Newspaper clippings

I read a lot every day, newspapers, websites and blog. Here are some excerpts which speak to the issue of property rights, mostly from the Kyiv Post. There are also many other interesting things, the struggle between western and Russian identity, analysis of the recent Constitutional revision which bolsters executive power, the incessant accusation of government corruption, and more. I must pick and choose.

My greatest interest is property rights and commerce, so I chose these:

Sept. 24th Kyiv Post — Series of interviews regarding opaque, arbitrary customs procedures:

One of the businessmen who wished to remain anonymous said

“For instance, last week customs cleared your goods #1 (unit price by invoice is $100). This week you try to clear the same goods #1 (unit price by invoice is still the same $100), but some risk criteria has appeared an you are informed that the minimum price you can custom clear the goods for is $150 not $100. What’s more, nobody knows who increased this minimum price for the goods. Why? Which criteria for which goods should be used? …and why are they constantly changing?

You’re faced with the choice of either clearing the goods at $150 (and overpaying the customs duties) or returning them to the sender.”

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Sept. 24th Kyiv Post — Headline: TAX authorities put squeeze on big, small businesses

“Ukrainian customs, tax and financial monitoring authorities are stepping up pressure on businesses of all shapes and sizes in a bid to meet tough revenue targets.”

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Oct. 1st Kyiv Post — Front Page Headline: “Return of the Good Squads – Berkyansk Tax police fire on workers, wounding four.”

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Oct. 1st Kyiv Post — Headline: “Nation’s pension system close to bankruptcy”

“Those who think the French pension system is bloated should take a look at Ukraine, a nation which has not only preserved but enhanced generous Soviet retirement benefits – which now threaten to bankrupt it.”

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Oct. 1st Kyiv Post — Headline: “Bank Forum complains of smear campaign”

“A large Ukrainian bank owned by Germany’s Commerzbank claims that it has fallen victim to a damaging smear campaign allegedly concocted by Ukrainian businessmen who owe the bank tens of millions of dollars…

Allegedly slanted reports suggesting the imminent collapse of Forum, which ranks as Ukraine’s 13th largest bank in terms of net assets, have appeared largely on the Internet, according to [bank chairman] Kolesnik.

One of the most problematic such clients, according to [bank chairman] Kolesnik, is Dnipropetrovsk-based Sparta Group, co-founded by . . . According to Kolesnik, Sparta Groups owes Bank Forum around $38 million and is using fraudulent means to avoid repaying the debt.

Whether Sparta group, or any other problematic Bank Forum client, is in fact behind the smear campaign remains unclear.

Kolesnik said that Sparta Group used the Europe mall in Dnipropetrovsk as collateral for the $38 million loan. But in an attempt to wriggle out of the debt, the part of the street on which the building is located was renamed, so that the address of the property specified as collateral in the loan contract no longer corresponded to the current address of the building. The building was then resold a number of times.

‘According to Ukrainian legislation, the third resale is considered bona fide and is hard to challenge,’ said Kolesnik. In April, Levin and Zxelrod formally exited the business. Finally, Sparta declared itself bankrupt.”

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Oct. 8th Kyiv Post — series of articles about anti-corruption efforts, mostly calling for government power as a solution

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Oct. 8th Kyiv Post — Headline: Ukrainian prosecutors go after ArcelorMittal mill

“Another Ukrainian court is set to turn back the clocks [this is a reference to the recent reversion of a 2005 Constitutional change which weakened presidential powers], this time threatening a landmark, five-year-old privatization deal that brought state coffers $4.8 billion in the cleanest state auction ever held.

The general prosecutor’s office is suing ArcelorMittal, Ukraine’s biggest foreign investor, which purchased the country’s largest steel mill in Kryviy Rih back in 2005. . . .

The current Yanukovych team consists of many of the same officials who served before the Orange Revolution, when Kryvorizhstal (now ArcelorMittal KryviyRih) was first sold under former President Leonid Kuchma to his son-in-law … and billionaire …, a major financial backer of Yanukovych, for a meager $800 million.

Now, if prosecutors are successful, the Dnipropetrovsk Oblast mill purchased by Mittal Steel, now ArcelorMittal, will return to state hands — and maybe eventually back to … and … . . . .

‘We are taking this very seriously,’ said Cornier, a 25-year veteran of the company flown in from London to confront the emergency situation. ‘We paid $4.8 billion for this plant, and put $500 million worth of capital expenditures into it. We feel it is a very good plant and we don’t want to lose it.”

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Oct. 8 Kyiv Post — Article about most successful (non-Russian) expats.

rank / country / industry
1 / Britain / steel, real estate, media
2 / Czech / investment banking, especially managing ipo’s
3 / Poland / film distribution, advertising, language dubbing, theater chain
4 / USA / restaurants & other ventures
5 / USA / agribusiness
6 / Sweden / farming
7 / Poland / flowers, now commercial real estate, manufacturing
8 / USA & Germany / restaurants, luxury brands, children’s entertainment centers
9 / USA / online and print media
10 / USA / radio broadcasting, online media, real estate

1’s estimated net worth is $500 million to $1 billion. 10’s is $12 to $15million.

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15 Oct. Kyiv Post — Front Page Headline: Reprieve – Lawsuit against steelmaker ends

“In recent weeks, ArcelorMittal raised such an international outcry over the attacks on the company that President Viktor Yanukovych felt compelled to respond publicly on Oct. 8th, assuring the investor that the government had no intention of seizing the plant. It took prosecutors only two days (not including the weekend) to act on the presidential edict.

If ArcelorMittal had truly violated legal obligations made during its 2005 purchase, then why was the case dropped? . . . .

Khrypun, a judge who is no stranger to controversial cases, dismissed the dispute without explanation after lone prosecutor withdrew the state’s claims, also without explanation. . . .

Since then [the 2005 sale], Ukraine’s biggest investor has barely had a moment’s peace.

Over the years leading up to the lawsuit filed by the prosecutor’s office in July, ArcelorMittal Kryviy Rih has been accused by Ukrainian trade unions of reneging on its investment obligations. More recently, the Security Service of Ukraine, successor agency to the Soviet KGB, began investigating the company for customs violations on imported coal. . . .

Strange and violent incidents also happened to plant workers. In October 2009, gunshots were fired at a company car . . . .”

From an editorial on the subject:

“The only thing that is clear from this case is that anyone who is bold enough to invest in Ukraine should learn how to shout – the louder, the better.”

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15 Oct. Kyiv Post — Headline: “Will Ukrtelecom sale be honest?”

“Ukraine’s government on Oct. 13 formally launched a privatization tender for a controlling stake in fixed-line telephone monopoly Ukrtelecom, the sale of which has long been stalled due to political gridlock.

The auction, to be wrapped up by Dec. 28, sets the stage for the nation’s biggest auction since top steel mill Kryvorizhstal was bought for a record $4.8 billion by the world’s largest steel group, ArcelorMittal.

With a starting price of $1.3 billion, the Ukrtelecom sale is likely to raise badly-needed fresh cash to cover stretched state finances. But . . . the sale is proceeding with controversial restrictions that threaten to exclude leading global telecommunications companies from the bidding.”

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15 Oct. Kyiv Post — Headline: “Khoroshkovsky makes U.S. visit”

“Valeriy Khoroshkovsky, the head of the Security Service of Ukraine, will conduct a one-day working visit to the United States on Oct. 15.

The Ukrainian intelligence chief is expected to meet with top officials in the U.S. Federal Bureau of Investigation and the Central Intelligence Agency, as well as the U.S. State Department.

One of Ukraine’s richest people, Khoroshkovsky is a media mogul who is also a member of the High Council of Justice, which appoints the 10,000 judges in Ukraine.”

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Sept. 5th Ukrainian Weekly — Headline: “A Donetsk entrepreneur tries to fight the system”

“Volodymyr Razumovskyi, a 38-year-old Donetsk entrepreneur . . . [has] a lovely wife, three children and a decorative plants business in the heart of Donetsk. . . .

Enter Oleskander Grupskyi . . . who became Mr. Razumovskyi’s neighbor in 2004. . . .

As with anyone wanting to do serious business in Ukraine, Mr. Grupskyi is a well-connected dude. He left the local police force to form his own business clan, maintaining valuable contact with the local prosecutor and police departments. . . .

In an undercover video shot included in Mr. Razumovskyi’s YouTube posting, Mr. Grupskyi boasts that for nine years he’s been a member of the Party of Regions of Ukraine . . . that he graduated from a KGB school. . . .

Mr. Razumovskyi’s 35-acre property, the site of Ukraine’s first plant nursery, is very attractive real estate within the city limits of Donetsk.

[Mr. Grupskyi] admitted himself in the undercover video: “You like the inspections? Until some intelligence emerges in your brain, you will be constantly inspected.”

On came the tax police, the prosecutor’s office, the sanitary inspectors and other local bureaucrats. There were 15 inspections in the last year, compared with three the prior year. . . .

In the worst case, local tax officials fined his business . . . nearly $10,000. . . .

[Mr. Grupskyi’s] boys allegedly destroyed Mr. Razumovskyi’s water main, causing more than $200,000 in damages and flooding the neighborhood. . . .

[The police’s] investigation led to the conclusion that “the reponsible persons can’t be established.” . . .

A February 2009 call came from someone claiming to be Mr. Grupskyi’s wife, who reminded Mr. Razumovskyi that he has three small children, advising him to care for them better.

The breaking point for Mr. Razumovskyi came with the shooting death of Mr. Grupskyi’s lawyer on July 12. . . .

That’s when Mr. Razumovskyi decided to plead his case to President Yanukovych on YouTube.”

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If you think the US government doesn’t deprive citizens of property to benefit influential businessmen, think again.

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