[Ohio UZO News] Ukraine: NYT; CT; AP; ISCIP Analyst

[Deychak, Orest]

New York Times

 

Storms Kill 18 in Southeast Europe 

By THE ASSOCIATED PRESS 

28 July 2008

Late Edition - Final

KIEV, Ukraine -- Severe storms and floods in the Carpathian Mountains
killed 13 people in Ukraine and five people in neighboring Romania,
officials said Sunday. Two other people were missing in Ukraine.

Five days of heavy rain near the Prut and Dniestr Rivers caused floods
that damaged more than 21,000 houses, Ukraine's Emergency Ministry said
in a statement.

Ukrainian officials evacuated more than 8,000 people and reported that
more than 300 towns and villages were left without electricity. The
government said damage was estimated at more than $300 million.

''Ukraine has not seen anything like this in 100 years,'' Aleksandra
Turchinov, first deputy prime minister, said in televised remarks.

President Viktor A. Yushchenko of Ukraine declared the region a national
disaster area. He left a celebration of the 1,020th anniversary of the
country's adoption of Christianity in Kiev, the capital, to fly to the
Ivano-Frankivsk region in southwestern Ukraine, which experienced severe
storms and flooding.

The meteorological service predicted the storms would continue at least
into Monday and water levels would continue to rise.

Prime Minister Yulia V. Tymoshenko called for a session of Parliament to
allocate disaster relief funds.

In Romania, five people died in flooding and heavy rain in areas
bordering Ukraine, and power failures affected about 20,000 people,
officials said.

 

Chicago Tribune

Ukraine seeks its own church 

By Maria Danilova, Associated Press 

27 July 2008

Chicagoland Final

20

Photo (color): Ukrainian Orthodox Church members hold portraits of
Russian Orthodox Patriarch Alexy II on Saturday in Kiev. AP photo by
Sergei Chuzavkov

KIEV, Ukraine

The Ukrainian president on Saturday asked the world's Orthodox spiritual
leader to bless the creation of a Ukrainian church that would be
independent of the powerful Moscow Patriarchate.

The request to Bartholomew I of Constantinople is part of Viktor
Yushchenko's drive to assert Ukraine's independence and shake off
centuries of Russian influence. It is certain to anger the Russian
Orthodox church, which is trying to maintain its influence over this
Orthodox country of 46 million.

"I believe that, as if by the gift of God, as a historical truth and
justice, a national self-governing church will be established in
Ukraine," Yushchenko said at the start of a prayer service marking the
1,020th anniversary of Ukraine's and Russia's conversion to
Christianity.

"I ask your all-holiness for your blessing for our dreams, for truth,
for our hope, for our country, for Ukraine," the president said to
Bartholomew.

The patriarch gave a vague response.

"The mother church has not only the right, but also the obligation to
support ... any constructive and promising proposal that would as soon
as possible liquidate the dangerous split in the church," Bartholomew
said.

Many observers believe the Ukrainian church, which now answers to the
Moscow Patriarchate, is bound to attain independence eventually.
However, an abrupt decision could lead to a deep split between
Constantinople and the Russian Orthodox Church.

Although all Orthodox churches recognize Bartholomew as their spiritual
leader, Constantinople and Moscow have been jostling for influence.

AP 

 

Moscow, Kiev both claim victory in Ukraine church dispute 

By MARIA DANILOVA 

Associated Press Writer

28 July 2008

08:44

KIEV, Ukraine (AP) - Moscow and Kiev both are claiming victory in a
dispute creating an independent Ukrainian Orthodox church -- which
Russia fiercely opposes -- after a weekend visit by the spiritual leader
of the world's Orthodox Christians.

Ukrainian President Viktor Yushchenko is hoping to win recognition of
the local church's independence from Moscow as part of his drive to shed
centuries-long Russian influence. The Russian Orthodox Church resists
losing control over this predominantly Orthodox country of 46 million.

Yushchenko said on his Web site that the spiritual leader of the world's
Orthodox believers has voiced support for the creation of a local
church, independent of the powerful Russian Orthodox Church.

"I am glad that the Patriarch is backing the aspiration of the Ukrainian
people to have its own national local church," Yushchenko said in a
statement. "Such aspirations are in line to all the principles of a
national, state and of course church life."

Yushchenko made the statement Sunday at the end of a three-day visit by
Ecumenical Patriarch Bartholomew I of Constantinople, who came to Kiev
to attend massive celebrations marking the 1020 anniversary of Ukraine's
and Russia's conversion to Christianity.

But Mikhail Prokopenko, a spokesman for the Moscow-based Russian church,
disputed Yushchenko's claim. He told The Associated Press on Monday that
a meeting between Russian Patriarch Alexy II and Bartholomew confirmed
that Constantinople recognizes Moscow's supremacy over the Ukrainian
church.

Prokopenko also said that Bartholomew also will not recognize a
breakaway church in Ukraine that has proclaimed its independence and
whose leader has been excommunicated by Alexy.

Bartholomew's office declined immediate comment.

Experts say the Ukrainian church likely will get independence
eventually, like churches in other countries will sizable Orthodox
populations. But an abrupt decision on this could lead to a deep split
between Constantinople and the Russian church, the biggest Orthodox
church in the world, which claims 95 million believers out of the
world's 250 million Orthodox.

 

The ISCIP Analyst
An Analytical Review
Volume XIV, Number 14, 25 July 2008

UKRAINE

Exploring Ukraine's Vanco dispute


The Western business community in Ukraine still is reeling over the
government's decision to annul a major deep-water oil and gas
exploration contract involving a US-based company.  "How will companies
sign contracts if they are canceled at a press conference, without
negotiations to find out whether the company is willing to make changes
before all this is aired as part of campaign speeches?" asked Morgan
Williams, president of the US-Ukraine Business Council.  (1)
 
To be sure, it is understandable why the unilateral canceling of a
contract without benefit of court or mediation decision would send
shockwaves through potential investors, and the government must begin to
understand that this type of remedy is not supported in Western circles.
Nevertheless, while the government handled the situation badly, it does
appear to have had grounds for concern.  The issue appears far more
complex than originally thought.  The question is whether Ukraine
originally approved one deal following a public bidding process, but now
has another (thanks to the curious approval of the previous government).
 
The contract with an affiliate of Vanco International Ltd. - a
subsidiary of Houston's Vanco Energy Company - was "revoked and
terminated" on 21 May.  The Production Sharing Agreement had a 30-year
span and reportedly could have involved up to 15 billion dollars in
investment to complete the surveying, prospecting and possibly
extracting of oil and gas on Ukraine's Black Sea shelf.  Most experts
suggest that the area at issue - the Prykerchenska region of the shelf -
contains enough gas to provide the country with 25 percent of its
domestic needs per year. 
 
The depth of the gas, however, is extremely problematic, and the size of
the area is unusually large at 13,000 square kilometers.  Therefore, the
government issued a highly specialized request for proposals in late
2005 to conduct the exploration work. 
 
On 19 April 2006, Vanco International Ltd won the tender to develop the
Prykerchenska area.  The bid, submitted jointly with UK-based JNR
Eastern Investments, beat out, among others, a joint bid by Shell and
Exxon Mobil. 
 
Jim Bown, Vanco's representative in Ukraine, told journalists at the
time that the Vanco-JNR bid was a 50/50 partnership, with Vanco
providing the technical expertise and JNR "the financial dimension."
Vanco International, registered in Bermuda, but reportedly based in
Switzerland, suggested it would spend around $330 million over eight
years to explore the field.   Any financial guarantees associated with
the winning bid presumably would be the responsibility of JNR, based on
Bown's comments at the time. (2)
 
The details of the Production Sharing Agreement were negotiated for 18
months, with much of the time reportedly spent waiting for the
government's responses to Vanco's proposals. 
 
Finally, the contract was signed in fall 2007.  But while the Production
Sharing Agreement (PSA) reportedly was signed between Ukraine and Vanco
International Ltd., all licenses for subsoil exploration were awarded to
an entity known as Vanco Prykerchenska.  This company, according to the
government, was said to have been registered on 18 October 2007, just
one day prior to the signing of the PSA.  (3)
 
(As we go to press, the government suggested that the contract actually
was not signed by Vanco International, but by Vanco Prykerchenska Ltd.
This claim is unconfirmed, as the document is unavailable, and a source
associated with Vanco Energy denies this statement.  However, Vanco
Prykerchenska is the entity requesting arbitration for failure to
fulfill a contract, suggesting that it may be the actual party to the
contract at this point.)
 
President Viktor Yushchenko signed the PSA in a public ceremony on 19
October 2007, announcing on his website that he would hold an event "to
sign a production sharing agreement to explore the Prykerchenska area of
the Black Sea shelf between Ukraine and Vanco Energy Company." (4)  The
deal, he said, "is a strategic project for Ukraine and this is a unique
precedent for, on the one hand, formulating a national energy strategy
and, on the other hand, for cooperating with the world's leading
international investors." (5)
 
The agreement was signed, perhaps not coincidentally, almost directly
following a snap parliamentary election that led to a change in
government from then-Prime Minister Viktor Yanukovych to current-Prime
Minister Yulia Tymoshenko.  The ceremony occurred as the new
parliamentary majority coalition was being formed.
 
In explaining his ministry's decision to revoke licenses for subsoil
use, Environmental Protection Minister Heorhiy Filipchuk suggested that
Vanco International was not granted the right in the PSA to transfer
rights of subsoil use to its affiliate.  (6)
 
Moreover, both Filipchuk and Tymoshenko complained that Vanco
International did not provide the required information about its
affiliate.  On 21 May, Filipchuk said, "We still have not received
confirmation of financial, technological or technical documentation from
this company [Vanco Prykerchenska]."  (7)
 
Gene Van Dyke, the President of Vanco Energy Company and Board Chair of
VPL, vigorously denies the government's charges.  "According to the
Production Sharing Agreement," he said, "Vanco International Ltd.,
winner of the tender, has the right to pass further execution of the
agreement to a company founded with this purpose - for example, Vanco
Prykerchenska Ltd."  (8)  Van Dyke also suggested that the government
had all necessary information on the Prykerchenska affiliate.  Moreover,
in an interview this week, a Vanco representative, who asked that his
name be withheld, noted that the company often works through consortiums
and profit-sharing agreements. 
 
VPL has called on the Ukrainian government to allow the publication of
the PSA (also known as the Hydrocarbons Sharing Agreement), which it
says has been misrepresented and quoted out of context for the purpose
of misleading the public.  (9)
 
Tymoshenko is standing her ground, however, suggesting that the deal
with Vanco International and VPL was "a corrupt agreement concluded by
the previous government."  The government "has put a stake in the ground
on this issue," she said, and expressed confidence in "a very strong
case."  (10)
 
Her primary contention appears to be that the VPL ownership includes a
company closely linked both to former Prime Minister Yanukovych, who
suddenly approved the deal before leaving office, and the current
Secretary of the National Security and Defense Council, who has taken
the lead in defending the agreement. 
 
Vanco Prykerchenska confirmed in May that it is not owned wholly by
Vanco International, as assumed by many.  Instead, its ownership is
split "in parity" among four entities:  Vanco International, the Donbass
Fuel and Energy Company (DTEK), Integrum Technologies of Austria, and
Shadowlight Investments Ltd., linked to Russian businessman Yevgeny
Novitsky.  (11)
 
It is the inclusion of DTEK that reportedly got the government's
attention.  DTEK is the corporation linked to System Capital Management,
which is owned by Ukraine's richest billionaire Rinat Akhmetov.  In
addition to his business interests, Akhmetov serves as a parliamentary
deputy and is allegedly the chief financier of former Prime Minister
Yanukovych's Party of Regions.  Akhmetov is also a close ally of Raisa
Bohateryova, now the head of President Yushchenko's National Security
and Defense Council.  Bohateryova serves on the Party of Regions
Political Council and was one of the leaders of the Party's
parliamentary faction during Yanukovych's premiership.  
 
Neither DTEK nor any of Vanco International's current partners in
Ukraine were involved in the original bid proposal.  At the same time,
JNR Eastern Investments, Vanco's original financial partner, is no
longer involved with the project. 
 
While DTEK's connections are clear, Integrum Technologies is unknown.
Its ownership has not been disclosed by anyone involved in the project,
and the government claims to be unable to find its backers. 
 
An email request from this author to Vanco Prykerchenska asking for
contact information for Integrum Technologies received no response.  The
Austrian company appears to have no website, or at least none that
appears on any general search engine. 
 
Hans Stege of the Kremlin, Inc. Blog, has been one of the most
aggressive pursuers of information about Integrum.  Since May, he has
spent considerable time calling and emailing Austrian, Ukrainian and
Russian companies attempting to locate contact information for Integrum
Technologies, but to no avail.  (12)
 
The shadowy nature of the company has allowed Ukraine's government to
speculate about its ownership - suggesting everything from Gazprom to
companies related to the presidential secretariat.  None of this
speculation is based on any available information and certainly cannot
be proven. 
 
The Vanco Energy Company website is no help; the site makes no mention
of Vanco Prykerchenska's connection to the contract.  In fact, the site
has little information about its Ukraine work.  The company is respected
for its deep water exploration in several African countries, and openly
lists its partners in these countries on its website.   It makes no
mention of any partners in its description of its work in Ukraine.  (13)
 
An archived page located through a Google search (and not available when
entering the site through its main page), however, shows what appears to
be a graphic of a power point presentation slide.  The slide - titled
"Legal Structure" -- provides an overview of the Vanco Energy Company
through the use of a flow chart. 
 
"Vanco Energy Company is an integrated independent oil and gas company
which operates its exploration and production activities through its
wholly owned overseas subsidiary, Vanco International Ltd. and through
the wholly owned subsidiaries of Vanco International Ltd.," the slide
explains.  "Vanco's integrated corporate structure is consistent with
generally accepted practices of the international petroleum industry."
(14)
 
The graphic flow chart appears to show a company called "Vanco Ukraine
Ltd. (Bermuda)" as a subsidiary of "Vanco International Ltd. (Bermuda)."
The slide is dated April 2006.  (15)
 
Vanco International's bid proposal to Ukraine was submitted in April
2006.  
 
Despite these questions, like many Western investors, the US Ambassador
to Ukraine originally expressed regret over Ukraine's decision.  "I am
very disappointed that the Cabinet of Ministers today took unilateral
action to revoke the Production Sharing Agreement [that] the Government
of Ukraine negotiated with U.S. company Vanco," Ambassador William
Taylor said in a statement.  "For the government of Ukraine to attract
investors," he continued, "particularly in those sectors vital to its
energy security, it needs to make clear that it respects the sanctity of
contracts and the rule of law."  (16)
 
This is, of course, very true.  The manner in which the Tymoshenko
government annulled its agreement with Vanco International is
questionable.  The case not only demonstrates the continuing opaque
nature of government agreements, but also underscores the utter failure
of the country's judicial system to mediate conflict.  The country long
has been criticized for a culture of corruption - judges routinely are
accused of accepting bribes or backing down in the face of severe
intimidation, while prosecutors often are dependent on political favors
for their positions.  As a result, power plays and public relations
often are substituted for legal remedies, as even political leaders have
little trust in the judicial system. 
 
Following the government's announcement, President Yushchenko responded
by requesting that the country's prosecutor-general intervene.  Without
benefit of investigation or court ruling, the prosecutor immediately
issued an order to the government to revoke its decision.  Because
Tymoshenko apparently views the prosecutor as a vessel of the president
(with some reason), she simply ignored the order.  
 
On 4 June, Yushchenko issued a decree ordering the government to rescind
its decision.  Tymoshenko ignored that decree, too, noting that it had
come based on a recommendation of Bohateryova's National Security and
Defense Council.  Yushchenko also created an interdepartmental
commission to investigate the situation, and placed Bohateryova-Rinat
Akhmetov's ally-in charge of it.  (17)
 
The Vanco case highlights many of the most urgent problems facing
Ukraine.  Continued reliance on administrative methods to remedy
questionable contracts-to say nothing of the fact that so many
questionable contracts exist-should cause serious concern for
corporations looking to work in the country.  Close relationships
between political leaders and businesses involved in major contracts
also undoubtedly do not send the appropriate signals.
 
Furthermore, the ease with which Western corporations may become
(sometimes unwittingly) enmeshed in the country's muddy business
environment is unsettling.   Corporations attempting to conduct normal
business often find themselves held hostage to political turf battles
and politically-oriented business interests. 
 
As the government works to clean up its business dealings, it must also
understand the need to reform the judicial and prosecutorial mechanisms
that should protect both private investors and the government.  If
nothing else, this should be the message of the Vanco dispute.
 
Source Notes:
(1) Anna Poludenko, "Tymoshenko cancels Vanco contract in fight with
Yushchenko," Kyiv Post, 22 May 08 via www.kyivpost.com.
(2) John Marone, "Vanco wins Black Sea deepwater tender," Kyiv Post, 27
Apr 06 reprinted in Alexander's Gas and Oil Connections, Vol 11, Issue
10, 18 May 06 via www.oilandgas.com.
(3)  Alexander Serafimovich, "Ukraine's government says: Vanco go
home!," Oil and Gas Eurasia, June 2008, No. 6 via
www.oilandgaseurasia.com and www.eurasiapress.com
(4) "Ceremony to sign deal with Vanco," Press office of President Viktor
Yushchenko, 19 Oct 07 via www.president.gov.ua/en/news/7901.htm\
(5) "Ukraine strikes deal with Vanco," Press office of President Viktor
Yushchenko, 19 Oct 07 via www.president.gov.ua/en/news/7905.html.
(6) Alla Yeremenko, "The Black Sea Shelf to the Bearer," Zerkelo
Tyzhnia, 17 May 08 via BBC Monitoring, Lexis-Nexis.
(7) Ibid.
(8) Press Release, Vanco Prykerchenska Ltd, 12 Jun 08 via PRNewswire.
(9) Press Release, Vanco Prykerchenska Ltd., 17 July 08 via email to
author. 
(10) BYuT Inform Newsletter, 22 Jul 08 via email to author.
(11) Alla Yeremenko, "The Black Sea Shelf to the Bearer," Zerkelo
Tyzhnia, 17 May 08 via BBC Monitoring, Lexis-Nexis.
(12) See "A Tale of Two Business Cultures:  The Integrum Technologies
Case," 3 Jul 08, Kremlin, Inc. Blog for an interesting (and sometimes
humorous) description of Hans Stege's attempts to track down Integrum
Technologies  (www.dartmouth.edu/~stege/blog/?p=112
(13) Website located at www.vancoenergy.com
(14) Vanco Energy Company website,
www.vancoenergy.com/aboutus/legalstructure.htm.
(15) Ibid.
(16) "Statement by U.S. Ambassador Taylor on Vanco Case," Public Affairs
Section, U.S. Embassy, 21 May 08. 
(17) "Bohateryova will study the agreement between Ukraine and Vanco,"
Forex and Finance, 21 May 08 via www.fin-forex.com.

By Tammy Lynch (tammymlynch at hotmail.com)


 





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