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.
A Principle Decision
A political crisis broke out in Ukraine yesterday after the unexpected dismissal of the Cabinet. The no-confidence vote in the Supreme Rada led to a complex situation. Even though it has dismissed the government, the Supreme Rada cannot appoint a new one until after the parliamentary elections in March because political reform in Ukraine will only give it the right to do so then. The president cannot dissolve the Rada nor appeal its decision to the Constitutional Court because that court does not exist in the Ukraine – the Rada is blocking the confirmation of the judges.
Clouds began gathering overt he government last week. “It is time to stop the attempts by a high-placed party to experiment on Ukraine,” Rada speaker Vladimir Litvin said, adding that “the government and people in the gas industry should read documents before they sign them… I think that the Supreme Rada will come to the same conclusion.”
Addressing the Rada yesterday, Prime Minister Yury Ekhanurov gave a long but vague explanation of how Ukraine will “unconditionally win” from the new contract because “$95 is not bad price for gas considering European market conditions.” He said that it was impossible to preserve the barter system with the price of $50 per 1000 cu. m., although Ukrainian negotiators were considering moving the conflict into the courts. “We could go into retreat and not sign any documents. But a trial in the Stockholm court would last several months, if not years. Who would our victory help if we go without gas for several years with ruined industry and social services?” Ekhanurov asked rhetorically. He also said that, because of the unexpected success of negotiations, the government would not raise gas prices to the public by 25 percent, as it had decided to do before the end of last year.
Ekhanurov gave shallow answers to penetrating questions. In particular, he would not say what the price of gas would rise to in the second half of 2006 and was unable to explain why Ukraine agreed to the participation of the RosUkrEnergo Co. in making supplies. He said that he did not know who the founder of that company was. The prime minister's comment that negotiations were not finished and a concrete text with specific prices had not been drawn up yet. “Negotiations are continuing. The necessary specifications and explications will be made and the necessary foreign trade agreements will be signed,” he stated, adding that the next round of talks would take place in Astana on Wednesday during a meeting between the presidents of Russia and Ukraine, who will be in Kazakhstan for the inauguration of President Nursultan Nazarbaev.
After Ekhanurov's address, parliament members spoke. It soon became clear that the prime minister had very few allies present and they were in a state of confusion. The speech of Yury Orobets, chairman of the pro-presidential Our Ukraine Party, was characteristic. He was the first member of the party to speak and read his speech from a text. He said that the criticism of the government's actions was in essence electioneering. “The gas conflict is over... I suggest that we stop belittling our own government,” he said. He went on to comment on the role of RosUkrEnergo in supplying gas to Ukraine. “No one is naming the owner of that firm,” he said. “For some reason, everyone is afraid of the name Putin.”
Commenting on the prime minister's speech, Litvin stated that the Supreme Rada “has not received reliable information” on the causes and effects of the gas crisis, which received what he called the worst possible resolution for Ukraine. “The impression arises that we were presented with that resolution without alternatives,” he noted. Litvin also expressed perplexity over the fact that the government did not present a legal evaluation of the Russian-Ukrainian agreement. “Obviously it was signed at night. There is no evaluation,” he mused. He also pointed out repeatedly that the main negotiators with the Russian, Minister of Fuel and Energy Ivan Plachkov and Naftogaz Ukrainy head Alexey Ivchenko, were not present. “I think that the Rada should make a principle decision,” he said.
The discussion lasted almost three hours, after which the no-confidence vote was held. Leader of the social democrats and first president of Ukraine Leonid Kravchuk introduced the resolution. He said that his faction would vote for the dismissal of the government “for its lack of professionalism in the gas negotiations with Russia.” He stressed that “We don't know what the price of gas will be in half a year. We don't know who is guaranteeing supplies to the country. A government that disregards the economic security of Ukraine cannot, in my opinion, exercise its authority.”
The opposition has stated its intention to hold a no-confidence vote on Monday. Nonetheless, even yesterday morning the parliamentarians spoke of the vote as a distant possibility. The majority of Rada member did not think that the necessary 226 votes could be found.
A Political Conspiracy
The vote proved to be sensational. Of 450 deputies, 250 voted no confidence. Implacable opponents, the Orange Yulia Timoshenko Bloc, Litvin's People's Bloc, Viktor Yanukovich's Party of the Regions and the Communists, voted against the Ekhanurov government. The parliament authorized the current ministers to serving in acting roles until a new government can be formed.
When he saw the vote results, Ekhanurov simply smiled and shrugged. Speaking to journalists after the session, he said he thought the events were a “political conspiracy” for the sole purpose of which he considered the approaching parliamentary elections. He placed the greatest blames for them with Litvin. He added that the government discussion the possibility of its dismissal this month, and was prepared to work in the new conditions. The political council of the Our Ukraine Party made a similar statement that evening. Member of parliament Nikolay Katerinchuk read a statement that called the dismissal of the Ekhanurov government “the same kind of reprisal as that against the Yushchenko government in 2001.” The statement mentioned the parties of Timoshenko and Litvin separately and hinted that Our Ukraine no longer considered them allies. Those political forces that we looked on as allies after the parliamentary elections have, unfortunately, chosen a different path,” Katerinchuk said. “In the face of the threat of national disaster, we call for direct presidential rule until the elections to the Supreme Rada, which must be held honestly and transparently, in accordance with the Constitution,” read the statement issued at the meeting of the Our Ukraine political council.
It should be noted that the dismissal of the government does not change power in the country. Ekhanurov and all the ministers will remain in their posts and will only have the qualifier “acting” appended to their titles. The parliament cannot appoint a new prime minister until after the parliamentary elections scheduled for March 26. Between January 1 and the elections, there is a transitional period in the constitutional reform. The old procedure for electing a prime minister had been suspended, but the new one, under which the government is to be formed by a coalition of parliamentary factions, has yet to come into force.
What Next
News of the dismissal of the government reached Yushchenko on the road to Astana. He flew there yesterday afternoon for the inauguration of Kazakh President Nazarbaev. His press secretary, Irina Gerashchenko, said that his first reaction was to say that the dismissal of the cabinet had a political motivation. When he arrived in Astana, he announced the possibility of the dissolution of the Rada had arisen because of its “unconstitutional actions.”
Observers in Kiev concluded that the president's statement was emotional and Yushchenko does not have the authority to dissolve parliament in the unfolding legal chaos. Ukrainian presidential legal advisor Nikolay Poludenny expressed the opinion that the parliament did have the right to dismiss the government, in spite of the legal conflicts it created.
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.
Commenting on the scandal, observers in Kiev say that the no-confidence vote was a heavy blow to the president in the run-up to the parliamentary elections. In one of his comments last night, Katerinchuk called the recent events Russia's revenge on Ukraine for its firm stance on gas. Observers point out that the initiators of the vote, both Orange and the others, had been in Moscow in recent months and wee received on a high level.
The hardest blow to the presidential team was the statement made by Ukrainian industrialists, representing such major groups as the Ilyich Mariupolsky Metals Combine, Azovstal steel company, Makeevsky Metals Combine, Novokramatorsky Machine Plant, Nikopolsky Ferrous Alloy Plant Zaporozhstal steel company, the Severny, Tsentralny and Inguletsky mines and others. The document, addressed to President Yushchenko, notes that the industrialists have a very negative evaluation of the agreement with Russia that “placed the economy of Ukraine under threat of collapse and loss of its market competitiveness.” “We will openly demand the disavowal of the natural gas agreements signed between Ukraine and Russia and the immediate dismissal of all officials, without exception, who were involved in creating this extremely dangerous situation,” the document reads. That statement shows that big business in Ukraine has made its choice. And hat choice is not n the president's favor.
Who Provides Ukraine with Russian Gas
The RosUkrEnergo AG oil and gas company was formed in July 2004 on a parity basis between the Russian Gazprombank (through its wholly-owned subsidiary Arosgas Holding AG) and the Austrian Raiffeisen Banking Group (through its wholly-owned subsidiary Raiffeisen Investments AG and that company's wholly-owned subsidiary Centragas). It is registered in the Swiss canton of Zug, at 19 Damstrasse (180 companies are registered at that address). According to Dun&Bradstreet, the company's turnover in 2004 amounted to $861,400.
The chairman of RosUkrEnergo is Wolfgang Putschek and its co-directors are Gazprom management board member Konstantin Chuichenko and former head of the Moscow office of EuralTransGas Oleg Palchikov.
The company has been supplying natural gas from Turkmenistan to Ukraine since January 1, 2005 and has been supplying gas to Poland since March 1. Analysts estimate that the company has supplied Ukraine with about 50 billion cu. m. and Poland with about 44 billion cu. m. at an average price of $85-90 per 1000 cu. m. Its turnover was around $2.5 billion and its market share in the CIS and Europe is 3-4 percent. After the Orange Revolution, Ukrainian authorities questioned the transparency of the company's operations ad announced their desire to buy Raiffeisen's share in the company. The press reported that the bank was willing to sell its share in the company for $500 million, but no transaction took place.
At the same time, former Ukrainian authorities made other accusations against RosUkrEnergo. On June 21, 2005, former head of the Ukrainian Security Service Alexander Turchinov stated that part of the assets of the company are personally controlled by former Ukrainian president Leonid Kuchma. Turchinov said that the supply plan for the company was devised by Kuchma and former prime minister Viktor Yanukovich to “insure their positions and economic control over the country.” Turchinov suggested that Kuchma then sold his share in the company to Gazprom employees close to Russian President Vladimir Putin. He also said that Yushchenko knows about that, but forbade him to “deal with it.” Since July 27 the former security service head has stated several times that Gazprombank's share in RosUkrEnergo is controlled by businessman Semen Mogilevich, who was convicted of embezzlement twice in Russia and is now wanted by the FBI on charges of embezzlement and money laundering. However, Turchinov said, the Ukrainian Security Service has only indirect evidence of Mogilevich's involvement in RosUkrEnergo.
by
Sergey Sidorenko, Alexander Chernovalov, Kiev; Sergey Strokan
All the Article in Russian as of Jan. 11, 2006
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