Politics
Presiden Yanukovich’s dubious deal
Reading Time: 5 minutesThe newly, democratically elected President Yanukovich of Ukraine has got off to a spectacularly fast but equally dubious start. First on his diplomacy. His first supposedly symbolic act of foreign policy was to fly to Brussels first, before to Moscow, as if to demonstrate his European credentials. But after seeing what he did in Moscow a few days later, this day trip to Brussels now looks a very hollow gesture.
By Michael Emerson
The newly, democratically elected President Yanukovich of Ukraine has got off to a spectacularly fast but equally dubious start. First on his diplomacy. His first supposedly symbolic act of foreign policy was to fly to Brussels first, before to Moscow, as if to demonstrate his European credentials. But after seeing what he did in Moscow a few days later, this day trip to Brussels now looks a very hollow gesture.
In Moscow he made a two-part deal, in which the headlines are an extension of the lease of the Russian Black Sea fleet at Sevastopol for 25 to 30 years, and a 10 year discount off the price of gas. As the Russian President has said, these two elements are intimately interconnected.
President Yanukovich has said that the gas discount deal gives Ukraine a profit of 40 billion USD over the ten year period, thus around 4 billion per year. Reading a Gazprom press release, this saving is made up as follows:
- The price discount will be equal to the reduction in the gas export duty set by Russia (which in principle represents the difference between world market prices and Russian domestic prices).
- This reduction is ’expected’ to be cut by 100 USD per 1,000 cubic metres, and will not exceed 30% of the gas price
- The discount will apply to 30 billion cubic metres in 2010, and 40 billion cubic metres in 2011 (100 USD multiplied by these amounts = 3 to 4 billion USD).
- The price formula and ‘take or pay’ principle will remain as originally stipulated (implicitly as in the agreement of 19 January 2009, which has been widely reproduced by the media). The ‘take or pay’ principle obliges the gas importer to pay for a given quantity of gas, whether he takes it all or not.
This deal has three aspects, all of fundamental importance for the future of Ukraine – the political, the strategic and the economic, all of which can be seriously criticised.
The political disaster for Ukraine is that Yanukovich has converted a relatively correct democratic electoral win into the most egregious case of ‘state capture’. This is a term of art of political analysts, who observe a party coming to power treating their electoral victory as license to appropriate and distribute state assets for the private benefit of its leadership and supporters. What has been common in the new, post-communist democracies of eastern Europe is for privatisation processes to be rigged in favour of the party of power. But Yanukovich takes this black art to new heights, in selling out the strategic Sevastopol naval base in exchange for cash benefits for his oligarch friends and supporters in the gas trading and gas using sectors.
President Yanukovich’s has described the renewal of the Black Sea Fleet lease as improving European security. That of course depends entirely on how Russia will frame its security strategy in the Black Sea region, and use the naval base in the future accordingly. We cannot predict the future, but we can observe recent realities, notably Russian strategic behaviour that led to the August 2008 war. This was an episode whereby Russia’s sustained provocation delivered the pretext to invade Georgia, leading on to its recognition of the independence of Abkhazia and South Ossetia.
Finally on the economics of the gas price deal, which are not transparent. What is the reference price in relation to which the 30% cut is given? Not clear. What has been happening recently to world gas market, affecting the difference between Russian domestic and international prices? Again not precisely clear, but some fundamental trends suggest that this 30% gift may become in some degree at least a deceptive illusion. International gas prices has certainly been substantially eroded in the last year under three influences, weak demand resulting from the economic slump, but also increasing supplies coming from shale gas in the US, and liquified natural gas (LNG) supplies from diverse sources such as Qatar, Australia, Nigeria and elsewhere. Whereas pot oil prices have risen for $50 to $80/barrel sicne the beginning of 2009, spot gas prices have not followed. Only the first of these three factors is temporary, and the other two are permanent. In particular for Europe there is now an abundance of LNG supplies, as the US has become self-sufficient in gas. As a result Gazprom had in February 2010 to concede to E.ON and ENI a large crack in the price setting mechanism, which consisted of indexation on the oil price lagged by around 6 months. These major European importers have themselves secured significant quantities at ‘discount’ prices linked to the spot market for gas, leaving other volumes subject to the ‘official’ oil-linked price. Which of these prices is the reference for Ukraine’s discounted price? Maybe Ukraine’s 30% discount price is not so different to the discount that E.ON and ENI have obtained, without giving a naval base in exchange. Moreover the structural changes to the world gas market may mean that the present ‘temporary’ break in the oil-gas price linkage may become permanent, alongside a relative decline in the world market price for gas, and given the massive expansion of LNG supplies to Europe leads to the emergence of a significant spot market in Europe. So even Ukraine’s 30% discount and annual 4 billion USD benefit is in some degree being eroded.
This weakness in the gas deal is magnified by the divergence between the time horizons for the gas price and Sevastopol deals, 10 years for the former versus 25 or 30 years for the latter. If the gas discount is meant to be a quid pro quo for Sevastopol the time horizons should logically have been the same.
In addition Ukraine itself may have large potential for shale gas. This has already become apparent in Poland. If these domestic or foreign alternatives supplies develop Ukraine’s agreement to ‘take or pay’ huge quantities of gas is especially hazardous.
Who will get the benefit from the discount, to the extent it is real? Given the opaque nature of gas trade, especially in and through Ukraine, there will be opportunities to win arbitrage profits between the discounted import price and the European market prices. All manner of gas swap techniques are at play, and Mr Dmitri Firtash, Ukrainian oligarch who is a backer of Yanukovich, is a master of this gas swap trade business. Ukrainian gas using industries will also gain, but the Ukrainian economy will remain the most gas-inefficient in the world. So Ukraine will be locking itself into a structure of major financial incentives to maintain, at one and the same time, gas inefficiency and dependence on Russia.
The alternative economic deal, on the basis of a political choice by Ukraine to extend the Black Sea Fleet lease, would have been to maximise the direct rent for the Sevastopol base, and to have put the annual 4 billion USD (or whatever sum) into the Ukrainian budget for the life of the lease. The gas price could have been left open to negotiation in the light of market tendencies, or left to the previous market price formula: i.e. to take the European import price as reference, and on this basis calculate the Ukrainian ‘net-back’ price (i.e. discounted for the lower transport costs). The Ukrainian government could then decide how the Sevastopol rent should be used, as between budget deficit reduction, or subsidies to aid energy efficiency, or social assistance where most acutely needed.
A new football club has earned a leading place in the UEFA Champions League groups and starred in the headlines of worldwide football news yesterday. The Football Club Sheriff Tiraspol claimed a win with the score 2-1 against Real Madrid on the Santiago Bernabeu Stadium in Madrid. That made Sheriff Tiraspol the leader in Group D of the Champions League, including the football club in the groups of the most important European interclub competition for the first time ever.
International media outlets called it a miracle, a shock and a historic event, while strongly emphasizing the origin of the team and the existing political conflict between the two banks of the Dniester. “Football club from a pro-Russian separatist enclave in Moldova pulls off one of the greatest upsets in Champions League history,” claimed the news portals. “Sheriff crushed Real!” they said.
Moldovans made a big fuss out of it on social media, splitting into two groups: those who praised the team and the Republic of Moldova for making history and those who declared that the football club and their merits belong to Transnistria – a problematic breakaway region that claims to be a separate country.
Both groups are right and not right at the same time, as there is a bunch of ethical, political, social and practical matters that need to be considered.
Is it Moldova?
First of all, every Moldovan either from the right or left bank of Dniester (Transnistria) is free to identify himself with this achievement or not to do so, said Vitalie Spranceana, a sociologist, blogger, journalist and urban activist. According to him, boycotting the football club for being a separatist team is wrong.
At the same time, “it’s an illusion to think that territory matters when it comes to football clubs,” Spranceana claimed. “Big teams, the ones included in the Champions League, have long lost their connection both with the countries in which they operate, and with the cities in which they appeared and to which they linked their history. […] In the age of globalized commercial football, teams, including the so-called local ones, are nothing more than global traveling commercial circuses, incidentally linked to cities, but more closely linked to all sorts of dirty, semi-dirty and cleaner cash flows.”
What is more important in this case is the consistency, not so much of citizens, as of politicians from the government who have “no right to celebrate the success of separatism,” as they represent “the national interests, not the personal or collective pleasures of certain segments of the population,” believes the political expert Dionis Cenusa. The victory of FC Sheriff encourages Transnistrian separatism, which receives validation now, he also stated.
“I don’t know how it happens that the “proud Moldovans who chose democracy”, in their enthusiasm for Sheriff Tiraspol’s victory over Real Madrid, forget the need for total and unconditional withdrawal of Russian troops from Transnistria!” declared the journalist Vitalie Ciobanu.
Nowadays, FC Sheriff Tiraspol has no other choice than to represent Moldova internationally. For many years, the team used the Moldovan Football Federation in order to be able to participate in championships, including international ones. That is because the region remains unrecognised by the international community. However, the club’s victory is presented as that of Transnistria within the region, without any reference to the Republic of Moldova, its separatist character being applied in this case especially.
Is it a victory?
In fact, FC Sheriff Tiraspol joining the Champions League is a huge image breakthrough for the Transnistrian region, as the journalist Madalin Necsutu claimed. It is the success of the Tiraspol Club oligarchic patrons. From the practical point of view, FC Sheriff Tiraspol is a sports entity that serves its own interests and the interests of its owners, being dependent on the money invested by Tiraspol (but not only) oligarchs.
Here comes the real dilemma: the Transnistrian team, which is generously funded by money received from corruption schemes and money laundering, is waging an unequal fight with the rest of the Moldovan football clubs, the journalist also declared. The Tiraspol team is about to raise 15.6 million euro for reaching the Champions League groups and the amounts increase depending on their future performance. According to Necsutu, these money will go directly on the account of the club, not to the Moldovan Football Federation, creating an even bigger gab between FC Sheriff and other football clubs from Moldova who have much more modest financial possibilities.
“I do not see anything useful for Moldovan football, not a single Moldovan player is part of FC Sheriff Tiraspol. I do not see anything beneficial for the Moldovan Football Federation or any national team.”
Is it only about football?
FC Sheriff Tiraspol, with a total estimated value of 12.8 million euros, is controlled by Victor Gusan and Ilya Kazmala, being part of Sheriff Holding – a company that controls the trade of wholesale, retail food, fuels and medicine by having monopolies on these markets in Transnistria. The holding carries out car trading activities, but also operates in the field of construction and real estate. Gusan’s people also hold all of the main leadership offices in the breakaway region, from Parliament to the Prime Minister’s seat or the Presidency.
The football club is supported by a holding alleged of smuggling, corruption, money laundering and organised crime. Moldovan media outlets published investigations about the signals regarding the Sheriff’s holding involvement in the vote mobilization and remuneration of citizens on the left bank of the Dniester who participated in the snap parliamentary elections this summer and who were eager to vote for the pro-Russian socialist-communist bloc.
Considering the above, there is a great probability that the Republic of Moldova will still be represented by a football club that is not identified as being Moldovan, being funded from obscure money, growing in power and promoting the Transnistrian conflict in the future as well.
Photo: unknown
Prime Minister of the Republic of Moldova, Natalia Gavrilita, together with Deputy Prime Minister and Minister of Foreign Affairs, Nicu Popescu, pay an official visit to Brussels, between September 27-28, being invited by High Representative of the European Union for Foreign Affairs and Security Policy, Josep Borrell Fontelles.
Today, Prime Minister had a meeting with Charles Michel, President of the European Council. The Moldovan PM thanked the senior European official for the support of the institution in strengthening democratic processes, reforming the judiciary and state institutions, economic recovery and job creation, as well as increasing citizens’ welfare. Natalia Gavrilita expressed her confidence that the current visit laid the foundations for boosting relations between the Republic of Moldova and the European Union, so that, in the next period, it would be possible to advance high-level dialogues on security, justice and energy. Officials also exchanged views on priorities for the Eastern Partnership Summit, to be held in December.
“The EU is open to continue to support the Republic of Moldova and the ambitious reform agenda it proposes. Moldova is an important and priority partner for us,” said Charles Michel.
Prime Minister Natalia Gavrilita also met with Paolo Gentiloni, European Commissioner for Economy, expressing her gratitude for the support received through the OMNIBUS macro-financial assistance program. The two officials discussed the need to advance the recovery of money from bank fraud, to strengthen sustainable mechanisms for supporting small and medium-sized enterprises in Moldova, and to standardize the customs and taxes as one of the main conditions for deepening cooperation with the EU in this field.
Additionally, Prime Minister spoke about the importance of the Eastern Partnership and the Deep Free Trade Agreement, noting that the Government’s policies are aimed at developing an economic model aligned with the European economic model, focused on digitalization, energy efficiency and the green economy.
A common press release of the Moldovan Prime Minister with High Representative of the European Union for Foreign Affairs and Security Policy/Vice-President of the Commission, Josep Borrell Fontelles, took place today, where the agenda of Moldova’s reforms and the main priorities to focus on in the coming months were presented: judiciary reform; fighting COVID-19 pandemic; promoting economic recovery and conditions for growth and job creation; strengthening state institutions and resilience of the country.
“I am here to relaunch the dialogue between my country and the European Union. Our partnership is strong, but I believe there is room for even deeper cooperation and stronger political, economic and sectoral ties. I am convinced that this partnership is the key to the prosperity of our country and I hope that we will continue to strengthen cooperation.”
The Moldovan delegation met Didier Reynders, European Commissioner for Justice. Tomorrow, there are scheduled common meetings with Oliver Varhelyi, European Commissioner for Neighborhood and Enlargement, Adina Valean, European Commissioner for Transport and Kadri Simson, European Commissioner for Energy.
Prime Minister will also attend a public event, along with Katarina Mathernova, Deputy Director-General for Neighbourhood Policy and Enlargement Negotiations.
Photo: gov.md
Politics
Promo-LEX about Maia Sandu’s UN speech: The president must insist on appointing a rapporteur to monitor the situation of human rights in Transnistria
The President of the Republic of Moldova, Maia Sandu, pays an official visit to New York, USA, between September 21-22. There, she participates in the work of the United Nations General Assembly. According to a press release of the President’s Office, the official will deliver a speech at the tribune of the United Nations.
In this context, the Promo-LEX Association suggested the president to request the appointment of a special rapporteur in order to monitor the situation of human rights in the Transnistrian region. According to Promo-LEX, the responsibility for human rights violations in the Transnistrian region arises as a result of the Russian Federation’s military, economic and political control over the Tiraspol regime.
“We consider it imperative to insist on the observance of the international commitments assumed by the Russian Federation regarding the withdrawal of the armed forces and ammunition from the territory of the country,” the representatives of Promo-LEX stated. They consider the speech before the UN an opportunity “to demand the observance of the Universal Declaration of Human Rights by the Russian Federation with reference to this territory which is in its full control.”
“It is important to remember about the numerous cases of murder, torture, ill-treatment, forced enlistment in illegal military structures, the application of pseudo-justice in the Transnistrian region, all carried out under the tacit agreement of the Russian Federation. These findings stem from dozens of rulings and decisions issued by the European Court of Human Rights, which found that Russia is responsible for human rights violations in the region.”
The association representatives expressed their hope that the president of the country would give priority to issues related to the human rights situation in the Transnistrian region and would call on relevant international actors to contribute to guaranteeing fundamental human rights and freedoms throughout Moldova.
They asked Maia Sandu to insist on the observance of the obligation to evacuate the ammunition and the military units of the Russian Federation from the territory of the Republic of Moldova, to publicly support the need for the Russian Federation to implement the ECtHR rulings on human rights violations in the Transnistrian region, and to request the appointment of an UN Human Rights Council special rapporteur to monitor the human rights situation in the Transnistrian region of the Republic of Moldova.
**
The Promo-LEX Association concluded that 14 out of 25 actions planned within the National Action Plan for the years 2018–2022 concerning respecting human rights in Transnistria were not carried out by the responsible authorities.
The association expressed its concern and mentioned that there are a large number of delays in the planned results. “There is a lack of communication and coordination between the designated institutions, which do not yet have a common vision of interaction for the implementation of the plan.”
Promo-LEX requested the Government of the Republic of Moldova to re-assess the reported activities and to take urgent measures, “which would exclude superficial implementation of future activities and increase the level of accountability of the authorities.”
Photo: peacekeeping.un.org
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