Jim Armitage: Oligarchs win again in game of Ukraine monopoly

Global Outlook

Depressing news from the Ukraine, where yet another vast monopoly asset has just been handed over to one of the tiny group of uber-rich oligarchs who pretty much run the  show there.

This time it’s the country’s fixed-line telecom monopoly and sole 3G licence that’s gone to the country’s richest man, Rinat Akhmetov.

His is a name that gets London estate agents’ juices flowing, as it was he who spent £136.4m buying Britain’s most expensive property – the penthouse at the billionaire’s bolthole, Number One Hyde Park.

Mr Akhmetov paid a reputed $1bn (£643m) for Ukrtelecom.

Ukraine’s monopoly laws are relatively easily traversed, resulting in a situation where, critics say, the country’s assets are shuffled between the state and a few privileged billionaires with little incentive to invest and boost quality. Economic growth is hampered.

Mr Akhmetov, who already co-owns the country’s No 3 mobile phone company, has amassed a fortune of $15.5bn – not bad for the son of a coal miner. His position on the European rich list table fluctuates from year to year, but he tends to star in the top five most of the time – and that despite the Ukraine being in the bottom five of the continent’s poorest countries.

Such wealth has allowed him to invest in the obligatory oligarch’s football club – Shakhtar Donetsk, which he inherited after his business partner was assassinated in a car bombing.

He also controls, according to the Financial Times, more than half of the country’s steel, ore, coal and thermoelectricity industry. His SCM investment company owns no fewer than 100 businesses.

His latest deal, SCM insists “will not limit competition in Ukraine’s telecom market”.

For the 45 million Ukrainians still awaiting nationwide, high-speed mobile, we can only hope so.

Free trade’s a non starter with Tymoshenko in prison  

Mr Akhmetov’s deal comes as president Viktor Yanukovych tries to persuade European Union leaders to strike a major free-trade deal with Kiev.

On Thursday, he pressed Brussels to accelerate its efforts in the hope of getting an agreement signed at a summit in Lithuania at the end of this year.

Fat chance.

Western European capitals are rightly sceptical of Mr Yanukovych. They point to the steady deterioration of democracy in the country since he took office and jailed his political rival, the Orange Revolution leader and former prime minister Yulia Tymoshenko.

In his “state-of-the-nation” style speech this week (which, incidentally, he issued as a press release, rather than going to the trouble of reading out loud), Mr Yanukovych pointedly failed to even mention Ms Tymoshenko.

She must, it seems, serve her seven-year jail sentence. Indeed, it could well be more than seven years: further charges – said by critics to be politically motivated – are waiting in the wings, ranging from tax evasion  to murder.

This failure even to mention her name was ridiculous. Mr Yanukovych must be acutely aware that, until he makes some compromise on her position, Europe will not countenance free trade with Ukraine.

Despite the huge damage its isolation is wreaking on the country’s economy, Mr Yanukovych will not budge on setting her free.

But reports this week suggested a “third way” solution could emerge. Some analysts reckon that he could tempt Brussels to the negotiating table if he allows the 52-year-old to leave the country for medical treatment on a severe back condition.

I can see why Europe is keen to keep Ukraine from the clutches of Russia’s trade bloc of former Soviet countries. But it’s unclear to me how offering a trade agreement in return for letting Ms Tymoshenko see a doctor can be presented to a Western electorate as a morally defensible position.

Mr Yanukovych is failing to agree to release her from jail because she would be a powerful political opponent come his re-election campaign in 2015.  Until she is freed and allowed to run for office, surely we in the West should ignore his pleas for trade.

Swiss banks are in for a slapping over tax dodgers

Well done to France, which yesterday launched a formal inquiry into UBS in Switzerland over allegations its employees helped wealthy French citizens evade taxes.

The announcement of “under formal investigation” status is part of the French legal process which takes UBS a step closer to a trial and means there is “serious or consistent evidence” implicating a suspect in a crime.

Coming on top of the previous week’s decision to put the Swiss bank’s French operations under the same status, it all marks a significant widening of the investigation.

I wrote here last month that Switzerland would suffer from its non-EU status as the country attempts to navigate its way through European governments’ crackdowns on its tax-haven banks. Outside the EU club, it has absolutely nothing with which  to bargain.

As we see from Paris’s actions, European capitals have learned from Washington that you can achieve a lot from threatening the Swiss banks with criminal actions.

Switzerland has agreed to let its banks hand over the dirty info on tax cheats to the US authorities in the hope of staving off criminal trials.

UBS’s response to yesterday’s development in Paris? To state that the EU and Switzerland needed talks “to find a solution for the past”.

I used the word “talks,” but that suggests it’ll be a two-sided negotiation. In reality, the bank, and others like it, should prepare to get slapped around until the EU has wrung out of them the details of every secret account of every suspected tax dodger that they have helped.

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