The Chernovetsky Challenge
Kyiv Mayor Asks for More

The city that boasts the highest incomes in the country does not seem to be happy with its one-hryvnia mayor. Leonid Chernovetsky, who got the job with a meager 32 percent of the vote, could pass for a philanthropist, were it not for his determination to see to it that our cost of living remains the highest as well.

What comes to mind when we think of a three-and-a-half-fold utility spike? In civilized municipalities like Paris or Berlin, they would probably set the City Hall ablaze, along with countless cars and stores.

In Kyiv, they held one of the biggest rallies since the Orange Revolution. According to polls, most Kyivites want Mayor Leonid Chernovetsky out. However, attempts to veto the bill so far have failed. On Thursday, the day the rally rocked the downtown area, the opposition miserably fell short of a quorum.

Leonid Chernovetsky found his way to the hearts and minds of people through their stomachs. In fact, he paid his way. As the owner of Pravex, one of the biggest banks in Ukraine, he had run for mayor in 1999 and 2002, only to be outflanked by former Mayor Oleksander Omelchenko, the longtime darling of Kyivites.

But times changed, and so did Chernovetsky’s chances.

By early 2006, Omelchenko, who called the construction industry his second home, had ruined his re-election bid with a housing policy that favored the select few. That’s when Chernovetsky’s charity chain came in handy. For a period of several months before the March election, his “Salvation Army” canvassed Kyiv's elderly population.

Sticking to a neat segmentation chart, his volunteers in sheepskin went to door-to-door, lavishing Pavlovian handouts on babushkas and perfecting their soft-sell technique. It worked! Even Vitaliy "Dr. Ironfist" Klychko, one of the world's most famous boxers and his rival in the election, had to throw his towel in.

Chernovetsky and Co. have imported these “best practices” to the City Council, the opposition asserts. Specifically, Chernovetsky keeps an under-the-counter “catalogue of carrots,” mainly land offerings, that he eagerly trades to maintain a manipulative majority in the City Council.

According to the opposition, to make sure the offerees keep their lips sealed, his aides got the bargaining process on “candid camera.” The most serious allegation is that Chernovetsky stands to profit from the price spike through his connections in the highly monopolized utility industry.

If true, that would make Chernovetsky and Yanukovych two of a kind. The “Better Living Today” they promised turned out to be a “Big Lying Tease.” Both did a great job of teasing pensioners for personal gain: Yanukovych — with an impermanent pension increment; Chernovetsky — with humanitarian aid packages. Regardless of who you voted for, if Mayor Chernovetsky goes on unchallenged, it’s payback time for all of us.

Of course, considering the vast array of fancy cars clogging the streets of Kyiv, upper and middle-class households will not experience any significant losses on this one. But what about the family budgets of such cash-starved species as school teachers and public healthcare workers? The Mayor says he’ll get the subsidies program running. The question is, how smoothly?

Of course, utility costs cannot be divorced from the reality of skyrocketing energy costs. Nor can they exceed the customers’ ability to pay.

But no matter how much we pay, improvements in service quality will not be forthcoming, unless and until measures are taken to demonopolize the industry. Kyivites have the right to know what they are paying for. Transparent utility costing should be a top priority for a local government that represents public interests.

The Chernovetsky challenge has reawakened us to the need to keep tabs on local government. Our goal is constant plutocracy patrol and a City Hall with a fishbowl interface.

Quorum Quake Averted
Yu Takes a Stand for Minority Stockholders

Equipped with an all-seeing eye, Bankova has embarked on a countrywide minesweeping mission.

Recently, President Yushchenko has vetoed a freshly-minted corporate governance bill that lowered the stockholder quorum requirement from 60 to 50 percent plus 1 share. Few independent analysts would disagree that the vetoed bill cut corners on the rights of minority stockholders, leaving them powerless in the corporate decision making process.

Undoubtedly, such an extreme regulatory zigzag would have hurt Ukraine’s investment outlook. Therefore, for his rescuer role, Yu deserves a thank-you note from the investment community.

Where did this abortive initiative originate? Analysts point to the corporate warlords of the anticrisis coalition. These they believe may be a little too anxious to reslice the equity pie in their favor.

At the very least, the intervention Yushchenko undertook has made him the personal hero of Pryvat’s Ihor Kolomoisky, one of the richest men in Ukraine, who allegedly holds a minority stake in the UkrNafta oil company, with the controlling stake being held by the government. The quorum quake engineered by the anticrisis coalition could have resulted in the ouster of Pryvat-friendly UkrNafta CEO Ihor Palytsya.

In light of the Cabinet’s crackdown on grain exports, the calculated risk taken by the anticrisis crowd has significantly added to the outrage already present in the investment community.

Up close and personal, the Yanukovych gov't has become a synonym for the comeback of unbridled vested interests to Ukrainian institutions, unmatched by the lyubi druzi experience.

One doesn’t have to go too far to reach that conclusion. Take the barebones 2007 budget proposal. That’s the gist of Yanukovych's BLT formula. (“Better Living Today”)

Lower taxes in 2007, maybe? Uh, forget about it too. Regionomics rules!
Ukrainian courts, overloaded as they are with takeover litigation, merit a separate discussion.

The Battle of Kyivstar has reinforced their reputation as warring fiefdoms that sell their services to the highest bidder. As long as Ukrainians of all walks of life continue shelling out on justice while keeping their lips sealed, justice will bear a very close resemblance to the oldest profession.

For Yu, it’s the anticrisis adventure that brought home the truth: Being a silent observer doesn’t pay.