Fit Mayor?

In the movie “The Wiz” there is a Wicked Witch screaming “Don't Nobody Bring Me No Bad News". The Wicked Witch would have a great time in Ukraine these days. Bad news abounds.
End of February S&P downgraded Ukraine to CCC+. This is actually a new S&P grade to "accommodate" Ukraine (have not existed before). The “+” makes Ukraine a bit better than Pakistan - currently rated “CCC”.
Since my last post more banks requested a help from Ukraine Central Bank. Over ten banks are under the Central Bank Administration. By day more and more corporate clients are unable to meet their financial obligations. More people is without work or they go to work but have not been paid for weeks or months. There is no progress on a second IMF tranche which was supposed to be disbursed in February.

And while an average Ukrainian struggles with a crises, Kiev's mayor “Cosmos” is asking “where is the love” from his humble home
http://www.whatson-kiev.com/index.php?go=News&in=view&id=6578 . Not only have Mr. Chernovetsky complained about lack of love from his neighbors, but the Parliament also showed lack of understanding for his policies. The most controversial issue is the mayor's decision in January 2009 to start charging for visits to cemeteries (http://www.kyivpost.com/city/34360/?p=0&sort=ASC )
While dead have not risen (yet) to complain about reduced visits from the living, about thousands of people demonstrated in front of Kyiv municipality: http://photo.ukrinform.ua/eng/current/indexa.php?asearch=TRUE&event_id=257199 These demonstrations prompted the parliament to order a psychiatric evaluation for the mayor who next to starting to charge alive Kiev residents for visiting their dead, also wants to have Santa Claus as a honorary citizen of Kyiv, fired a Kyiv ZOO manager for failing to find a mate for a resident elephant and started to charge USD 100,000 for receiving Kyiv residents in his office. The test of the mayor’s mental abilities is scheduled next week.
In order to show the public he is not mentally challenged - the mayor invited last week reporters to show his – physical – fitness and on Dinamo Kyiv stadium run 400m, did 15 pull-ups and in a swimming pool swam 50m. Read all and admire a photo a mayor in speedo at following links: http://www.kyivpost.com/city/37914 ,
http://www.finchannel.com/index.php?option=com_content&task=view&id=32195&Itemid=56 and http://english.pravda.ru/society/stories/18-03-2009/107257-kiev_mayor_speedo-0.

Ukraine News Agency quotes the mayor saying: “Look at this body of mine, see how I express my thoughts. I’m absolutely healthy, sane. My thinking is logical, philosophical.”

On a weather front it's still snowing. I hardly wait spring finally arrives.

I returned from Dubai a week ago. Had a great time. Faye, Peter and Goldie are fantastic hosts and I am so lucky I could enjoy their home for a week. Faye made amazing job in decorating her new home in only 6 months. When she comes to my place she will be slamming it. I have no garden and no swimming pool.

Faye is the best guide in Dubai. She is an expert in all Dubai shopping malls. She knows all personal assistants at every shop we have been in. As I visited during the last week of Dubai Shopping Festival I maxed my credit card. Faye also arranged appointments for things I do not know how to get in Kiev or my experience of getting them in Kiev is such I prefer not to have them done in Kiev. So thanks to Dubai visit I have best highlights since I left Moscow and a complete new summer wardrobe from Ishtar Tailoring in Satwa. These fantastic tailors made my complete wardrobe in 3 days!!! I am not going to post how many bags and pairs of shoes I bought.

I was also lucky to meet Karen. I have not seen her since I left Seoul and it was great to catch up with her. We had a long lunch and a fantastic curry dinner at her new place. After the dinner we went dancing and singing karaoke until 4 am. Have not had such fun in a year. Karen and Guy - thanks a lot! Karen - if you go to Seoul please let me know!

I love Dubai. It's skyline is amazing. Faye tells me that 7 years ago it had not exists. She showed me some funny looking building about 25m tall which was few years ago "Hard Rock Cafe" and told me that this has been the tallest building in the city. Now Dubai skyline reminds me of Hong Kong or Shanghai - there are so many skyscrapers. Unfortunately due to credit crunch there are not fully occupied. Credit crunch or not - Dubai is one huge construction site. Peter said that actually all construction halted some time ago but Dubai skyline remains adorned with numerous cranes. It is cheaper to keep than to dismantle them.

Palm and Atlantis are amazing. Atlantis huge aquarium filled with all kinds of fishes is fantastic. But keeping Sammy - a female whale shark in captivity is horrible. They should let her go.

I also like Dubai's mix of traditional UAE and Western culture. You can see a man in a dish dash having a coffee with a woman in abaya and hijab in Starbucks. Most abayas have elaborate embroideries on sleeves. Some ladies wear hijab in a way which shows their hair. All ladies in abaya have impeccable makeup.

I hoped to sort Dubai photos last week but as situation in Ukraine continues its downhill direction after work I am too exhausted. One evening last week my attempt to sort photos ended with me deleting hundreds of Dubai photos both from a card and the disc. I will never/ever work on my photos again when tired.

It was great to spend a week in a warm and sunny climate especially as Kiev is covered with snow and temperature is -7 degree Celsius.

While I was in Dubai Igor was with Catherina, Kees and Wiebe. They took great care of Igor. Many thanks for that!

Of course it's not over

Last Friday evening Yushenko addressed the nation on TV. But actually he spoke to Tymoshenko.
He accused her of signing a disadvantageous gas deal for Ukraine and for leading the country to the crises. Read all at http://www.president.gov.ua/en/news/12765.html.
Immediately on Saturday Yulia asked the President not to fall into “hysteria”: http://eng.for-ua.com/news/2009/02/02/123045.html. Her exact words in Russian are: Для того чтобы бороться с кризисом, нам нужны политическая консолидация, холодный и трезвый ум, железные нервы, сила воли, решительность и глубокое чувство ответственности – именно то, чего всегда не хватало, не хватает, и будет не хватать Виктору Андреевичу. (My free translation: To fight with the crisis, we (Ukraine) need political consolidation, cold and calm thinking, iron nerves, strong willpower, decisiveness and deep sense of accountability – all of these (qualities) Viktor Andreeivich (the Prez) – never had, does not have and will never have.

While Yulia and Yushenko continue to exchange punches, Yanukovich takes a role of a referee http://eng.for-ua.com/news/2009/02/02/131038.html (For those not well versed in Orange revolution protagonists Mr. Yanukovich is the “other” candidate” who rigged 2004 presidential elections.)

The “gas middleman” Mr. Firtash from RosUkrEnergo called today to establish a gas consortium with Ukraine, Russia and Europe. Of course in this consortium Mr. Firtash wants to play a part. See Bloomberg:http://www.bloomberg.com/apps/news?pid=20601102&sid=a7fZhJ7lkiBA.

Personal faces of this crisis for last weekend: On Saturday a boy asked me for some money in front of a pastry shop. An acquaintance told me she was asked in a supermarket by a man if she could buy some vegetables for his family as he does not have any money. One large car dealership disappeared in a day. The other car dealership put “bottom price” sign on all its cars. There was a long queue in front of the Nadra bank ATM at Artemova Street. One pregnant lady who has difficulties with her pregnancy told me she cannot afford to take a sick leave or take a maternity leave as she needs her salary to pay her mortgage.

For average people life is getting more difficult by day.

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.

Awesome vacation, bleak reality

I returned from holidays over a week ago. I had fantastic time in Galapagos. It’s spectacular landscapes were relaxing. Swimming and snorkelling with playful sea lions and “cool” turtles was amazing therapy. Made me forget about crisis and “other” frustrating things. The fellow travellers on "Eclipse" - the ship I was a on – were adventure loving and fun. The guides highly knowledgeable, enthusiastic and fun loving.
I made hundreds of photos of sea lions, lizards, boobies, finches, pelicans, albatrosses -which I expect to be sorting for months. In short my Galapagos memories will be an uplifting tonic when spirits are down for years to come.

Some pics from Galapagos are on http://picasaweb.google.nl/lh/photo/ZiaBwkoLONPlkGBXolsBNQ?feat=directlink
When I left UA for three weeks vacation I expected things in the country would improve. I could not be more wrong.
Shortly after my return I heard someone gave Ukraine a nickname "Zimbabwe of Europe". While this might be an exaggeration (no cholera - yet) it's difficult (within Europe) to match speed of hrivnya devaluation (hrivnya moved from 5/USD to 10/USD within last month). The government remains dysfunctional. Tymoshenko accuses Yushenko of flaring-up devaluation. Yushenko states Tymoshenko is incapable of controlling the economic developments. While the President and PM argue people are losing their jobs and savings. The government proposes regulations smacking of administrative economy. Seems like moving towards the drak age of late 80ties and early 90ties. For all practical purposes country is in default or rapidly heading towards it. Ukraine also has not paid EUR 1.8 bn gas bill outstanding since September 2008. Since 2005 Ukraine-Russia "gas spats" around New Year are "regular event". The issue is UA-RU cannot agree an a gas price as of Jan 1st 2009. These gas price negotiation may win award for intransparency. On other side lack of clarity into gas price fixing process might be highly beneficial to off shore accounts of some individuals. In the meantime courtesy of politicians - common people will most likely have their flats decorated with icicles. While people will have fresh albeit freezing air in their apartments, Kiev mayor will be warm in his new Rolls Royce he purchased for a USD 1 mio last month (Rolls replaced "old" Maybach). In any European country there would be an outrage if a mayor will drive Rolls.
Amazingly some of my co-workers try to convince me there is actually no crisis. If Zimbabwean crisis standards are applied – they might be right. The worst is the dysfunctional government (naturally) lacks any "plans ahead" to face or fix problems.

During my vacation Catharine, Kees and their 11 year old dog Vibe took care of Igor. Under their excellent care Igor became a grown up boy (started to lift a leg)!!! Many, many barking thanks to Catherina for taking excellent care of Igor!!!

For Christmas and New Year I'll stay in Kiev. Pauline and Wyger will come to visit over Christmas. Since last week it snows here so "white Christmas" is guaranteed.

To all of you I wish you merry Christmas and happy, healthy, peaceful and prosperous New Year.

Autumn to remember

Last four weeks have been tough.

In September it looked as the financial crises in the West will only brush off Ukraine. Instead of brush off Ukraine found itself in a bigger crises than one in 1998 or in 2004. And I fear we are only at the beginning. Unexpected drop of steel prices put Eastern Ukraine almost at halt. Steel is major export and as steel stock remains high steel companies are reducing production by more than 50% and aggressively reducing workforce. Steel needs a lot of energy - one of sources being coal. As steel production is significantly reduced - coal mines are closed. There are entire villages and small cities in Eastern Ukraine depending on coal mining or steel. Closure of a mine or a steel factory has a dramatic effect on a village or a city. Construction is also halted. There is actually no industry which is not affected.

The government remains dysfunctional. I am truly amazed it took the government three weeks to sign the IMF package. I am not fan of IMF. Each country supported by IMF found itself in even larger mess few years after in received IMF package. But the fact is Ukraine desperately need external funding these days. However for about three weeks it looked like personal turfing between the President and the PM was more important than the country's survival. It looked like personal scoring had a priority over receiving USD 16,5 bn package. There were days it looked very likely that the President will refuse to sign the package as one of IMF conditions was to postpone the early election which was triggered by the President. The President finally signed it last week.
To recap - we had a banking crises first week of October. The second week in October we received a very strange Central Bank of Ukraine instruction #319 on Oct 10th. The instruction #319 requested banks not to lend i.e a bank was forbidden to provide a new financing. Although this instruction was short lived and not registered at Ministry of Justice (thus legaly not enforacble) - it caused a lot of havoc. The Central Bank of Ukraine revoked the instruction on Oct 14th. Than hrivnya (local currency) started to rapidly devalue. The state spend billions to support it but still the currency devalued 30%. The last instruction from Nov 4th basically halts forex market. Depressing events.

In the office my collgaues are mostly very young people who in 1998 were in collage. They have no idea how to read signs of crises and even less how to adjust working habits. Clients display similar attitude. Most of the companies here know only good times of aboundant liquidity and most of them have owners who still live in a bubble. One client told me that company which these days struggles heavily with liquidity remains basically healthy as in June he had an offer to sell the company for USD 500 mio. Well - since June so many things happened. I am sure he will regret not selling the company in June. But for him in June USD 500 mio was not enough.

Unsurprisngly all these events and situations create an intense atmosphere at work. Stress I can manage. It comes and goes. But continuous intensity of problems wears me down. Two weeks ago I thought it cannot get worse. Last week each day was worse than a day before. I see two clients a day. We do not share good news in these meetings.

But there must be some correlation between dire conditions Ukraine economy finds itself and wonderful autumn weather we had so far. Until last week it was sunny and mellow. Than it cooled down significantly but sun is shining brightly and skies are crystal blue. I spent weekend walking Igor and taking photos of autumn leaves.
The only bad think today was that we were chased by 12 stray dogs. We survived but it was not pleasant especially as there were no people around.
Pics from this weekend are at http://picasaweb.google.nl/gordie26/AutumnLeaves#