ODESA, Ukraine — Odesa, a city of 1 million people some 476 kilometers south of Kyiv and home to Ukraine’s largest seaport infrastructure, is positioned to be an international economic hub and world-famous tourist destination.
But the city’s pervasive corruption, poor infrastructure and high port tariffs are sapping Odesa’s potential, civic activists and businesspeople say.
And the city’s troubles start at the top: a name that everyone associates with corruption in Odesa is that of Mayor Gennady Trukhanov.
The mayor and his business partners have been accused of trying to monopolize the most lucrative businesses in Odesa, including real estate and municipal tenders.
Trukhanov’s press office said it would not comment on “untrue information that is aimed exclusively at discrediting the city authorities and has no factual basis.”
Neglected seaports
Oleksandr Varvarenko, the head of Odesa based cargo shipping f rm Varamar Group, told the Kyiv Post that Ukraine’s port tariffs and duties are the highest in the world, and described Ukrainian ports, including Odesa’s, as some of the worst in the world, making it difficult for them to compete internationally.
The largest seaport in the region, the Odesa Commercial Sea Port, has argued that high tariffs are necessary to finance investments in infrastructure.
The seaport processed 24 million tons of cargo last year, or 4.4 percent less than in 2016, and the net profit of the port amounted to Hr 303 million ($12 million) in 2016, according to Nashi Hroshi investigative network.
No data is available for last year, whereas the forecast for this year is Hr 119 million ($4.5 million).
EuroTerminal
EuroTerminal, a private logistics complex, has an effective monopoly on processing container shipments from the Odesa Commercial Sea Port, and due to its location all containers have to go through it.
Ihor Tkachuk, CEO of the Odesa Sea Port Authority, told the Kyiv Post that he was negotiating plans to build a bypass road around EuroTerminal’s facilities to spur competition.
“We’ll build a bypass to remove obstacles for private businesses and make sure that one company doesn’t have a monopoly,” he said.
The terminal was built under then-President Viktor Yanukovych’s instructions in 2011, and Yanukovych and his allies were suspected of participating in the scheme, although they denied this. EuroTerminal’s owner, Pavel Lisitsin, used to be a business partner of Leonid Minin, Oleksandr Angert and Oleksandr Zhukov.
Angert, Zhukov and their associates — Odesa Mayor Trukhanov and Vladimir Galanternik — have been accused of spearheading corruption in Odesa, and according to an Italian police dossier, were members of a mafia gang in the 1990s. They deny all accusations of wrongdoing.
Elena Goryayeva, EuroTerminal’s deputy director for special projects and public relations, denied accusations that the terminal is linked to Angert and his allies, and that it has a monopoly on container shipments from the port.
Odesa Airport
But another obstacle for doing business in Odesa is the lack of a modern and well-functioning international airport.
The city’s airport is dilapidated and should have been closed a long time ago, Varvarenko said.
And if that were the case, his firm would have to move to another city or country since the infrastructure is vital for his business trips.
The airport’s press service told the Kyiv Post that its runway was operational and complied with a certificate issued by the State Aviation Service.
Currently, the outdated terminal and runway serve for departures, while a new terminal launched in 2017 services arrivals.
The airport is in the process of building a new runway, which is scheduled to be operating later this year. The airport is also known for its high service fees for international flights.
Pavlo Prussak, CEO of the airport, denies that the fees are excessive, and says they were set by Ukraine’s national authorities, not by the airport.
Moreover, the airport offers fights to few international destinations for a city of such size and economic importance.
Odesa has about 36 international destinations, while its traffic amounted to 1.2 million passengers in 2017.
In comparison, the airport serving the Moldovan capital Chisinau — a city with a population of less than 700,000—has about 50 destinations, and its traffic was up to 2.7 million passengers last year.
Trukhanov, then head of Yanukovych’s Party of Regions’ faction in Odesa City Council, is currently under investigation by the National Anti-Corruption Bureau of Ukraine for allegedly unlawfully selling Odesa International Airport to businessmen Boris Kaufman and Oleksandr Hranovsky in 2011.
In April, a Kyiv court seized Odesa Airport’s property as part of the case. The airport did not respond to a request for comment.
Odesa Mayor Gennady Trukhanov and businessmen Oleksandr Angert and Volodymyr Galanternik are accused of profiteering from lucrative real estate projects and tenders in Odesa due to their political clout. They
deny the accusations.
Tourism and real estate
All of this is blocking the city’s development, including tourism. With its rich history, 19th century architecture and beautiful Black Sea coast, Odesa is a natural tourist destination.
And after Russia started its occupation of Ukraine’s Crimea in 2014, many Ukrainians switched to taking their summer vacations in Odesa.
In 2017, 2.5 million tourists visited Odesa, 19 percent more than in 2016, according to Odesa city authorities. But Odesa is still not ready for the increased inflow of visitors.
Historic buildings in the city center are not sufficiently maintained, with many of their facades crumbling, Mykhailo Kuzakon, civic activist and head of Odesa’s branch of the People’s Movement of Ukraine party, and Inna Kravchuk, head of the Council of Odesa Businesspeople, told the Kyiv Post.
And while many historic buildings are not being properly maintained, Odesa’s real estate market is dominated by two property developers—Budova, owned by three Odesans, and Kadorr Group, a company owned by Kyiv Post publisher Adnan Kivan.
In 2016 to 2017, Budova and Kadorr Group accounted for at least 60 percent of all buildings built in the city, Odesa-based journalist and civic activist Mykhailo Meizersky told the Kyiv Post.
In 2016, Kadorr Group alone built 29,700 square meters of real estate, according to Ukraine’s Forbes magazine (not related to U.S. magazine Forbes).
Budova is formally owned by little-known Odesa residents Oleh Glushankov, Dmytro Dimarsky and Boris Rodin.
However, given the privileges given to Budova by the Odesa City Council, the property developer has been linked by numerous Odesa activists, investigative journalists and market insiders to Odesa Mayor Trukhanov and his business partners Angert and Galanternik.
Budova declined to comment on the accusations, while Trukhanov denied being a co-owner of Budova in a comment for the Kyiv Post.
Under Trukhanov’s mayorship since 2014, Odesa City Council has allocated the most high-end land to Budova, according to Kuzakon and Kravchuk.
Small businesses
And municipal authorities are also making life more difficult for small businesses with numerous regulations, many of which violate national laws, Kravchuk argued.
The reason? Local authorities still want businesses to pay bribes. It is nearly impossible for businesses not connected to municipal authorities to receive land for kiosks or shops, Kravchuk said, adding that it is much easier to do business in Kyiv than in Odesa.
Trukhanov’s office denied the accusations of wrongdoing, saying that the allocation of land had been in line with the city’s urban planning projects.
