Swedish forum highlights Ukraine’s age-old problems

Ukraine's Soviet heritage is holding the country back. The 31-year-old deputy economy minister took the microphone to speak at a business conference in Kyiv on June 11 and, in fluent English, began rattling off his country’s achievements: a rise from 115th to 16th in the World Bank’s doing business ranking, reduced bribery and greater trust in police. “The transformation we made and achievements which I can list during the period of 2005-2010 [mean that] we’ve been named as the number one reformers,” he said. Sadly for Ukraine, this was not one of its own officials, but Georgia’s Deputy Economy Minister Mikheil Janelidze. Janelidze was speaking at the Sweden-Ukraine Business Forum, which had gathered together potential investors to inform them about investment opportunities in Ukraine. His Ukrainian counterpart produced a speech in heavily accented English that was full of platitudes. Janelidze’s fluent presentation of Georgia’s successes raised the question as to why Ukraine still remains toward the bottom of international business rankings. Natalie Jaresko, CEO of Horizon Capital investment bank, pointed to the age difference between Ukrainian and Georgian elites. She said Ukraine’s “Soviet heritage” was holding the country back, as older politicians and officials are not open to new approaches and a more global view. “I don’t know what the average age of our Cabinet of Ministers is today, but it’s older than 35,” she said. Tomas Fiala, CEO of investment bank Dragon Capital, said he had also noticed the limited international exposure of members of the government and presidential administration. “Last week at a meeting with the president, there was about half the government members present and unfortunately about 75 percent of them did not speak English and had their headphones on,” Fiala said. Georgian Janelidze is among many members of Georgian government, led by President Mikheil Saakashvili, known for having a number of young, Western-educated members. The president himself received a masters of law from Columbia Law School and has a good command of English. Having recognized corruption as the core problem of Georgia’s development, the government saw younger people as a solution. “We had a huge change in the administrative staff. Instead of corrupt officials, we hired new people, with less working experience but with no experience of taking bribes. They were young but we trained them,” Janelidze said. Roman Shpek, an adviser to Ukrainian President Viktor Yanukovych, admitted at the forum that Ukraine needs more “concrete knowledge” of international trends. “Very important not to find how to build on our own way, we should use more international experience,” the 57-year-old said in heavily accented English.

Olympic Stadium figure admits guilt in $3 million embezzlement

The general contractor of Kyiv’s $585 million Olympic Stadium confessed in court on June 6 to embezzling Hr 24 million ($3 million) of public money. During questioning in the Shevchenko District Kyiv City Court, Volodymyr Artiukh who heads AK Engineering, said he “effectively helped commit a crime” when he allegedly helped funnel money from a bank that was under state administration to renovate its head office near St. Sophia Square following the global financial crisis. Authorities allege the renovation was never done and that the money disappeared. “If possible, don’t put me in prison. I’m more useful on the outside,” an Ukrainska Pravda courtroom reporter quoted him on June 11. Artiukh testified that he was offered 3 percent of the Hr 24 million, or Hr 740,000, for initiating a money transfer that led to the money’s disappearance via a chain of companies. When Infrastructure Minister Borys Kolesnikov handpicked Artiukh’s AK Engineering as the Olympic Stadium’s general contractor in June 2010, Artiukh was already under investigation for the alleged financial fraud. Investigators allege Artiukh took the money from Rodovid Bank in 2009, then being bailed out by the government, without doing the renovation work and instead sent the money down a chain of subcontractors, the last of which investigators say was a fictitious company headed by a homeless person. Artiukh subsequently spent three days in a pre-trial detention center because he reportedly wasn’t cooperating with investigators. He signed a pledge to not leave Ukraine when he was released and which is currently still in force. Artiukh’s AK Engineering has also been probed in two investigations concerning the Olympic Stadium, one of which is still ongoing. Investigators allege that AK Engineering funneled Hr 119 million through a chain of companies to purchase and import a German-manufactured vacuum plumbing system for the stadium. At the end of the money trail, investigators allege, part of the money was used to purchase the equipment by individuals whose signatures were allegedly faked on the customs documents, while the rest of the money was converted into cash. Investigators furthermore probed how AK Engineering procured Australian-made stadium seats. They had alleged that Hr 3.8 million wasn’t paid into state coffers because a beneficiary company along the money trail had allegedly inflated the VAT credit amount. The company Vailis, according to past court rulings is “a fictitious enterprise that is used to minimize tax obligations.” A court in Cherkassy closed the case into the stadium seats. Since June 2010, AK Engineering has received more than Hr 2 billion in government orders for reconstructing the Olympic Stadium. It also received Hr 80 million in public money under a no-bid tender to refurbish the Palace of Sports near the stadium where the Union of European Football Associations, the Euro 2012 organizer, is housing the media and accreditation center for the three-week football tournament. Media reports have linked AK Engineering to Kolesnikov whose lawyer had been a co-founder of the company along with Artiukh. Kolesnikov has categorically denied benefiting from AK Engineering’s government orders and denies any association with the company. Additionally, Artiukh has denied having relations with Kolesnikov. “You don’t have to in principle tie me with Kolesnikov because we aren’t friends. Kolesnikov is a top politician and businessman. I’m a tiny builder that can’t do anything else,” he told Ukrainska Pravda in an November 2011 interview. Nevertheless, media reports uncovered old times between Artiukh and Kolesnikov as well as billionaire Rinat Akhmetov, Ukraine's richest person. Artiukh was the co-founder of Ukrinterstroi together with the late Zhyhan Taktashev, who was the ex-vice president of Donetsk’s Shakhtar football club. He was reportedly a partner of Kolesnikov in the Yug company. Ukrinterstroi was once the founder of Ukraine’s largest transportation and logistics company – Lemtrans. The latter company is controlled by President Viktor Yanukoych’s family and Akhmetov. Artiukh is scheduled to appear in court next on June 21.

Tasty speciality beers give a flavor of Ukraine

Apart from ubiquitous mass-produced big beer brands, Ukraine can offer some brews that you just can’t find anywhere else. One particular lager stands out for a long history on this turf. “Ukraine is a lager nation,” says Artem Starikov, a 31-year old lawyer and beer blogger. “And the most famous sort in the country is certainly Zhigulivske lager.” It’s a historic brand dating back to the era before the Soviet Union. Sometimes it’s referred to as “Zhiguli” – the same as a popular Soviet car, which in the West was more commonly knows as Lada. Legend goes that it was originally brewed by Alfred von Vacano, an Austrian entrepreneur, in 1881, in Samara, Russia. It was called Viennese Beer then. In 1936, the Soviet authorities changed the bourgeois-sounding name and launched its production at many breweries. At the time the lager was a very pale straw color and contained around 2.8 percent of alcohol. This was pretty much the only beer brand easily available all over the Soviet Union. It disappeared for a while after the breakup of the Soviet Union, and it took breweries a while to realize that it’s a brand well worth recycling. “Beer producers consider Zhiguli to be an essential type [for making now] because its name attracts consumers that are nostalgic for the Soviet past,” Starikov says. “Sometimes they don’t follow the original formula and slap the Zhigulivske label on anything, knowing that there are always going to be those who buy this beer because of the name.” To find the authentic Zhigulivske, Starikov recommends buying the brand made by the Kyiv Podil brewery or the Uman brewery. These breweries designed labels reminiscent of the original Soviet one. Look out for blue stripes on a red background, with Zhigulivske inscribed at an angle in gold letters. Starikov says that Lager Zhiguli Pivo Barnoe, brewed and bottled by Radomyshl brewery to the recipe of the Moscow Zhiguly Restaurant, is also a must. It’s available practically in any supermarkets and in many bars. Of course, Zhigulivske is not the only pebble on the beach. An adventurous beer lover is also advised to try a range of beers coming from the Lviv Brewery Persha Pryvatna Brovarnya. “I never have any second thoughts about drinking new brands of this brewery because the beer is always of high quality,” Starikov says. “I’d recommend to try Avtorske and Platinum beers.” Kyiv Podil brewery also makes a remarkable dark lager (temne in Ukrainian), called Gostynniy Dvir. “This is German Dunkel (a traditional style brewed in Munich and popular throughout Bavaria) with a Ukrainian zest,” Starikov says. “My friends and I regaled English beer expert Peter Brown coming to Kyiv with Gostynniy Dvir recently. He seemed fully satisfied with its taste.” In Ukraine, beer is usually accompanied with snacks. Salty dry fish tops the list of beer accompaniments. It may be unusual for the European palate, but here it goes down like a song. Fried cheese, onion rings, sausages or nuts are also common.

Eni reaches shale gas deal in Ukraine

MILAN, - Italian oil and gas company Eni said on Friday it had signed an agreement to develop unconventional gas in Ukraine as it moves to strengthen its presence in the country and develop its shale gas portfolio. In a statement, Eni said it had reached a deal with Ukrainian state-owned Nak Nadra Ukrayny and Cadogan Petroleum Plc to buy a 50.01 percent stake and operatorship of Ukraine's LLC Westgasinvest. LLC Westgasinvest has rights to shale gas license areas in the Lviv Basin of Ukraine, it said. The Lviv Basin is considered one of the most promising areas in Europe for the exploration of shale gas. Eni already has shale gas assets in Poland and in the United States.

Daughter: PACE president plans to visit Tymoshenko

The President of the Parliamentary Assembly of the Council of Europe (PACE), Jean-Claude Mignon, has said that he intends soon to meet former premier of Ukraine Yulia Tymoshenko who is imprisoned for abuse of powers during the signing of “gas contracts” with Russian in 2009, reads a posting on the personal Web site of Tymoshenko. The posting says that the PACE president gave this information during a meeting with Yevhenia Tymoshenko, the daughter of Yulia Tymoshenko on Saturday. “I’m planning to come to Ukraine in the near term to meet Yulia Tymoshenko,” Mignon said. Yevhenia Tymoshenko thanked the PACE president for contribution in organization of returning Ukraine to the democratic road, she, in particular, meant monitoring missions and PACE resolutions. "We really value everything that you are doing for Ukraine, its people and its political prisoners. Your assistance is indispensable," she said. It was reported earlier that PACE co-rapporteurs Marietta de Pourbaix-Lundin and Mailis Reps visited Tymoshenko on May 16 at Central Clinical Hospital No.5 in Kharkiv, where she is undergoing a treatment course now. Tymoshenko was arrested on August 5, 2011. After Kyiv's Pechersky Court sentenced her to 7 years in prison, she was transferred from a Kyiv-based pretrial detention facility to a penitentiary in Kharkiv.

Ukraine Party Ruined As Soccer Highlights Orange Revolt Flop

KIEV, Ukraine -- Ukraine hoped the European soccer championships would showcase its progress since the Soviet Union collapsed. Instead, it’s shining the spotlight on accusations of political repression, graft and aging infrastructure. Almost eight years after the bloodless Orange Revolution propelled the country toward closer European integration, the bloc’s leaders are boycotting the tournament, which culminates July 1 in Kiev. They say democratic values have slipped since President Viktor Yanukovych took over in 2010, dislodging the leaders of the protests that overran the capital’s main square. That’s left Ukraine’s leader, who’s struggling to secure cheaper energy imports from traditional ally Russia and unlock international aid, looking isolated at a time when the economy is losing steam. Halfway into his five-year term, credit markets signal a 44 percent chance of a Ukrainian default, while Societe Generale SA predicts the hryvnia will be devalued. “Euro 2012 is definitely a chance for Ukraine to improve its international image,” Liza Ermolenko, emerging-markets analyst at London-based Capital Economics Ltd., said June 1. “Unfortunately, it looks more likely that the exact opposite will happen.” The cost of insuring government debt against non-payment for five years using credit-default swaps has risen to 850 basis points from 460 a year earlier, data compiled by Bloomberg show. The government sees no threat of default, First Deputy Prime Minister Valery Khoroshkovskyi said yesterday. The hryvnia may be devalued by 10 percent after parliamentary elections in October, according to Vladimir Tsibanov, an economist for Societe Generale’s OAO Rosbank unit in Moscow. It fell to 8.103 as of 3 p.m. in Kiev from 8.0935 yesterday. Viewers worldwide watched in 2004 as millions of Ukrainians braved freezing temperatures to challenge Viktor Yanukovych’s presidential-election win in what became known as the Orange Revolution. The Kiev tent camps, rebuilt as fan areas for Euro 2012, helped sweep opposition leader Viktor Yushchenko to power in a rerun vote, prompting the EU to pledge closer integration. In years that followed, foreign direct investment surged, while billionaire Lakshmi Mittal paid $4.8 billion for Ukraine’s largest steelmaker and Raiffeisen Bank International AG (RBI) made a $1 billion acquisition. Ukraine joined the World Trade Organization in 2008. Still, Yushchenko’s overhaul became bogged down amid infighting with his Orange Revolution ally Yulia Tymoshenko, allowing Yanukovych to become president in 2010. Talk of stronger EU ties has run aground after Tymoshenko was handed a seven-year prison sentence in October for abuse of office. The bloc’s leaders say the case is politically motivated and want her released. Yanukovych said in a June 12 interview that her conviction is legally sound. Ukrainians “are still suffering under dictatorship and repression,” German Chancellor Angela Merkel said May 10. EU Commissioners including Jose Barroso have refused to attend Euro 2012 matches in the country. Germany defeated the Netherlands 2-1 in Ukraine’s eastern city of Kharkiv yesterday after Portugal beat Denmark 3-2 in Lviv, near the country’s western border with co-host Poland. ‘Offended Ukraine’ “Those who declared the boycott offended Ukraine,” Yanukovych said June 12 in an interview. “Ukraine is a very hospitable country, we’ve been preparing for the tournament for so many years and we’ve fought for the right to host it. Let them put themselves in our shoes.” The president is also struggling to seal a discount on natural-gas imports from neighboring Russia that would bolster his nation’s public finances and refuses to raise household fuel tariffs to unblock an International Monetary Fund bailout that’s been frozen since last March. Gross domestic product grew an average 6 percent a year in 2005-2007 before the global financial crisis sparked by Lehman Brothers Inc.’s 2008 collapse triggered a recession. After expanding 5.2 percent in 2011, GDP may rise 1.6 percent this year as Europe’s debt crisis curbs demand for exports such as steel and grain, Fitch Ratings said May 11. Business Climate Conditions aren’t conducive for enterprise, according to Mykola Tolmachov, chief executive officer of TMM Real Estate Development Plc, Ukraine’s largest property developer, who said corruption adds as much as 30 percent to his costs. “The business climate is very difficult,” he said. “It’s very hard to open a new business and to run it. So many people decide to close down.” Ukraine has slipped to 152nd from 134th in Transparency International’s Corruption Perceptions Index, where a lower score indicates higher perceived levels of graft. That leaves it trailing Uganda and Tajikistan. Regulation remains cumbersome even after changes made during Yushchenko’s stint as Ukraine’s leader, according to Cargill Inc. Chairman and Chief Executive Officer Gregory Page. “I expected more from Ukraine” after the Orange Revolution, Page said June 8 in an interview in Kiev. “Things should be easier.” While the president recognizes global attention will be on Ukraine, he’s called the soccer tournament an opportunity to promote his nation, with airport and railway investments to provide a legacy for economic prosperity. ‘Step Forward’ “For us, Euro 2012 is a chance to show our country to the world,” Yanukovych said May 30. Infrastructure “is a step forward and represents investments for future generations.” Ukraine has spent 11 billion euros ($13.9 billion) on preparations for the championship, according to London-based Capital Economics Ltd. Still, while stadiums and airports were built and renovated, some projects failed to materialize and others haven’t run smoothly. A fast-train link between downtown Kiev and the city’s Boryspil airport, planned to ready in time to ferry fans from abroad to their hotels, hasn’t been started. While fast trains have been introduced between the four Ukrainian host cities to save supporters from tackling journeys of as much as 1,198 kilometers across Soviet-era roads, tickets only became available two weeks ago, giving fans logistical headaches. “It dragged on from March,” said Peter Dutczyn, a British television editor who works in Kiev and chose a slower overnight train for himself and his friends. “It’s really bad service.” There were delays June 11 to a fast train and flights to the eastern mining city of Donetsk before the England team’s first game of the tournament, against France. With the world watching, Euro 2012 isn’t working in Ukraine’s favor, according to Rob Drijkoningen, who helps manage $12 billion in debt as global head of emerging markets at ING Investment Management in The Hague. “Politically, it’s moving in a direction that’s seen as inappropriate,” he said June 8 in a phone interview. “They’re not getting what they should out of it.”

Romney, Russia, And Ukraine

KIEV, Ukraine -- President Barack Obama’s private remarks to Russian counterpart Dmitry Medvedev at a summit in Seoul in March, unleashed a foreign policy storm between the White House and Mitt Romney, the Republican candidate for the US presidency. It also opened up a long overdue debate on whether Russia remains America’s primary adversary. At the end of his meeting with Medvedev, Obama asserted that he would have “more flexibility” after the November elections in dealing with controversial issues such as Missile Defense (MD). The remarks set off alarm bells among Republicans that Obama was placating the Kremlin by making major concessions on MD. Some Republican leaders even charged the White House with secretive deal making about US national security. Democrats in turn attacked Romney as a Cold Warrior for claiming that Russia remained America’s “number-one geopolitical enemy.” Obama himself had previously asserted that Putin still had a foot in the Cold War past. But all such Cold War comparisons miss the most important question: in present-day geopolitical configurations is Russia a partner or a competitor for the US? The answer is that both Obama and Romney are correct. Obama’s Russia “reset” was based on the premise that Moscow can be drawn into cooperative relations by focusing on joint projects. And this proved useful in signing a new arms control agreement, gaining NATO access to Afghanistan across the former Soviet Union, and placing limited UN sanctions on Iran. However, in the bigger picture Romney is right that a resurgent Russia ultimately challenges US interests in numerous domains. His views are shared by many senior Republicans, including Senators John McCain and Jon Kyl. According to Romney, Russia’s nuclear arsenal, its energy politics, its geographic position astride Europe and Asia, the veto it wields on the UN Security Council, and its domestic authoritarianism present serious challenges for Washington. And among the regional challenges are the future of Ukraine and other former Soviet republics that are seeking to avoid incorporation in a new Moscow-dominated bloc. Although Romney has not been specific on Ukraine or the broader region, he has strongly favored NATO enlargement eastward, condemned Russia’s occupation of Georgian territory, and supported the emplacement of the MD system in Central Europe. In doing so, Romney has depicted Obama’s foreign policy as weak and indecisive. Although much of this is electioneering bluster, Democrat representatives are themselves aggressively defending the president by exaggerating Romney’s comments on Russia as “reckless and dangerous.” Democrats also underscore Obama’s foreign policy successes in decimating al Qaeda’s leadership, ending the Iraq war, and initiating a transition in Afghanistan. If Ukraine was a developing democracy and eager to join NATO and the EU, much like Georgia, it would benefit from more substantial support among the majority of Republicans. But Kiev’s problem is Ukraine’s reversals in democratic development and its deteriorating human rights record. This can rebound negatively if Romney reaches the White House. The human rights constituency in Washington spans both parties and one of its most active champions is John McCain, who is likely to be a senior voice on foreign policy in a future Republican administration. US support for Ukrainian independence may be tempered by condemnation of its internal politics, much like in Belarus. Hence, it will be vital for Kiev to demonstrate that it is determined to maintain its national sovereignty, as Washington has doubts about Minsk’s commitment to statehood. The Romney approach may be even more evident toward Russia, where the Putinist system not only destroys democracy, but also threatens US allies and partners. Putin’s assertive foreign policy distracts attention from domestic upheavals by depicting the US as the major global adversary intent on breaking up Russia. Whatever the degree of cooperation in arms control or counter-terrorism, the fundamental relationship between the US and Russia will remain competitive and potentially conflictive. While the Democrats are right that one can work with Moscow in certain circumscribed areas, Romney is also correct that at present no single power is as well positioned as Russia to disrupt America’s national interests. And a Romney administration could prove more intent on responding to Moscow’s challenges.