Who Is Manipulating Fuel and Energy Complex Statistics and Why?
Attempts to sell dear to public opinion the results of its work are characteristic of any government. While the lower limit here is determined by elementary decency, the upper one is adjusted to the requirements of national security. On October 10, Vice Premier Yuliya Tymoshenko did not seem to fit in even with these limits when she reported to parliament on fuel and energy complex (FEC) performance and preparations for winter.
After heated debate, the corresponding Verkhovna Rada committee proposed that the Cabinet’s work in this area be recognized as inadequate. The latter was told to modify the proposed draft resolution, with due account of amendments introduced during the debate. Moreover, many lawmakers think it necessary to put the record straight on this matter and clarify which versions of FEC performance corresponds to reality and which are deliberate disinformation.
It will be recalled that on the eve of the parliament question time, State Tax Administration Chairman Mykola Azarov said at a meeting of the Organized Crime and Corruption Control Coordination Committee that the FEC’s debts have risen by UAH 1.1 billion this year, while the sector’s total debt is UAH 13.6 billion (the government’s report gave the considerably lower figure of UAH 8.3 billion). What also proved erroneous were the data on current payments to budget coffers, given in the charts enclosed with the report. Instead of the 97.9% indicated in the report, Naftohaz Ukrayiny transferred to the budget only 46% of the amount calculated. The Enerhoatom National Electricity Generating Company has also paid a paltry 24.3% of the assessed sum, while the government reported it had paid about 68%. Power supply facilities paid only 47% of the calculated budget revenues in the first eight months of this year, while coal mines paid not UAH 356 million, as the Cabinet claims, but UAH 100 million less. All in all, the tax people claim, coal mines, Naftohaz, and electrical energy facilities provided UAH 2.589 billion to budget revenues during the period rather than the UAH 6.401 billion the government claims.
According to Mr. Azarov, this situation with budget payments was caused by “the imperfect system of settlements and the passing of a number of regulations, which create money flows uncontrollable by the tax authorities.” Nor, Mr. Azarov thinks, has the new settlements system improved the situation in the sector itself. He reminded the hall that FEC facilities’ accounts receivable increased to UAH 12.8 billion over the first nine months of 2000, while the accounts payable rose to UAH 17.8 billion, Interfax-Ukraine reports. The Ukraine’s chief publican also pointed out that the energy market works on the basis of a number of distributive accounts and special-status expendable accounts, which function outside the control of tax authorities. “The settlement system established in the FEC has brought forth only massive violations in they way funds are used,” Mr. Azarov said. He also believes the FEC “is in fact developing today a coal-mine-based scheme of financial flows out of Ukraine.” Mr. Azarov cited as an example the conclusion of contracts on the supply of imported coal to Ukraine by a number of foreign firms. On July 17, coal import contracts were signed between Dniproenerho and Tandem Engineering Ltd. of Israel, Donbasenerho and Ruta Holding of Great Britain and Beverly Ltd. (USA), as well as between Tsentrenerho and Ruta Holding, Beverly Ltd., and Tandem Engineering Ltd. Mr. Azarov said the choice of these firms was “strange,” noting that they are well-known and reliable companies on the world market.
Last Tuesday, addressing the people’s deputies, the Vice Premier in charge of energy, Yuliya Tymoshenko, earlier accused of misinformation, tried to challenge the Tax Administration information without the least embarrassment. She said nuclear power plants and the whole FEC are prepared for the fall and winter period and announced good, in her opinion, main indicators of FEC performance, budget payments, and successful payment of wages arrears to sector workers. In her words, FEC facilities had transferred 2.753 billion live hryvnias to the budget in the nine months of this year, vs. UAH 1.394 billion over the same period of 1999.
However, in a surprisingly prompt move, the Tax Administration press service released a statement during a session break, which denied, in detail and on many counts, the Vice Premier’s just heard claims of the financial achievements in the FEC.
According to tax inspectors, consumers’ electric energy debts in the third quarter did not drop by UAH 344 million, as the Tymoshenko report claims, but rose by UAH 1.6 billion from the beginning of the year to October 1. The same situation exists with payments for electricity bought on the energy market. While the arrears constituted UAH 6.6 billion at the start of the year, they had reached UAH 9.5 billion by the beginning of October. The government’s information on payments for natural gas also turned out to be inflated. Can there be any question of the “increased discipline of payments and level of settlements” if in reality the consumers’ debts to Naftohaz Ukrayiny went up from UAH 2 billion to 4.4 billion in nine months?
In discussing all these statistics the People’s Deputies leveled much reproach and complaints on the FEC leadership, casting doubt on the data and conclusions submitted to them by the Vice Premier. Thus, in the discussion of the government’s report in the name of the committee responsible People’s Deputy Oleh Panasovsky stated, “Today the state is not prepared to assume the obligation of financing (the FEC — Auth.) and rescue it from its crisis.” He disputed Ms. Tymoshenko’s statements, saying, “The amount of coal extracted cannot cover energy requirements,” and “the schedule for procuring fuel has in practice not been adhered to.” His oversight committee believes, he went on to say, that “the situation in the sector is maintained at the expense increased reliance on natural gas.” In his opinion, “Under the conditions of the critically low frequencies with the complete use of emergency abilities and accidental brownouts of energy blocks, a breakdown of Ukraine’s electricity system cannot be ruled out.”
People’s Deputy Bohdan Hubsky told The Day that he was certain that the key question in the work of the FEC is not only the struggle against the shadow economy begotten by corruption. He believes that the codification of current Ukrainian legislation would itself help overcome shadow activities in the Ukrainian economy.
Heorhy Kriuchkov, one of the leaders of the Communist fraction, characterized “the latest measures” outlined in the discussion of how to prepare changes as a fight between oligarchs that will have no practical result. He called it “highly problematical” that the government will be able to put the sector in order.
This idea was also supported by another leftist, Ivan Chyzh. He pointed to the fact that experts estimate that by 2010 Ukraine could cover with its own resources two-thirds of its energy needs worth 300 billion hryvnias, but to do this would require an investment of 500 billion, meaning 50 million should be spent on this annually. For this reason, he believes that the Government Day report should not follow the “everything is all right” line but talk about the huge problems awaiting the country.
People’s Deputy Roman Bezsmertny (NDP) had an original idea when he told The Day that it was simply lack of conscience concerning its own people to make products, for which energy accounts for 70% of the cost. He said that we cannot work according to the scheme one unit of energy produces one unit of energy, which produces one unit of energy that produces yet one more unit of energy. This, lawmaker Bezsmertny is convinced, is one of the reasons why Ukraine cannot break out of the magic circle of its energy problems.
“As far as I recall,” Privatization Special Oversight Committee Chairman Oleksandr Riabchenko told The Day, “the first word in reports on the FEC is about fighting corruption. It’s no secret that the relationship between the Cabinet and parliament is not simple, that the most serious charges of corruption are in the sphere of the fuel complex, and mutual recriminations about corruption there are simply a means of fighting each other. This is no way out. Sooner or later people will inevitably come to the helm, who are not going to take part in this struggle but simply introduce a model of transparency into the FEC. Today there is a great deal of talk about this, but as a rule the slogans are not carried out. Nevertheless, the government is itself primarily to blame for corruption, for Cabinet decisions determine most of the questions of how the FEC functions, and if there is corruption there, it must be completely bound up with the government.”
