Saturday, 11 September 2010
KIEV, Ukraine -- Ex-Prime Minister Yulia Tymoshenko may be fading in popularity, but she remains one of the few politicians to openly denounce conflicts of interest between top officials of President Viktor Yanukovych’s administration and RosUkrEnergo, the shadowy gas trader jointly owned by Russia’s Gazprom and Ukrainian businessmen.
Ex-Prime Minister Yulia Tymoshenko this week charged top members of President Viktor Yanukovych’s administration with large-scale corruption and conflicts of interest in the natural gas trade.
Tymoshenko, speaking to foreign diplomats on Sept. 6, repeated accusations she made while in power during two terms as the nation’s prime minister.
But she added a new wrinkle by imploring nations and governments that lend Ukraine money – such as through the International Monetary Fund – to stop being complicit in schemes that effectively fleece the nation’s 46 million citizens.
The immediate flashpoint is more than 11 billion cubic meters of disputed natural gas – worth at least $5 billion.
The government may be forced to return the bounty to RosUkrEnergo, the shadowy gas-trading intermediary that is jointly owned by Ukrainian businessmen and Russia’s state-run Gazprom.
Tymoshenko cut RosUkrEnergo out of the lucrative trade before she lost the presidential election in February and, subsequently, the prime minister’s post in March.
She alleges that Dmytro Firtash, part-owner of RosUkrEnergo, is the de facto financial sponsor of her political rival, Yanukovych, and his ruling Party of Regions that controls parliament. Party leadership and Firtash deny he backs the Party of Regions financially.
Now, seven months into Yanukovych’s term, Tymoshenko zeroed in on Firtash’s alleged business ties with top administration officials – the same ones who play key roles in the ultimate fate of the disputed 11 billion cubic meters of natural gas.
With prosecutorial zeal, Tymoshenko accused Fuel and Energy Minister Yuriy Boyko, presidential administration chief Serhiy Lyovochkin and the enforcer in the bunch, State Security Service head Valeriy Khoroshkovsky, of being in cahoots with Firtash.
Boyko, Lyovochkin and Khoroshkovsky have denied connections to Firtash’s RosUkrEnergo, while Khoroshkovsky says there is nothing improper in his shared media interests with Firtash, including the Inter TV channel – the nation’s most powerful and most-watched media outlet.
“RosUkrEnergo, when it was being formed, had current Fuel and Energy Minister Boyko as a signatory of its formation. All of this was submitted to a special investigative commission of parliament,” Tymoshenko said, laying out her case.
“Thus, Boyko, in effect, who today heads the Ministry of Fuel and Energy and state-owned [energy holding] Naftogaz, is part and parcel of this system and is a direct partner of RosUkrEnergo. He is a co-founder of RosUkrEnergo. There are original documents proving this.”
Then she drew Khoroshkovsky into the picture.
“Also a partner of RosUkrEnergo is the current State Security Service chief, Valery Khoroshkovsky, who is a partner of Inter TV channel. In addition, in recent times current presidential chief of staff Lyovochkin has been a business partner of RosUkrEnergo.
This is an obvious fact, which today doesn’t elicit any protest.”
The web of insider dealing and conflicts of interest is coming at the expense of average Ukrainians, Tymoshenko charged. She urged foreign diplomats not to be complicit in sleaze. The IMF, for instance, supported by governments internationally has recently approved a $15.2 billion loan to Ukraine.
“Therefore we will in the near future ask the IMF to send a special commission, which could look into the situation regarding RosUkrEnergo,” Tymoshenko said.
“Because a part of the state’s finances will be withdrawn and given to RosUkrEnergo, which, in it its part, will break the overall (financial) balance of the nation. This means that if $5.4 billion is given to RosUkrEnergo, the financial imbalance of Ukraine will deepen to such an extent that Ukraine essentially will further fall into risk of not repaying money to the IMF.”
Tymoshenko claimed that IMF money is indirectly being used to pay off RosUkrEnergo at the ultimate expense of Ukrainian taxpayers. “I think this isn’t an empty issue,” Tymoshenko said. “Indeed, the money that the IMF gives to Ukraine and other countries comes from the taxpayers of your citizens. And if your citizens finance corruption in Ukraine, then I believe this requires great attention.”
Tymoshenko eliminated RosUkrEnergo from the multi-billion-dollar business as monopoly gas supplier to Ukraine in 2009, after she – as premier – struck a deal with her Russian counterpart, Vladimir Putin.
Before this, RosUkrEnergo generated huge profits. On paper, billionaire Dmytro Firtash owns a 45 percent stake in the company while Ivan Fursin owns a 5 percent share. Both are close associates of Lyovochkin, Yanukovych’s chief of staff. Boyko, the energy minister, has close ties to Firtash.
Western anti-corruption watchdogs such as London-based Global Witness have long questioned the transparency of RosUkrEnergo. The other half of the gas trader is owned by Russian state gas monopoly Gazprom. Tymoshenko has long described such intermediary companies as “parasites” that collect profits that should belong to state gas companies – Russia’s Gazprom and Ukraine’s Naftogaz.
The $5 billion in natural gas up for grabs – the approximate worth of the disputed 11 billion cubic meters – was supplied by Gazprom and accumulated by RosUkrEnergo in recent years for underground storage.
Gazprom reportedly agreed to re-sell it to Naftogaz as part of the 2009 Putin-Tymoshenko agreement. Along with partners, Firtash claimed the Tymoshenko government illegally expropriated the gas. He filed a lawsuit against Ukraine. Tymoshenko defended the transaction as legal, citing contracts that gave Ukraine a purchase option for gas that RosUkrEnergo failed to pay Gazprom for upon import.
Since no one is showing all documents involved, it’s not clear where the truth lies.
What is certain is that a Stockholm arbitration court ordered Ukraine earlier this year to return the gas to RosUkrEnergo.
One investment banker said such a loss could double Naftogaz’s deficit and increase the national budget deficit by at least one percent – to 7.5 percent of gross domestic product, expected to reach $140 billion this year.
Tymoshenko claims that associates of Yanukovych, who beat her in the Feb. 7 runoff presidential election, did everything in their power for Ukraine to purposely lose the Stockholm arbitration case. If so, that means associates of Yanukovych’s inner circle could profit handsomely at the nation’s expense.
Tymoshenko elaborated: “Having paid twice for natural gas – once to RosUkrEnergo, which never passed the funds to Gazprom, and some $1.7 billion a second time directly to Gazprom – now, according to the Stockholm Court’s decision, we have to pay a third time for the 11 billion cubic meters of gas to RosUkrEnergo. Moreover, we will have to pay for the gas at double the price. Then the gas cost $1.68 billion; today the nation faces a $5.4 billion bill.”
The individuals whom Tymoshenko implicated in the alleged scam have repeatedly denied any wrongdoing. With the exception of Lyovochkin, they have never responded to requests by the Kyiv Post for interviews.
But a trail of documents and recent comments show that the owners of RosUkrEnergo and Yanukovych’s top officials are, in fact, tight-knit associates, if not business partners. These conflicts of interests – and Tymoshenko’s charges – fuel suspicions that national interests may be sacrificed for personal enrichment in the RosUkrEnergo case.
During a Sept. 8 briefing with journalists, Lyovochkin admitted to being close friends with Firtash and Fursin. But Lyovochkin, who served as a top assistant to ex- President Leonid Kuchma when RosUkrEnergo was introduced as the supplier of natural gas to Ukraine, denied allegations that he has ever been a business partner in the deal.
Lyovochkin also denied a conflict of interest, while describing Fursin as a longtime friend. But he could not explain what Fursin was doing in the presidential administration that very day. “I have not seen him,” Lyovochkin said. Fursin declined to speak with journalists about his visit.
Lyovochkin’s close friend, energy minister Boyko, has repeatedly denied having a vested interest in RosUkrEnergo.
However, Boyko served as head of Naftogaz and energy minister in the early-to-mid 2000s. During this period, two Firtash-owned companies were appointed suppliers of gas to Ukraine: RosUkrEnergo and its predecessor, Hungarian-registered Eural Trans Gas. They generated billion-dollar revenues and profits.
Roman Zvarych, head of a parliamentary investigatory committee into RosUkrEnergo, said evidence exists to show possible wrongdoing by Boyko in these decisions. According to Zvarych, while serving as a public official with the power to approve of the gas traders’ privileged position in the lucrative trade, Boyko also served as a board member of RosUkrEnergo.
This alone, according to Zvarych, is a clear-cut violation of the law and evidence of collusion and conflicts of interest.
Documents obtained by the Kyiv Post show that Boyko served as the legal representative of Firtash in his recent divorce with Maryna Kalynovska-Firtash, whose maiden name is Moskal.
As for Ukraine’s top spy chief, Security Service of Ukraine (SBU) head Khoroshkovsky, he is described by the political opposition as Firtash’s enforcer.
Despite being a partner of Firtash in Ukraine’s largest television group, U.A. Inter Media Group (which owns the Inter TV channel), Khoroshkovsky has overseen investigations that aimed to reverse the Putin-Tymoshenko agreement and return the disputed 11 billion cubic meters of gas to RosUkrEnergo.
Tymoshenko isn’t the only one raising questions about RosUkrEnergo.
During the January 2009 gas crisis, in which Moscow shut off supplies to Ukraine for nearly three weeks because of non-payment, Putin described RosUkrEnergo’s role as a sign of massive corruption within Ukraine’s highest echelons of political power.
Putin told reporters that Ukrainian authorities were fighting “not for the price of gas but for the possibility to maintain one or other intermediaries so that they can use the proceeds for their personal gain and also get resources for future political campaigns.’’
However, Putin’s associates have served on RosUkrEnergo’s board of directors. Political analysts have said that the intermediary served Russian interests by ensuring slush-fund money went to pro-Russian political parties in Ukraine.
Russia’s end game appears to be control of Ukraine’s vast natural gas pipeline, which carries 80 percent of Russian-bound blue fuel to Europe.
At a Sept. 6 press conference, Tymoshenko said: “If Ukraine compensates RosUkrEnergo for this gas, it will lead to the bankruptcy of Naftogaz.”
If the Ukrainian people are the losers, the winners are also clear, according to Tymoshenko.
“I want to name these people. This is SBU chief Khoroshkovsky, presidential administration chief Lyovochkin.
This is energy minister Boyko. And this is Yanukovych’s shadow financier – Firtash. In my opinion, a sizable share of the money will go directly to Yanukovych.”
When asked about such accusations by Tymoshenko, Lyovochkin said: “She says an awful lot, and as life shows, not everything she says corresponds to reality.”
For now, nobody is rushing to support Tymoshenko’s call for an investigation into what she calls the biggest scam in Ukraine. Some dismiss her relevance. Others note how she acquired her own fortune.
As the nation’s gas princess in the 1990s, she reputedly made a fortune from price markup schemes as a monopoly trader. Tymoshenko has explained her past by saying she played by the rules of the game under Kuchma. After being squeezed out of the business, she turned against the regime and started to battle corruption.
Today, the truth is that Tymoshenko is one of the few top politicians speaking out against RosUkrEnergo and the web of conflicts surrounding the gas trade.
“Tymoshenko is the only national-scale opposition leader,” said Oleh Rybachuk, who served as presidential administration chief under ex-President Viktor Yushchenko. “If not for her, nobody else would speak up about the issue at all.”
However, “although Tymoshenko is right about RosUkrEnergo,” Rybachuk said, “she has low credibility to speak up about gas corruption.”