Ukraine's Cabinet vs. Naftogaz: Who to become new gas monopolist?

Author : Oleg Ustenko

Source : 112 Ukraine

Ukraine has witnessed a "showdown" among the Naftogaz managers
11:39, 11 March 2019

Open source

  1. Any property owner should be able to influence decisions regarding the management of this property. I do not think that Naftogaz (vertically integrated oil and gas company engaged in the full cycle of operations in gas and oil field exploration and development, production and exploratory drilling, gas and oil transport and storage, the supply of natural gas and LPG to consumers, - ed.) should be an exception.
  2. The state is a very bad proprietor, but it should have the right to influence decisions if the property is state-owned. Otherwise, we create a “non-system monster” that “is going rogue” and decides on his own what to do with someone else’s property. However, its actions would not necessarily meet the interests of the owner.
  3. The task of the state "non-system monster" is to preserve such status as long as possible, it becomes the most important condition for ensuring one's own good existence.
  4. To solve this problem, the “non-system monster” must select “independent arbiters,” whose main task is to approve any of its actions. Arbitrators must have a good reputation, which would be evaluated by appropriate compensation.

That is why, most likely, when disclosing the statistics of Naftogaz, we will see that the salaries of its supervisory board members are more than impressive.

Related: Naftogaz CEO Kobolev: I will not resign

And, probably, they are not corresponding to their real contribution to the company's activity. But they absolutely correspond to the "Okay" that they say to the company’s top managers concerning a wide range of issues. Including questions and their fantastically high wages.

Related: Ukraine's Government announces competition for Naftogaz Board Chairman post

  1. The basic logic of setting wages at a state-owned enterprise for any categories of workers is like in any other enterprise. It is determined by the opportunity cost of their labor.

When you cling on your workplace so strongly, it might be a signal of “unprecedented zeal and great love” both for the company and for the work that the employees are engaged in.

Related: Naftogaz wins Hague Tribunal against Russia

But it can also be evidence that the opportunity cost of an employee in the labor market is much lower.

Perhaps that is why we have witnessed a "showdown" among the Naftogaz managers.

  1. Maybe the statement of MP Groysman about announcing a competition for the position of head of Naftogaz is good. Perhaps the current leadership should try to compete for such a “favorite place” at an open competition, as suggested by the PM.

In addition, Naftogaz is subject to unbundling, however, it itself is resisting this process. And then the big question arises: which employee are we looking for?

Related: Naftogaz initiates process of recovering debts from Gazprom in Luxembourg

The one who would lead the small disaggregated activity of the entity? Or the one who would control a group of lawyers in the Stockholm arbitration? And how much would it cost?

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This column does not necessarily reflect the opinion of the editorial board or 112.International and its owners.  

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