www.kyivpost.com: OP-ED http://www.kyivpost.com/news/opinion/op_ed/ OP-ED Al Capone, the Mafia and Ukraine’s criminal mindset http://www.kyivpost.com/news/opinion/op_ed/detail/122944/ OP-ED Wed, 22 Feb 2012 15:39:03 +0200
You can imagine my surprise when, upon my return to Kyiv. I realized that the capital boasts a club, a pizza place and a restaurant that feature the same name. When I found a namesake restaurant in Vinnytsia, I realized it's a trend.

As Wikipedia will tell you, Alphonse Gabriel “Al” Capone was an early 20th-century American gangster of Italian descent who headed a criminal syndicate. In particular, his gang ran an alcohol contraband operation during the prohibition era from 1919-1933.

Capone was behind the most outrageous murders in the criminal world: The 1929 Saint Valentine’s Day massacres of seven mobsters in Chicago’s Lincoln Park.

Now the name of this bloody and immoral murderer is featured on venues beckoning our youth to rest and relaxation.

This is what the Dnipropetrovsk nightclub advertises on its website: “The Capone bar will submerge you into the atmosphere of 1920-30s America, the epoch of adventures and the Dry Law. ... The cuisine of Capone bar is Italian, since most mafiosi in Chicago were Italian. The big menu features the famous gangster’s favorite dishes. Our restaurant also holds gangster-styled parties and mafia games where everyone can feel like a participant of the events of the ‘mad 20s.’”

I do not believe that every visitor of Al Capone’s is an amoral person inclined to break laws and exhibit anti-social behavior. But I am convinced that any attempt to turn criminals into heroes, or presenting criminal activities as mundane and entertaining, does nothing for educating our citizens about good and evil in society.

Nevertheless, I first thought that the opening of restaurants named after a famous gangster is a matter of fashion, of attracting customers and the desire to make money by attaching to a famous name. That was until Ukraine got a wide network of restaurants of Italian and Japanese cuisine called Mafia, carrying the motto of “family values.” There is a score of such venues in Kyiv, Kharkiv and Dnipropetrovsk.

Had it not been for the motto, the name would not carry such a deep ideological meaning. In essence, one of the most emotionally loaded channels – the food channel – is being fed with a signal that Mafia is something good, tasty and cozy. That it's about family values.

The reality is the opposite. The world only knows two types of collective actions: with horizontal connections between more or less independent actors, or vertical connections with relations like master-slave, or lord-vassal.

History has shown that the most effective societies are those where the first type of connections dominates. The United States and other countries where the Anglo-Saxon system of law dominates, belong to the first category. The second type is more prevalent in Latin American nations, for example.

These countries gained independence and started building civic institutions roughly at the same time. The economic and social success of both types of countries prove the superiority of the first type of social arrangement as a more modern and open, as opposed to the closed and effectively feudal, one.

So the propaganda of family values, Mafia-style, is nothing but molding the masses into thinking that equal and independent citizens do not form the community, but rather families and clans created in the image of criminal gangs. They are the secret of success. This is the message sent to society by those who choose Mafia for a name of their restaurant.

A quick analysis of our TV also testifies that criminalization of our minds is good for someone. Every day we are offered criminal dramas and soaps popularizing figures from the underworld. It even affects law enforcers, and the singing of Murka (a prison song) by a famous prosecutor at a private party, which was then broadcast on one of the leading TV channels, is testimony to that.

So, if you choose feudalism, lack of freedom, submissiveness to the boss, cover-ups and gangster-style shootouts, then Mafia is for you!

Yaroslav Pylynskiy is an expert on Ukraine and has a PhD in Slavic Studies.]]> Digital Tonto: Brand engagement and value exchange http://www.kyivpost.com/news/opinion/op_ed/detail/122932/ OP-ED Wed, 22 Feb 2012 14:04:40 +0200 distinguished jurist once said about pornography, is easy to recognize but hard to define.]]>
I think that’s because when people speak about definitions in marketing circles, what they really mean is metrics. Engagement comes in many forms and simply doesn’t doesn’t lend itself to simple quantitative measures. What it does represent is a value exchange.

Consumers engage with a brand they see as providing superior value. That has been, historically, derived mainly through product performance. More recently, however, marketers have been able to provide superior value in creative ways that go beyond product specifications. And that, is where it gets really interesting.


Product value exchange

Steve Jobs was famous for insisting on full control of his product, which is why he invested in Apple stores. Buy Apple anyplace else and you get the same product, sometimes even at a lower price. However, the chances are that you simply get the box, take it home and hope for the best.

Apple stores extend the selling past the cash register. Once you make a purchase, someone will walk you through how to use it. You can take free classes later on to help you further and set up an appointment at the Genius Bar if something goes wrong. Apple doesn’t want you to just buy their products, they want you to love them.

Apple isn’t the only one either. Nike + iPod transforms running shoes into diagnostic devices. Many bookstores host readings and book clubs. Restaurants hold wine and food tastings. Who would pay the freight at Starbucks, after all, if it wasn’t for the cool music and atmosphere?

So the first step towards engagement is creating value beyond the basic transaction of payment for a product or service.

Content value exchange

Content marketing has become hot and, as I’ve written before, the idea of content strategy has created a lot of excitement in marketing circles. However, many marketers treat content much like an ad, just in longer form. That’s a grave mistake. Content marketing only becomes powerful if it facilitates a value exchange.

The oldest and probably best example are the Michelin Guides, which co-founder André Michelin first published in 1900. They began as simple handbooks with useful suggestions about where to stop for gas, lodging and food, but have evolved into the most prestigious restaurant rating system in the world. As of today there are only 86 3-star Michelin rated restaurants in the world.

Michelin is exceptional, but not at all unique. Red Bull’s longstanding association with extreme sports is enhanced by Red Bull TV. L’Oreal Paris’ Destination Beauty has become a wildly successful channel on YouTube by dispensing helpful beauty tips. Mailchimp, an e-mail marketing service, sends you tutorial videos after you sign up. The list goes on.

Content only delivers engagement if it confers value over and above simply promoting the brand that generates it. If it can’t do that, it’s simply an ad. Nothing more.

Social value exchange

Social strategies have become another active area of engagement. However, they can backfire if they only serve to promote, like when brands automatically send tweets after a consumer completes an action. Rather than conferring engagement, brands run the risk of offending users. Using social tactics in that manner is, in effect, a form of identity theft.

As Harvard professor Mikolaj Jan Piskorsky points out in this HBR article, social strategies only work if the deliver a social value exchange and some brands have become amazingly effective at doing just that.

American Express Open Forum built on its content value exchange by launching a members-only social network for small business owners. Zynga has become one of the most successful businesses on the web not just by making games, but by helping friends stay in touch through exchanging game value. Expedia exploits the friendship paradox by offering trips to consumers who recruit their friends.

Delivering engagement through social value exchange doesn’t have to be online either. Harley Davidson has engaged their consumers for decades through Harley Clubs. eBay has supercharged their business through their On Location events and Fortune magazine has even developed a new revenue stream with Fortune Live Media conferences.

From making contacts to building assets

Brand value exchange has become a crucial component of the post-promotional paradigm. Brands, if they are to gain share of synapse, must create connections that transcend a purchase. That will entail a paradigm shift from the old model of making contacts to a new model of building assets in the marketplace.

That doesn’t mean, as many say, that paid media doesn’t still have an important role to play. In fact, old standards like TV and banner ads are essential to activating brand value exchange. While every brand engagement is important, numbers matter. In fact, they are crucial.

Eyeballs, however, are fickle organs. They dart here and there, always searching for something new and different. They fixate only when engaged and they engage with that which confers value.


Greg Satell is a U.S.-based independent media analyst.You can read his blog entries athttp://www.digitaltonto.com.]]> Ukraine will triumph http://www.kyivpost.com/news/opinion/op_ed/detail/122887/ OP-ED Tue, 21 Feb 2012 18:27:09 +0200
“Why have you come to Ukraine, just as everyone is leaving?" asked one person. “What's the point of having an English-qualified M&A [mergers & acquisitions] lawyer here when there are no M&A deals, and no rule of law?" asked another.

“If I was you I would get on the first plane back to the UK," said yet another.

It did not get better, and in fact the impression I built over the next few weeks was that the entire business community of Ukraine had been brainwashed to sing along to exactly the same song, as loudly as possible, in the same dreary unison tones to the same broken record.

“'X company is being raided by He-Who-Should-Not-Be-Named.”

“Y company is pulling out of the country.”

“The country is being run by criminals.”

“There's no funding.”

“There are no jobs.”

“There’s no hope.”

Well, I beg to differ. Yes, this country faces problems right now. Yes corruption is rife. Yes there are liquidity problems. Yes, businesses have gone bust, and yes more will go bust.

But are these problems that are unique to Ukraine? No.

OK, things may be worse here than elsewhere, but there are reasons for that, and to write the entire country off the business map because of that is like a doctor treating patients with the common cold, but refusing to see those with the flu.

This country has enormous potential.

One can feel that simply from living here.

The people are educated, smart, ambitious, warm and friendly. Add such ingredients to a country which is rich in resources and whose foreign and direct investment figures are significantly lower than like countries (i.e. there is value to be captured by investors), then we have the basic, but essential, ingredients to make this a success story.

Everything else can be fixed. And it will be fixed. It's just a matter of time.

The Ukrainian people are not the type of people who will sit back and let themselves get trampled upon. There's only so much they will take, and the government knows this.

And what’s more, the outside world will not allow them to get trampled upon - Ukraine is too strategically important for neighboring countries to sit back and let it spiral downwards into a black-hole. Things will get better.

In the meantime, there are things to be positive about.

It is a myth, for example, that there is no funding out there. There is plenty of funding out there. Private equity and venture capital funds, for example, especially those that raised their funds before the onset of the crisis, have significant amounts of “dry powder” on their books - i.e. funds that were raised but which have not yet been spent.

Such funds need to be spent, otherwise fund managers will lose their management fees (which are typically calculated against the amount of ‘committed funds’ or the amount of funds ‘under management’) and will find it harder to raise funds if/when the world returns to normal again.

It is a myth, therefore, that funding is not available right now. It is available, but it is being spent elsewhere, principally (in terms of Europe at least) in Poland and Turkey.

Yes, private equity funds may be a little more cautious about Ukraine given what is going on, and they may therefore need a little more hand-holding. But funding is nevertheless out there for businesses that show potential, and which have (or could potentially have) the right management.

Private equity funds don't need rocketing levels of annual gross domestic product growth to make the country interesting. They simply need to know that their investment is likely to be safe, and that they will be left alone to get on with what they do best - namely bringing funding, international management and sector expertise, and future exit opportunities to existing companies and their owners.

OK, some funds may be nervous about the country's (or, more correctly, the country's courts) perceived disrespect of the rule of law. But this too can be mitigated, for example, by structuring transactions such that disputes will be resolved outside of Ukraine, by investing in industries that are “off the radar screen” or too complicated for troublemakers to understand, by investing in companies (e.g. IT companies) that are de facto based on the ground here in Ukraine, but which in reality are servicing clients (and deriving most of their revenue from) outside of Ukraine, or by teaming up with strong and prominent local entrepreneurs or businesses.

Opportunities are therefore out there, and my prediction for the year ahead is that existing stakeholders and entrepreneurs will increasingly come to recognize the benefits of having private equity/venture capital funds involved in their businesses - and this will be a good thing for those businesses, and for the business environment as a whole.

Ukraine should not be written off the business map. It will get to where it needs to be eventually.

In fact, as I was writing this, a “Visit Ukraine” advertisement (quite an impressive one, I must say) appeared on BBC World News.

I flicked over to CNN, and I then discovered an interview with Ukraine's deputy prime minster which involved the deputy prime minister personally escorting the CNN interviewer around Ukraine with a view to demonstrating that Ukraine is a country that is ready for EURO 2012.

Does this sound like a country that doesn't care about its image in the West?

Or a country that's quite happy to maintain the status quo and continue to miss out on foreign capital inflows?

Not to me it doesn't.

I have travelled all over the world, and lived in countries quite similar to this. This country feels different. Very different. The sense of future opportunity has struck me harder than it has struck me ever before.

Perhaps my hunch may turn out to be wrong. But I don't think it will be, and I am prepared to put my money where my mouth is. How? By ignoring the person who told me to get on the first plane back to the United Kingdom, and staying put.

I won't be going anywhere anytime soon. Lawyer Graham Conlon has just recently relocated from London to the Kyiv office of CMS Cameron McKenna. His biography can be found here: http://www.cms-cmck.com/graham-conlon]]> Carnegie Endowment: Ukraine and Russia. Another gas war? http://www.kyivpost.com/news/opinion/op_ed/detail/122885/ OP-ED Tue, 21 Feb 2012 18:22:45 +0200 Read full story here.]]> Ukraine's gas problems and how to resolve them http://www.kyivpost.com/news/opinion/op_ed/detail/122870/ OP-ED Tue, 21 Feb 2012 15:11:37 +0200
There are a number of issues at stake.

First, there is the economic and political relationship between Ukraine and Russia. The latter country is adamant that Ukraine should join its Eurasian Economic Community and that in order for the price of gas to be lowered, it must make some concessions, such as the sale to Russia of Naftohaz, Ukraine’s national oil and gas company.

For its part, the Yanukovych administration has a dual complaint: Ukraine agreed to pay $388 per 1,000 cubic meters of gas (tcm) under the agreement made by former Prime Minister Yulia Tymoshenko in 2009, but this level is extraordinarily high for a neighboring state; and it also wishes to reduce obligatory gas imports from Russia to 27 billion cubic meters (bcm) from the 52 bcm stipulated in the contract (RIA Novosti, Feb 1).

Second, Russia has put pressure on Ukraine in other areas too.

In early February it instigated a so-called “cheese war,” by prohibiting imports of cheese produced in Ukraine. According to one account, there was more at stake than dairy products—Russia began a similar dispute with Belarus in the summer of 2009 after that country declined to privatize its dairy industry—and the dispute was linked to Russian territorial claims on Crimea. It cites a statement by Stanislav Govorukhin, a Duma deputy who is the head of Vladimir Putin’s electoral headquarters, reportedly commented that Crimea and Sevastopol should be returned to Russia by means of the economic integration of Ukraine with its neighbor, as well as into its religious and cultural-historical space (Glavred, Feb 13, at: http://glavred.info/archive/2012/02/14/161348-2.html).

Govorukhin’s needlessly provocative statement may have been a means to divert attention from the anti-Putin protests taking place prior to the March 2012 presidential elections in Russia. But they nonetheless put further pressure on Ukraine. The same applies to the construction of Nord Stream, which was officially launched in early November last year, and should account for the transport of about one-sixth of Russian gas exports in 2012 through a pipeline from Vyborg, near St. Petersburg, under the Baltic Sea, to Greifswald in eastern Germany.

The anticipated capacity of the pipeline, which may be attained by 2015, is 55 billion cubic meters, and would allow Russia to transport about one-third of its gas to the countries of the European Union for the next 50 years. (Nord-stream.com, Nov 8, 2011). South Stream, a pipeline that is planned between Russia’s Black Sea coast from the Pochinki compressor station south of Novorossiysk to the Romanian coast just north of Varna is anticipated to start construction in 2012 and to be transporting gas by 2015 (http://south-stream.info/index.php?id=10&L=1).

Ukraine’s energy situation was discussed recently at a roundtable of the Kyiv-based Gorshenin Institute under the title “Is Gazprom monopolizing the European gas market?” Anatoly Kinakh, former Prime Minister and Minister of the Economy of Ukraine, and the head of the Party of Industrialists and Entrepreneurs, began somewhat predictably by attacking the 2009 agreement by Tymoshenko, and maintained that the contract needs to be renegotiated with Russia without confrontation because the latter country is Ukraine’s “strategic partner.” He perceived the need to balance the interests of suppliers (Russia and Central Asia), the transit region (Ukraine), and the consumers (countries of the European Union). Ukraine also in his view needs to improve its energy policy by developing energy-saving technology and increasing the consumption of domestic energy resources (Levyi Bereg, Feb 7, and ff., at: http://economics.lb.ua/trades/2012/02/07/135340_gazprom_monopoliziruet.html).

Ivan Plachkov, former Minister of Fuel and Energy, and a board trustee member of Kyivenergo, is much in agreement with Kinakh, and he asks how Ukraine might lower its dependence on Gazprom. First, he believes, Ukraine can reduce its consumption, which is 4-5 times more gas per unit of GDP than the average in Europe. The situation would stabilize if Ukraine could cut consumption by 50%. He suggests also reforming Naftohaz, and allowing more gas traders access to the Ukrainian market. There should also be more exploration of shale gas in the Black Sea region as well as reliance on existing energy resources of coal, oil, and nuclear power. His comments, however, raise the issue of whether Ukraine would be permitted to reduce the amount of gas it purchases from Gazprom. Another speaker, Volodymyr Saprykin, who is director of energy programs as the Razumkov Center, notes that the Kharkiv Accords, while not a favorable agreement, at least allowed for a reduction of $100 in the price of gas and elimination of penalties for not purchasing the minimum volume. He also advocates increasing the strategic reserves of oil and gas.

One speaker in the roundtable was more sanguine about the prospect of developing domestic resources of gas. Yurii Korol’chuk of the Institute of Energy Research maintains it is impractical to produce shale gas, construct a liquefied natural gas terminal, or carry out explorations of the Black Sea littoral because Ukraine lacks money for such projects. Preferable in his opinion is to raise energy efficiency. Valery Borovyk of the “New Energy of Ukraine” alliance thinks that the issue is not only the fact that Gazprom can influence European officials, but also that it has clout among Ukrainian officials, especially those in the energy sector and government, who have no interest in lowering domestic gas consumption. However, people should not be alarmed by the construction of the Nord Stream and the South Stream (carrying Russian gas under the Black Sea to Romania and thence to other European countries). He believes that Nord Stream can divert a maximum of 15 percent of gas supplies from Ukraine, whereas the South Stream project is likely to collapse because gas consumption worldwide will fall in the wake of the economic crisis.

Are there any other alternatives for Ukraine? One analyst notes that the year 2011 was important for keeping the country on course for integration into European structures. Ukraine also joined the European Energy Committee and made progress on the issue of liberalizing the EU visa regime. But despite such progress and what she describes as “titanic efforts of several ministries,” the goal of integration is more distant than it was at the start of 2011. Western leaders are very concerned about the increasing authoritarianism in Ukraine, the imprisonment and ill treatment of Tymoshenko, and President Viktor Yanukovych’s defiant refusal to take seriously the criticisms of his European counterparts. As a result Ukraine has frittered its first year in the Energy Community, and the dialogue on visa issues has stalled and will not be resolved by the time Euro-2012 begins in June. Perhaps most significantly, Ukraine is strategically dependent on Russia, a country that has long forgotten Kyiv’s past concessions made against its national interests, as demonstrated by the “cheese war.” Yet there are few alternative openings: the United States is losing interest in Ukraine and few practical steps have been taken toward deepening relations with China. In Silina’s view, Ukraine does not have a foreign policy doctrine (Tatyana Silina, Zerkalo Nedeli, Feb 10, at: http://zn.ua/POLITICS/my_sami_zakryli_vorota,_my_sami-97143.html).

Her article raises another key question: that of Ukraine’s failure, vis-à-vis Russia, to gain more publicity for its part in past gas wars. Part of the problem is the close relationship between Gazprom and local companies and influential statespersons in the EU, particularly in Germany and France. The Europeans prioritize gas supplies over regional squabbles, and in such situations tend to side with the supplier rather than the country providing the conduit. They are also in favor of the development of alternative paths such as Nord Stream and South Stream that will cut into Ukraine’s role as the dominant pipeline provider. Thus Ukraine needs not only to build up its domestic resources, but also to cut back significantly on the amount of energy it uses. Added to that, the Yanukovych leadership needs to boost its public image, and could make a significant start by releasing political opponents such as Tymoshenko and former Minister of Interior Yurii Lutsenko. To add to its embarrassment, the European Court of Human Rights is likely to announce its decision on the Tymoshenko case on the eve of or during the forthcoming parliamentary election campaign (Glavcom.ua, Feb 13, at http://glavcom.ua/vblog/2471.html).

There is little indication, however, that such steps will be taken or even that they are being considered. Morally, and in terms of human rights, there is little to distinguish between the current leaderships of Ukraine and Russia and accordingly neither Brussels nor Washington are likely to endanger their relationship with Moscow by offering strong support for Ukraine’s position in its energy battles with Russia.

The problems are not new. They were evident as soon as Ukraine began its independent existence in late 1991, as illustrated by the problems faced by its first president Leonid Kravchuk. That they remain even more acute 20 years later is a sad reflection of the failure of all the administrations to date to devise a viable energy policy, let alone a solution to dependence on Russia. It signifies that Ukraine enters every discussion as the weaker partner in what is essentially a power struggle on several levels and with few clear rules.

David Marples is professor of history and classics at the University of Alberta in Edmonton. Marples is the author of 10 books on Soviet and post-Soviet affairs, including “Belarus: From Soviet Rule to Nuclear Catastrophe” (New York: St. Martin’s Press, 1996) and “Belarus: A Denationalized Nation” (Amsterdam: Harwood Academic Publishers, 1999).]]> East by southeast http://www.kyivpost.com/news/opinion/op_ed/detail/122862/ OP-ED Tue, 21 Feb 2012 14:38:34 +0200
Very importantly, despite internal friction, the party is noted for its organizational cohesion under the joined hands of oligarch Rinat Akhmetov and the nominal leader Viktor Yanukovych. In effect, this party has hijacked the Ukrainian state.

Remarkably, during the collapsing attempts to sign an agreement for economic alignment between Ukraine and the European Union last December, it was Akhmetov who royally received a visit from prime ministers of Poland and Sweden in their last-ditch failed bid to secure the release of Tymoshenko from prison.

Inexorably, the existing conundrum has evolved from a profound change of the ownership of Ukraine’s economy from the Soviet state into the hands of an oligarch-dominated moneyed elite with criminally tainted roots.

In the Soviet Union itself, while political repression and extermination of “the enemies of the people” for many years was the hallmark of the system, a close second on the list of the KGB mission was battling the indigenous criminal gangs of various degrees of sophistication.

Some of them, nested in the south-east Ukraine, as in the Odessa region known for its international contraband, were legendary in arrogance and corruptive power. They actually created a poetic page in the Russian folklore in Ukraine that flourished and resonated among dispirited population. Who did not remember the tune “V temnom pereulke vstretilis dva urki” (Two hoods met in a dark alley)?

With the collapse of the Soviet Union, organized crime moved to confront the ex-communist nomenclatura in ugly privatization battles for ownership of the key industries.

As in Russia, this confrontation -- in which the nomenclatura was mostly the loser – was marked by fire-bombings, assassinations, and a period of shootouts in public places in Ukraine’s south-east.

The money part was mostly a formality, because it was easily available for the key players – with phony bank loans devalued by inflation, pilfering, intimidation and bribery of officials.

When the winning oligarchs had surfaced -- some of them backed by real money from the West to make acquisitions at bargain-basement prices -- they effectively owned most of the country’s assets. It was only a matter of short time to gain the overall political control in the 1990s. Money captures political power.


The Orange Revolution, sparked by the increasing wind of democracy, was a fly in the ointment for the oligarchs. They made adjustments, and some chose sides, but their natural home base is the Party of Regions. They saw ex-President Viktor Yushchenko’s national consciousness as a fetish.

In any event, Yushchenko (“private property is sacred”) was not the one to round up “the bandits” on charges of looting public property. Instead, Yushchenko rushed to reassure the Western stalwarts of market ideology that “the Orange Revolution is over and we need stability,” despite the fact that the crowds at Maidan Nezalezhnosti had demanded change, not stability – as a New York Times editorial commented wryly.

In retrospect, there was a missed opportunity and the right time to break up the oligarchic stranglehold on the country, strip the Regions Party of its money advantage and save democracy from losing at the polls in 2010 against the stronger money machine.

Prime Minister Yulia Tymoshenko in 2005 was on record as advocating action to settle at least some of the strategic property issues – initially with a long list. She was sacked with her Cabinet of Ministers the same year, as the president was losing his direction.

The notion of a Ukrainian state with Ukrainian content is totally foreign for the oligarchs and is incompatible with their culturally Soviet-Russian nest. The latter is also the source of an indelible authoritarian mentality, consistent with the pro-Russian outlook of the Regions Party’s politicians.

That culture is the bedrock of the constituency of the Party of Regions. If dissatisfied with the performance of Yanukovych, this constituency will rally for another standard-bearer designated by the party. This is a winning paradigm against splintered democratic camp. Natural losers can blame it on election law chicanery .

The oligarchs love the chateaus they own in Europe, Cayman Islands and Cyprus (where their loot is checked in). They love to do business in the West, and Western universities for their family members. But the yoke they made for Ukraine they love best.

Amazingly, the pressure of the existing breathtaking socio-economic disparities in Ukraine is not causing much visible rancor against the ruling elite. Such rancor would have to catch fire and redefine the national debate if the devastation of economic inequality is to make an impact in any upcoming elections, honest or rigged.

This should be a 99 percent movement, beyond the protests of this or that group of small businessmen, students, pensioners, and the like. This is a tall order for Ukrainians unaccustomed to subordinating private and party egotism to a common cause. There is also a crippling legacy of disappointment with the results of the Orange Revolution (“We have been fooled”) that needs to be shaken off. Yes, the leaders for a real change must come from jail, not ride in a Mercedes.

And finally, the most natural impulse of outrage against the present regime – the patriotic resentment at the indignities being inflicted on Ukraine as a nation by the Tabachnyks of this regime and by the shame of political repression aided and abetted by corrupted courts – needs to become part of the moral compass of Ukrainian citizens.

Boris Danik is a retired Ukrainian-American living in North Caldwell, New Jersey.



]]> World Affairs Journal: Media censorship and controlling freedom in Ukraine http://www.kyivpost.com/news/opinion/op_ed/detail/122798/ OP-ED Mon, 20 Feb 2012 14:29:29 +0200
Read the story here.]]> Digital Tonto: How growth can kill a business (and what to do about it) http://www.kyivpost.com/news/opinion/op_ed/detail/122788/ OP-ED Mon, 20 Feb 2012 14:10:16 +0200
However, with success also comes growth and that brings its own set of challenges, especially for young companies. Often, it sends promising new stars into a tailspin from which they never recover.

There’s lots out there to advise companies on how to be successful, but very little about how to manage the growth success brings. I’ve spent most of my career building entrepreneurial companies, done several turnarounds after things went awry and uncovered some common problems as well as some successful solutions.

The Dunbar dilemma

In 1992, anthropologist Robin Dunbar published his groundbreaking paper on optimal group sizes in primates. For humans, he estimated the limit to maintain stable relationships in a group to be about 150, now known as the Dunbar Number.

Since then, other researchers using different methodologies have come up with slightly higher numbers, but the general principle stands. Go past a certain point and natural connections start to break down. In my experience, that number does seem to be somewhere in the range of 150-200.

That’s when the “really cool place” with a family atmosphere starts to take on a decidedly more corporate feel. Some of the changes are positive; things become more structured and less off-the-cuff. Nevertheless the loss of connectivity is palpable and things begin to fray.

The biggest danger at this point is that the breakdown is hard for senior management to see. They have usually worked together for years, feel a special camaraderie and find it difficult to understand how others don’t feel the same way. In fact, they are offended that newer arrivals don’t feel the same commitment that they do.

The rise of the nasty people

With the loss of connectivity comes a loss of visibility. People who have been around for a while get promoted on the basis of longevity and internal relationships rather than competence or performance. Inevitably, some of these people will have a nasty, territorial streak.

That’s when the real trouble starts. They tend to surround themselves with sycophants who make up for their lack of professional talent with fealty. Strong up-and-comers who question the status quo are set aside and even ostracized. False consensus is favored over real debate.

From there the process becomes self-reinforcing. Strong players become frustrated and leave, while those who stay are rewarded for their loyalty. They are valued for their reliability and senior management, who by now have come to understand that something has gone wrong, now depend on those they feel they can trust even more.

A bunker mentality sets in. The wagons are circled. The”family affair” has been transformed into a set of internal fiefdoms, which can’t seem to work together effectively.

The reorganization

The next step is the inevitable reorganization. By now, everybody realizes that the company is going through “growing pains.” There is a general acknowledgement that the organization is no longer an upstart and must become more “corporate.” A consensus builds that something has to be done.

Unfortunately, that “something” is usually some form of massive reorganization. Months are spent planning and then implementing the new structure. Of course, everybody realizes that there will be some resistance, but there is confidence that obstacles will be overcome and in the end everybody will be better off. Good times will return.

It hardly ever works out that way. Personal relationships and tacit organizational knowledge play an important role in any organization, once those become defunct, breakdowns occur. The new structure breaks old connections and doesn’t replace them fast enough.

Reorganizations rarely, if ever, take informal relationships into account, which is why they usually fail. (Incidentally, the reorganization of the societies in post-Soviet nations ran into similar problems).

A network approach

It is the last point, about informal relationships, that is the most crucial. Entrepreneurial companies that find themselves growing into substantial corporations are acutely aware of the need for structure, yet often implement a hierarchy that looks good on paper but fails in practice.

A well-functioning organization is a well-functioning social network and, as I wrote before, social networks thrive on internal connections. In a small company, they form naturally, but in a big company they need to be nurtured. Here are some ways to do that.

Fire Nasty People: Whenever I’ve been called in to do a turnaround for a company that has hit the skids, I inevitably find that there are a handful of people (usually quite competent) that are the source of many of the problems.

That’s why it always makes sense to fire nasty people. They tend to be more trouble than they are worth, scare off a lot of good talent and make it much harder to run the company. It’s tough to build a well-networked organization when everybody needs to watch their back because of a few bad eggs that seek to get ahead by undermining others.

Focus on Junior Employees: Small companies tend to be tightly knit. People grew up in the company together and have built strong bonds. As the business grows, it’s tough for newcomers, especially younger ones who lack commonality with senior staff and are unfamiliar in professional life, to break in.

The result is that they never really feel at home at the company and the “inner circle” becomes even more isolated. Management needs to put special emphasis on junior staff to make sure that they are being on-boarded and mentored effectively. It’s the newbies, not the incumbents, that can provide the energy to keep the company vibrant and growing.

Internal Training Programs: One of the best ways to build connectivity at the junior levels is to create an internal training program run by middle and senior level staff. It’s also a great opportunity to build mentoring relationships and confers status to promising mid-level employees who are asked to present to newcomers.

They work best when they are cross functional, so that new employees get to bond with others across the organization and learn skills that, while not applicable to day-today-work, helps them understand the bigger picture. Those relationships and skills are crucial for integrating diverse skills across departments.

Best Practice Programs: Another exceptional technique is instituting best practice programs across departments. These are regularly scheduled meetings in which people get the chance to present their best work to their peers. I’ve found it works best without senior staff present.

Autonomy, Mastery and Purpose: Most of all, management needs to realize that the people joining the company need to be motivated. That’s much easier to do in a small group than in a big company. As I wrote in an earlier post about motivating employees, it’s important to instill autonomy, mastery and purpose.

Probably the toughest thing about growth is that it’s difficult to recognize the problem until it’s too late. After all, when you’re running a business, growth is what you’re after. Nevertheless, at some point every successful company will have to deal with the challenges that go along with it.



Greg Satell is a U.S.-based independent media analyst. You can read his blog entries at http://www.digitaltonto.com.]]> World Affairs Journal: Ukraine's future amid an unstable Russia, EU http://www.kyivpost.com/news/opinion/op_ed/detail/122786/ OP-ED Mon, 20 Feb 2012 13:48:29 +0200 recent posting for this blog that Europe’s troubles and Russia’s turbulence herald an “unhappy new year” for Viktor Yanukovych and the Regionnaires. Let’s up the ante and ask what the European Union’s meltdown and Russia’s breakdown might mean for Ukraine. Both possibilities may still strike us as unlikely, but, in contrast to the conventional wisdom that ruled over the last decade, they’re no longer unimaginable. Indeed, one can easily imagine the EU’s transformation into a loose economic association without political aspirations or a tight political-economic entity under German leadership. And one can just as easily imagine Russia’s experiencing popular uprisings, coups d’etat, and regional secessionist movements that would make it a weak, brittle, and possibly even failed state.

Read the story here.]]> World Affairs Journal: Yanukovych brings in Russian thugs for back-up http://www.kyivpost.com/news/opinion/op_ed/detail/122765/ OP-ED Mon, 20 Feb 2012 09:21:36 +0200
The bad news is that he’s replaced them with two individuals with absolutely no connection to or roots in Ukraine.

The worse news is that they’ve been placed in charge of the “power” agencies, the Ministry of Defense and the Security Service (SBU).

And, lest you think you can now take a breath, the worst news is that both guys have a record of violence as long as Yanukovych’s security entourage.

It started on February 3rd, when Yanukovych made Igor Kalinin the head of the SBU. Then, on February 8th, he made Dmitri Salamatin minister of defense.

Read the story here.]]> The Snow Revolution’s shadow of orange http://www.kyivpost.com/news/opinion/op_ed/detail/122596/ OP-ED Thu, 16 Feb 2012 20:49:40 +0200
Like the Snow Revolution, the Orange Revolution was a broad middle-class reaction against corruption and the absence of the rule of law. In contrast to the Arab Spring, the Orange Revolution was entirely peaceful, as the Snow Revolution has been, and neither was triggered by economic or social crisis. In 2004, the Ukrainian economy grew faster than ever, by 12 percent, and Russia’s gross domestic product increased last year by a respectable 4.3 percent.

But there are also significant differences. Ukraine has a big ethnic divide between Russian speakers and Ukrainian speakers. The Ukrainian opposition was well entrenched in the parliament and media, rendering it part of the old system.

The outstanding achievement of the Orange Revolution was political and civil freedom. But its ultimate flaw was a nearly complete political stalemate, which led to even worse corruption and authoritarianism. Having been in Ukraine during and after the Orange Revolution, and having just spent time in Moscow, some pitfalls facing the Snow Revolution seem evident to me.

The Orange Revolution was peaceful because a sufficiently large number of people took to the streets. The Russian opposition has already absorbed that insight, minimizing the risk of violence.

But it might have been a mistake in 2004 to occupy the center of Kyiv and pursue persistent demonstrations that forced a quick resolution of the crisis, because it prompted a flawed compromise with the old regime. The sudden relief caused dangerous euphoria and hubris among the Orange revolutionaries.

For this reason, the Russian opposition is probably being sensible by holding large demonstrations from time to time, showing the regime its strength but not forcing an instant solution. Indeed, the sudden resolution of the Orange Revolution led to the adoption of a dysfunctional constitution with a confusing and unwieldy division of powers. It looked like a trap set by the old regime’s operators.
Vladimir Putin’s regime is warning Russians that their budding Snow Revolution will be as big a mistake as Ukraine’s Orange Revolution of 2004.

There is no reason for anybody to repeat such a mistake. A constitution requires serious consideration. The old regime’s adherents can more easily trick the newcomers into dangerous compromises if the process is exceedingly fast.

The other major shortcoming was that the leader of the Orange Revolution, Viktor Yushchenko, turned out to be a feckless and irresponsible president.

Initially, he traveled the world for months to celebrate his victory, ignoring the chaos back home.

Then he began vetoing virtually all decisions by the government, causing a political stalemate, and, toward the end of his presidency, tacitly joined with the old guard (now back in power) against then Prime Minister Yulia Tymoshenko (whose party, to its credit, had voted against the constitution).

But, while Yushchenko serves as a warning to Russians not to elect an accidental president with excessive powers, an underlying cause of the Orange government’s breakdown was that most of its ministers (Yushchenko appointees) were defectors from the old regime. Most had never opposed its corruption, and the prominent businessmen who funded the Orange Revolution expected to profit handsomely from their political investments. As a result, there was no cleansing of the old cadres, and corruption declined only temporarily.

By contrast, Georgia’s Rose Revolution of 2003 carried out a wholesale change of senior officials, bringing in young and well-educated leaders with Western educations. Russia needs to follow the example of Georgia (and Estonia) by promoting a new generation of young, skilled, and untainted professionals.

The Orange Revolution’s greatest policy mistake was its early focus on re-privatization – the renationalization and resale of enterprises that had been privatized at exceedingly low prices.

The Orange government spent its first half-year discussing which enterprises should be reprivatized and how. Meanwhile production slowed every month, as uncertainty about property rights scared businessmen. In the end, only one big metallurgical enterprise, Krivoryzhstal, was reprivatized; by then, the Orange coalition had already fallen apart.

For Russian politicians, re-privatization is a great political temptation. Indeed, all three opposition parties in the Duma (parliament) call for far-reaching renationalization, though it would be politically and economically devastating. Instead, a new democratic government could call for higher property taxation and prosecution of corrupt officials. In comparison with Ukraine, Russia has quite decent legislation, and its economic courts enjoy some respect.

The ultimate reason to expect a more successful democratic breakthrough in Russia today than in Ukraine in 2004 is that Russia is so much richer and more developed than Ukraine, with per capita GDP (at current exchange rates) four times higher.

As modernization theorists like Seymour Martin Lipset and Samuel Huntington would have noted, Russia is simply too wealthy, well-educated, and open to be so authoritarian. According to the NGO Freedom House, only seven small oil-exporting states and Singapore are wealthier than Russia and still authoritarian.
Russia should draw four major lessons from the Orange Revolution as its own Snow Revolution proceeds.

First, the new democrats must avoid being tricked into a dysfunctional compromise with the old regime. Second, leaders are critical to a sustainable democratic breakthrough, and this choice will be as vital as it is difficult. Third, Russia needs a cleansing of corrupt officials, and it should draw from its wealth of young and well-trained talent. Finally, re-privatization is a poison pill that must be avoided.

The Orange Revolution was no mistake, but a just cause is no guarantee of victory. Russia’s Snow revolutionaries must make sure that the good fight is also a smart fight.

Anders Aslund, a senior fellow of the Peter G. Peterson Institute for International Economics in Washington, D.C., has previously advised Russian and Ukrainian governments. Copyright: Project Syndicate, 2012. www.project-syndicate.org]]> euronews: Ukraine’s bid to join the EU http://www.kyivpost.com/news/opinion/op_ed/detail/122560/ OP-ED Thu, 16 Feb 2012 13:32:17 +0200 Read the story here.]]> Time for Ukrainian-Canadians to review relations with Ukraine http://www.kyivpost.com/news/opinion/op_ed/detail/122558/ OP-ED Thu, 16 Feb 2012 12:55:13 +0200
But as we urge our government representatives to take a strong stand on Ukraine, should we not reconsider our own contacts with official Ukraine and with Ukraine’s business leaders?

Recently Ukraine’s minister of culture visited Canada and met with both the community and our community representatives. True, this was part of the official program of the Canadian Parliament’s first Ukrainian Day on the Hill and Ukrainian culture is something we all support.

But he is still a member of the Yanukovych regime. So do we continue maintaining relations as before? That is not something we can answer right now, but it is an item that should come up for some serious discussion within our community.

Similarly, both the UCC and the Canada-Ukraine Chamber of Commerce participated in one of the events in the United States which was part of the “Road Show” organized by the which was part the Head of State Agency for Investment and National Projects of Ukraine Vladyslav Kaskiv, and designed to promote investment in Ukraine. Should the UCC want to promote investment, or even appear to promote investment in Ukraine when it is asking the Government of Canada to use the free trade negotiations as a lever for human rights?

Investment in Ukraine is a tricky question. Since financial investment benefits mostly the rich oligarchs who prop up the Yanukovych regime, promoting such ventures is of dubious value. On the other hand, there may be some strategic cases where exceptions may apply.

Take, for example former Alberta Premier Ed Stelmach’s participation in the Jan. 18-19 oil and gas conference in Kyiv to explain Alberta’s shale gas extraction technology which can be used to help make Ukraine self-sufficient in energy. While any kind of cooperation in that field requires working with some very unsavoury characters in Ukraine’s energy industry, including Energy Minister Yuri Boyko himself (see: http://www.kyivpost.com/news/nation/detail/120861/), this has to be balanced with the strategic need to eliminate the stranglehold Moscow has over Ukraine with its heavy dependence on Russian oil and gas.

As for those projects that encourage the growth of Ukraine’s civil society, provide humanitarian aid and support education, we must certainly continue to concentrate our resources there. Projects that come to mind include those providing assistance to orphans, those aimed at fighting human trafficking and those supporting educational institutions that promote democracy and provide moral guidance such as the Ukrainian Catholic University in Lviv and the Kyiv-Mohyla Academy.

There are many complex issues involved with our community’s relations with Ukraine. Some, such as support for humanitarian projects are clear-cut. Others such as relations with official Ukraine, investment and dealing with Ukrainian businesses are much more problematic. There are no easy answers. But there is a need for a broad and open discussion on this issue within our own community.

Marco Levytsky is the editor and publisher of Ukrainian News, an independent bi-weekly newspaper based in Edmonton and distributed across Canada.



]]> Digital Tonto: The future of publishing http://www.kyivpost.com/news/opinion/op_ed/detail/122546/ OP-ED Thu, 16 Feb 2012 10:41:14 +0200
People were understandably scared. Red ink spewed everywhere. Layoffs at major media companies were rampant. Yet today, publishing is becoming a hotbed of innovation.

Major publishers like Conde Nast, Hearst and Time Inc. are transforming themselves while upstarts like BuzzMedia, Say Media and Glam Media are building new models altogether. There are significant challenges ahead and, inevitably, some will falter. Nevertheless, the future of publishing is brighter than ever.


The bust that wasn’t

The crash of 2008 and 2009 hit the media world hard. Publishers reported heavy losses. Lots of hard working, competent people were put out on the street. Meanwhile, social media was hitting its stride and many thought the publishing model was broken.

Many, but not all and certainly not me. I pointed out at the time that the signs pointed to magazines making a comeback and that the enormous losses at media companies were mostly due to bad investments and not to poor operational results. The downturn, in other words, was cyclical and not structural.

That didn’t go for everybody, of course. I also pointed out that Newsweek made grave mistakes. Interestingly, however, their error lied in overreacting to the “digital threat” and trying to transform a mass product into a niche one (I still don’t now how they thought the numbers could work on that one).

That’s not to say that nothing has changed. A lot has and publishers have some hard adjustments they need to make. Nevertheless, the overall effect is positive and will make publishing more vibrant, exciting and profitable in the years to come.


What will happen to print?

But wait. Isn’t print in decline? Aren’t circulation numbers falling? Isn’t all the money moving online?

Those things are somewhat true, but the situation isn’t nearly as dire as some would have us believe. Firstly, the overall decline in circulations is rather small, about 1% in the US. Second, publishers make money on ad sales, not distribution, which they subsidize to maximize readership (the cover price is often less and sometimes much less, than it costs to print and distribute.)


On the ad sales side, the story gets a bit more complicated, because we have to make a distinction between newspapers and magazines. Newspapers have indeed been hit hard. In North America, ad revenues have declined 45% since 2007 and are projected to go down further from there.





However, newspapers are a special case. Historically, they made their money from classifieds. All of those people buying small boxes of text advertising jobs, cars and personals added up and made for a very good business. In a very real sense, the hard hitting journalism basically served to promote small transactions.

That money is gone and will never come back. The Internet is a much more efficient medium for classified advertising and newspaper companies have, for the most part, missed out. As I’ve noted before, the drop in newspaper ad revenues roughly equals the rise in digital ad sales since 1997.

For magazines, on the other hand, the story is much different.





Magazines have always been used by marketers to build brands among discrete audiences. Digital media still struggle to consistently build awareness among consumers and therefore the drop for magazines has been far less severe. Moreover, ad revenues should remain fairly stable in the coming years, dropping only slightly if at all.

For the foreseeable future then, we can expect the bulk of magazine publisher’s revenues to come from print.

How tablets will change the game

What’s amazing is not how much things have changed, but to what extent they have stayed the same. For all the talk about everything going digital, roughly 80% of total ad spending goes it where it always has: traditional media.

That is, until now. Tablets are quickly changing the face of media.

Strong Christmas sales doubled tablet penetration to about 20% and, with just about every computer manufacturer coming out with devices to compete with the iPad and Windows 8 entering the fray, that figure will rise quickly, especially in younger demographics.

Further, advances in OLED technology will make tablets, thinner, lighter and cheaper, putting screens everywhere. To get a sense of what the future will look like, take a look at this video from Corning.







The rise of tablets represents both an enormous opportunity and an enormous challenge for publishers. The opportunity is that tablets will allow them to integrate text, video and interactive graphics seamlessly and not only create more engaging products, but also gain access to big TV budgets.


Multiplying revenue streams

As I mentioned above, publishers have historically earned their money from advertising and going forward, they will remain heavily reliant on it. Clearly, marketers will pay more for consumers than consumers will pay for content, which is why the world’s most successful publications are ad supported.

Still, there will be plenty of opportunities for publishers to increase their share of the pie. They have immensely talented people, strong brands and devoted readers. Digital technology will allow them (impel them, actually) to deploy content over multiple devices and touchpoints.

Video, of course, is the most obvious and we can expect publishers to start deploying networks of YouTube channels which will be increasingly viewed not only on smartphones, tablets and PC’s, but on interactive TV’s as well. We can expect to see a renaissance in short form video content similar to what Bleacher Report is doing in sports.

E-commerce affiliate programs like Amazon’s represent another golden opportunity. Links from product reviews are easily monetized. Recent reports indicate that Pinterest is already making money that way. Moreover, companies like Flite and Stipple are developing new ways of embedding links inside images, further integrating e-commerce and editorial.

Those are just a few new revenue streams. Others are surely to appear. Anyway you slice it, there are more ways to make money from publishing than ever.


The integration imperative

The challenge, is that to take advantage of the new environment, publishers will have to acquire skills they don’t presently have and there’s bound to be quite a bit of organizational inertia. Integrating video, for instance, is not something that immediately occurs to print editors. It’s just not something they’ve had to do before.

Further, publishers are used to operating on the principle of a chinese wall. Editorial operations and business interests have been kept separate and disticnt. However, rules need to be updated. If editors are choosing what to promote through links, for instance, than the issues change dramatically.

Probably the most difficult area is not reconciling business and creative interests, but integrating skills. Editorial teams used to have nearly total control over the product, but now have to share the road with technology, UX and video teams, which will create obvious tensions. To be successful, publishers will have to bridge those divides.

The future of publishing, then, lies in capitalizing on multiple revenue streams andintegrating diverse skills effectively.


Greg Satell is a U.S.-based independent media analyst. You can read his blog entries at http://www.digitaltonto.com.]]> Gulfnews.com: Ukraine lesson for Russians http://www.kyivpost.com/news/opinion/op_ed/detail/122516/ OP-ED Wed, 15 Feb 2012 19:18:36 +0200
Read the story here.]]> Ukraine’s archaic education system must change http://www.kyivpost.com/news/opinion/op_ed/detail/122508/ OP-ED Wed, 15 Feb 2012 17:17:17 +0200
Days later, two additional draft laws intended to integrate Ukraine into the European educational systems were registered in Ukraine’s parliament – one by Arseniy Yatseniuk and Lesya Orobets, members of parliament and the Front of Change Party, and another by Yuri Miroshnichenko, a member of parliament and the representative of President Viktor Yanukovych. The proposed drafts facilitated more public and academic discussions on education reform.

Ministry attempts to pass a Soviet-style law failed last year due to resounding opposition embodied in student protests, and domestic and international demands for European standards and transparency. Kyiv Mohyla Academy, along with leading Ukrainian intellectuals, political and civic leaders, spoke unapologetically for autonomy and academic freedom.

There is general agreement that the country’s archaic system does not provide for academic freedom, university autonomy, curriculum choices, Ph.D. programs, transparency in admissions and degree awards, independence in research, management and administration, and achievement of higher educational standards. The issue of certification of degrees must finally be brought into focus as well.

The absurdity of the ministry’s refusal to certify foreign academic degrees and credits, even from the best universities in the world, such as Oxford, Harvard, Stanford, Sorbonne and others makes a mockery of Ukraine’s entire educational system. And yet, the ministry continues to promote the current antiquated Soviet relic of certification known as “nostrifikatsia.”

Another serious issue of contention is the still-in-place Soviet system that artificially divides education and research. Such a system prevents Ukrainian universities from competing internationally and blocks any chance to elevate their rankings. This situation persists because their own government impedes participation in activities and publications according to international requirements.

EU criticizes Tabachnyk policies

Tabachnyk’s recent attempt to receive approval for his proposed draft law from the European Union’s Commission on Education backfired. Inna Sovsun, director of the Center for Society Research and faculty member of Kyiv Mohyla Academy, summarized the EU’s report in a thoughtful article published on Feb. 3 (education.unian.net/ukr/detail/192128). The EU criticized the ministry’s focus on overwhelming central regulations, lack of innovation and guarantees of institutional autonomy and academic freedom, and dismissed the government’s continuous empty rhetoric about “guaranteeing the quality of education” as political maneuvering.

Clash of Ideology, special Interests

It appears that a clash of ideologies exists within the government between the president on one hand and the minister of education on the other.

In 2010, Yanukovych announced a proclamation outlining his position on general reforms, including the area of education (Ukaz No 926/2010 of Sep 20, 2010).

The president instructed the education minister to “provide real autonomy to the leading institutions of higher learning as a means to improve the quality of higher education…” The president repeated his position throughout the year in the specific sentence: “The goal of reforms of the system of education is to raise the level of competitiveness of Ukrainian education, and the integration of Ukraine’s education system into a European educational space.”

Ukraine signed the Bologna Declaration in 2010, a pledge by 29 countries in Europe to reform the structures of their higher education systems in a convergent way and promised to comply with requirements for integration of higher education into European educational standards. To this date, Ukraine has failed to comply with its lawful obligations. Tabachnik directly usurps this agreement.

If Yanukovych’s word is true, then Tabachnik’s proposals directly challenge the stated goals of the president and circumvent Ukraine’s national interest. Unfortunately, Tabachnikhas become a lightning rod and continues to foment controversy and confrontation. When the minister’s agenda abrogates the president’s program with impunity, it calls into question the president’s role and authority. Creative manipulation of power, such as this, is counterproductive to Ukraine’s intellectual and economic prosperity.

It is well past the time for the government to stop empty rhetoric on reform. Continued lip service to academic reform, while implementing a contrary agenda, will bring ridicule, scorn and ultimately, failure.

Time to shape future is now

Genuine steps must be taken now to secure Ukraine’s competitive position in education and movethe country to join the world community. It is imperative to Ukraine’s national intereststo raiseacademic standards and provide opportunities for innovation that lead to economic prosperity. The price of failure to implement true reforms is high. Education’s importance to the growth of a vibrant, broad and robust economy in Ukraine underscores the difference between fundamental reform and a step backward.

Ultimately, the forces of change will not be stopped. Change is essential and it is inevitable. The people of Ukraine chose freedom and self-determination. The National University of Kyiv Mohyla Academy has been leading the country’s reform in education since its re-establishment twenty years ago. A new generation of Ukrainians educated in such an environment testifies to this irreversible change.

Tabachnik’s policies are doomed to fail. A culture of arrogance, control, retribution and archaic systems is unsustainable. The choice is between preparing for the future or being doomed to past failures. Ukraine’s government has an obligation to protect freedom, independence and the security of current and future generations. The time to take a stand and shape Ukraine’s future is …now.

Marta Farion is president of the Kyiv Mohyla Foundation of America.]]> Ukraine: is discounted gas good? http://www.kyivpost.com/news/opinion/op_ed/detail/122480/ OP-ED Wed, 15 Feb 2012 13:05:39 +0200 Editor's Note:The author of this blog, Leigh Turner, has been the British Ambassador to Ukraine since June 2008. You can read all his blog entries at blogs.fco.gov.uk/roller/turnerenglish (in English) or blogs.fco.gov.uk/roller/turner/ (Ukrainian).

Gas matters. The embassy follows closely talks between Kyiv and Moscow on gas supplies; and between the Ukrainian authorities and the IMF about prices for domestic gas.]]>
Gas is also one of the cleanest hydrocarbon fuels – and will play an important role as we work to minimise the impact of global climate change on economic growth and energy security.

The concept of discounted gas is important to understanding the debate about gas in Ukraine. There are two broad types. The first kind is gas which a country can persuade other countries to sell it at a discount, for whatever reason. The second type of discounted gas is that sold within a country when eg domestic consumers pay less than industrial users. This blog is about the first kind.

Gas is an unusual commodity. It is less fungible than other commodities and harder to transport than eg steel, coal or grain. Traditionally it’s been traded on long-term fixed bilateral contracts and transported by expensive, fixed pipelines.

There is less of a world spot market for gas than there is for other commodities (but see below). Pipelines create powerful ties between producers and consumers, and difficult negotiations.

Naturally, producers want the highest prices they can negotiate; consumers want the lowest. In the case of Ukraine, securing cheap gas supplies could potentially benefit the economy by reducing inflation; saving money to the budget; and making Ukrainian industry which uses gas more internationally competitive.

But there are problems in negotiations of this kind. The first is what Ukraine has to give up in return for securing potential discounted gas supplies. This is a familiar issue which is at the forefront of the minds of everyone engaged in gas negotiations, so I won’t go into it further here.

A second issue is that, if most of Ukraine’s supplies come from a single supplier, that weakens Ukraine’s negotiating position. Some theorists argue that gas-importing countries can become “hostages” of their suppliers during price negotiations.

So what can Ukraine do? There is some good news. New sources of “unconventional gas” are diversifying supply around the world. It is becoming cheaper to transport gas by ship. Gradually, a spot market is developing, making it easier to secure gas more cheaply from alternative suppliers.

These developments by themselves mean that Ukraine could, in theory, have a stronger negotiating position than in the past by diversifying gas suppliers. Ukraine could strengthen its position further by forging ahead with energy efficiency – thus consuming less gas; by encouraging domestic gas production; and by diversifying into energy sources other than gas.

Some of these measures have already been announced. But progress remains challenging. This is where the second type of “internal” discounting comes in. If domestic gas prices were increased, this would have a big impact on the willingness of consumers to invest in energy-saving technology and to turn down their thermostats.

It would also give producers more incentives and resources to invest in exploration and exploitation of gas resources inside Ukraine. I hope to blog more about this shortly.



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]]> BusinessDay: The Snow Revolution’s Orange shadow http://www.kyivpost.com/news/opinion/op_ed/detail/122383/ OP-ED Tue, 14 Feb 2012 08:14:40 +0200 Read full report here.]]> Digital Tonto: Six principles of strategy http://www.kyivpost.com/news/opinion/op_ed/detail/122318/ OP-ED Mon, 13 Feb 2012 10:46:34 +0200
Napoleon had a strategy till the Russian winter exposed its flaws. Pompeii had a strategy until Caesar outfoxed him. The best laid plans are often laid asunder by the quirks of an uncertain and uncaring universe.

Winning, after all, isn’t a simple matter of merit, but one that is subject to theidiosyncrasiesof chance and circumstance. So what to do? How can we pursue a purpose with vigor and meaning when we can never be certain about what fate has in store for us? Here are six principles that will help guide you on your way.


1. Parsimony

When Steve Jobs came up with the idea for the iPod, it was “1000 songs in your pocket.” Herb Kelleher’s vision for Southwest was to be “THE low cost airline.” The iPod became the most successful consumer product of all time and Southwest has had 38 profitable years in an industry strewn with bankrupcies.

Both are simple, elegant ideas. However, what really made the difference wasn’t the initial conception, but what happened (or didn’t happen afterwards). Jobs and Kelleher understood that subtraction is more powerful than addition.

Jobs didn’t push for a launch date, but waited until a hard drive that could perform the task became available (it took about a year). Kelleher didn’t adopt the tactics of his competitors, even when they were successful, if they would undermine his cost advantage.

In other words, they followed Occam’s Razor, also known as the principle of parsimony, which states that “entities must not be multiplied beyond necessity.” In other words, don’t add stuff unless you really need to. When in doubt, leave it out!

2. Rigor

The bugbear of strategy is confirmation bias. Once we get an idea in our heads, it tends to stay there. Worse, we’ll tune into information that tends to support it and tune out data that contradicts it. As Solomon Asch showed with his conformity experiments, the problem only gets worse when a group of people believe the same thing.

What’s really essential is to ask, what do I think I know and why do I think I know it. As Richard Feynman once said, “The most important thing is to not fool yourself, because you are the easiest one to fool.” Don’t believe everything you think.

That’s why it’s always better to do strategy in Excel, rather than PowerPoint. Headlines and snazzy charts might be easier to digest, but they represent opinions, not facts. You can’t test assumptions or apply statistical filters. If you are merely following the zeitgeist, you are really just operating in the dark.

3. Small and Scalable

Great strategies, like great innovations, start out small. They take advantage of one specific phenomenon. Like the fact that data storage efficiency doubles every year (i.e. Dropbox) or that links to a web page imply authority (i.e. Google). True insights are elegant, they tease the greatest possible truth out of the fewest possible statements.

Yet they are not small minded, they have the power to grow. Google’s PageRank wasn’t unique or extraordinary, in fact, many believe Jon Kleinberg’s HITS algorithm, conceived at about the same time, was superior. What made Google great wasn’t the sudden flash of insight, but how they built on it.

So an obscure algorithm eventually became a quest to “organize the world’s information.” A small idea, in fact one that very few people understood at the time, became immeasurably big. Moreover, it did so without losing the kernel out of which it sprung.

4. Disruptive or Sustaining

In his groundbreaking book, The Innovator’s Dilemma, Harvard professor Clayton Christensen identified two types of innovations, disruptive and sustaining. A disruptive innovation creates a new business model while a sustaining innovation makes an existing model work better.

While every company needs to do a bit both, it’s crucial to identify which type of innovation is primary for a particular business strategy.

Disruptive technologies don’t work as well by conventional standards, but change the basis of competition. A strategy based on disruptive innovation needs to find a new market among light or non consumers who value different things than existing customers. Research means very little for disruptive strategies.

Sustaining innovations improve performance by conventional standards, but can be vulnerable to changes in the basis of competition. They respond to the needs of existing customers and are therefore heavily dependent on a well researched marketplace.

If you can’t identify what kind of strategy your business is based in, you won’t know which tactics will help you achieve your goals.

5. Adaptation

No industry is static. Every business eventually gets disrupted and successful disruptive technologies become market standards which need to be optimized through sustaining innovations. As the business environment changes, business strategy needs to adapt.

Tim Kastelle makes the point vividly in this post about Kodak. While their industry was being slowly disrupted, they continued to improve their existing products. It wasn’t because they didn’t understand digital photography. In fact, they were pioneers in the technology. Their problem was that they were so focused on their existing customers they failed to recognize a nascent opportunity.

Apple, on the other hand, has become the world’s most valuable company by recognizing when disruptive technologies are ripe for improvement. They didn’t invent the first digital music player, the first smart phone or the first tablet computer, but they came in and made those products a whole lot better.

6. Organizational viability

In every industry there are highly successful companies with widely divergent strategies.Coke and Pepsi, Microsoft and Apple, Fox and CNN. While a company’s history doesn’t determine its future, it does determine how a strategy can be introduced.

When IBM decided to make the PC, they understood that it would die in their organization. A business based on manufacturing and selling large ticket items to major corporations just isn’t set up to build consumer products.

Understanding the dilemma, IBM’s management moved development of the PC to a new design unit in Boca Raton, Florida. There, they did things that would have been an anathema to the old organization.

They used “off the shelf” components rather than designing everything themselves and developed an open architecture that let third parties add to and improve the product. The result: they launched one of the most successful products in history within a year.

So those are my 6 principles of strategy. If you have one I missed, I’d love to hear about it in the comments below.



Greg Satell is a U.S.-based independent media analyst. You can read his blog entries at http://www.digitaltonto.com.]]> EU integration and Ukraine: next steps? http://www.kyivpost.com/news/opinion/op_ed/detail/122249/ OP-ED Fri, 10 Feb 2012 18:19:59 +0200
Until then, these agreements cannot give Ukraine the foundations for long-term reform and economic growth for which they are designed. Some of the steps are technical; others are political. To take them in turn:

(i) initialling the agreement. This is a technical process which does not require a political decision. Together with lawyers, translators and other experts going through the agreed texts to make sure that there is no scope for uncertainty or difference about what has been agreed, this process is likely to take a number of months.

(ii) The next stage is signing. Before this can happen, a political decision of the European Council, representing the EU member states, is required. Because the Council decision would be on signature of the whole package (ie the Association Agreement including the DCFTA), it would be what is known in EU jargon as a “mixed agreement”. This means that the Council decision would need to be taken by unanimity: every single member state would have to agree.

(iii) Once the Association Agreement has been signed, it will need to be ratified by 30 Parliaments: those of the current 27 member states; Ukraine; the European Parliament; and soon-to-be-member state Croatia.

The technical detail of how signature and ratification work is important because the EU and member states have expressed concern that the recent trials of opposition leaders inUkraine appear to be politically motivated and selective. They have said explicitly, including during the EU-Ukraine Summit on 19 December, that unless opposition leaders jailed as the result of flawed trials are freed and permitted to participate in politics, it is unlikely that the Association Agreement will be signed or ratified – ie stages (ii) and (iii) above.

The mechanisms for signature and ratification mean that all the governments of the member states need to be satisfied before the Association Agreement can be signed; and all the parliaments of the member states, plus Croatia and the European Parliament, need to be satisfied before it can be ratified. It therefore seems unlikely that either of these stages will happen while opposition leaders remain in prison and unable to participate in politics on the basis of flawed trials.

Thus, these important agreements, potentially the most powerful tool to help bring about Ukraine’s European integration, will not begin to work.

PS: I have seen suggestions in some quarters that even if it is not possible to sign or ratify the Association Agreement and DCFTA, some elements of the Agreement could be put into force provisionally. In practice, this, too, looks unlikely. I will blog about this shortly.



Leigh Turner has been the British Ambassador to Ukraine since June 2008. You can read all his blog entries at blogs.fco.gov.uk/roller/turnerenglish (in English) or blogs.fco.gov.uk/roller/turner/ (Ukrainian)]]> DigitalJournal.com: Is Putin the only way? http://www.kyivpost.com/news/opinion/op_ed/detail/122246/ OP-ED Fri, 10 Feb 2012 17:17:50 +0200 Read more here.]]> Back Story: Reporting fairly on the president http://www.kyivpost.com/news/opinion/op_ed/detail/122162/ OP-ED Thu, 09 Feb 2012 21:53:43 +0200 Michael Willard writes: When reality is bad, an accurate newspaper is going to show this in its stories.]]>
That is, it is difficult to report without the Kyiv Post appearing to be in opposition to the administration.

There are arguments that the ambitious Grigory Potemkin never constructed perfect village facades and dressed serfs as happy villagers to impress the 18th-century Empress Catherine. He was a showman, but not a charlatan.

The same cannot be said about the information cranked out by the administration of Viktor Yanukovych. One often wonders if the purveyor and the public reader are on the same planet.

Potemkin got a bad rap from jealous courtiers. The current regime is judged in the here-and-now by the multitudes. The president’s polls have tanked, and the people are saying that they are not better off than they were two years ago.

For the record, witnesses from Catherine the Great’s 4,000-mile epic journey down the Dnipro River – which included foreign ambassadors, no less – testified of flourishing communities. However, the false “Potemkin village” legend entered common lore.

Fast-forward to the 21st century: In Yanukovych-land, that which is gloomy and sad is rather gloomy and sad, though portrayed with a kind of Alice-in-Wonderland doublespeak suggesting that all is peaches and cream.

This is true whether one measures national well-being on a corruption, economic or freedom index. These, in my view, are the Big Three.

A few months ago, I posed the question: Is the Kyiv Post an opposition newspaper? I answered that question in the negative. I could almost hear giggles from every quarter. Great belly laughs, really.

Readers raised the old saw, paraphrased here: If it looks like a duck, walks like a duck and quacks like a duck, it ain’t a hippopotamus. Hence, the Kyiv Post must be an opposition publication.

I prefer a more practical explanation.

Most issues of the Kyiv Post carry stories that would be rated negative by the administration. No argument there. However, my recollection is that Presidents Leonid Kuchma and Viktor Yushchenko felt the velvet glove of the newspaper as well.

That’s political life. It’s rough and tumble. It goes with the territory.

Also, we at the Kyiv Post are smart enough to know that our words will not cause anyone to storm the barricades. We are, in large part, communicating with expatriates. In other words, we’re talking among ourselves.

We do hope, however, that our columns and editorial observations – and we strive to present all sides – contribute to honest and healthy dialogue.

The fact is that a sitting president will always get more scrutiny by a free media. Yulia Tymoshenko, the jailed former prime minister, had no invisible media protection shield during her head-spinning government.

Though I come from a political background, I left that suitcase at the border when I stepped into Ukraine in 1994. In business – and when representing multinational companies – I felt no compulsion to alienate any political side unnecessarily.

In fact, I took on all comers: The company of which I am chairman, Willard, has conducted speech and media training for representatives of three Ukrainian presidents and several parliamentary factions (We were not yet on the scene during the Leonid Kravchuk years).

I don’t have a favorite Ukrainian politician. I am an expat, and can’t vote. My geopolitical view, however, is that this nation should look both east and west. I am not sure that the basket-case economies of Europe offer great economic role models or tremendous opportunities for Ukraine

As for our chief editor, Brian Bonner, I really don’t know his Ukrainian political view. I do know him to be a liberal on most things, as am I.
I think we both support a man named Barack Obama. We both also believe passionately in freedom, and in a democratic, rather than an autocratic, government. I don’t believe that this is a partisan view, even in Ukraine.

In a recent meeting, Kyiv Post publisher Mohammad Zahoor noted that people generally believe most opinions expressed on the editorial page are his by virtue of the fact he is the publisher.
However, this is not necessarily so.

As owner, Zahoor has a right to influence editorial policy, but has not chosen to do so. He is, however, head of the editorial board and can step in and decide at his discretion. He is, indeed, a benevolent publisher. I have known editorial tyrants in that position.

In the dozen years that I have known Zahoor, I have not heard him express a preference for any politician. However, he did insert an important line into the Kyiv Post editorial policy:

“If any Kyiv Post reporter, editor or, in fact, CEO pushes a partisan political agenda, he or she will be fired.”
Not to put too fine a point on it, but that’s a pretty definitive statement.

Kyiv Post CEO Michael Willard can be reached at Willard@kyivpost.com ]]> US, EU may want to consider visa bans http://www.kyivpost.com/news/opinion/op_ed/detail/122160/ OP-ED Thu, 09 Feb 2012 21:43:54 +0200 Editor’s Note: The following is a Feb. 1 statement by former U.S. Ambassador to Ukraine Steven Pifer before the U.S. Senate Foreign Relations Committee-Subcommittee on European Affairs, in Washington, D.C.]]> Steven Pifer writes: It may be time for U.S. and EU officials to consult as to whether it is appropriate to consider lists of Ukrainian individuals who would be denied visas to visit the U.S.and EU member.

... Regrettably, the first two years of President [Viktor] Yanukovych’s tenure in office have seen a significant regression in democratic practices within Ukraine. That is unfortunate for the Ukrainian people, and it is blocking the strengthening of Ukraine’s relations with the European Union and the United States. EU officials have made clear, for example, that the signature of an EU association agreement with Ukraine depends on Kyiv taking certain steps, such as releasing former Prime Minister [Yulia] Tymoshenko from prison.

…It remains in the U.S. interest that Ukraine develop as a stable, independent, democratic, market-oriented state increasingly integrated into Europe and institutions such as the European Union … Democratic regression within Ukraine, however, impedes that country’s ability to draw closer to the West … with weaker relations with the West, Kyiv will find that is has less room for maneuver in its dealings with Moscow. Tough negotiations will likely become even more difficult.

Yanukovych only has to look north to Belarus and what happened to President [Alexander] Lukashenko once he had burned his bridges with the European Union and the United States following the December 2010 crackdown on opposition leaders and demonstrators. Facing a dire economic situation and with no hope for help from the West, Lukashenko struck a deal with Moscow that secured a lower price for gas and a loan from Russia—at the price of surrendering control of the Belarusian gas pipeline system to Gazprom.

…The U.S. government’s priority with regard to Ukraine now should be to encourage the Ukrainian government to make the right choices regarding the country’s democratic development. …To promote this objective, the U.S. government should, first of all, continue to underscore to Kyiv U.S. concerns about democratic regression and continue to remind the Ukrainian leadership that its internal political policies have a negative impact on its relationships with the United States and the West.

Second, the United States should keep the door open for a more positive relationship with Ukraine should Kyiv heed the message on democracy…Third, the United States should coordinate closely with the European Union so as to maximize the impact of Western policy on decisions by Yanukovych and the Ukrainian leadership…

What do these policies mean in practice? As one example, the Ukrainian leadership greatly desires high-level contact with Washington, which gives it a degree of political legitimacy. Yanukovych would dearly appreciate an invitation to the White House or the chance to host President [Barack] Obama in Kyiv.

The U.S. government should continue what appears to be a de facto policy of minimizing high-level meetings with Yanukovych. U.S. officials should inform Ukrainian officials that, as long as Kyiv imprisons opposition leaders and regresses on democracy, no meetings at the highest level will be possible.

…This approach does not mean freezing ties across the board. Normal diplomatic interaction should continue at most levels. The target should be the most senior leadership in Kyiv, those who are responsible for Ukraine’s democratic regression.

As for assistance programs, the U.S. government should carefully consider its priorities, especially as budget resources for Ukraine will be limited. U.S. assistance should aim to sustain civil society in Ukraine, which has made dramatic gains over the past 20 years. In this context, exchange programs that bring Ukrainians to the United States and Europe can play a major role. The U.S. government should also continue assistance programs to promote energy security, so that Ukraine can become less dependent on imported energy.

It may be time for U.S. and EU officials to consult as to whether it is appropriate to consider lists of Ukrainian individuals who would be denied visas to visit the United States and EU member states. Even the threat of this could send a forceful message to Kyiv and have a powerful effect on Yanukovych and the elite around him.

This is not a call for the type of isolation that the West has applied to Belarus. Ukraine has not yet regressed to that point. But the United States and European Union should seek effective ways to disabuse Yanukovych of the notion that he can pursue a more authoritarian course at home without repercussions for Kyiv’s relations with the West.

… Some Ukrainian officials likely will warn that this kind of approach by the United States and European Union will cause Ukraine’s leadership to turn toward Russia. Western officials should not be taken in by this. If Ukraine truly wants to join Europe, then its leadership must accept the democratic values that prevail in Europe. If the leadership is not prepared to adopt such values, then how can Europe and the West integrate Ukraine?

Moreover, Kyiv does not wish to fall too closely into Moscow’s orbit. Yanukovych does not want to compromise Ukrainian sovereignty; he wants to be the leader of a fully independent state. The Ukrainian elite and public likewise overwhelmingly support an independent and sovereign Ukrainian state. For the Ukrainian oligarchs—who control so much of the Ukrainian economy—the Russian model holds little appeal.

The overall goal of U.S. and European Union policy thus should be to crystallize in Yanukovych’s mind the following choice: He can have a more authoritarian political system, more difficult relations with the West, and a greatly weakened hand in dealing with Russia, or he can return to a more democratic approach and have a stronger relationship with the West and a balanced foreign policy. In the end, Yanukovych has reasons to opt for the latter course. The West should face him with the choice as clearly as possible.

Steven Pifer, a senior fellow at the Brookings Institution, is a former U.S. ambassador to Ukraine. The full transcript of his testimony can be found at http://www.kyivpost.com/news/opinion/op_ed/detail/121746/]]> Ukraine’s energy business ‘optimized for corruption’ http://www.kyivpost.com/news/opinion/op_ed/detail/122159/ OP-ED Thu, 09 Feb 2012 21:38:48 +0200 Editor’s Note: The following is testimony given by Edward C. Chow on Feb. 1 to the U.S. Senate Foreign Relations Committee-Subcommittee on European Affairs on Feb. 1 ]]>
Until the discovery and major development of West Siberian gas fields in the 1970s, Ukraine was a net exporter of gas to the Soviet Republic of Russia. Ukrainian gas production peaked at 69 billion cubic meters in 1975 … Today Ukraine’s domestic gas production has stagnated below 20 billion cubic meters and it is two-thirds dependent on gas imports from Russia.

… If proper policies and investment conditions were in place, domestic gas production can easily increase by 50 percent in a few short years. Together with energy efficiency improvements, Ukraine can be more than 50 percent self-sufficient in gas. However, today, Ukraine … consumes two-thirds as much gas as Germany does, while its gross domestic product is less than 5 percent of Germany’s.

Ukraine’s oil and gas sector is operated in a totally dysfunctional manner. This, as they say in this part of the world, is not accident. Various state energy assets have been hijacked by rent seekers for their private gain.

Regulation and pricing are left deliberately murky in order to benefit private interests. This is not a particular indictment of the current government of Ukraine. In fact these conditions of Ukraine’s incomplete transition from its Soviet command economy have remained through the terms of four different presidents and many more prime ministers and cabinet of ministers. Franchises on control of energy assets may shift, but the business model never changed.

In fact, if you were to design an energy system that is optimized for corruption, it might look very much like Ukraine’s.

You would start with a wholly state-owned monopoly that is not accountable to anyone except the head of the country who appoints the management of this company. It would operate non-transparently without being held accountable by shareholders (who might demand legal rights as owners) or capital markets since its chronic indebtedness is periodically repaid by the state treasury.

Domestic production would be priced artificially low, ostensibly for social welfare reasons, leading to a large grey market in gas supply that is allocated by privileged access rather than by price. Low gas prices suppress domestic production and energy efficiency improvement, thereby necessitating the import of large volumes of gas which coincidentally is controlled by the same state monopoly or its chosen middleman company.

The opaque middleman is frequently paid handsomely in kind, rather than in cash, which allows him to re-export the gas or to resell to high-value domestic customers, leaving the state company with the import debt and social obligations.

Similarly Ukraine has eroded its major advantages as a major oil and gas transit country between Russia/Central Asia and European markets from its geographic location and Soviet legacy pipeline infrastructure.

Ukraine inherited Soviet gas transit pipelines, which had a nameplate capacity of 175 billion cubic meters per year, as well as ample and ideally located gas storage capacity. Oil transit pipelines also have a capacity of more than one million barrels per day, linking Russian and Central Asian oil production with landlocked markets in Central Europe.

Yet today Russian gas transit amounts to less than 100 billion cubic meters from a post-Soviet average of 120 billion cubic meters and Russia is busy building and planning pipelines that bypass Ukraine, namely Nord Stream and especially South Stream. When the second line of Nord Stream is completed by the end of this year, it will bring capacity to 55 billion cubic meters per year.

If Russia proceeds next year with South Stream at 63 billion cubic meters by 2016, it would have bypass pipeline capacity that completely replaces current gas transit through Ukraine, which represented about 80 percent of the gas Russia sells to Europe or 20 percent of European gas demand.

This developed because Ukraine has proven itself over the last 20 years as an unreliable transit partner for both Russia and Europe …The root causes of Ukraine’s energy insecurity are well known to all, as are their remedies…These recommendations basically come down to modernizing the business practices of this large and non-transparent sector of the Ukrainian economy, which has served as an exclusive playground for Ukrainian leaders for the past 20 years.

This means the end of rent seeking in this sector that leaks billions of dollars per year; transparent and fair rules of the game for investors in the sector that do not favor special and politically-connected interests; and above all energy pricing reform...

...For the moment, Russia and Ukraine are supposedly at an impasse in their gas price negotiations, after the disastrous decision Yanukovych and his government made on gas agreement with Russia signed in Kharkiv in April 2010 soon after his ascendency to the presidency.

Ironically, the Kharkiv agreement essentially confirmed and locked his government into the terms of the agreement made by then-Prime Minister Yulia Tymoshenko and Prime Minister Vladimir Putin in January 2009, the unfairness for which she is currently accused and jailed.

The most likely scenario is an agreement … that cedes partial control and or ownership of Ukraine’s international gas transit system to [Russia’s] Gazprom in exchange for another so-called discount on gas pricing. Concessions on penetration into Ukraine’s domestic gas market may also be made to Gazprom and/or its chosen middleman company.

…Russia may expect to gain full control of Ukraine gas transit system over time, as Ukraine continues to mismanage its energy sector, as it has already done in Belarus under rather similar circumstances…The result of this possible scenario is that Ukraine becomes an energy appendage of Russia’s.

Edward C. Chow is a senior fellow in the energy and national security program for the Center for Strategic and International Studies in Washington, D.C.]]> Tymoshenko’s daughter calls on Americans to speak out for democracy http://www.kyivpost.com/news/opinion/op_ed/detail/122158/ OP-ED Thu, 09 Feb 2012 21:22:30 +0200 Editor’s Note: The following is Feb. 1 testimony before the U.S. Senate Foreign Relations Committee-Subcommitte on European Affairs in Washington, D.C., by Eugenia Tymoshenko, daughter of imprisoned ex-Prime Minister Yulia Tymoshenko.]]>
My mother has been illegally imprisoned, maltreated and humiliated for six months by the regime which is trying to break her. This didn’t break her. Her spirits are high, I can say that emphatically, but her health is failing. When I see her I must lift her from her bed; she can barely walk. Yet she still works, and not only to fight all the legal mud that is being thrown at her, but to unify all of Ukraine’s democratic forces to challenge President Viktor Yanukovych and the repressive clan that rules with him.

My mother went into politics and put on her small shoulders the great task to free her country of injustice, absence of rule of law and corruption left from Soviet past, so that we, young Ukrainians, would not need to devote our lives to do the same. She, unlike many young entrepreneurs in newly independent Ukraine, managed to build a big, successful corporation that helped restore the lost production and trade ties between ex-Soviet states. By doing that she uncovered most major failures of the old system. One of the major failures was and now remains - corruption. She chose to go against the system, refused to be part of corrupt schemes and, ended up facing the system alone, letting it destroy her business, putting her, her family and friends behind bars and again on falsified charges.

Ten years ago, when my mother was vice prime minister for the energy sector, she managed to remove corruption in oil, electricity and gas trading and restored financial functioning in this sector. When the country’s leadership resisted her reform efforts she organized massive protest movements. These protests later grew into the [2004] Orange Revolution, which she helped to lead and supported a person for president she believed would lead the country into democratic victory.

While prime minister, even though she had limited control but big responsibilities, she fought for major reforms and country’s well-being. After she had removed the gas trading monopolist RosUkrEnergo she became enemy number one, to those who were trying to monopolize the energy market and who are in power now. She ended up illegally imprisoned, convicted and tortured for not playing by the rules of their game, not complying with their orders that were detrimental to Ukraine.

…I have no doubts that the verdict against my mother was sought and approved by President Vikotr Yanukovych. She is, according to recent polls, his main political opponent and more popular than him.

But I don’t want you to think that this is only about my mother. It is not. Others are being repressed and unjustly imprisoned. Unfortunately Ukraine turns into an authoritarian regime with leaders of the opposition sitting in jail.

…Yanukovych and his team are trying to do everything possible to charge my mother with corruption. They hope the smallest hint of corruption will confuse Western politicians and make them turn their back on Ukraine and on her. And that’s what Yanukovych’s administration is trying to achieve. They spent millions of US dollars hiring American audit companies in hoping they can find traces of her corruption. Hundreds of her ex-co-workers were summoned for questioning. They were looking hard, but never found anything and they never will.

The current government’s activities are not only ruining the image of Ukraine, and Ukraine as a united nation, but also the profitable sectors of the economy, that become paralyzed and eventually abandoned, when the rule of law is ignored. Successful people prefer to leave Ukraine and our population is declining.

…I am here today to answer your questions … but also to plead that America do all that it can to preserve democracy in my country. My mother’s plight has united many great, strong nations and amazing people, true heroes of our time who are trying to get her and other political prisoners out of jail. We are hoping for your support. It is paramount for Ukraine to have free and fair elections this fall, but it would be impossible without major opposition leaders.

… The enemies of democracy and freedom should not be welcome in a democratic society unless they correct their mistakes. I ask you to consider all possible ways to influence them and to explain to them the consequences of their actions. But most of all, I ask you to speak out, loudly and clearly, so that the people of my country do not feel abandoned and lose hope.

Eugenia Tymoshenko's full testimony can be read at http://www.kyivpost.com/news/opinion/op_ed/detail/121742/]]> Vox Populi with Mark Rachkevych: How has the worsening of relations between Ukraine and the West affected your life in general, personally or professionally? http://www.kyivpost.com/news/opinion/op_ed/detail/122157/ OP-ED Thu, 09 Feb 2012 21:01:53 +0200 The Kyiv Post asked expats at Arizona’s BBQ before the Super Bowl on Feb. 5: How has the worsening of relations between Ukraine and the West affected your life in general, personally or professionally?]]> Charles Roston,
IT engineer



“The worsening relations have led me and my Ukrainian wife to consider leaving Ukraine. “







Daniel Aspleaf,
regional head of an engineering and environmental consultancy



“It’s not affecting me personally. It’s affecting me as a business owner. Things have gotten worse. The political situation is discouraging. I wish that Western countries would take a more pro-active stance, especially the U.S. and European Union.”





Jeff Howley,
independent telecommunications consultant



"It’s a recycling of the same old thing. I’ve lived here for 16 years. It’s not the end game yet. Nonetheless, life goes on and people make due.”





Curtis Bjelajac,
chief financial officer



“The situation is making it difficult to stay here.”






Jay Boling,
aviation company owner



"The basic financial and political uncertainty is causing investments to move away. It’s adversely affecting business relationships. Many of my expat friends who own service venues have noticed a dip in clientele. Look at Arizona’s today. It’s not as full as it used to be. I worry about Ukraine’s future after the Euro 2012 soccer championship.”




Vox Populi is not only in print, but also online at kyivpost.com with different questions. If you have a question that you want answered, e-mail the idea to kyivpost@kyivpost.com.
]]> EurActiv: A win-win for EU and Ukraine http://www.kyivpost.com/news/opinion/op_ed/detail/122132/ OP-ED Thu, 09 Feb 2012 16:33:36 +0200 Read full report here.]]> Digital Tonto: Why I still think the New York Times paywall is stupid http://www.kyivpost.com/news/opinion/op_ed/detail/122064/ OP-ED Wed, 08 Feb 2012 16:24:53 +0200 first results of its paywall last week and showed that it gained 390,000 digital subscribers between the Times and the International Herald Tribune.]]>
I wrote before that I thought the paywall was a stupid idea and I still think so. While the subscription numbers are impressive, the business itself is worse off and falling further behind. Some, like Henry Blodget, think the answer is to simply fire more journalists. I believe the solution lies in the NY Times learning how to build a digital business.


The golden rule

As I’ve written before, media has a golden rule: Marketers are willing to pay more for consumers than consumers are willing to pay for content. Of course, there are exceptions and some are important ones, but generally the rule stands.

What I don’t understand is why people think that for some reason it wouldn’t apply to the NY Times. It certainly isn’t a niche product, nor does it give any time sensitive information that isn’t widely available (although the Wall Street Journal does, which is why their paywall works). They have never made money on print and distribution, so “free” shouldn’t bother them.

The problem is clearly shown on this chart from Henry Blodget’s Silicon Alley Insider:



Clearly, the increase in subscription numbers has barely made a dent in their revenues. Moreover, the haven’t improved their product, so it’s hard to see how they will grow from here if they can’t win advertising or e-commerce dollars. (Mathew Ingram makes a similar point in a recent post).

Falling further behind

The New York Times digital ad revenues didn’t fall last year, as some suspected, but actually increased by 10%, which helped mitigate their shrinking print revenue. Many are saying that’s a positive result, but I think not. That figure actually reflects the fact that the NY Times has fallen further behind.



While a 10% increase in revenues might be great for a newspaper business, it’s pretty crappy for digital, which grew at 23% last year. In reality, they didn’t pull ahead, but lagged the market by 13%. As online growth eventually slows, how will they ever become sustainably profitable by keeping the current course?

And that’s not all. The digital business they bought, About.com, did even worse. Due to a change in the Google algorithm About.com’s revenues dropped 67% which caused overall digital revenues for the entire enterprise to actually drop by 0.8%! Not exactly a digital juggernaut.

With results like these, how can anyone call the NY Times digital strategy (of which the paywall is the most prominent part) a success?

How to fix the New York Times

By now it should be clear that the paywall is certainly no solution to the NY Times’ problems. Rather than trying to boost revenues temporarily to stem the tide, they need to learn how to effectively run a digital business, which has considerably different logic than a print business.

Here are some suggestions:

Stop Building Stupid Things: While a lot of people think that the NY Times got into trouble because they ignored the Internet, nothing can be further from the truth. Much like I previously wrote about Blockbuster, they are actually a technologically forward company.

The problem is that they build the wrong things, like an incredibly complex hierarchical tagging system for articles that was outdated almost as soon as they built it and their reference search feature, which allows you to double click on any word and get reference information. Impressive, but useless.

Integrate blogs: Another thing they can do is integrate blogs. Lots of people would love to write for the NY Times for free, why not let them? Huffington Post has made a lot of money that way. As I’ve written before, professional journalism and blogs are complimentary as much as they are competitive.

Leverage Inventory: Print media is about space. Electronic media is about inventory. That makes all the difference in the world and there are a number of ways inventory can be leveraged and optimized.

One of my favorites is to syndicate satellite brands that build communities in key verticals. The NY Times has deep content in a number of niche areas such as theatre, books and local New York politics. They can use this content to fuel separate brands that focus on those areas and augment it with community building features.

Incidentally, the Wall Street Journal does this very well with brands like All Things Digital, Market Watch and WSJwine.

Innovate: Creating satellite brands would also have another ancillary benefit – it would help them innovate. Probably their biggest problem is that its very difficult to innovate on their enormous scale (AOL and Yahoo! have similar problems). Having a stable of smaller brands will help them take more chances.

Most of all, they need a greater spirit of innovation. Instead of yearning for a lost age and wasting time with paywalls, they should be looking to the future. While they tell themselves that they the last great hope for quality journalism, the truth is that there is no worse betrayal to quality journalism than running a media business poorly.



Greg Satell is a U.S.-based independent media analyst. You can read his blog entries at http://www.digitaltonto.com.]]> People First: The latest in the watch on Ukrainian democracy http://www.kyivpost.com/news/opinion/op_ed/detail/122013/ OP-ED Tue, 07 Feb 2012 20:23:48 +0200
The performance of the Ukrainian legal system throughout 2011 betrays the real attitude of Ukraine's authorities to the people and society.

Football fans who dared to shout slogans or sing songs of a vaguely political nature during matches in Ukraine were the first to receive the hard end of this judgmental bias. One football fan was officially charged with hooliganism delivering the sentence of potentially up to four years imprisonment. A member of parliament has now filed a draft law suggesting penalty measures for anyone voicing political songs or slogans during or around Euro-2012 matches).]]>
The court case over the death of a young student Igor Indylo, who died under suspicious circumstances in police custody, resulted in a very mild punishment without any imprisonment for the militia officers who are implicated in the student’s death. In fact, this is part of an ongoing trend where Ukrainian courts refuse to deliver serious punishments to law enforcers known to be responsible for the mysterious deaths of young people in their custody.

Ukrainian justice was also particularly cruel upon the political opposition, with perfect examples being the cases against former Prime Minister Yulia Tymoshenko, former Interior Minister Yuriy Lutsenko and many others.

According to Human Rights Watch the public trust in Ukrainian courts has fallen dramatically. The organisation's annual report concludes that the guilty verdicts delivered to Tymoshenko and other former government officials have shattered public confidence in the independence of the courts.

Entrepreneurs have also felt the sting of the judge’s gavel, with tax-protest activists being accused of damaging paving stones on Independence Square where protests were held.

Relatives of high state officials who commit crimes with indisputable evidence against them somehow receive special treatment in the courts. They do not account for fatal road accidents they cause whilst children with wealthy parents feel free to beat up ordinary citizens. In January a deputy's son was found guilty for beating a young woman and sentenced to three years of imprisonment with a probation period of two years. He was immediately released. Provided he does not get caught breaking the law over the next two years, he may well go free.

Representatives of the European Union have on many occasions publicly condemned the selective nature of Ukrainian justice).This was one of the reasons why the association agreement between Ukraine and EU was not ratified last year.

Decreasing public confidence in the legal system creates some distinct risks for the governing authorities. Ukrainian sociologists report that citizens are choosing to blame the situation in the country on President Viktor Yanukovych.

At the same time, the government makes occasional claims to an understanding of problem with the system of justice in Ukraine. For example, the president recently announced a new Criminal Code, to be adopted in Ukraine in the nearest future. Yanukovych believes the code will positively influence the development of Ukraine as it introduces the principle of competition between prosecution and defense.

Balance, rule of law, presumption of innocence and proper protection of human rights are allegedly just around the corner. The president of Ukraine is confident that the new Criminal Code will be an important step towards creating an efficient system of state administration, creating balance among all the branches of power and establishing democratisation.

Let us hope that the governing authorities realize the danger of the court system losing its independence, as should it happen, it will utterly undermine the balance of the whole political system of the country.

People First Comment: On a warm summer’s afternoon in central Kyiv last year, a young judge’s assistant mounted the curb in her Mercedes 4x4 and proceeded to drive down the sidewalk looking for a place to park. In any other European city, a driver doing this would attract the attention of the public and, if available, the police. In Kyiv however, it is common practice; with pedestrians having to squeeze their way past cars parked half, or often fully, on the pavement.

Sadly this story doesn’t end with one girl’s disregard for the Ukrainian traffic code. In what local police believe to have been a momentary confusion between the brake and accelerator pedals, Nataliya Solovey lost control of her vehicle, running down and killing Svitlana Teterevkova; a married mother of three.

When the case went to court in November, a verdict was delivered that might shock readers who are unfamiliar with the ways of the Ukrainian legal system: freedom from prosecution, return of impounded vehicle, return of driving licence and no entry into criminal record – which would have otherwise impacted her job at the state judicial service.

Judge Volodymyr Bugil explained that the amnesty was granted on compassionate grounds – Miss Solovey being a mother with two young children; a compassion contrasted by the fact that the victim’s family will see neither justice nor compensation.

Apparently Ukraine’s judiciary can be as selective in its compassion as it can in its wrath: one need only cite the case of Lutsenko, a key political opponent to the government, who was jailed for 6 months, before even a case against him was submitted to court, and has remained there for a further 7 months as new allegations periodically materialize.

Optimistic hopes that these are but freak-cases are to no avail – they embody what in Ukraine is common knowledge: a connection to Ukraine’s ruling political and business elite, which are largely one and the same, effectively bestows immunity from prosecution; whilst outsiders must choose between compliance or pseudo-legal persecution.

Whether it is a councilor’s son crushing a motorcyclist with his Bentley, or a deputy’s son beating a 20-year-old woman in the middle of a crowded restaurant (as witnessed by thousands since the CCTV footage was leaked to YouTube), or even the theft of an entire shopping center from its international owners, the elite know that by carrot or by stick they have the means to generate near-enough whatever verdict they like.

Aside from the damage such a partisan judicial service does to the injured parties, attention should be paid to the impact its toleration by the Ukrainian people has upon the notional relationship between justice and the rule of law.

Despite the Ukrainian Prosecutor General’s office having a 98 percent conviction rate, making it perhaps the most effective legal body in the world, trust for it and other state arms, such as the militia and secret service, exists in only 10-16 percent of the population.

The divorce between the legal system and the public sense of social security is a manifest threat to the organizational fabric of the nation itself: as the power of the state and the institutions that support it are perceived as oppressors to the common man; echoing the totalitarian aspects of the bygone Soviet era.

Though calls from European neighborrs for a strengthening of the rule of law might seem constructive, until the public believe that the laws and law makers act in the national interest, rather than their own, stricter enforcement will only have a further destabilizing effect at the social level.


If politicians can get away with murder, the public will see no shame in testing the rules themselves, such as driving on the pavement or perhaps rising in violent protest.

Viktor Tkachuk is chief executive officer of the People First Foundation, which seeks to strengthen Ukrainian democracy. The organization’s website is: www.peoplefirst.org.ua and the e-mail address is: democracywatch@peoplefirst.org.ua
]]> The Economist: Gas in Europe. Spiked http://www.kyivpost.com/news/opinion/op_ed/detail/121939/ OP-ED Mon, 06 Feb 2012 19:44:28 +0200 Read full story here.]]>