Anyone thought it is over?

The relief brought by finally singed gas deal between Russia and Ukraine last Monday was short lived. On Friday Jan 23rd, Ukrainian President Yush(enko) indicated he would like to revisit a gas deal with Russia this summer. He considers the terms of the gas deal undermine Ukraine economy. The PM Tym dismissed Yush’s idea as irresponsible. Gazprom considers Yush’s idea laughable. Alexey Miller’s, Gazprom CEO, exact statement is “Such proposal could only appear in some Ukrainian humor newspaper”.
Another party who is not letting it go is RosUkrenergo - a winner of 2006 gas deal and largest looser of the 2009 deal. According to FT (http://www.ft.com/cms/s/0/aa271cca-e8b1-11dd-a4d0-0000779fd2ac.html) Rosukrenergo is determined to recover $650m in debts from Kiev (http://rus.4post.com.ua/economics/122864.html). The company is half-owned by two Ukrainian businessmen, Dmytro Firtash and Ivan Fursin. These two have most to lose with the new deal. Tym and Firtash know each other well from the times Tym was a gas trader. Tym calls Mr Firtash Ukraine’s “number one corrupt person”. That Tym has a strong grudge against Firtash was clear on Thursday when Kyiv's district administrative court supported a government appeal to ban the National Bank of Ukraine from refinancing Nadra Bank (Ukrainian 7th largest bank). Firtash singed a preliminary agreement to buy 86.7% shares of Nadra in November 2008. The deal was to be finalized in May 2009.
Announcing the refinancing ban on Thursday Tym said: Now [RosUkrEnergo's co-owner Dmytro] Firtash [who announced plans to buy Nadra Bank] will have a short rest," One has to admire her political skills.
Nadra Bank demands the Ukrainian premier stops groundless accusations about its operations (http://www.interfax.com.ua/eng/eco/6087/).
Personal fights aside some terms of the new gas contract need to be clarified.
Per disclosed contract terms Ukraine is obliged to purchase a fixed amount of gas every quarter. If it imports less than 94 percent of the contracted amount of gas, it will be forced to pay three times the price of the gas it does not use. Main consumers of Russian gas are steel mills and manufacturing companies which since October 2008 are mostly closed due to global downturn. One wonders will Ukraine really need full contracted amount. The deal also requires Naftogaz to make advance payments if it fails to pay gas bills on time. The recent gas dispute erupted over a $2.1 billion debt accumulated by Naftogaz and not paid since September 2008. Given severity of the crisis in Ukraine it is very likely the country will have even more difficulties to timely pay bills in 2009. And if Ukraine fails to pay on time, another gas dispute is likely.
On Friday the gas deal had "first" public Ukrainian causality. Oleh Dubyna, chairman of Naftogaz had an emergency heart surgery. PM Yulia said Mr. Dubyna was under a lot of stress during the gas dispute because President, Yushchenko, gave him "diametrically" different instructions from her government.
So the poor man is yet another victim of a dysfunctional relationship between the President and the PM. While Yush and Tym continue to turf about power, the country is by day "exploring" depths of the crisis. For Wednesday, Jan 28th Kiev's health care workers announced a general strike as they have not been paid for last two months. Kiev's doctors and nurses met the Mayor (guy with Rolls Royce) on Jan 21st who promised the City will pay their salaries by end of March '09. At the moment the mayor's priority is to get Santa Claus as an honorary citizen of Kiev. Perhaps the Mayor hopes Santa will pay doctor's salaries.

The photo above is of men getting drinkable water from a public tap. Every park has "a well" were people come daily to fill bottles with drinkable water.

Igor and I are warm, have water and electricity. I am looking forward to visiting Dubai.

New Year Start

Happy New Year!

Hope all of you had a great New Year's Eve with a lot of chilled champagne and fantastic fireworks in the company of loved ones!

Let me start with good news: I am not freezing. Yet. There is still some gas in the pipes. But the central heating system is weaker by day. Given outside temperature is around -11 C let’s hope that indeed Ukraine has enough gas reserves until April as politicians state. Fortunately I have electric heaters so no need to burn my furniture.

While I still enjoy moderately warm apartment last week I had to manage without internet. Past two days there was no warm water in my apartment block. The cold water I get looks like “coke” and smells funny.
Initially water was to be a temporary one day thing. But continues for a second day. I have enough drinking water but keep fingers crossed for a nice hot shower tomorrow.

In any case being connected again feels good. But good things in Ukraine do not last long so I want to use this “connected moment” to share my thoughts about the “gas issue”.
There is enough money to pay for gas. The bill for USD 1.8 bn was due in October but since than have not been paid. All individuals in Kiev using gas (about 4 mio of them) have to prepay gas bills. If they do not pay a bill tthey do not get gas (Kiev mayor who drives Rolls Royce applies same Gazprom tactic).
However the Ukrainian government was reluctant to pay its bill on time. Why to show discipline in paying bills if people in power have incentive for paying bills with a two months delay?
The entire process of gas prices negotiations between Gazprom and Ukraine is so murky it will make water coming currently from my tab cristal clean. And where you do not have transparency there is a lot of money to be made – for some. That "some" appears to be “RosUkrEnergo” - a Swiss registered trading company acting as intermediary between Russia and Ukraine. It’s ownership structure 50% owned by Gazprom and 50% by Ukrainian oligarch Dmytro Firtash - is telling. What RosUkrEnergo does is “exporting” Russian gas to Ukraine. How export works is that on the RU-UA border RosUkrEnergo purchases Russian gas and re-sells it to Ukraine. RosUkrEnergo as an intermediary both Russia and Ukraine can easily do without is that it’s a well oiled machine to make loads of money. And who cares that millions of people might freeze when one can make billions! Thus while Russian and Ukrainian oligarchs argue about dividing a loot, people across Eastern Europe will freeze. Shame European Union has no guts to press the issue.