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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

Americans Blown Up By Ukrainian Ammo

2 March, 1999 - 00:00

By Serhiy ZGURETS, The Day
America's Elayent Techsystems, which set up a joint venture with the Ministry
of Defense of Ukraine six years ago trying to cash in on salvaging obsolete
ammunition from military arsenals, is folding up business and leaving Ukraine.

It is now much in the interests of the official Kyiv, as said US Ambassador
in Ukraine Steven Pifer, to have a civilized "divorce" between the project
participants. Elayent Techsystems still retained a glimmer of hope the
last two months. Over that period, the Ukrainian government has been frantic
to settle its disputes with US investors, so that Ukraine might acquire
a full $195 million package of US financial aid this year. But Elayent
Techsystems was unlucky: it could not help being blown up by the dangerous
Ukrainian ammunition.

The joint venture was supposed to salvage almost two-thirds of the total
obsolete ammunition from Ministry of Defense arsenals. The American cofounder,
Elayent Techsystems, which had cooperated with the US Department of Defense
for fifty years, invested over $20 million in an ammunition-salvaging facility
in Ichnia and a powder-grinding enterprise at Tsvetos, near Khmelnytsky.

It was expected that sales of components from salvaged ammunition on
the domestic and foreign markets would bring in a total $100 million. The
profit was to have been equally shared between the American and Ukrainian
parties.

However, only 28,000 out of 220,000 tons of ammunition have been salvaged
in five years, netting only $7 million. The Americans say this resulted
from failure of the Ukrainian partners to deliver on time the ammunition
to be salvaged. The Ukrainian military in turn stresses that the Americans
went back on their promises to ensure comprehensive salvaging of the ammunition.
Peacemaking attempts failed. Little wonder, for no influential posts at
the Ministry of Defense are now being held by those generals who adamantly
supported the project six years ago. Elayent Techsystems now wants to gainfully
sell the joint venture equipment in order to recover its investment.

"I think the Ukrainian government would also do well to get involved
so that Elayent Techsystems does not have to refer to OPIC," US Ambassador
in Ukraine Mr. Pifer told The Day.

It will be recalled that the US Overseas Private Investment Corporation
(OPIC) insured this demilitarization project in Ukraine, and in case of
failure it must pay insurance to Elayent. However, under the US-Ukrainian
agreement on reciprocal protection of investments, it is Ukraine that will
have to later fully compensate OPIC for its losses. Thus, everything will
have to be paid by penurious Ukrainian taxpayers.

 

Elayent Techsystems does not want do business in Ukraine
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