Infrastructure Minister Volodymyr Omelyan on April 27 in Kyiv. Photo by Kyiv Post
The waiting room walls outside the infrastructure minister’s office are lined with portraits of his predecessors: Some dead, some suspected of massive corruption and some both – such as Heorhiy Kirpa, found shot to death on Dec. 27, 2004, the day after the Orange Revolution-inspired election of Viktor Yushchenko.
“It was my first wish to remove all those portraits on the ‘cemetery wall.’ I will do it definitely,” said Ukraine’s new Infrastructure Minister Volodymyr Omelyan in an interview with the Kyiv Post on April 24. “It’s a wall of dishonor I would say.”
But Omelyan, who was deputy minister before taking over for his former boss Andriy Pivovarsky on April 14, has bigger problems to solve first.
Omelyan runs what Ukrainian lawmaker Serhiy Leshchenko, the investigative journalist, calls a “mafia ministry.”
Or, to use the more polite term of “vested interests,” the Infrastructure Ministry is one in which the nation’s industrialists and insiders reputedly seek preferential rates and access to state-owned or state-run railways, roads, air routes, ports and postal services.
And now all of these areas — badly mismanaged yet vital to Ukraine’s economic future — are run by 600,000 employees under Omelyan, a 36-year-old native of Lviv with extensive government but no business experience.
“You know, Leshchenko is right,” Omelyan said. “It’s a miracle they appointed me. For the mafia, it’s a great loss that such a huge ministry is given to a reformer where there is no corruption.”
Would he care to name the members of the mafia?
“I will keep the perimeter for them not to come in,” Omelyan said. “If they enter the ministry, I will name them.”
Conflicts with oligarchs
But clearly antagonism exists between the ministry and some of the leading customers of the state-owned railway monopoly, Ukrzaliznytsia. Three of the biggest customers of the railways are companies owned by industrialists Rinat Akhmetov, Dmytro Firtash and Konstantin Zhevago.
Omelyan said that these oligarch-owned companies have historically gotten subsidies and sweetheart deals on the railways at the expense of everyone else. It has to stop, he said. “It was happening 25 years, all the time,” Omelyan said.
A worker cuts grass on a railway on Aug. 17 in Kyiv. Ukraine’s state-owned railway monopoly Ukrzaliznytsia, which employes 280,000 people, will soon get a new CEO. (Volodymyr Petrov)
Omelyan noted that – as the clash heated up with oligarch-owned companies over railway tariffs and preferential access to state resources — a “black PR” campaign started in the news media falsely alleging that top Infrastructure Ministry employees were receiving illegal payments.
A former top Infrastructure Ministry adviser, Maxim Buryachok, fueled the accusations of illegal payments by accusing Pivovarsky of receiving $50,000 monthly from the Presidential Administration, allegations the ex-minister and Omelyan dismissed as false. Today Buryachok is among the skeptics of Omelyan. “It’s kind of a strange appointment because he doesn’t have relevant experience,” Buryachok said.
Omelyan, however, links criticism to the battle over getting commercial customers to pay fair and higher rates for use of the state railways.
“We endured a great fight on tariffs with them,” Omelyan said of the industrial customers. “My hope is that we are able to reach some compromise and that those tariffs will be increased as they were before.”
Jock Mendoza-Wilson, a spokesman for Akhmetov’s System Capital Management, said on April 28 that he was seeking a response to Omelyan’s contention that the billionaire’s companies were getting preferential rates on state railroads.
‘A great fight on tariffs’
“This is a state company,” Omelyan said. “Everyone should have equal access to state resources. It should be done in a transparent way…We endured a great fight on tariffs with them. My hope is that we are able to reach some compromise and those tariffs will be increased as they were before.”
His message to the oligarchs and everyone else “is that we have to build a transparent state system, build anti-corruption enforcement…if everything works well, you get the benefit.” Omelyan said. “We realized from the first day being here that there’s no chance to fight oligarchs with the weapons you have. The only chance and the only weapon is publicity, the truth.”
His priorities include corporatization and privatization of many of the ministry’s state-owned enterprises.
He said that “50 percent of the bad things happening are about corruption and the other 50 percent are about ineffectiveness.”
To counter both problems, Omelyan said: “I will put every effort for this first ministry to become the first ministry not only to declare the importance of privatization, but to conduct deep privatization,” he said. “We do not have enough human capacity to run state business. We should get rid of these companies and keep only pure strategic companies, not cover all with (the) strategic (label): ‘This factory some decades ago produced very specific goods. It’s a fake. It’s only a source of corruption for some people.”
He also wants to appoint a special deputy minister to fight corruption within the ministry.
Omelyan’s ideal candidate would be someone not from any of the areas he oversees — airlines, railways, ports, postal and roads, but rather someone “with strong motivation, strong skills that he would end cover issues and all schemes and make them public.”
If law enforcement doesn’t act, Omelyan said, “we will do everything possible to make it public” and to identify the suspects by name and present publicly the facts that the ministry has uncovered. “If we have is no chance to arresting them at least the public will know who they are,” he said. After the EuroMaidan Revolution, which drove ex-President Viktor Yanukovych out of power in 2014 and during which “so many people died, to keep silent about bloody vampires is not correct,” he said.
New rail, postal CEOs
Omelyan is upbeat about two new appointments as CEO of leading state-owned companies under his management.
He believes the ascension of the two executives – coming after a competitive and open hiring process – heralds a new era in ending the cronyism and bribes of past appointments. Taking money to appoint certain people as deputy ministers or as heads of state-owned enterprises “was a normal practice in the ministry a couple of years ago,” Omelyan said.
Wojciech Balczun, a Polish citizen was hired as CEO of the state-owned railway monopoly Ukrzaliznytsia.
This is no ordinary railroad. It affects the lives of every Ukrainian and employs almost half of the 600,000 employees under the Infrastructure Ministry’s control. So much featherbedding has built up that many think the railway service needs only half of its current employees.
Balczun is credited for turning around Poland’s largest railway freight carrier, PKP Cargo, and prepared it for an initial public offering in 2013. It went from losing $26 million a year in 2008 to making $130 million in 2011 during his tenure, which lasted from 2008 to 2013. He is also a musician who posted on his Facebook page on April 12 that taking over management of the Ukrainian railway would be “the most difficult business task” of his life.
Balczun wants to develop a high-speed railway network in Ukraine and open up the service to private carriers.
He will be well-compensated for his efforts, with news reports saying that he was offered $375,000 yearly as base pay and bonuses bringing total compensation up to $1.5 million annually if specified goals are met. Kristina Nikolayeva, spokeswoman for the Infrastructure Ministry, said that Balczun has not yet signed a contract to run the enterprise and that all salary figures would be released when an agreement is reached.
Another key appointment within the Infrastructure Ministry is that of Igor Smelyansky, a native of Odesa, as CEO of Ukrposhta, the state postal with a reputation for corruption and massive inefficiency. Smelyansky’s total possible compensation will likely be approximately half that of Balczun, according to Nikolayeva, but she said his contract has not been finalized yet either.
Omelyan said that not only top managers must be paid well, but so do other state employees and that he hopes the Ukrainian government will increase salaries across the board.
Giving ‘political cover’
Omelyan said he sees his job as protecting the new CEOs from the inevitable political attacks that Pivovarsky faced when he tried to make unpopular but necessary changes.
“I will do everything possible to protect them and let them do the reforms,” Omelyan said of his subordinates. To those in the ministry, he says: “I promise you that I am your shield to protect you from all political enemies. You should just do your job.”
Omelyan’s predecessor, Pivorarsky, was bedeviled by what he called “bl…