Backstage negotiations: Energy crisis puts Poroshenko and Akhmetov together

Author : Dmytro Ryasnyi

Source : 112 Ukraine

In terms of elites relations, blockade of the trade between Ukraine and Donbas occupied territories began to dot the i’s
10:07, 10 March 2017

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The “paralysis” of Ukraine's trade with the ATO zone is officially recognized as a national disaster: the country loses money, the population loses its workplaces and breadwinning opportunities.

In terms of elites relations, the blockade also began to dot the i’s. The first process has already been launched: Poroshenko’s team began open fight for the preservation of Rinat Akhmetov's business.

However, defending the interests of the Donetsk oligarch, the president's team automatically protects its own businesses.

One of them is the resumption of commercial operations with indecent profitability between state generation and coal producers from the ATO zone.

However, the team of the guarantor will win even if this bet does not play.

Related: Losses due to blockade may amount to $3.5 billion and 75 thousand jobs, - Prime Minister

Rules of etiquette

The effectiveness of the blockade initiators should be measured in absolute figures: during a month and a half they "produced" about 600 thousand tons of blocked goods of different nomenclature.

In parallel, they have put various rumors upon themselves. There were versions that the blockade has been initiated by Lviv mayor Andriy Sadovyi, the team of Poroshenko or even Russia. The last variation was popular among the authorities.

An argument in favor of the "presidential" version, is the fact that in one and half months the executive branch did not undertake any serious attempt to clean the railway track from the protesters’ tents.

That is, the government behaves the same way as a year and a half ago, when with its tacit consent Ukrainian activists cut off the occupied Crimea from energy supply from the mainland.

Related: Voice for all: Two sides of Donbas trade blockade

Still, Bankova has a decent answer to this version: Poroshenko's apparatus has already taken a number of concrete steps demonstrating its remoteness from the termination of trade communication between Ukraine and the ATO zone.

This is evidenced by the fact that presidential team supports Rinat Akhmetov. There are at least two examples of it.

First. About two weeks ago, the Cabinet rejected a proposal to establish a temporary moratorium on the export of Ukrainian electricity to Europe, performed by DTEK (energy division of System Capital Management headquartered in Donetsk – Ed.).

The authors of this proposal insisted that in terms of the energy balance of the country this would help slow the rate of coal burning of anthracite, which became scarce due to the blockade. Nonetheless, the government did not accept this argument.

"For a year, we have been keeping the export market at a loss. It would be irrational to lose it now and all the foreign exchange earnings," one of the representatives of Akhmetov told in an interview.

Second. On March 1, the day when the LPR/DPR militants announced the beginning of the "nationalization" of local enterprises. At the meeting of the coordination center chaired by Deputy Prime Minister Volodymyr Kistion, DTEK's proposal to establish a ban on the import of energy brands coal from Russia was approved.

This was done in order to exclude the possibility of selling coal from the Akhmetov's Rovenkyanthracite, Sverdlovanthracite, and Komsomolets Donbasa, implying the export of these associations from Luhansk region to the chaotic sorting warehouses of the Rostov region, and then through Kharkiv region to Ukraine.

The fact that the power is supporting Akhmetov' is an ideal occasion for its criticism, but those who are rushing to take advantage of this option, simply misdirect the accents.

Related: Russia is surprised with "unwillingness" of Kyiv to stop trade blockade with Donbas

"They blame the owner of the President's Administration for collusion with the owner of SCM, but in reality the point is in parasitization: Poroshenko is using Akhmetov to solve his own problems," said one of the interlocutors.

Let us look at the results of the blockade through the prism of the last state company in the heat generation sector - PJSC "Centrenergo".

Related: G7 ambassadors called for ending blockade of coal supply in Donbas

On the one hand, like the rest of the TPPs, this company has lost the main coal supply channel. On the other, Centrenergo has also ceased to be a generator of shadow earnings. Thus, the purchasing price of the coal by "Centrenergo" might exceed the cost of its production by three times.

It happened in a relatively recent episode, when "Centrenergo" bought coal from the state enterprise "Luhanskvuhillia" at UAH 1,320 per ton. However, this enterprise does not extract anthracite, but buys it at UAH 460 per ton from the occupied territories.

The difference between these two figures is the net profit, shared by representatives of today's authorities in Kyiv and in the "LPR".

Actually, this explains why the authorities so sensitively react to the blockade of trade communications with the occupied regions of Donetsk and Luhansk regions.

Related: Donbas blockade HQ refuses to surrender weapons to police

It is frustrating, but you get used to it.

In the spring of 2016, National Commission for state regulation in the energy sector and utilities accepted the well-known formula for determining the cost of coal "Rotterdam +", which caused a flurry of criticism from the expert community and the public.

Thermal generation of DTEK received additional earnings in the form of a tariff increase, which in its essence depended on the increased quotations of coal.

Then Poroshenko's team also used the conjuncture: shortly before the adoption of Rotterdam +, the ICU group of Makar Pasenyuk (close to the guarantor), bought up DTEK's bonds, which grew just after the tariffs.

The fact of collusion on the basis of the "Rotterdam formula" was then denied by both sides. However, the coal deficit caused by the current blockade showed that anthracite is purchased not in the Netherlands, but in the same Donbas, thus hinting that "Rotterdam +" was adopted not to solve the problem of diversifying coal supply sources, but to justify raising its price.

Related: MP hit in face during meeting with Donbas blockade activists, -video

In general, it turned out that the blockade was also a kind of “developer” of this scheme.

And in this context the situation already looks like this: the more aggressive is the government fighting against blickade, the more likely the electorate will believe in the personal financial interest of officials from the restoration of trade operations with occupied Donbas.

Therefore, Bankova presents an initiative to restore trade relations with LPR/DPR as a concern for the third party - the local population and businesspersons, and the undisputed leader among them is Akhmetov.

A concrete example of concern for the owner of SCM would soon appear: according to our sources, this week Minister of Energy Igor Nasalyk would execute the solution that has been “lowered” to him - he will sign the order on the mentioned ban on the import of steam coal from Russia to Ukraine.

Related: Blockade participants claim numerous provocations by police in Luhansk region

Even if this step does not cool down the Kremlin’s hotheads and does not force them to abandon the idea of "nationalizing" industry in LPR/DPR, Poroshenko still has reasons for optimism.

The termination of trade relations with the ATO zone means that the local industry would be de facto forced to transfer to work with Ukrainian counterparties through foreign intermediary structures. That is, de jure it will lose its subjectivity in Ukraine, and therefore, and share in the market.

A vivid example: in the conditions of the transport blockade of Donbas, coal from Akhmetov's mines will be able to flow to warehouses of Ukrainian thermal generation only through Russia (and then through Kharkiv region).

However, in this case, it will enter Ukraine as a "Russian" or "African" coal, thereby reducing the official role of DTEK in the Ukrainian energy market, and at the same time, the influence of its owner on decision-making of the country.

Related: Donbas trade blockade: pros and cons

Russia has already worked out similar schemes. The best example is Transnistria autonomous territorial unit with special legal status, which is often compared to LPR/DPR. "Electromashservice", registered in Moscow sells the equipment of the Tiraspol plant of ZAO NP "Electromash" under the guise of its own products.

In order to extrapolate this scheme to Ukraine, it is only necessary to agree to the abolition of the ban on imports of anthracite from Russia.

Related: EU calls to stop Donbas trade blockade

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