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Ukrainian public broadcaster risks going off-air due to its inherited Yanukovych-era debts

Ukrainian public broadcaster Suspilne risks going off-air due to inherited debts from Yanukovych-era
The main office of the Public Broadcaster. Photo:
Ukrainian public broadcaster risks going off-air due to its inherited Yanukovych-era debts
Edited by: Sonia Maryn
The independent National Public Broadcasting Company of Ukraine or Suspilne has been paralyzed as a court has blocked its bank accounts because of old debts inherited by the company. This news first appeared on 28 February, and the message seemed to come out of the blue. In fact, it did not. Despite issuing multiple warnings, ignored both by the previous and the current governments, the debt grew like a snowball cascading down a hill.

Now Ukraine risks to pull out from the Eurovision Song Contest for the second consecutive time since Suspilne is a local partner of the contest, and even to shut down the broadcaster entirely if the government will not cover the debts.

In the cut-throat environment of oligarch-owned media in Ukraine, the role of the independent Public Broadcaster, headed by Zurab Alasania, cannot be underestimated. However, due to the government’s attempts to limit its budget, the broadcaster was not able to keep up with the expectations of its viewers. The freeze on the company’s accounts has become yet another link in the chain of ambivalent news regarding the media field this year.

The demand to establish a public broadcasting company in Ukraine increased following Independence in 1991, reaching its peak after the Revolution of Dignity in 2014. During the revolution, very few of the nationwide TV channels owned by oligarchs covered Euromaidan events objectively. In most cases, they simply catered to the interests of those in power – promoting a narrative of division among citizens and rifts between different regions of Ukraine. When the Public Broadcaster was launched in 2017, its main purpose was to serve objectively the information needs of Ukrainian citizens – not the government, politicians, or oligarchs.

The head office of the Public Broadcaster was set up in the premises of the old National TV and Radio Company of Ukraine in Kyiv. Comprised of more than 20 companies across the country, the National TV and Radio Company of Ukraine had become a bureaucratic monster, bloated with incompetent management, redundant staff, and corruption breeding in every filing cabinet. Moreover, at critical times, these national companies mainly acted as a PR service for the government.

When the Public Broadcaster came on the scene, Alasania inherited these non-functional companies that were spread across the entire country. The Public Broadcaster managed to curb the rampant corruption and fend off political influence. On 28 February, all the offices of the company across the country were blocked.

What are the old debts about

Being accustomed to constant turbulence, Public Broadcaster management has thus far been able to deflect recriminations and appear ready to deal with future issues. Irrespectively, they will not be able to avoid criticism – unjustified as it is – for ratings that are unfairly compared to commercial channels.

In his Facebook post, Alasania outlined how circumstances evolved. The broadcaster’s bank accounts were specifically suspended by the responsible division in the Ministry of Justice. They did so to collect funds for the outstanding debt owed to the Euronews company – the Euro 10.5 mn debt that was inherited by the Public Broadcaster. The broadcaster is now also obligated to pay Euro 1.6 mn in executive fees, and UAH 73,038 (about $2,700) in court costs.

Alasania explains the origins of the debt. During his regime, then-President Viktor Yanukovych – who escaped the country after the Euromaidan revolution – had wanted to gain publicity in Europe. To facilitate the president’s demand, in 2010 then-Prime Minister Mykola Azarov launched a Ukrainian-language version of Euronews. The agreement was signed for six years.

Alasania points out that this was a direct violation of Ukrainian legislation, which prohibits agreements of this nature to cover a period longer than one year. Terms of the agreement required the state to make a one-time payment of Euro 8.5 mn, and then Euro 5.2 mn annually. A separate state budget program to cover these payments was created, and payments were made from 2010 to the first half of 2013.

In 2014, the new management of the National TV and Radio Companies of Ukraine began applying to the incoming government for assistance in paying the debt. However, in 2014/15, the government ceased its assistance. As a result, in 2015 the agreement was broken, with the balance of the debt amounting to Euro 10.5 mn.

Euronews, Public Broadcaster, and Eurovision

The newly established Suspilne public broadcaster inherited the debt and bore its fruits. Meanwhile, as Alasania puts it, Euronews had already started sueing the National TV and Radio Companies, both in the Ukrainian and Swiss courts.

Into the mix came the Ukrainian performer Jamala, who won the 2016 Eurovision Song Contest, held in Stockholm. As a result, Ukraine was obliged to hold the contest the following year, and had to provide Euro 15 mn as a guarantee. The funds were deposited in a Swiss bank and were to be returned to Ukraine following the competition.

In 2017, the song contest was held successfully in Kyiv, and Ukraine was entitled to the Euro 15 mn refund, but Euronews intervened. Seeing their opportunity, they filed a lawsuit in a Geneva court to block the refund. Since the Ukrainian Economic Court had ruled in their favor two years earlier in 2015, Euronews considered the refund to be theirs for the taking.

Of the original deposit, some Euro 11 mn remains frozen in Geneva. The Public Broadcaster, as well as the Ministry of Justice, have launched an appeal to release the funds.

“Yes, it was the same Ministry of Justice that now arrested the Public Broadcaster’s accounts,” Alasania says, adding that the Geneva appeal remains before the courts.

In his FB post, Alasania posed the question as to why the ministry decided to freeze the accounts of the broadcaster at this time, and provides rhetorically the answer himself,

“Don’t ask. It’s a political case, human logic does not work here,” Public Broadcaster chief believes.

The consequences and the government’s reaction

In his official statement on the consequences of the decision, Alasania noted:

“The freeze of bank accounts has already made the preparation for broadcasting the 2020 Olympic Games impossible, and it has blocked Ukraine’s participation in Eurovision 2020. Additionally, it has stopped the launch of projects by the Public Broadcaster – in particular the launch of their new national TV channel, UA:Pershyi.”

The funding freeze is expected to have dire consequences in the near future. Activities of the public broadcasting company will necessarily suffer, once expenditures reach their limit. National and regional TV channels, at least three radio stations, and innovative digital platforms will cease to exist.

The statement also noted that in the week prior to the freeze, the Public Broadcaster applied for assistance to the Cabinet of Ministers, the Ministry of Finances, the Ministry of Culture, Youth, and Sports, and the Ministry of Justice, however, had not yet received a response, let alone a funding lifeline.

Following the news of the suspension of the broadcaster’s bank accounts, Minister of Culture Youth, and Sports Volodymyr Borodyanskyi finally reacted. He made assurances that his ministry, together with the Ministry of Finances, will provide funds for the urgent debt repayment to Euronews. However, the funds will be detracted from the budget of the Public Broadcaster. The arrangement states that once the current crisis is resolved, the ministries will put financing in place for the public broadcasting company to recover the allocation.

Alasania had foreseen that the government would pay the debt from their budget, and had criticized it in advance:

“We are aware that even as the 2020 Budget is about to be tabled, allocations intended for the National Public Broadcasting Company will be transferred immediately to Euronews. This deficit will impact all expenditures that had been forecasted by the Public Broadcaster – and required by statutory law. The company will therefore be underfunded by close to UAH 300 mn. Planned programming and other initiatives for 2020 will not be possible. The broadcaster will go into survival mode, as it has continuously in the past. We will see no innovation in content and no upgrading of necessary technical deficiencies.”

Vadym Miskyi, secretary of the Supervisory Board of the National Public Broadcasting Company stresses the risk of structuring the public broadcaster by combining all its companies into a debtor-enterprise. Potentially, because of the outstanding debts, the whole system — including radio and regional channels — would be suspended. The expert provides examples of public broadcasting organizations from other countries.

“[In some countries] all media assets are independent subsidiaries, responsible for their own obligations, but they are owned and operated by a joint holding company – an umbrella national public broadcaster. This umbrella entity sets editorial standards and other policies, and controls their execution. This is the model followed by Sweden and Switzerland, also the process of transferring all the independent broadcasters to larger entity – another joint holding company is ongoing in France. Ukraine also had the option of creating a shared public broadcasting system, but the legislators at the time chose the least optimal path (note: all the stages of combining the entities under a single-debtor enterprise were outlined precisely in the law). However, the risk of folding under the weight of debt held by any one single legal entity was not properly assessed and calculated.”

In other words, the advantages of a joint entity were not understood. Going forward, Mr. Miskyi asserts that the best way to optimize the structuring of the Public Broadcaster, would be to limit its liability, so that no single company could burden its debts upon the whole entity, thus shutting down the entire enterprise. This approach would need to be rooted in legislation and supported by a more reliable financing system. Miskyi adds that such alternative models have already been developed and are widely recommended by the experts of the Council of Europe.

The money and the ratings

According to law, Ukraine’s Public Broadcaster is financed by the state. It should receive at least 0.2% of the total state budget of the previous year annually. However, from the outset, the broadcaster has been underfunded. Last year, of the budgeted UAH 1.8 bn ($73 mn), the broadcaster received about UAH 1.5 bn ($61 mn), a mere 57% of funds required by law.

The Public Broadcaster attributes their chronic underfunding to their resistance to government pressure. As Alasania described in an interview with Euromaidan Press in 2017, officials and politicians expect collaboration, as is the norm in Ukraine’s media field. The common understanding is that funding for media depends upon their cooperation in promoting certain people and broadcasting certain messaging. The broadcaster’s ongoing financial difficulties are a direct result of their non-compliance — their commitment to true independence.

As a result, the broadcaster has consistently found itself on the verge of collapse. Unable to support new development or to produce quality content, neither in popular nor conventional programming. Struggling to maintain its overhead and cutting everything but the bare essentials.

Nonetheless, in critical moments, the broadcaster still found a way to fill society’s information needs. For example, its coverage was crucial, when in November 2018 Ukraine announced martial law following Russia’s attack on Ukrainian ships in the Sea of Azov.

Last year, when Ukraine was going through two election processes, the broadcaster’s main channel launched the political talk-show Zvorotniy Vidlik (Final Countdown), which was praised by Ukrainian and international experts alike for its objective reporting. Compared to other programming on this channel, its ratings were high.

However, it could have been higher, had key politicians taken part in the talk show, instead of lining up for slanted programs of oligarch-owned TV stations.

It is foreseen that in 2020 the Public Broadcaster has to receive around UAH 2 bn (about $81.3 mn). UAH 1.7 (about $ 69 mn) out of them is envisaged for the consumption costs, and UAH 278, 310 7 (about $11,000) for the development.

The recent Ministry of Justice’s decision was perceived as the element of pressure within the Public Broadcaster.

“No doubt that at the end of the year, the government officials will ask us where is our effective work, ratings, new programs, and all of this. By the way, you will ask as well. You will forget to ask about the money which was taken, however will not forget to ask about effectiveness,” Alasania concluded.

Media Transformations

Earlier this year, there were a few important news items related to the field of media. At first, the government announced its plan to launch a Russian-language channel for the occupied territories of Donbas. It turned out that the channel will be launched on the base of UATV, Ukraine’s international broadcasting. As a result, Ukraine lost its international voice.

Read also: Canceling its international broadcast, Ukraine yields more ground to Russian propaganda internationally

Also at the beginning of 2020, the private Crimean Tatar channel ATR found itself on the verge of closing, due to the suspension of the financial support from the state’s budget. ATR has received funding from the state budget since 2016 through the program of resettlement and arrangement of Crimean Tatars and persons of other nationalities deported from the territory of Ukraine. On 14 February, the Radio Broadcasting, Radio and Television Concern warned that it can turn the ATR off due to the debts. However, as told by the management of the media due to the efforts of Serhiy Kostynskyi, a member of the National TV and Radio Broadcasting Council, the situation was settled.

Also on 26 February, at the forum Age of Crimea 2020 devoted to the sixth anniversary of the illegal annexation of the peninsula, President Volodymyr Zelenskyy promised that the question of renewing the financing for the ATR will be resolved in the near future.

Meanwhile, there is also ongoing work on the media legislation which contains ambivalent provisions criticized by the media community.

Read also: Proposed legislation on media may impede freedom of speech in Ukraine

Read more:


Edited by: Sonia Maryn
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