Akhmetov – Strategic Culture Foundation https://www.strategic-culture.org Strategic Culture Foundation provides a platform for exclusive analysis, research and policy comment on Eurasian and global affairs. We are covering political, economic, social and security issues worldwide. Mon, 11 Apr 2022 21:41:14 +0000 en-US hourly 1 https://wordpress.org/?v=4.9.16 Kolomoisky Is About to Devour Ukraine https://www.strategic-culture.org/news/2015/02/21/kolomoisky-is-about-to-devour-ukraine/ Sat, 21 Feb 2015 12:35:46 +0000 https://strategic-culture.lo/news/2015/02/21/kolomoisky-is-about-to-devour-ukraine/ About a quarter century ago oligarchic capitalism started to grow in the soil of Ukraine. It is based on «natural selection» – oligarchs devour small and medium businesses, as well as state assets. With primitive capital accumulation resources coming to an end, oligarchs begin to devour each other using administrative power, forcible takeovers, corrupt courts, discrediting evidence and even assassinations, if need be. They look very much like scorpions in a jar. 

After the coup of 2014 the «natural selection» process in Ukraine abruptly accelerated. Some of oligarchs, like Dmitry Firtash, for instance, drop out of the race with others about to join them. Rinat Akhmetov once was the leading oligarch in Ukraine, now he has left the world 100 wealthiest people list. The Bloomberg Billionaires Index brought him down from 88th to 121st position. In a year he has lost $4, 3 billion to make him worth $ 9, 6 billion. 

Now Petro Poroshenko and Igor Kolomoisky are reaching the final. It’s hard to assess the state of Poroshenko’s business after the inauguration, but some information about Kolomoisky has become public domain. 

Here is the latest news. The Kolomoisky company’s shares went down by 25% on February 19 at London stock exchange. JKX Oil & Gas plc (JKX) is a Britain-based hydrocarbon exploration and production company listed on the London stock exchange. Kolomoisky is the co-owner of Eclairs Group Ltd…Eclairs which holds 27.47% of JKX shares. In May 2014, Nigel Moore, the JKX chief executive, wrote in a letter to shareholders saying that Eclairs, a British Virgin Islands registered company controlled through a complex web of offshore trusts, is ultimately 59.1 per cent owned by Igor Kolomoisky and 40.9 per cent by Gennady Bogolyubov and family. The JKX shares abruptly went down by 34% in the middle of the day. As the working day was over the drop was 25% in comparison with the shares stock price in the morning. According to Reuters, the JKX market capitalization was $90 million in early February. The company operates primarily in Ukraine (85% of revenue). It also has assets in Russia, Hungary and Slovakia. JKX Oil & Gas owns Poltava Petroleum Company which holds four licenses to develop oil and gas fields that are part of the Novomykolaivsky complex in Poltava region. It also has three exploration permits: for the Zaplavske, Yelyzavetivske and Chervonoyarsko-Skhidne fields. Experts believe a Russian company brought the JKX shares down. Russian investment firm Proxima Capital Group said on February 19 that it did not plan to make an offer for JKX Oil & Gas Plc, two weeks after announcing its intention to consider an offer. The reasons behind the decision are clear. JKX has been seriously losing its positions the recent year. The stock had fallen 73 percent or $250 million in the 12 months to Feb. 4.

Kolomoisky invested in JKX a few years ago hoping to convert millions into billions in a short period of time. The company planned to make profit exploring and developing shale deposits. In 2013 it launched the largest in Europe shale gas project. Experts said it would lead to ecological disaster with implications involving Russia and other neighboring countries of Europe. The wave of chaos that hit Ukraine hindered the process. The fall of oil prices made the project unprofitable. 

Here is another story related to Kolomoisky, the citizen of Israel, and JKX, the company he controls. The company said on February 16 that it had commenced arbitration proceedings against Ukraine under the Energy Charter Treaty, bilateral investment treaties (with Great Britain and the Netherlands) for the repayment of $180 million related to the production of oil and gas. JKX is seeking repayment of more than $180 million in rental fees that its Ukrainian subsidiary has «illegally paid» on production of oil and gas in Ukraine since 2011. The company’s statement says «In these proceedings, JKX is seeking compensation for the losses it has suffered from Ukraine's treaty violations, including Ukraine's failure to treat JKX's investments in a "fair and equitable" manner and failing to comply with commitments made by Ukraine in respect of JKX's investments.» The bilateral treaties protected from increasing tax burden or any other «game changes» in the Ukraine’s oil and gas sector. Ukraine imposed royalties on the production of gas by JKX's Ukrainian subsidiary in excess of the rate of 28% (as opposed to the 55% rate that is currently applicable under Ukrainian law). There were other payments imposed. In 2014 the Ukrainian parliament temporarily increased royalty for extraction of gas from 28% to 55% (from depths less than five kilometers) and then the parliament prolonged the requirement for 2015. The company said in its report posted on the London Stock Exchange (LSE) on February 16 that in support of JKX's claims against Ukraine under the Energy Charter Treaty an Emergency, Arbitrator appointed under the Arbitration Rules of the Stockholm Chamber of Commerce had already issued an Emergency Award on 14 January 2015 ordering Ukraine to refrain from imposing the royalties. Ukraine did not respond. It’s funny that Kolomoisky, who represents the Ukraine’s ruling regime in the capacity of Dnepropetrovsk governor since March 2014, files claims to this very regime. So what? He is accustomed to make money using «administrative resources.» If the international arbitration court will grant the petitioner’s request to defend the rights of Kolomoisky and Bogoliubov (the company’s Ukrainian beneficiaries), then Kolomoisky will use all the «administrative resources» at his disposal to make Ukraine comply and pay all the due «compensations». 

Igor Kolomoisky is a bright example of parasite sucking the state budget. Here is the recent example. Naftogas is the national oil and gas company of Ukraine involved with extraction, transportation, and refinement of natural gas and crude oil. It has subsidiaries with Naftogas holding 100% of shares. Ukrnafta is the most known subsidiary with 51% of shares under Naftogas control. Formally Ukrnafta is a state company but actually Kolomoisky controls it. On February 10, Ukrnafta Kolomoisky-controlled management team filed a claim with the district administrative court of Kiev against the Ukrainian government, the Ministry of Economic Development and Trade and the Ministry of Energy asking that four representatives of national joint-stock company Naftogaz Ukrainy be removed from the auction committee on the sale of oil, gas condensate and liquefied natural gas of national origin. The representatives were appointed in accordance with the government’s decision of December 16, 2014. 

Sergey Leshchenko, a member of parliament, revealed the reasons behind such strange behavior of the state company. According to him, for many months Kolomoisky sold the Ukrnafta assets at sham auctions held at a pocket stock exchange. There they were acquired at the starting price with 15% discount by Kolomoisky-controlled firms without competition. At each auction the oligarch saved and the company lost 0, 5-1 billion hryvnas. Leshchenko said Kolomoisky cannot have the discount anymore. He was prevented from holding an auction with 15/1 hryvna to dollar rate (the real rate is 23/1). Now Ukrnafta wants to sabotage another auction with oil sold at market price. Actually Ukrnafta deprives itself of additional revenue. But it’s not as absurd as it seems to be, the matter is that the state company openly protects the interests of «patriot» Kolomoisky. 

Kolomoisky has suffered great losses in recent years and lost a lot of wealth. He lost $2 billion in the Crimea besides his assets in Russia and the south-eastern part of Ukraine. According to Forbes, Kolomoisky's worth was 1, 3 billion dollars (in comparison with $2, 4 billion two years ago). He loses wealth, but other Ukrainian oligarchs lose wealth even faster. He demonstrates great resourcefulness to compensate the losses. The man is cunning and merciless. Perhaps he’ll devour another big parasite, like Poroshenko, for instance. And then what? 

There will be nothing to devour. The Ukraine’s economy and the state will be finally destroyed. According to experts, the economy may go down by 10-20% this year. Then parasites of different – world – caliber will expropriate the property accumulated by Kolomoisky as a result of plundering. The contemporary Ukrainian expropriators will be expropriated in their turn. Ukraine and its oligarchs are a good example for those who is interested in the process of «natural selection» in the world of predators.

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Country’s Future and Drastic Reshuffle in Ukrainian Tycoons’ Ranks https://www.strategic-culture.org/news/2015/02/20/country-future-and-drastic-reshuffle-ukrainian-tycoons-ranks/ Thu, 19 Feb 2015 20:00:02 +0000 https://strategic-culture.lo/news/2015/02/20/country-future-and-drastic-reshuffle-ukrainian-tycoons-ranks/ The civil war unleashed by the ruling regime in Ukraine resulted in human suffering and degradation of national economy, as well as transformation of ruling elite. The perception that nine families of tycoons rule the country does not correspond to reality anymore. The ruling circle gets rapidly narrowed as big business in the south-east gets bankrupt with its property systematically eliminated as if it were done according to some plan. More Ukrainian experts say the military operation in the Donbass is an action undertaken to divert attention from the main battle raging in the country – the battle for property. 

The temporary cease-fire is in force as a result of Minsk agreement, but the internal fight between tycoon clans is in full swing. The aim is to get hold of the assets that belonged to overthrown President Yanukovych and his retinue, to confiscate and appropriate what belongs to the supporters of «separatists» (any private property owner from the Donetsk region could be the one), to privatize the titbits of state property, especially economic infrastructure, energy facilities and military industry. The battle for Naftogas, Energoatom, military industry, (especially in view of growing military expenditure), sea and riverine ports, airports and many other assets can undermine the fragile armistice and make the country plunge into the quagmire of further bloodshed. 

Serhiy Taruta, the head of the Donbass Industrial Union and former governor, said he was completely broke. There were times when Rinat Akhmetov was the richest man in Ukraine, now he has only one significant asset left at his disposal – the Mariupol Metallurgical Plant – which is on the brink of bankruptcy. His Ukrtelecom suffered greatly as a result of nationalization in Crimea. The whole empire of Akhmetov ekes out its existence at the expense of Kryvorizhstal-produced iron ore. Dmytro Firtash will be out of business if the country loses its status of the transit route on the way of exporting Russian hydrocarbons to Europe. The company Interpipe founded and owned by Victor Pinchuk cannot shoulder its foreign debt burden. It already exceeds $1, 3 billion. According to experts, Interpipe is facing bankruptcy. Many believe that the return of former Ukrainian President Leonid Kuchma into big politics in the capacity of guarantor of the Minsk accords is an attempt to rescue the business of Pinchuk, his son-in-law who is pressed hard by tycoon Igor Kolomoisky. Zaporizhia (Zaporozhye) clans cannot recover from the losses suffered by well-known Zaporizhia Automobile Building Plant, that had to has stop production, and Motor-Sich (a Public Joint Stock Company in Zaporizhia, one of the largest engine manufacturers for airplanes and helicopters worldwide) is unable to operate at full capacity. The «unfortunate oligarchs» may not be worthy of our pity – in recent years they have transferred at least $100 billion to offshore zones and will hardly die of hunger. The matter is – the formal bankruptcies destroy the economic and technological potential of the country negatively affecting the lives of millions. 

More predator-like and unscrupulous rivals are coming to take the place of East-Ukrainian tycoons. The duo of Petro Poroshenko and Igor Kolomoisky is stepping in. The country is actually divided between the two. The reasons for making these leading clans prevail are obvious. The business climate and all economic indicators are significantly degrading to make administrative power a determining factor as it allows to support allies and put pressure on rivals. Contrary to what he promised, Poroshenko has not given up the ownership of a single enterprise that belonged to him before being elected as President while all his assets started to miraculously bring in huge profits as presidential powers are actively used for this purpose. On his part, Kolomoisky is getting closer to the cabinet led by Arseniy Yatsenyuk and the Ukraine’s National Security and Defence Council headed by Oleksandr Turchynov. The control over power agencies plays a big role in the competition as the civil war continues. Poroshenko has the advantage of being the Supreme Commander-in-Chief, but Kolomoisky is the chief sponsor of volunteer armed formations and has some units under his direct command, for instance, the battalions Dnieper, Donbass and some others. 

The conflict of interests between Petro Poroshenko and Igor Kolomoisky to large extent defines the Ukraine’s fate. The stakes are getting higher. The media outlets which belong to Kolomoisky have been trying to paint President Poroshenko as an interim leader who committed an act of national treason by being a party to the Minsk accords. In particular, they actively discuss the issue of President’s business (Roshen confectionary manufacturing group) on the Russian market. They serve as the sources of information about the looming «third Maidan» and inevitable coup. The Poroshenko-oriented media constantly comes up with the stories about Kolomoisky’s dishonest schemes launched to get profit thanks to defence deals and appropriation of state resources. The nucleus of Kolomoisky’s empire – Privatbank – may soon go bust. This issue is also kept in focus by pro-Poroshenko media. The President can rely on the support of other Ukrainian tycoons as Kolomoisky has antagonized many of them. Some experts believe that the Privatbank owner has crossed the red line in his drive to get all the state resources under his control and become the only beneficiary as the property of Yanukovych family is divided. Kolomoisky has come up with an initiative to transfer the property of disloyal «oligarchs» to the reserve fund for anti-terrorist operation that he heads – the gesture to evoke extreme annoyance. The attacks against the Minsk accords launched by pro-Kolomoisky media, politicians and members of parliament are to great extent influenced by the tycoon’s private interests. Billionaire Viktor Pinchuk launched a lawsuit against Kolomoisky in London for over $2 billion in damages for unfulfilled pledges on mining investments. Pinchuk has Leonid Kuchma behind him. By criticizing the Kuchma’s performance in Minsk Kolomoisky attacks Pinchuk as well. Pursuing the same purpose he tries to revive the relatively forgotten case of Gongadze. He wants the related information to be declassified. It may result is giving a start to a large-scale investigation in the Kuchma’s case to involve many supporters of Kolomoisky. The tycoon has also used his pocket media and some members of parliament to get rid of General Prosecutor Vitaly Yarema who was disloyal to him. With a lot of compromise coming to surface the President had to fire the official. 

Poroshenko hit back. He nominated Victor Shokin, the former Kolomoisky’s adversary, for the Prosecutor General’s position. The President’s nominee was endorsed by parliament on February 10. Unlike Yarema, he is a professional lawyer. His biography includes an interesting detail. In 2005 he launched a criminal case against Kolomoisky. 

The system of duumvirate is taking shape and it does not bode well for Ukraine. Those who share power view the country exclusively as a source of income. That’s the result of «Maidan revolution» taking place under the national banner but transferring the power to cosmopolitans. 

Levko Lukyanenko, a Soviet dissident who has served 26 years in prison camps and exile for propagating the ideas of Ukrainian nationalism, has become a fierce opponent of tycoons. He said their guilt was comparable to the largest crimes against humanity that were committed in the XX century. According to him, in 23 years since independence Ukraine has made no progress. To the contrary, it has degraded in all spheres. He wants the oligarchs to be held responsible. Lukyanenko is an inveterate nationalist. He believes that the gist of the problem is that the ruling class was nationalist in all the countries of Eastern Europe unlike in Ukraine where it was «pro-Russian international». To assert its nationhood Ukraine needs «the second phase of Russian Empire’s disintegration.» I wonder what Lukyanenko meant talking about the domination of «Russians» among the ranks of Ukrainian tycoons? Did he mean Poroshenko and Kolomoisky? Until Ukrainian masterminds see the specially invented «dummy targets» as the source of their troubles the people of the country will not become masters in their own house. 

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Ukraine: Tycoon Rinat Akhmetov Creates Puzzle https://www.strategic-culture.org/news/2014/05/19/ukraine-tycoon-rinat-akhmetov-creates-puzzle/ Sun, 18 May 2014 20:00:01 +0000 https://strategic-culture.lo/news/2014/05/19/ukraine-tycoon-rinat-akhmetov-creates-puzzle/ As the presidential election in Ukraine slated for May 25 is drawing near, the Kiev regime starts to imitate «national unity» by launching round tables with participation of the regions. At that, the so called «anti-terror operation» in the south-east never stops. Some time ago the idea of comprehensive talks was supported by Berlin. Now Germany has no wish to admit the evident failure of the «dialogue» started by Kiev. German Foreign Minister Frank-Walter Steinmeier is known to be an informal sponsor of the Ukrainian round tables. He has recently come under harsh criticism from Markus Ferber, a German politician and Member of European Parliament for Bavaria with the Christian Social Union. According to Ferber, the Steinmeier’s efforts have been in vain and the whole process has failed. The German establishment flatly rebuffed this attack. The Social Democratic Party of Germany even said it was mean to denigrate the national foreign policy. At that, the pessimistic assessment of Markus Ferber could be understood. The round tables have become a makeshift decoration to imitate the democratic procedures before the election. The first round table was held in Kiev, the second – in Kharkiv. The third round is to be held in Cherkassy. As a rule only those who accept the rules imposed by the Kiev regime are invited. What effect could the «the Peace and Harmony Memorandum» produce at the time when the war is raging in the country’s south-east with artillery fire and aviation attacks increasing the civilian death toll? Before leaving for the May 19-20 visit to Germany, Ukraine’s acting Foreign Minister Andrei Deshitsa told German Welt in an interview (1)  that Kiev refused to hold talks with terrorists and called upon Germany to more vigorously oppose Russia. The Welt readers were shocked by the fact that a representative of the regime coming to power as a result of a coup allows himself criticism of the federal government. Emboldened, Deshitsa stated to pontificate about the Western policy as a whole. He said the West should toughen the sanctions regime against Russia going to the stage of imposing sectoral punitive actions comprising some branches of Russian economy, including banks… He stressed the importance of preventive measures. This kind of swagger makes sober European politicians start mulling the ways to keep Ukraine away from being pushed into the abyss of civil conflict.

One of the ways is obvious. It is related to the oligarchic circles – the tycoons who have appeared in Ukraine since it got independence as a result of the Soviet Union’s collapse. Right after the coup Igor Kolomoisky was appointed Dnepropetrovsk governor and Sergey Taruta became the governor of Donetsk. Donetsk-based steel and iron ore billionaire Rinat Akhmetov is the richest man in Donbass region and Ukraine. Forbes magazine lists Akhmetov as the 92nd richest man in the world, worth $12.2 billion. Until now he has been cautious sticking to wait and see policy. Realizing that the situation in Ukraine is extremely shaky, the German diplomacy has started to seek new approaches and connections.

There was a leak into media about Steinmeier meeting Rinat Akhmetov on May 13 during his short visit to Ukraine. The information was scarce. The Foreign Minister’s schedule was pretty busy including the meetings with Alexander Turchinov, acting speaker and president of Ukraine, Arseniy Yatsenyuk, acting prime minister of the country, the OSCE team and also a short stop in Odessa. The very fact that Steinmeier found time for an informal meeting with the richest Ukrainian tycoon displays how important it was for Berlin. It’s worth to note that the meeting was held away from radar screen. The German Ministry of Foreign Affairs statements omitted the fact, but some believe the event was the main part of the tour…

It’s not known what they talked about. One can conjecture that Steinmeier failed to convince Akhmetov to take part in round tables. Soon after the meeting it was reported that Rinat Akhmetov-owned companies group Metinvest signed a memorandum on protecting order and security with the Donetsk People’s Republic. As Metinvest reports, it was signed on May 15 in Mariupol. Some Ukrainian analysts saw it as a warning to the Kiev regime; Akhmetov concluded an agreement with «terrorists» and politely asked the Ukrainian block posts be removed from the city suburbs. German Spigel construed the events in its own way. The outlet believes that Akhmetov is trying to squeeze the self-proclaimed republic forces away so that he could side with Kiev. This interpretation of goings-on was allegedly confirmed by SKM industrial group press-service saying the Akhmetov-owned enterprises will operate only according to the laws of Ukraine. It was not an off-the-cuff statement: the government of the republic has suggested that Ukrainian billionaire Rinat Akhmetov pay taxes into its budget. (2) In a YouTube posted video clip the billionaire declared unequivocally that he favors a unified Ukraine, though he also spoke in favor of federalization, "The only right way, in my view, is to amend the Constitution and decentralize government. It is when Kyiv gives authority to the regions. It is when regional governments are not appointed but elected. And it is when local authorities are responsible to the people in the present and future." The Kiev interim government plans to start reforms aimed at federalization no earlier than in 200 years, as it was stated by Ukraine's interim Foreign Minister Andrei Deshitsa before starting his visit to Germany. One way or another Akhmetov does not disclose his real intentions. Perhaps he has not made his choice as yet. And he has a reason to think real hard about it.

Berlin is not inclined to overestimate the regime’s achievements if they are not backed by the money and influence of Ukrainian tycoons. Former Chancellor Helmut Schmidt, the patriarch of German politics, has come out with harsh criticism of Western Ukraine policy. According to him, the West underestimates the implications in case the situation aggravates further and, what’s even worse, nobody has any concrete plan to manage the crisis. It’s hard to disagree with this opinion especially in view that the United States of America, the leader of Western world, has proven its proclivity to spoiling the things while tackling the crises instead of finding appropriate solutions to them.

(1) Berlin muss gegenüber Russland starker auftreten/Welt, 17.05.2014.
(2) Forbes Ukraine 05.16.2014.

 

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