Russian gas verses the will of Ukraine
The renewed gas debate has again put strain upon the Ukraine – Russia relationship. The gas agreement signed by former Ukrainian Prime-Minister Yulia Tymoshenko in 2009 has become supposed grounds for her prosecution as well as becoming a lever of political pressure upon the Ukrainian economy.
The contract leaves Ukraine committed to buying Russian gas at the highest price in Europe – US$380 per 1000 cubic meters throughout the last quarter of this year.
Following his election President Yanukovych attempted to cut the price of Russian gas by $100 per 1000 cubic meters by extending the Russian lease of naval facilities in Crimea to the year 2042 in the now infamous 2010 Kharkiv Accords.
Whilst greater leniency is extended towards the EU member states, Russia’s attitude towards Ukraine demonstrates a zero tolerance policy regarding changes to the gas treaty.
Russian President Dmitriy Medvedev has stated that concessions will only be considered if Ukraine either joins the Customs Union of Russia, Belarus and Kazakhstan or hands its gas pipeline network over to Russian ownership.
Yanukovych cannot accept either of the two proposed options and retorted that if the countries fail to reach a consensus then Ukraine may file a case with the Stockholm Court.
Yanukovych is already pressing forwards with reforms in the energy sector including the liquidation of "Naftogaz Ukrainy" which may in itself warrant a revision of the gas treaties.
At present both Ukraine and Russia are gritting their teeth and arming themselves for a new gas war. Relations between the neighbour states are at an all time low prompting Russia to aggressively flex its internal influence, stepping up the pressure in Ukraine.
One of the few perceived escape routes for the Ukrainian authorities would be the rapid integration with the European energy legislative environment along with the attraction of foreign investors and technologies to Ukraine.
Only policies of this nature can lessen the dependence on Russian energy resources. Until then Russian gas is winning the battle against the state of Ukraine.
People First Comment: For a nation of chess players Russia seems to be playing a very short term game. They currently sell gas to China at around $200 per 1000 cubic meters, to Europe at an average price of $299 per 1000 cubic meters and yet they demand one of the highest prices in the world at around $380 per 1000 cubic metres from a nation they claim to be a ‘fraternal brother’.
True, Russia is in no position to play hardball with China and their gas trade with Europe supports the entire Russian economy but why pick on Ukraine. One reason may be that Russia is simply tired of Ukraine’s gas games after all in 2001 Russia signed a ten year contract to supply gas to Ukraine at $50 per 1000 cubic meters with no strings attached, no demands to join customs unions or to hand over the pipeline network, just a good contract with a former close ally.
Prime Minister Yushchenko, in his infinite wisdom, chose to cancel this contract in favour of a complicated deal involving various intermediaries the result of which has been: two gas wars with Russia that has seen Europe’s gas supplies halted in the depths of winter, escalating spats as each new Ukrainian President and Prime Minister has sought to get a better deal for somebody and all at a cost to the Ukrainian people of $38.6 billion dollars in additional gas tariffs.
Gazprom may be laughing all the way to the bank but this constant renegotiation is wearing, time consuming and frankly totally unprofessional. If other nations can sign gas supply contracts over long term periods then why can’t Ukraine?
The answer is simple… it’s called profiteering as it is very difficult for those in power on both sides to siphon off their perceived share from a long term contract. But the Ukrainian authorities had better beware as if they push the boat out too far it could well be in Moscow’s political interests to point the finger at just who has benefited from the Ukrainian gas games and by how much.
Privatisation for Private gain
Close relationships with the current Ukrainian authorities have allowed Ukrainian oligarchs to snap-up Ukrainian state assets at "below the market" prices or in some cases practically for free.
For example, Crimea State Industrial Union "TITAN", owned by an oligarch close to the government, is utilising the Irshanskiy Mining and Processing Plant and Vilnohirskyi Mining and Metallurgical Plant wihout any leasing contracts.
According to Oleksandr Ryabchenko, Head of the State Property Fund of Ukraine, "TITAN" does not need to pay any fees at this time due to the fact that a dispute over the ownership of the enterprise is currently being reviewed in court. As a result the state is losing about 6-7 million UAH (0.8 million US Dollars) every month.
A number of other state assets have also been exploited by selected business heavyweights. A number of journalists and experts claim that after Volodymyr Kozak, who is close to Rekhnat Akhmetov, took charge of "Ukrzaliznytsya" the state transport giant the commercial interests of Akhmetov have been receiving special privileges for the use of railway services.
At the same time the government intends to increase the list of enterprises handed over to privatisation, including those that are currently highly profitable, such as aviation, spacecraft, military, Industrial and transport manufacture. The big cheeses of Ukrainian and Russian business are already lined up to take bites out of Ukraine’s assets.
Although the immediate profit margins must seem attractive to Ukrainian oligarchs, one has to consider the impact upon their credibility when time comes for them to expand abroad.
Are you a politician asking what your country can do for you, or a zealous one asking what you can do for your country? If you are the first, then you are a parasite; if the second, then you are an oasis in the desert.
– Kahlil Gibran
Lebanese American artist, poet, and writer
People First Comment: Sorting out the mess of Ukraine’s commercial economy will take decades as since independence and as a result of vested interest and corruption. Millions of clever little schemes have been devised to evade taxation and take advantage of the lax legal environment. The ‘Titan’ case is just such an example.
Clearly it is in the interests of the protagonists to milk the system for as much and for as long as they can, but all good things must come to an end and in this case the winner of the court battle may win a bitter pill as it will be he who will have to pay the State Property Fund all the back fees and at $800,000 per month this could be a substantial amount.
The case of ‘Ukrzaliznytsya’ is somewhat different in that if Mr Akhmetov is now a substantial investor in the Ukrainian transport industry it would seem to make good business sense to optimise his investments to maximise profits however if this optimisation results in, what the World Trade Organisation terms unfair pricing, then he too may have a rude awakening in the not too distant future.
In joining the WTO Ukraine signed up to a huge swath of new rules and regulations designed to level the playing fields to ensure that all trade is free and fair.
Traditionally Ukrainian businessmen are not that good at following rules and invariably believe they can bend them to their advantage. The WTO on the other hand has a very different view and regularly fines companies that abuse the rules. If Ukrainian businessmen want to be taken seriously it is time for them to start following the same rules as the rest of the free world.
Donbas calls on President to end censorship
In the President’s home region of Donetsk a conference entitled "Obstacles to the professional activity of Donbas journalists" has given rise to the "Donbas without censorship" public movement.
Local media and members of the general public have already joined its ranks. Civil society organisations along with prominent artists and scientists from the Donetsk region are all contributing to the growing debate over restrictions on freedom of speech, providing a diverse but solid foundation for the movement.
A key issue regards the government’s wielding of the tax authorities as a threatening weapon, with many cases of unjustified inspections and meddling in the editorial processes of publications – directly undermining media independence.
The response has thus far been to block attempts to question the authorities responsible, restrict internal communication efforts and ignore requests for information materials.
The movement’s first action was to address the President of Ukraine himself, requesting his personal intervention in the restrictions of freedom of speech in the Donbas region. To this end the protest group has organised a drive for signatures in support of the petition "Donbas without censorship".
Evidently the local media feels that Yanukovych would not knowingly permit such censorship in his own native region – perhaps preferential treatment in this case might lead to a trend for freer media in the nation as a whole.
People First Comment: There seems to be a belief amongst Ukrainian media owners that if they own a publication or TV station that they have the right to determine the editorial content, style and format. Whilst this may be true in the strictest sense of ownership it fails to take into consideration the social responsibility of the media or the economics of publishing. You only have to compare the newspaper industries of Ukraine and the UK to see the stark reality.
The leading newspaper in Ukraine prints around 200,000 copies every other day whilst in the UK there are 11 newspapers that print over a million copies a day and two that print over 2 million copies.
The cost of a page of advertising in one of the serious Ukrainian business newspapers is around $7,000 whilst in a UK equivalent it can be as high as $170,000. One is a viable and profitable industry based on established titles with establish political and social positioning and good journalism whilst the other is a feeble excuse designed only to appease the ego of the owner and curry political favour.
Despite the differences however there are signs that the Ukrainian media industry is heading in the right direction. The ‘Donbass without censorship’ movement is the first time that journalists in Ukraine have go together to say enough is enough. They have stood up for their rights just as journalists did in the UK in 1905 and under very similar circumstances.
What resulted in the UK was the National Union of Journalists which is today one of the more powerful of the UK’s trade Unions where an attack on one is an attack on all. It was this collective power that bought the media owners to the negotiating table and ensured the rights of journalists and editors to act as the conscience of society. If the journalists of the Donbass can achieve the same then the Ukrainian media really will be free and Ukrainian society all the better for it.
Authorities prepare to break popular protest
Reports from many sources suggest that Ukrainian militia forces are receiving emergency training in crowd control and riot suppression. The official explanation provided by the Ministry of Internal Affairs of Ukraine states that in preparation for Euro-2012 training of special "Berkut" units and other additional forces are necessary.
However, militia units have been observed receiving training not only in and around the four cities where the championship matches will take place, but also in many others regions scattered all over Ukraine. The opposition and human rights activists together suggest that the authorities are preparing to resist popular protest against the government, which are already expected to unfold this autumn.
Evgen Zakharov, leader of a human rights group in Kharkiv, Gennadiy Moskal, a deputy from the People’s Self-Defense Bloc, along with other public figures claim that the government has been actively conducting training, primarily to be able to break up the potential rallies of those unsatisfied with life in Ukraine.
The Ukrainian militia is already famous for its abrasive approach to communication, as shown by the research of the Kharkiv Institute for Social Studies conducted with the Kharkiv human rights group. According to sociologists and human rights activists every 40 seconds in Ukraine somebody suffers from an unjustified violent attack from a militia officer.
By actively training security units in order to protect themselves from the people of Ukraine the authorities demonstrate not only fear but also unwillingness to engage socio-political issues in a frank and democratic manner.
People First Comment: One of the most impressive social revolts of the Orange revolution was the role played by the elite soldiers of Ukraine’s SBU regiments. President Kuchma, so it is reported, ordered the Minister of the Interior to use his soldiers to clear ‘Maidan’ using force if necessary on two separate occasions.
The first was met with a telephone call from US Secretary of State Colin Powell who advised the President of the potential consequences of his order.
On the second occasion the interior troops were preparing to leave their barracks when their commander got a call from the General in charge of Ukraine’s special forces who advise him that in order to get to ‘Maidan’ his conscript soldiers would have to first get past regiments of the elite special forces of the SBU.
Needless to say the Interior forces commander got the message and his troops were stood down.
And herein lays the moral of this story. Ukrainian’s will fight like tigers and to the last man to repel anybody who seeks to invade Ukrainian sovereign territory but they are highly unlikely to turn their guns on their own people simply because they are ordered to do so by a politician.
For any army to suppress their own people by force they have to cross a massive psychological threshold.
They have to believe in their leadership and in their cause and this is not the case in Ukraine as all the political leaders are universally despised. Those who resort to such tactics, as recent events in North Africa clearly illustrate, are desperate people who have already lost.
Viktor Tkachuk is chief executive of the People First Foundation, a politically independent democracy foundation. He is a former deputy secretary of Ukraine’s National Security and Defense Council, a former senior adviser to three presidents and a former member of the Ukrainian parliament.
