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01/10/2016

Kyiv challenges oligarch’s grip on energy sector

Europe's East

Kyiv challenges oligarch’s grip on energy sector

Rinat Akhmetov [Wikipedia]

Ukraine’s judicial authorities moved to curb the influence of the super-rich yesterday (7 April) by challenging tenders that gave leading businessmen control over key power companies under ousted president Viktor Yanukovich.

The legal actions targeted the 2012 and 2013 sell-offs of electricity-generating companies in eastern Ukraine to holdings of multi-billionaire Rinat Akhmetov and a close associate, and of a power distributor in the west of the country.

State assets in Dniproenergo and Donbasenergo and a main power distributor in the Zakarpatya region were sold off for low prices in tenders limited to a few favoured participants, the prosecutor’s office said in a statement.

“These privatisations … were drawn up in such a way as to artificially create the conditions for acquisition of the state assets by specific individuals, which significantly narrowed down the circle of potential purchasers,” it said.

The move against Akhmetov, Ukraine’s richest man, and other oligarchs close to the disgraced Yanukovich appeared to be part of concerted moves by the pro-Western leadership to end cronyism and break the influence of the super-wealthy on political life.

In a statement on Tuesday, Akhmetov’s DTEK holding company said it saw no reason to review the privatisation of Dniproenergo, which it said had been carried out legally.

It said it any such action by the prosecutor’s office would be a violation of the fundamental rights of private ownership and rebound on government privatisation plans later this year.

President Petro Poroshenko began the drive to curb oligarch power by sacking tycoon Ihor Kolomoisky as Dnipropetrovsk region governor last month after a bid to put a legal brake on his commercial interests in the oil industry.

“De-oligarchisation”

Poroshenko, under pressure from Western financial institutions and potential donors to clean up in exchange for bail-out money, has since announced a campaign to clip the wings of oligarchs who try to buy influence with lawmakers.

He appears to have set his sights on the gas industry, the battleground for competing oligarch interests ever since independence from the Soviet Union in 1991.

Some deputies are pushing for legislation that will curb the power of another tycoon, Dmytro Firtash, the owner of Group DF.

Firtash, who was arrested in Vienna last year on charges of bribery, still controls an empire built up under Yanukovich controlling much of Ukraine’s regional gas distribution network.

“They (the oligarchs) want chaos, not order. I want the de-oligarchisation of the country,” Poroshenko told Channel 5 television on Saturday.

In February 2013, Firtash bought Inter Media Group Ltd., which owns eight television stations, for $2.5 billion from ex-First Deputy Prime Minister Valeriy Khoroshkovskiy, who was in charge of the secret services of the then-President Viktor Yanukovich. More recently, Firtash bought the Ukrainian services of Euronews, prompting the authorities in Kyiv to ban the service on Ukrainian territory.

>> Read: Ukraine bans Euronews

Poroshenko owns Channel 5 television.

Akhmetov’s DTEK company paid $147 million for 25% of Dniproenergo’s state assets in 2012, two years after Yanukovich was elected, to boost his extensive energy and steel holdings.

Recently DTEK hired Brussels lobbyists to promote is as a modern business in Western circles.

Control over Donbasenergo went to Ihor Gumenyuk, a friend of Akhmetov and member of Yanukovich’s Regions party, iIhor Kon a 2013 tender in which his Energoinvest Holding snapped up 61% of the state share for $90 million.

Half the state share in the Zakarpatya power distributor was sold in early 2012 for about $18 million, only slightly above the opening price, to a company run by Russian businessmen.