Oleg Onopko
Expert on Euastern Europe at Europe Insight
onopko@europeinsight.net
722
08.06.2016

Before you sell

What role foreign management may play for the future of Ukrainian Railways

Ukrainian ministers keep repeating that Ukrainian Railways will not be privatised. In early June, the Ukrainian parliament even forbade the privatisation of the state-owned corporation with 250 votes. The president has yet to sign the law, however. This fact, along with the situation and changes in the company, may show that the selling may take another route.

On 6 June the Ministry of Infrastructure of Ukraine signed a contract with the new head of the company, Polish citizen Wojciech Balczun. Also presented was the company’s new management board, comprising of foreign nationals and only one Ukrainian.

By appointing foreigners as top managers, Kiev is trying to show the public that it is doing everything possible to save Ukrainian Railways. However, the futility of such a move has already been proven by political practice. Thus, one must presume the government is guided by entirely different considerations.

Even though foreign professionals may be incorruptible, they lack understanding of the special characteristics of Ukrainian society and power systems turned out to be ineffective; they got lost – falling victim to intrigues and corruption scandals – and quit (for example, Economic Minister Aivaras Abromavičius, Deputy Interior Minister Ekaterina Zguladze, Health Minister Alexander Kvitashvili.

It is of note that it was namely Abromavičius who chose Balczun for the position of the new head of Ukrainian Railways. So, according to the logic of all previous personnel decisions, the outcome seems predictable enough: the “Polish railwaymen” will fail to cope with the state’s “Ukrainian locomotive” hurling towards the precipice and, in the end, privatisation will be the only solution remaining for its salvation.

Taking structural specificities into consideration (The company consists of 6 regional railways.), it is most likely that the state corporation will be sold in parts, divided between key financial and industrial groups. One might suppose Donetsk Railways will be acquired by Rinat Akhmetov or the Donetsk Oblast’s former governor Serhiy Taruta, who is more loyal to Kiev; the Near-Dnipro Odessa railways will go to Ihor Kolomoyskyi’s Privat Group; and so on.

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