Wednesday, January 11, 2006

Ukraine Gases Government

Yushchenko's Ukrainian government ran out of gas yesterday a second defeat for his regime of friendlier oligarchs, since the Orange Revolution. His government was defeated over their gas deal with Russia.

On January 1 the Ukraine went from a Presidential Republic to a Parlimentary Republic.

Way back in the Kuchma era, when the idea of changing the constitution was first bruited about, then-opposition leader Viktor Yushchenko and his allies were against it. The changes, which would have shifted a lot of power from the president to the parliament and the prime minister, were a ruse on the part of the regime running Ukraine at that point: the powers that be wanted to ensure that a future President Yushchenko would have as little power as possible.

Now fast forward to last December, when, as part of the compromise package that ended the Orange Revolution on favorable terms, Yushchenko agreed to the same constitutional changes he’d previously fought against so bitterly. Come Jan. 1, 2006, Ukraine would indeed become a parliamentary, and would no longer be a presidential, republic. Keiv Post

Today Yushchenko
is whining and crying because he has been taught a lesson in parlimentary representative democracy, which of course is not the same thing as real democracy which was in the streets a year ago. And of course it just screwed up his plans to challenge the Constiutional changes that came into effect January 1.

Ukraine president says parl't vote destabilising

KIEV/ASTANA (Reuters) - Ukrainian President Viktor Yushchenko said on Wednesday the decision by parliament to sack his government over a costly gas deal with Russia was wrong and destabilised the country.

Deputies, angered by last week's deal with Russia to pay nearly twice as much for imported gas, on Tuesday backed a no-confidence motion against the government after just over three months in office.

"Yesterday's decision was incomprehensible, illogical and wrong," he told reporters in the Kazakh capital where he is on a visit. "It simply serves to destabilise the situation."

Incomprehensible, illogical and wrong? Hardly. Since Russia's Gazprom has been playing politics with gas supplies to the Ukraine, not unlike our Big Brother down south playing politics over Soft Wood Lumber, the deputies were right.

Ah well there is always a silver lining in such a parlimentary defeat......

Yushchenko said: "I don't see this as a tragedy. It's an experience that will increase the quality of Ukrainian politics."

Analysts said it was another blow for Yushchenko who has struggled in the face of corruption scandals and a faltering economy to hang on to the euphoria that marked his rise to power a year ago after popular protests against his Moscow-backed opponent.

But that's not how the quizzling Yushchenko see's it. And suddenly in the defeat of his government for a second time, the Orange Revolution also appears threatened. A desperate man, Yushchenko goes from democrat to Presidential dictator in the face of crisis.

Ukraine MPs vote to sack cabinet over 'traitorous' gas price deal with Russia

Viktor Yushchenko, the hero of the orange revolution of 2004, questioned the parliament's right to dismiss his government and ministers spoke of a bizarre legal vacuum opening up.Mr Yushchenko hinted he might disband the parliament in response, as his supporters called on him to adopt direct presidential rule until new parliamentary elections could be held at the end of March

There is no crisis here, the government fell, it's no confidence, come back with a better deal. But Yushchenko is acting in the traditional apparatchik style, like the west's favorite little Tzar, Yeltsin. Speak like a democrat rule with an iron fist. Yushchenko opposed the idea of a Parlimentary Republic, still does. He faces certain defeat now in the upcoming Spring elections.

Putin's number 1 man stepped down over Gazprom's plan to renege on an already existing gas price deal, then Yuvshenko's government deserves to fall for accepting a bad deal just because the Russians offered them an even worse choice. As the Guardian reported;

Andrei Illarionov, a former senior economics adviser to the Kremlin, who resigned last week in protest over government attacks on political freedom, claimed that Gazprom's price of $50 per 1,000 cubic metres had been fixed for five years with Ukraine in 2004.

"The talks ended successfully for Gazprom, and Gazprom is completely satisfied," said Alexei Miller, chief of the Russian company, as he and Naftogaz head Oleksiy Ivchenko announced a new five-year contract. "We reached a broad-based agreement on mutually acceptable terms," echoed Ivchenko.

The deal appeared to have a third winner: a Russian-Swiss trading company that will be the sole gas provider to Ukraine. OAO Gazprom will sell gas to the Rosukrenergo trading company for $230 per 1,000 cubic metres as of January 1, and Ukraine will buy gas from the company for $95. Moscow had earlier insisted that the Ukrainians should pay $230.

Ironically Gazprom has a new board member, one with whom Putin hopes to solidify his state monopolies access to Europe economically and politically.

The board of Gazprom, the Russian state-owned energy company that supplies gas to the West, has recently welcomed a new member: Gerhard Schroder. Why, one may ask, would Mr. Putin want a former German chancellor on the board?

The answer is that the Russian president owes Mr. Schroder quite a debt. Not only did Germany throw its considerable weight behind Mr. Putin's brutal regime, but it was during the period when Mr. Schroder's Red-Green coalition was in office that Germany abandoned nuclear power and left itself at the mercy of the Kremlin for 40% of its gas supplies.

Yep there is a winner here, its the Public Private Partnership's (P3's) in Russia and the Ukraine.

While those in the west will cheer this and claim that the Free Market, er private sector can make a better deal, competition will drop prices, blah blah, all this shows is that once again privatization does no such thing.

It merely lines the pockets of the private sector by passing on increased costs to the average citizen. In this case a mysterious company formed by the Oligarchs in the Ukraine to take advantage of the gas crisis. It's almost criminal, except that this is business as usual in the new capitalist Ukraine. Sort of reminds me of Enron.

Putin And The New Cold War
UNIAN, Ukraine - 10 Jan 2006

Some believe the move was motivated by something more sinister. Jérôme Guillet, a French banker who has worked closely with Gazprom, said: "There is a story behind this deal as most of the negotiations go on behind the scenes and what we see in public is only ever a small part of the iceberg.

"Gas transit is the biggest source of loot on offer. It looks like Yushchenko has been trying to clean up but that new people are attempting to barge into the business. They have caused the public row in an effort to
embarrass the president."

The only clear winner from last week's deal is a company called RosUkrEnergo, which has been promoted to "exclusive distributor" of Russian gas to Ukraine. The deal will see its sales nearly double from 40bn c ubic metres to 77bcm as a result. Although it is a 50/50 joint venture between Gazprom and Ukraine, no one really knows who owns the Ukrainian half, which is controlled by Swiss registered holding companies in nominee accounts of Austria's Raiffeisen Zentralbank Oesterreich.

The draft agreement between Russia and Ukraine also creates another intermediary to handle the imports from Russia, jointly operated by RosUkrEnergo and jointly owned with the Ukrainian national gas company Naftogaz.

One western gas executive who works with Gazprom and Naftogaz said: "Something very fishy is going on here as Gazprom has further diluted its share of the profits it gets from selling gas to Ukraine. It looks very much like someone behind the scenes was blocking a compromise unless they were cut in on the deal. Gazprom only owns half of RosUkrEnergo, which means it owns half of a half of the profits this new intermediary will earn. Someone was making a lot of money before. Now they are going to make even more."

Under the deal, Gazprom will receive from Ukraine its demanded four-fold increase in price from $50 to $230 per 1,000 cubic metres. Although the volume of gas it delivers to Ukraine will fall to 17bcm from 23bcm, it will still net $3.9bn this year from the higher prices, up from $1.1bn last year. struck on prices with Ukraine a few days later and supplies were restored. Thus the dispute could also be seen as a high-risk move by Putin to bring a revenue-destructive gas subsidy from its Soviet days on to a market footing.

RosUkrEnergo, set up in the summer of 2004, is the latest in a line of mysterious companies acting as an unnecessary middleman between Naftogaz and Gazprom. It replaced EuralTransGas, which was a 100% Ukrainian-owned company with unknown owners, which in turn replaced the scandal-ridden Itera, believed to be controlled by Gazprom's previous management.

Bill Browder, president of Hermitage Capital, a big Gazprom minority shareholder, said: "There is no economic reason to justify the existence of this company. It earns hundreds of millions of dollars a year of profit, but why would Gazprom, a monopoly supplier, want to give away this money to a faceless company when it could perfectly well handle this business on its own?"

So is this another case of the Oligarchs influence over the Yuvshchenko government? An accusation the Prime Minster the Orange Bloc's Yulia Timoshenko made against him last fall. So he sacked her just like he plans to sack the current government. His threat to do a Yeltsin on the Ukrainian Parliment, is an empty one. All bluster and bravado of someone who has been defeated not once but twice, by the very Revolutionary changes he called for.

So much for the Orange Revolution. Yuvshchenko has made pulp of it. The Revolution is dead, Long Live the Revolution.

Gas Pressure
The Ukrainian government is the first victim in the gas war
The Fight for Power
Ukraine's Supreme Rada assembled yesterday to discuss the agreement with Russia on natural gas and fired the country's government, accusing it of “inability to defend national interests.” In response, Ukrainian President Viktor Yushchenko threatened to dismiss the parliament and his party, Our Ukraine, called for direct presidential rule until parliamentary elections in March. Although the current government is continuing to function, the ministers are being called “acting.” This is a heavy blow to Yushchenko, not least because big business is supporting the opposition. Ukrainian industrialists are not happy with the agreement or with the government.

Timoshenko held a press conference last night as well. When asked by Kommersant how the dismissal of the government would effect the further development of events and the negotiations between Kiev and Moscow on natural gas, she stated that “there is not a single political party in Ukraine that thinks that contract should have been signed. The great victory of Ukraine was that Ukrainian politicians showed the ability to unite before the threat of external risks, regardless of ideological and political differences. Nonetheless, there will never be a union between our bloc and other political parties.”

Timoshenko said that “the dismissal of the government means that the parliament has taken responsibility for how the situation will develop with guaranteeing Ukraine natural gas.” She wanted to see the parliament form an official negotiating group with special responsibilities. That group would establish “where the corruption is” and where negotiations with Uzbekistan, Kazakhstan, Turkmenistan and Russia were conducted unprofessionally. “If the parliament forms such a negotiating group, I want to be part of it,” Timoshenko added.
And behind all this sturm and drang over Gaz lays the real politicks about what this all about. Russia is cut off from its Baltic Sea Fleet harboured in the Ukrainian controled Black Sea.

The new Crimean war: how Ukraine squared up to Moscow

For 200 years, the Black Sea has been a haven for the Russian fleet. Now, thanks to the dispute over gas, the first salvoes have been fired in the battle to rid Ukrainian waters of Moscow's presence. Andrew Osborn reports from the historic port of Sevastopol


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