01 September 2014


Timothy Ash from Standard Bank in London provides an excellent summary of the current situation in Ukraine. Maybe he should give up the day job and become a full time journalist.

Commentary & Analysis, Timothy Ash, Standard Bank, London, UK, Mon, 1st Sept, 2014 

LONDON ---- I am amazed by the generally poor media & business commentary around Ukraine/Russia relations, which often belies a fundamental lack of understanding of the issues – maybe the demands of 24/7 news drives that to an extent. This is also apparent from commentary from high level Western diplomats and political leaders – either they do not understand, or would rather not understand the realities with respect to the Ukraine crisis.

So let’s try and make this as simple as possible.

Let’s start at the beginning, or at least for most of the recent focus on Ukraine. And therein, the Maydan protests are the obvious starting point – we could go back to the Vilnius process, but that’s possibly getting a bit too deep for a simplified analysis.

Maydan earlier in the year was about a bulk of Ukrainians’ desire to have a European perspective – to live by common European values, not necessary EU or Nato membership at that point of time. It was more about things like democracy, human rights, rule of law, protection of property rights, but really about living in a normal European country.

And they felt that the incumbent Yanukovych administration was not willing or able to deliver on that, arguably because of the anchor of too close ties to Russia. Only by securing an EU perspective did they think that their country could be reformed towards European core values, and bringing real improvements in their way of life.

Evidently Moscow finds the whole Maydan thing a threat to its model of development and security – and is particularly nervous about any NATO aspirations of Ukraine. Many Russians have also never really accepted that Ukraine is an independent country (albeit it has been fully independent for 23 years now) or indeed that Ukrainians are a different and distinct ethnic group – indeed,  seeing the collapse of the USSR in 1991 as a mistake, at least as it resulted in the “mistake” of bringing Ukrainian independence.

BULK OF UKRAINE'S POPULATION WANT A EUROPEAN PERSPECTIVESo the gist of it is that the bulk of Ukraine’s population want a European perspective, and to finally break away from domination by Russia, and Russia wants to stop this process, and through the recent advent of the CIS/Eurasian Union to actually pull Ukraine closer in terms of economic and political integration.

Whether it was security concerns or a desire to stall/destabilise Ukraine’s momentum towards Europe, Russia moved to annex Crimea back in March, and then actively promoted/supported separatist movements in South-East Ukraine – in the event, these only secured traction in two further oblasts/regions of Ukraine, i.e. Donetsk and Luhansk, collectively known as ‘the Donbas’ – Ukraine’s industrial heartland.

Note prior to the on-set of separatist demonstrations and unrest in April, there was scant evidence in Ukraine of any particular separatist cause/movement – opinion polls also showed 90%+ support across Ukraine for an independent Ukraine, and only around one-third support even in Donetsk for the separatist cause, with a majority still favouring an independent Ukraine. Opinion polls showed no oblast in Ukraine had majority support for joining Russia – and by a large margin, perhaps with the exception of Crimea.

In any event protests and conflict broke out in Donetsk and Luhansk, and these evolved into a war to all intents and purposes, with large scale casualties now on all sides. Throughout there have been strong indications that arms/fighters have been supplied across the border from Russia – separatist leaders have suggested at least 4,000 of the 10-15,000 separatist fighters are of Russian origin (either retired Russian soldiers, or soldiers “on leave”).

The Ukrainian military eventually regrouped, and managed to deploy around 50,000 troops to Donbas, eventually seeing significant gains on the ground – which up to a week or so ago laid the prospect that unless Russia escalated with the use of more formal troop deployments to Ukraine, that the separatist cause in Donbas would whither away. This led to some debate about whether Russia had achieved its objectives in Ukraine through the annexation of Crimea – and the destabilisation of Donbas, sufficient to stall/slow Ukraine’s drive to EU/NATO membership.

The assumption by some therein was that Moscow would assume that it had sowed sufficient uncertainty in the minds of Western leaders for them in effect to veto Ukraine's future NATO/EU membership. This charitable interpretation of Russian strategy assumed a benign de-escalation by Russia.

EVENTS ON THE GROUND IN RECENT DAYS NOW APPEAR TO HAVE CHANGED THE ABOVEEvents on the ground in recent days now appear to have changed the above. In particular, the government in Kyiv and NATO have signalled much larger and more direct Russian intervention in fighting in Donbas, which seems to have slowed/reversed the advances of the Ukrainian military – even suggesting a broadening of the conflict south towards the industrial port city of Mariupol.

The message now from the most recent Russian escalation (“invasion” or “incursion”) is that Moscow has made clear that it is unwilling to allow the defeat of the separatist cause in Donbas, and is willing to further escalate, by pumping yet more arms/kit into the conflict.

Moscow’s aim is seemingly (and perhaps now clearly) to force a military stalemate on the ground whereby a large swathe of Ukrainian territory – and important territory, given that it is Donbas – is beyond the reach of the Ukrainian government. Their assumption is that this will force the government in Kyiv, and the West, back to the negotiating table to negotiate over the long term future of Ukraine – and therein the agenda for Russia is No NATO, No EU and No Maydan (Moscow wants a broader coalition in office in Kyiv, more amenable to representing its views).

To restate, for Russia this is not really about backing the separatist cause in Ukraine, it is about shaping the long term future of the whole of Ukraine, and Ukraine’s geopolitical, economic and strategic orientation back east, and certainly away from the West.  Indeed, if Russia was doing all this really in support of the minority rights in Ukraine it would surely have rallied to the cause of minorities in Russia itself – and recent history therein has been about pulling back from a Federalist agenda/model.

RUSSIA HAS PUT THE BALL BACK IN THE COURT OF THE WEST/KYIV BY ITS RECENT ACTIONSIn effect Russia has put the ball back in the court of the West/Kyiv by its recent actions in Ukraine.  Herein the Poroshenko administration now faces a number of choices, with hugely difficult consequences and calculations to be made:

FIRST, First, negotiate a ceasefire with separatists and their backers in Moscow, and secure a longer term agreement which would require assurances of a pull back from Western orientation, and hence assurances of No Nato or EU membership for Ukraine. Moscow will also likely demand a Federal constitution to be enacted in Ukraine, with much more power decentralised to the regions, but whereby the regions have veto rights over key decisions at the national level, e.g. covering NATO and EU membership.

In effect by so-doing Kyiv would secure the return of Donbas to its de-jure (if not necessarily de-facto, as per Crimea) administrative “control”. This would likely make short term economic development/recovery easier. However, the price would likely be a return to the model of development prior to Maydan – of autarchic oligarchic elites plundering the population and the economy not really going anywhere fast, but this would rather be a model for stagnation and decline.

All the above would be difficult for any Ukrainian government to sell to the people of the Maydan, or indeed the wider population, which now appears to have changed through the current conflict to become much more ardent in support of Ukrainian independence, and the Western orientation.

Therein note that support for NATO membership for Ukraine, which was always low, pre-Maydan (single digits) is now in a majority, and support for the EU is now approaching two-thirds. Thus, it seems that delivering on Russia’s “terms” might just result in the destabilisation of the domestic political situation in Ukraine itself. Such a scenario buys short term peace, but ultimately results in long term failure for Ukraine.

I find the chances of the above at this stage to be fairly low – maybe 10-15%.

SECOND ----  Second, try and pursue a military solution. This would require re-arming, and heavy investment in the Ukrainian military, but the plan would be to raise the stakes and cost for Russia of its continued stay in Donbas. This might also suggest a long-running conflict, with huge human and economic costs for both sides.

For Ukraine, it also might imply an uncertain outcome, as Ukraine could lose such a conflict with Russia, and hence lose even more territory than currently occupied by Russian troops and separatists. But the strategy would be to ramp up the cost to Russia that it blinks first and backs-off – Ukraine could become Putin’s Afghanistan, and hence ultimately the source of his own decline.

The chances of the second scenario are perhaps 35-40%.

THIRD ---- Third, the authorities in Kyiv could simply accept the status quo in Donbas and Crimea, but reach a temporary ceasefire with Russia and the separatists, but without giving up on its Western orientation. In effect the result would be a frozen conflict scenario, akin to that in Trans-dniestr, Abhazia, South Ossetia or even Nagorno-Karabakh or Northern Cyprus. The government in Kyiv would try as best to get on with the task of rebuilding the rest of the economy, and delivering on the IMF reform agenda.

They would have the advantage therein of a strong, and re-invigorated feeling of national identity on the part of the bulk of the population, and willingness to sacrifice for the national good and to ensure independence and security. The problem with this strategy is though rebuilding and recovery will be acutely difficult with Donbas remaining out of the control of Kyiv, as the region accounts for 13-18% of GDP and around 27% of industrial output.

There is nothing to suggest that oligarchs would pump money back into the Donbas economy with such uncertainty over its long term future – similar in many respects to the problems currently besetting Crimea. We would also add that this also assumes that Moscow opts not to further escalate – to try and make life even more difficult for the government in Kyiv, and to try and ensure the failure of the Maydan administration and the re-orientation of Ukraine back eastwards.

The assumption has to be that Russia will still go out of its way to make life difficult – via trade disruptions, sanctions, blockades, and using the energy and default card via the 2015 Russian “bail-bonds”.  Ukraine’s only hope in this latter regard would be massive financial support/backing from the West – to make up for the loss of Donbas, and this would require something much larger than the existing USD17bn IMF programme – there has been talk of a “Marshall Plan for Ukraine”, albeit things therein seem to be moving very slowly.

In effect though the West needs to give the government in Kyiv enough assurances that its Western orientation will be supported both through real progress in technical preparations connected to NATO/EU membership, and cash, to ensure the survival of the Maydan administration.

I would probably attach a similar probability to the third as to the second scenarios.

The balance hence would be any other scenarios, of which I am sure there are many.

Disclaimer: This material is non-independent research. Non-independent research is a "marketing communication". The above commentary represents a personal view, is not investment advice or Standard Bank research, but may contain extracts from published research.
===================================================
A FEW UPDATED THOUGHTS ON DEVELOPMENTS IN UKRAINE

Commentary & Analysis, Timothy Ash, Standard Bank, London, UK, Sun, Aug 31, 2014

LONDON ---- Obviously late last week the crisis in Ukraine took yet another turn for the worse, with the government in Kyiv and NATO claiming increased Russian intervention in SE Ukraine. The reports suggested more open and substantive Russian involvement on the side of separatists, with the latter seemingly opening another front to the South of Donetsk and Luhansk, on the approaches to the large industrial and port city of Mariupol.
The intervention of more substantive Russian forces appears to have stemmed the tide of Ukrainian military victories which had appeared in the weeks prior to be offering the prospect that Ukrainian forces could clear Donbas and re-secure Ukraine's borders thereby bringing a speedy end to the conflict.

What we have perhaps learned from the separatist assault towards Mariupol, and indeed Putin's own new statements of support for Novorossiya, is that Russia is not content with letting the separatist cause die a death in Donetsk and Luhansk as some had claimed - remember some had claimed that changes in the leadership of the separatists in recent weeks indicated preparation for perhaps a withdrawal by Russia.
RUSSIA'S STRATEGY IS MUCH CLEARER
It now seems much clearer that Russia's strategy is not just about Crimea, but rather and in addition perhaps to create a frozen conflict on the ground in Donbas. Such a scenario creates scope either for enlargement of Russia's borders, partially through the concept of Novorossiya, or to deliver on Russia's broader objectives of preventing Ukraine's Western orientation partially by destabilising Ukraine through military intervention.

Clearly Putin is not willing to accept defeat in Ukraine, and has constantly proven his willingness to raise the stakes, through ever greater intervention and escalation.

Note that the above suggests the scenario playing out of further Russian intervention in Ukraine - as we presented in our own scenarios analysis from a few weeks back.

Interestingly, the Russian media focused on an inteverview given by Putin this weekend, whereupon he hinted that talks needed to be held over potential "statehood" for SE Ukraine. If true this would be a notable development, and further strain relations between Russia and Ukraine/the West.
Albeit not that Putin's press secretary has subsequently denied that Putin meant the breakaway of SE Ukraine from Ukraine proper, albeit after the annexation of Crimea, Ukraine and the West will no doubt be cautious in interpretating Putin and Russia's statements in this regard.
Perhaps this was all meant as a subliminal warning as to what could happen if Russian interests were not taken on board in re shaping Ukraine's future. That is this was meant to improve Russia's negotiating position in any subsequent peace talks.
HUGE DILEMMAS FOR POROSHENKO AND THE WEST

The above creates huge dilemmas for both the Poroshenko administration in Kyiv but also the West, in terms of how to counter this new and present danger/threat from Russia.

For Poroshenko the problem is a frozen conflict in Donbas arguably fundamentally threatens the durability and sustainability of an independent Ukraine. Donbas is critically important to the Ukrainian economy - accounting for anywhere between 13% and 18% of GDP, and containing some major industrial and transport infrastructure, including steel plants, oil refineries and coal mines.
Arguably this is why Russia has focused its intervention in Donbas, as it assumes that it will force Kyiv back to the negotiating table with Moscow to deliver on its broader strategic objectives of No NATO, No EU and No reform minded Maydan administration.
Therein is the huge dilemma for Poroshenko as the past year has arguably fundamentally changed Ukraine, with Maydan, the loss of many lives during the ousting of the Yanukovych regime, and now several thousand killed in the conflict in SE Ukraine, opinion in the country has now decisively turned away from Russia, and towards Europe.
NATO MEMBERSHIP UNLIKELY
By way of example, on the critical issue of NATO membership, while before the outbreak of the Maydan protests, and the unrest in SE Ukraine, popular support for Ukraine's NATO membership was in single digits, recent opinion polls now show majority support.
Therein the Ukrainian government is currently pushing thru legislation facilitating a drive for NATO membership - even though NATO itself is likely now to be reluctant to accept Ukraine as a member as long as Russia is opposed.

Simply put, how can a Poroshenko presidency compromise on such key tenets of popular thinking now in Ukraine, as EU/NATO membership and a broader reform agenda. Compromise is also made that much more difficult by the onset of the campaign for early parliamentary elections set for October 26.
Those same elections are expected to bring a large majority for Ukrainian statehood parties, and those likely opposed to any move back away from a Westwards orientation.

The best perhaps that can now be hoped for is for some form of temporary ceasefire on the ground, which halts the fighting but which unlikely addresses the underlying issues. Donbas would remain beyond the reach of the administration in Kyiv, which would add deadweight to an already hugely challenging economic policy challenge - and piecemeal support therein from the West.
Ukraine would, meanwhile, likely focus on re-armament, and for Russia would increasingly pose an even greater security threat - in effect the two states would likely remain daggers drawn, with the border resembling more that between Turkey and Greece, or Armenia and Azerbaijan.
RUSSIA WILL CONTINUE TO TRY AND MAKE LIFE DIFFICULT FOR UKRAINE
Russia will, meanwhile, continue to try and make life difficult for Ukraine by imposing trade restrictions and in effect embarking on a trade war with Ukraine. The danger of a larger, full blown conflict between the two sides will likely remain ever present.

The more immediate focus will be various efforts to broker some sort of ceasefire and peace agreement.

Poroshenko has himself promised to reveal some sort of peace plan over the next week, albeit this is unlikely to be that different from plans already tabled, and including the offer of some decentralisation of powers to Donbas (but stopping short of Federalisation which remains acutely unpopular in Ukraine), on the proviso that separatists lay down their arms, foreign fighters depart and the OSCE assumes monitoring over the long Ukraine-Russia border.
We doubt that Russia will accept anything which hinders its ability to re supply separatists in SE Ukraine, and indeed the de facto control of territory already in the hands of separatists.

The EU has, meanwhile, given itself one week to decide on another round of sanctions to be rolled out against Russia - presumably in coordination with the US. The assumption is that the EU wants to give negotiations to secure some form of ceasefire/peace in the Russo-Ukraine conflict a further chance - albeit numerous efforts/rounds of talks over the past 10 months to try and resolve the on-going crisis have achieved very little.
The one week delay probably says more of the weak state of Europe and the divisions therein over its approach towards Russia, than the chances of some form of peace agreement being reached within the week.
MANY EUROPEAN LEADERS ARE CLEARLY DESPERATE TO AVOID ROLLING OUT FURTHER SANCTIONS
 Many European leaders are clearly desperate to avoid rolling out further sanctions, for fear of damaging their own business interests and relations with Russia - personal and professional. Therein it is still fairly remarkable that both the EU and the US have failed to adequately describe events on the ground as a Russian invasion, but prefer instead to use the term "incursion".
The difference is obviously in the assumption as to the timeframe for Russian intervention - invasion implies something large in scale and permanent, incursion is rather smaller in scale and temporary. That said there is little to suggest that Russia's intervention in Ukraine is temporary, and as events surrounding Crimea, Abkhazia, South Ossetia, and Trans-Dniestr have proven, such interventions can quickly become permanent when it comes to Russia's recent interventions in the near abroad - there is now a well honed script for these.

Our assumption still is that reaching a permanent peace deal will be acutely difficult still. And this still suggests the likelihood of yet more Western sanctions iterations, however weak and feeble these may end up being. Suffice to say that we do not expect the "sanctions malaise" which currently hangs over Russian markets or the economy to lift that soon.

What form of sanctions can we expect? Well the problem is still that securing unanimity within the EU for any such sanctions is painfully difficult, with the pace/scope only really driven by the weakest link - and there are many.
Many might still argue that it is incredible how soft and feeble existing sanctions have been despite the remarkable events we have seen on the ground, including the Russian annexation of Crimea (which trampled over international agreements), the downing of an international airliner, the loss of well over 2,500 lives in the conflict to date (including the loss of Russian troops this figure could perhaps be much higher than this), and clear evidence of a direct Russian invasion/incursion into Ukrainian sovereign territory.
LIKELY EXPECT MORE RUSSIAN INDIVIDUALS AND CORPORATES TO BE SANCTIONED
We can likely expect more Russian individuals and corporates to be sanctioned, and this time perhaps deeper sanctions on arms trade with Russia - there has also been hints of restrictions on SWIFT transactions with Russia, albeit it may yet be too early for such action to be rolled out.

NATO is, meanwhile, meeting on September 3 in Wales - the English and Welsh fought for centuries despite also having many common roots, which is hardly auspicious in terms of the current Russo-Ukraine conflict. Ukraine is probably hopeful of some signal of its potential membership, albeit I would expect NATO members to hold back from this at this stage for fear of further infuriating Russia.
NATO also seems likely to hold back from agreeing to directly arm Ukraine - albeit there is nothing to stop individual NATO and EU member states deciding to increase unilaterally their own level of military backing for Kyiv. NATO is likely to make some strong statements of disappointment with Russia's actions in Ukraine - talk if cheap after all - and perhaps push forward preparations for reinforcing members bordering Russia in the event of more direct and specific threats appearing.

In summary, the West is struggling to come to terms with a new and more aggressive Russia. Many would rather ignore the facts on the ground, as they face difficult choices and risk damaging business interests.
MANY IN THE WEST WOULD PREFER THE GOVERNMENT IN KYIV TO APPEASE MOSCOW
Many in the West would prefer the government in Kyiv to appease Moscow, but the problem therein is selling any such scenario to the people of Ukraine who now more than ever appear set on their Westward course, and away from Russia.
Large numbers of lives have been lost and what we are perhaps seeing still is the birth of a Ukrainian nation. Ukrainians seem willing to fight in defence of their country and, if this is added to Russia's determination to keep a tight grip on Ukraine, this all bodes ill still for the future.

NOTE:  The above commentary represents a personal view, is not investment advice or Standard Bank research, but may contain extracts from published research.

26 August 2014

The Battle for Cyprus

The island of Cyprus is reliant on tourism which represents approximately 12% of GDP.  The latest figures from the Cyprus state statistical service shows a 22.6% increase in the number of visitors from Russia in July 2014. Over 116582 Russians visited the island compared to 96641 in July 2013.

There was a small dip in the number of visitors from Britain but still the largest number at 127152 for July 2014 compared to 132566 in July 2013.

The total figures for the first seven months of this year are: British 478882, Russians 372457, Sweden 57676 plus many tourists from other countries around the world. During 2013 Cyprus welcomed 2.4 million visitors and it looks like 2014 will see an increase on the previous year. Tourism income brings in around €2.0 Billion per year.


Cyprus is still seen an an ideal location for those who are seeking to purchase a holiday home or retirement or investment property. 

12 August 2014

Ukraine - Could it get any worse?

It would be fair to say the business environment in Ukraine is well and truly ****ed.

Even before the Russians started trying to dismember parts of Ukraine the country was in a mess.
Unemployment is high. Inflation is out of control.
Public finances are in a mess. Although we now know that Yanukovych stole billions, it is doubtful if any of the stolen money, even when found will find its way back to Ukraine.
The government is in a mess. The public sector remains part of the old soviet system of doing things, or usually the system of not doing anything. Always easier to say NO just in case.
The parliament is still made up of members from the old regime and old way of doing things for their own personal gain. God forbid they would think about doing anything for the people of the country.

Businesses are not doing much and their employees are going unpaid for many months.

Oh...and the currency has gone into steep decline.  So, not a good environment for doing business in Ukraine.

The level of corruption is probably a little less than what it was under the old regime. We hope.
Many commentators claim that the black economy in Ukraine is over 60 percent.
There is still a massive hole in the country's tax collection. The road to recovery is going to be a long way.

23 July 2014

Ukraine is at war with Russia

On 17 July 2014 in Ukraine an horrendous event showed how 'terrorists' could murder 298 innocent people.
Malaysian Airlines flight MH17 flying from Amsterdam in The Netherlands to Kuala Lumpur in Malaysia was shot down from 33000 feet by a surface to air missile. The missile was launched by terrorists operating inside eastern Ukraine. The terrorists are Russian citizens.

These terrorists receive all their equipment and support from the Russian Federation. Nearly all the terrorists are serving or former members of the Russian FSB, GRU or any number of so called 'elite' units from Russia. The thing they all have in common is that they enjoy killing people.

It is impossible to compare these terrorists to what we normally assume to be terrorists in other parts of the world. They are not like the PIRA in Northern Ireland. These terrorists are equipped with TANKS, HEAVY ARTILLERY, SAM SYSTEMS and other sophisticated military equipment. They are supplied by Russia with everything they need. They are allowed to pass freely across the border between Russia and Ukraine as Russia controls many of the crossing points.

So, it is obvious that we should not be referring to these people as terrorists any longer. They are RUSSIAN citizens. Therefore they are acting on behalf of the Russian Federation.

Russia has declared war on Ukraine but has never made any pubic statement to this effect.

14 July 2014

Ukraine needs to stop ACTING like a Rich Country

Many, if not all people who visit Ukraine for the first time arrive in Kyiv. One of the big surprises for them is when they discover the high prices on the Ukraine residential property market. The overall market has not picked up since the crisis of 2009 but prices are still in what I call the ‘crazy category’

Why should property in Ukraine be more expensive than the following countries in the EU? :
Malta, Slovenia, Romania, Cyprus, Latvia, Estonia, Croatia, Lithuania, Hungary, Portugal and Bulgaria
So we can say that Ukraine is more expensive than 12 EU countries.

What is so special about Ukraine? Some locals will claim that it is due to the demand of not enough housing stock in the first place and people just want to have their own place to live and are prepared to do anything to have their own place of residence. Some property developers would claim it is just a simple of case of supply and demand.

Since the financial crisis and the on-going problems with the economy and political unrest in the country, prices have still not reduced.
Moreover, there is a major difference in how new properties are sold in Ukraine. They are not really finished when they are sold although the developer will be doing no further work after you have paid. Why? – Well in Ukraine the normal practice is to sell property in the ‘core and shell’ state. Which means the property is a bare shell, no windows, (but maybe sometimes), no doors, no plaster on the walls, no floors, no ceilings just a brick shell with water and electricity and sometimes gas supplied. The rest is up to you. The ‘rest’ will probably cost the same if not more than the sales prices to fully complete the property ready for living.

Can you imagine an EU citizen buying a property in Malta or Cyprus or Portugal which had been completed to a state where it cannot be used for living?

The secondary market (used market) is a little easier as the buyer would be able to move in without too much extra expense?  But, most of the property stock in Ukraine is still made up of apartment buildings constructed during Soviet Union times. Buy WHY should an old place be so expensive? Here is one example chosen at random. A 2 bedroom apartment in Kyiv, 75 SQM in an old building. The asking price is a crazy $210,000 - http://www.apartments.kiev.ua/sale/kh3v37s.htm

It is any wonder that so many Ukrainian people get the surprise of their lives when they visit EU countries for the first time and see things are much better and lower priced that back home.
Is it any wonder they want to leave Ukraine?

Ukraine is a poor country yet it continues to act like it is for rich people only. Things need to change.

The British have invaded The Netherlands - So what?

A few months ago President Putin ordered the invasion of Crimea.
Crimea is part of Ukraine. Putin now claims that Crimea is a part of the Russian Federation.
Russians continue to invade eastern Ukraine and kill Ukrainians on an almost daily basis.

Despite the on going weak threats from western leaders about sanctions against Russia, nothing
appears to deter Putin from doing exactly what he wants. Ukrainian people still fear that Russia
will invade the whole of Ukraine.

Yesterday Putin attended the world cup final in Brazil. He was greeted by fellow criminal
Mr Sepp Blatter, President of FIFA and German Chancellor Angela Merkel.
The world cup will take place in Russia in 2018......maybe.

A few days ago Angela Merkel announced that Germany had deported a US Intelligence operative
from Berlin after it was alleged the 'spy' had been monitoring German activities.
Moreover, Putin continues to demand peace in Ukraine and will do ''all he can to help in the
peace process.''

Also yesterday Russian tanks and other military vehicles and soldiers entered eastern Ukraine.
No doubt Putin will quickly deny that they are Russians.

So......I wonder. Let's say that the British had invaded The Netherlands a few months back.
The British government had then declared that The Netherlands were now part of the United Kingdom.
The British army special services were continuing to kill Dutch people on a daily basis.
David Cameron declared that ''They are not British soldiers but Dutch activists responsible for this.''

Would David Cameron have got the same welcome in Brazil?

12 July 2014

Ukraine Economy - Very Bad

During the past few weeks I have come to the conclusion that the economic situation in Ukraine is BAD....VERY BAD.  It is always difficult to find out what is really going on in Ukraine because people are reluctant to tell the truth.  Perhaps now is the time for Ukrainians to admit that the situation is worse than most people realise.

The time has come for Ukraine to stop 'acting' like a rich country. Why do I say this? Well take a look at the price of property for sale in Kyiv for example or the price of Motor Vehicles.  The price of property is way beyond prices in EU countries plus I'm sure most people already know that buying a car in Ukraine is one of the most expensive markets in Europe.

There is far too much ‘acting’ still going on in Ukraine. If you have ever visited a typical Ukraine company HQ office you find the very best quality usually Italian designed furniture, drinks cabinet, floors, reception etc.  The whole place shows luxury at the so called VIP standard.       (I admit it is not always the same outside Kyiv). I have visted many during the past years.  They want to create the illusion that they are a very successful organisation and they assume that this is the only reason you will want to do business with them. As we say back in the UK, ‘’It’s all smoke and mirrors.’’ Just a trick. But more accurately I call it acting. Why? Well because you will also find the same company with the luxury show off office has not paid its employees for many months as it will have informed them that ‘due to the crisis’, we have no money for salaries.

I remember when we opened our first office in Kyiv and wanted to buy some office furniture. Each furniture retailer we talked to assumed that because we are a ‘foreign business’ we would be spending a lot on buying the very best/most expensive furniture. I remember our secretary at the time being very disappointed that we had not purchased the best Italian furniture instead of the boxed standard IKEA style furniture we did buy and still have today. I admit that in British culture a business never wants to show that it has wasted money in buying ‘fancy furniture’ for its first office or any office. It is the opposite in Ukraine culture.

The same applies to motor vehicles. In Kyiv you will still see some of the most expensive cars on the streets everyday. Black coloured top of the range Toyota Land Cruisers, Range Rovers, Porsche Cayenne, Mercedes Benz ‘S’ class are everywhere driven by so called ‘Successful Businessmen’. But yet again it is all part of the acting.

In 'normal' countries when in a crisis the prices of most things stay the same or usually come down significantly.  We know that many people in Ukraine own their own properties without any mortgage and they are lucky when compared to the people in Western Europe.  But I can assure you these people in the west would never pay the prices in Ukraine. Moreover banks in Ukraine are not so ready to provide mortgages these days.

The following countries offer LOWER property prices than in Ukraine.
Hungary, Portugal, Bulgaria, Cyprus, Lithuania, Croatia, Estonia, Latvia, Romania, Slovenia, Malta, Slovak Republic. This applies to both sales prices and rental prices.

In my opinion it would be better for Ukraine to face the truth and downscale.
Prices need to come down significantly before we see any signs of a recovery in the economy.
And stop all the acting. Get real.