their due even when they do something stupid like Monday. If the legislature becomes an effective force in Ukrainian politics, something that is "iffy" right now, they are going to have to give Yuschenko an award for some part of that. He is not ignoring the vote, which could serve to undermine the Rada's legitimacy, nor is he taking them head on, which could strip it of any power. Respect for the institution is what we are seeing from him and there ought to be some kind of an award for that.

Of course, in some circles, that will be despised as weakness. Take power and rule is what the strong do and strength is what is needed, they will say (in private at least.) And that kind of thing has the added advantage of showing the people that something is being done. They can take comfort in the fact that the good Uncle (or Aunt) is out there taking care of them.

But there is also a purity to it that will make people feel better too, a kind of purity it shares with truth. With power there is no compromise. Democracy, on the other hand, is all about it. Principles need to be sacrificed, or at least accommodations made, for the good of all. Truth of course can accommodate nothing beside itself. Power can't either.

Democracy is a messy thing and the results do not completely satisfy all the time and maybe never. But, as Churchill said, democracy is the worst system out there, except for all the rest.

And Yuschenko is out there trying to prop up the institutions of democracy to make them look, at least, respectable. That is something that should be respected in itself.

Thursday, January 12, 2006

Gas sorted at the moment, now for domestic matters...

So, the toys that have been thrown around the Eurasian nursery by the little bully Putin at goody-two-shoes-tight-wad Viktor, to the shock of all of the outer boys and girls, have been put away. After their meeting yesterday in Astana, which Putin described as, "detailed and fruitful," its business back to normal.

For Putin the gas deal may have been fruitful indeed. In an interesting piece in 'Ukr Pravda' Stanislav Belkovskyi says most Gazprom professionals anticipated that despite the bluster from both sides, the price for gas sold to Ukraine would have been settled, after negotiations, at around the $145/Tcm mark. When they heard it would would be raised to an unrealistic $230 they quietly cursed Putin under their breath. The final price achieved by the Ukrainians was fixed at $50 lower than even their 'bottom price'.

Belkovskyi praises Yushchenko and Yekhanorov for correctly assessing their opponent and 'making him an offer he couldn't refuse.' By agreeing to use the services of RosUkrEnergo, they provided a simple mechanism for persons in the highest branches of executive power in the Russian Federation to skim off billions of dollars every year into their own personal bank accounts, with little cost to the Ukrainian state. Had Naftogaz Ukrainy dealt direct with Gazprom, then the unit price fixed for gas would have been much higher.

Belkovskyi says that Yulia T. had proposed a similar plan, using 'Itera', a Delaware-registered company she had used in the past when she was arranging shady deals herself in the gas-trading business.

The speedy resolution of the crisis caught her unawares, prompting the vicious attacks that resulted it the 'ousting' of PM Yekhanurov and his Cabinet by parliament. For BYuT, her over-the-top actions in sponsoring the 'ousting' was a political blunder in my opinion, as was criticizing Yekhanurov before a deal was done in the gas negotiations . It's bad form to do this when the captain is walking up to the plate with bat in hand to deal with hostile pitching.

Putin must be delighted with the ructions in Ukrainian politics. He can say to his people, 'You see how they are arguing in Ukraine - it shows that we won, and they lost,' so diverting attention from his own 'insider-dealing' schemes. If Belkovskyi's assertions are true, then how handy it is for Ukrainians that, as London cockneys say, "Putin likes a bung" [i.e. bribe].

The gas crisis has been settled for now, proper electioneering can begin. There are three big players, Yushchenko, Yulia, and Yanukovych, two of which will gang up on the remaining one. But which two? Today Yushchenko had ripped up his 12th Sept 05 Government-Opposition Memorandum with Yanukovych, and after Yulia's recent performances, it really is not easy to see with whom he will work in the next parliament. Someone should have told Yulia a few days ago, in politics, "he who wields the dagger never wears the crown."

I totally agree with you Scott that what happened in the VR yesterday was symbolic, peevish and irresponsible, because parliament will be wound up soon anyway, before the elections. I do not believe that politically Yushchenko has been significantly weakened, but now has to attack, attack, attack. Ripping up the memorandum [rather un-Yushchenko-like] is a very good first step.

Some more thinking on the vote

I was thinking yesterday that the vote on Monday dismissing the government was a real blow to Yuschenko. Today, I'm not so sure. Maybe I was looking at this through Western eyes. When governments in the West vote no confidence, the government falls. That is a real "no confidence" in the government. After that, the only thing left to do is to go to elections or form a new government.

But what was the result of Monday's vote? They took the largest bore they had, leveled it at the government, and fired away on all sides. But when it was all over and the smoke had cleared the government was still standing in place. After all that, no effect. Oh, they are fighting about whether the word "acting" should be used but if that is all the effect that a sitting legislature in a sovereign country has on the government, it is really pathetic. (Yekhanurov yesterday said that he was Prime Minister and not acting. Who's to contradict him? Maybe the Rada could schedule a vote on it?) This just undermines the credibility of the legislature, a point I was making yesterday. They might as well have been voting on the best recipe for grilled chicken for the all the effect it had on the government. You can't do these kinds of things and maintain any credibility. No credibility affects the power of the legislature.

I'm surprised Litvin was involved in this. It was he who husbanded the power of the Rada during the Orange Revolution something that allowed it to survive and to come out with some credibility and more power. On one occasion, when Tymoshenko--anybody remember this?--opened up the doors of the Rada building letting the revolutionaries come in, Litvin stood before the crowd and said something like, "We're doing your work. Let us get on with it." That dispersed the crowd and maybe saved the legislature as an institution. It at least allowed it to keep some credibility with the people and so you went down to the square and to the camp-in at the presidential administration building and you saw the large screen TVs tuned into the sessions of the Rada. This was so because it was doing the business of the people and had maintained some credibility. (Or had cultivated some credibility.) This is in no small part because they didn't take any stupid votes. So I'm surprised at Litvin being involved in this. Maybe he couldn't do anything about it though I suspect he could. But his party is in the running in March and, as LEvko said yesterday, there is politicking in this too.

But I think this presents an opening that Yuschenko could exploit. If he really wanted to, and Tymoshenko has suggested it because, I think, she would do it, he could dismiss the legislature and rule by decree. Forward to the past. I might make an argument that he should but, as I said yesterday, that would mean he needs to be very astute in what he does to move forward reform and create rule of lawÂ—a very difficult thing to do. Witness Russia under Putin.

At the very least, Yuschenko could hang this vote around everyone's neck. This means taking some swings out there. He hasn't seemed to be interested in doing this though. No one has yet except Tymoshenko but the blows from her have been light.

And no one has even started to go after Yanukovych, someone who has a past that is a target rich environment, as the military would say. He was involved in the vote on Monday. At least they ought to hang it around his neck. Somebody needs to do it.

UPDATE: I guess the obvious retort to the above argument is that the Rada told the government to remthe in power until the elections and that it had a right to do this under the Constitution. That is a legal nicety I don't think will come through. The Rada took its best shot and nothing happened. That is what will be out there.

But this puts me at odds with a lot of people. They disagree and think that it has weakened Yuschenko and strengthened everyone else. I guess we'll just have to wait and see.

Wednesday, January 11, 2006

Contracts, agreements, and cynical deals

Scott's last posting highlights what all Ukrainian and Russian politicians know, but nobody has said, i.e. that the contracts between Naftogaz Ukrainy and Gazprom/Kremlin [GazKrem?] are not contracts as normally understood at all, because they are not enforceable by any higher body, rather they are agreements between two antagonistic parties that have leverage over one another. The 4th January document is entitled ‘Soglasheniye’ – Agreement.

Russia has its foot on pipes providing Ukraine with gas, but Ukraine has its foot on Russia's pipes to Europe. Furthermore Ukraine has faucets which it can screw into the latter pipes when required; but Russia has its other foot on pipes from Turkmenistan supplying a major portion of Ukraine's gas. This degree of mutual capacity for blackmail means that any dispute over prices will inevitably be resolved quickly.

The events of the first days of this year were ritualistic and calculated posturing by the Kremlin with the purpose of showing how mean and tough they can be. Ukraine acted completely predictably, turned off valves feeding gas westward, then, again predictably, shock and anxiety in the world media, and finally the whole matter resolved indecently quickly, ending in a bout of mutual backslapping. Most reasonably well-informed Ukrainians realize the 'contract' is just the first stage of inevitable stepped gas price hikes, although Ukraine's 'foot on the pipe" will always provide a healthy discount. The Kremlin will not stop trying to get its hands on the pipes, by fair means of foul, in the future. The two protagonists know one another so well, like two soccer teams that play each other several times a season, so these games will usually end in a draw. But for end-users in Europe, this is a wake-up call - they now know who they are dealing with. The EU should close ranks and develop a common energy strategy, but they won’t of course because it is such an unwieldy self-serving structure.

Putin must have been certain of what Ukraine's reaction, and what the subsequent knock-on effects in Europe would be to his rather contemptuous actions. He may well have calculated that Ukraine would receive more of the blame, but overall I get the feeling that despite bad press in the west, he will be reasonably satisfied with the last few days work, and not too worried about riling the Europeans. He has made his mark. Respect, that's the important thing.

It was the fact that the Ukrainian government did not 'come clean' with the electorate immediately the gas agreement was made that has caused indignation amongst Ukrainians who were misled into believing that prices would be stable for five years. But even more annoying was the realisation that all gas supplies will be exclusively handled by a shady middleman, 'RosUkrEnego'. Ukraine is big enough to deal with the organ-grinder, not a monkey with a can in its hand.

In a country as corrupt as Ukraine, every citizen understands perfectly well how this works. The notion that if you are in a position to take bribes you have to milk the situation for all its worth, is deeply engrained, and if you don't, then you are a fool. "So? Everybody else does it," and "It's a sin not to sin," are heard as justification, even though people are aware corruption is the biggest evil which has to be dealt with.

It was hoped that after the Orange Revolution the government would start tackling this, but the gas deal has shown everyone how breathtakingly cynical the Ukrainian Government and GazKrem can be. Sure, there is a political angle to yesterday's turmoil in the VR - everyone is out to improve their chances in the March VR elections, but the breakdown of VR deputies voting for Yekhanurov's resignation is revealing: e.g. 'Our Ukraine' faction - 19 against, 21 abstentions. Kinakh's party [a member of Ukr Gov] 1 against, 13 abstentions, and so on, altogether 250 for the motion, over 100 abstentions, and only 50 against the motion to dump him. An astonishing result.

Yekhanurov's dismissive statements that it was GazKrem who wanted the middlemen are simply not believed. As you say Scott, 'you’ve got to talk to the people to tell them what you're doing and why. A lot of what has happened could have been eased in a bit more if they had communicated what was going on'. Yekhanurov is now paying the price for trying to 'pull a fast one' on the electorate. Shady middlemen skimming off billions are no longer acceptable.

Ps I read that Tymoshenko is suggesting that Yushchenko introduces Presidential rule until the elections in March [as is Nasha Ukraina]. She wants to be show her intention was ‘only to wound, but not kill'. Maybe she's used one club too much..

The Rada, rule of law and the buildings

In some of the commentary on the government dismissal the claim has been made that it was illegal. According to one, the issue was not placed on the agenda before the vote and that made the procedure illegal. (According to the radio today, which I heard second hand, Lytvyn, the Speaker, has been dismissed and charged with reading the Constitution. Sounds poetic but my question is, if it happened, who did it and how.)

I’m sure this is true. But my question is a more mundane one: who controls the buildings? This sounds odd, I know, coming from someone trained in the law, but in this country, a country with no tradition of rule of law and, so, no habit of rule of law, who controls the buildings is the important thing. Whoever controls the buildings here controls the government. That was the intuition of the Orange Revolutioneers and it was a good one. (Was it conscious? I don’t know. But it was effective.)

Doesn’t that set the stage for an autocrat to come in and take over? Yes, it does and that has always been the risk. My argument early on was that Yuschenko needed all the power he could get to get things done, reform being the most important. All the time he was pursuing reform he would also be setting the groundwork for rule of law institutions. That may sound inconsistent—a benign autocrat working toward rule of law. Is there really such a thing? Maybe not but I thought of all people Yuschenko could be trusted with it. Maybe he wasn’t George Washington but he was good enough for what needed to be done here. He could take charge get things moving, set in place the institutions, give them a push and relinquish power when his time came to give it up.

Was that dangerous? “Absolute power corrupts absolutely” doesn’t it? It does in the vast majority of the cases. Napoleon couldn’t do it, nor could Caesar. Washington is an example of someone who did and the club is a rather exclusive one. (Napoleon is purported to have said on his deathbed, “They wanted me to be a George Washington.”) I thought Yuschenko could do it. And if he couldn’t and became a Kuchma, the people would have what they always have had. It would be more of the same. So what would they have risked?

But things haven’t worked out that way. Yuschenko, with all the faults, has been interested in making sure that rule of law tradition is established before anything else. That is a good thing and a noble thing but you’ve got to have some firm institutions that have some power to be able to do that and make it stick. The Supreme Court looked like it had come into its own during the Orange Revolution, but it has kind of faded away. It isn’t much of a factor now and there is some indication that the government is not acting all that quickly in getting new justices approved when the time of the sitting justices is up. Does that mean a lack of interest? A country has to have a functioning and powerful judiciary to be able to have a rule of law system. This isn’t the case here--not yet, at least. (One can always hope.)

The Rada came into its own during the Orange Revolution which is another institution that has to have power for democracy to function as it should. And it is also an important institution for rule of law. But the Rada is dominated by business interests right now--that means oligarchic interests—and is not bringing credit to itself with that they are doing. Democratic institutions must have credibility to work. People have to believe in them for them to function as they should. With the vote yesterday, they are reminding me of the rogue grand juries we used to see when I was working at the US Attorney’s office in Salt Lake. They, mostly in Wyoming but Utah one too, would refuse to be controlled by the prosecutor and would indict anyone they thought was not doing their job. The local sheriff or the school board or anyone else they thought should be brought to justice for what they had done. By exceeding their mandate though they discredited themselves and rule of law in the process. Fortunately, the tradition is robust enough in the US to survive something like that.

Maybe the Rada could outlaw avian flu while they're at it? If it affected eastern business interests maybe they would.

So my argument is that control of the buildings is the major issue. If they control the buildings they control the government.

By the way, this gives a real opening for Yuschenko. Someone said that he should have milked that gas crisis for all it was worth. Refuse to cave in on any price other than the original; hunker down when the gas was turned off and blame Russia for everything. I made that argument myself. He didn’t do that and probably acted more responsibly as a result.

But this presents a major opening that is just crying to be exploited by him. The eastern magnates pull their strings and the Rada dismisses the government. Rub their noses in it. Make the point that they can’t get what they want according to the law, so they end up getting it any way they can, (and maybe any way they want to.) Tell the people that they are in it for themselves at the expense of the country, the people in both east and west Ukraine. Hang them with it. He could score points both against the oligarchs and against Yulia, who voted with the majority on this.

But of course, this will require some strategy and that is something Yuschenko and his group need to come up with. Come on guys, the door has been left wide open for you.

Government fired

If it ain't one thing, it's another--Ukraine Parliament Fires Government After Gas Accord.

Ukraine's parliament voted to fire the government today over President Viktor Yushchenko's gas accord with Russia, as divisions persist about the nation's ties to its former Soviet partner a year after the Orange Revolution.

The vote was passed by 250 of the assembly's 450 members, who said they were upset the government signed an agreement that more than doubles the price the country pays.

The move raises the possibility of a constitutional crisis in Ukraine, the main gateway for Russian gas shipments to Europe, before March 26 parliamentary elections. Yushchenko, who is on a visit to Kazakhstan, said the decision contradicts the constitution and the government said it will challenge it.

The possibility of a constitutional crisis? This is the fact of a constitutional crisis. It makes everything unclear. Who's really in charge now?

More later.

UPDATE: Tymoshenko last night said that there is an agreement in Parliament to put Yanukovych in as Prime Minister. That ought to be interesting if it's true. He smiles a lot these days. Maybe that will help.

All I can say is that it is the missteps of the government that has brought Ukraine to this. You've got to talk to the people to tell them what you're doing and why. A lot of what has happened could have been been eased in a bit more if they had communicated what was going on. But Yuschenko has not done this for much of anything. One news organization here said that the government had no strategy to get any information out on the gas crisis and that created a vacuum that Russia filled and dominated. The only thing going for Ukraine in that whole thing was that, in the end, Russia is not trusted by Europe. (Must be some of that old time Russophobia. More on that later.)

And that has been true for everything. There is no strategy to get the government's position out there. It mostly goes by default. And rumor mills here fill the space and are pretty effective at moving things around, so you've got no governrment position being made in public and rumors floating around that just sit there. (Can they float and sit?)

One that we heard recently is that Yuschenko has taken over Marinsky Palace for his own personal residence. This isn't true but it is out there and plays into the "these guys are no better than all the other guys who have pillaged before" point of view that seems to dominate right now.

Anyway, we'll keep on this.

Tuesday, January 10, 2006

The contract

We have been entranced by the fact that a contract has been signed between Russia and Ukraine solving the gas crisis. I have been as much as anyone. It looked like that contract solved everything.

But now the contract has been made public and there isn’t much “there” there. It turns out that the price is set for six months only, a point LEvko picked up on early. And there is not much there on delivery terms or anything else for that matter. Ukraine says it has to sign a contract with Russia—this was only between Gazprom and Ukraine—for what is, I guess, the delivery of the gas to Ukraine. This seems to mean that the deficiencies would be solved in that next contract. But they might not be.

And it doesn’t really make that much difference anyway. The problem is that these contracts are not really enforceable in any court that could make a difference. And that is true even if the contract complied with all the legal requirements law students learn in the first year course on contracts. In other words, they may have a contract but it doesn’t really solve much of anything.

Why is this the case? Look at it this way: Suppose Russia didn’t comply with some provision in the contract—say they turned the valves again and stopped the gas-- what court could Ukraine take it the case to for the contract to be enforced? Some mentioned early on that Ukraine could take the original contract to arbitration—in The Hague was it?-- and that they would win. I am sure they could have. But winning would mean getting a verdict and that verdict would be from an arbitrator in The Hague. The gas however is in Russia. To get the verdict to have any effect on gas in Russia would require a Russian court to enforce that verdict. So Ukraine files to enforce that verdict in Russia. What happens? It is not impossible that the court would enforce it, but with the interest of the Kremlin in this and with the power the Kremlin has over the courts in Russia, it would make it highly unlikely that any Russian court would enforce it. So judgment for Ukraine in Europe but victory for Gasprom in Russia. And no gas would flow.

To be fair the same sort of thing applies to courts in Ukraine. This area is known to have the rule of law—except when it matters. For anyone really interested, that doesn’t mean you can’t get justice when going up against powerful interests. It’s just that you probably won’t get that kind of justice from a court of law. Our company works on these issues from a number of directions and we have success with it. But the legal option is only one of these.

So the upshot of this all is that having a contract, Ukraine really doesn’t have a contract. This whole thing is not settled at all. It still remains in the political sphere where it has been all along and will continue to come up when the Kremlin sees it in its interests to bring it up again. And being that the Kremlin sees its interests rather narrowly, it is bound to see it in its interests again.

The only limit right now on the Kremlin is either that they are afraid of riling the Europeans or that the players actually profiting from this are satisfied, at least for now. If the former, there might be some long-term peace even though the gas price is set for only a six month period. Making noises about Ukrainian gas might set the Europeans off again. But if it is the latter, though they might be satisfied now, they may not be for long.

Correction: It's the Stockholm Arbitration Court not anything from The Hague.

Monday, January 09, 2006

More to say

There is more to say about teh contract with Gazprom. Some have suggested that the whole row was simply a matter of some jostling for position by the new big men on the block. The contract, what little of it there seems to be, suggests there might be something to that point of view.

However, I will have to delay saying anything else until tomorrow.

Sunday, January 08, 2006

Gazprom/Naftogaz contract flawed?

An article in today's London 'Times' is one of only a few in western media sources that reveal how flawed the Gazprom-Naftogaz Ukrainy contract, agreed and signed on Jan 4th, may really be.

A facsimile copy of the original, produced by Yulia Tymoshenko at a press conference on Thursday, may be seen here together with the previous contract between Gazprom and Naftogaz Ukrainy, dated 9th August 2004, fixing the price of gas delivered to Ukraine at the [ridiculously low] rate of $50/thousand c.m., and a transit rate of $1.09 until 2009.

The following translations of the relevant passages need no further comment:

To ensure transit of natural gas which belongs to Gazprom (Gazeksport Ltd) and Rosukrenergo through Ukraine and the Russian Federation, the Sides have agreed on the rate of payment for transit to the amount of 1.60 US dollars per 1,000 cu.m. per 100 km until 01.01.2011.

The Sides shall sign appropriate agreements and contracts...To sell: - in 2006 - 34bn cu.m. of gas to be sold at the price of 95 US dollars per 1,000 cu.m. of gas which is in force in the first six months of 2006, to the joint venture created according to Paragraph 3 of this agreement (to be sold to Naftohaz Ukrayiny until 1 February 2006 until the creation of the joint venture) for subsequent sale on the Ukrainian domestic market without the right to re-export;

The $95 rate is for six months only, not five years as trumpeted in the media.

Conspicuously, the newly-signed contract does not include paragraphs revoking the previous gas supply contract, which fixed the $50 thousand price, and was to run until 2009. I assume, therefore, that the Ukrainian side could always claim at some time in the future that the old contract is still valid.

The new contract may be considered as a statement of intent only - arrogant 'ochkovtiratelstvo,' [deception] presented to take the heat out of the rapidly developing crisis.

'Der Spiegel' today reports that former Chancellor Schroeder telephoned Putin and Gazprom chief Alexei Miller at its peak, when gas deliveries were dropping precipitously, and persuaded them to turn the gas on again and to sort out the disagreement with Ukraine as quickly as possible.

This gas business is going to rumble on, for sure. The above-mentioned 'Times' article gives details of problems in Turkey, Moldova, and Bulgaria. How long will it be before the Turkmens demand a fairer price for their gas? And Putin will be desparately trying to get Ukraine's gas transit system, its ace card, into his clutches, especially after the 'kicking' he's had. Tymoshenko will not let the matter rest either - this is her chance to get even for being sacked by Yushchenko - she knows all the intermediary 'operators' dirty secrets. And everyone knows negative campaigning works best..