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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

Password “Firtash”

Will the arrest of one of the most influential Ukrainian oligarchs trigger the elimination of oligarchs in Ukraine? Who will occupy their spot?
20 March, 2014 - 10:41
Photo from The Day’s archives

The Vienna District Criminal Court ruled for Firtash’s extradition arrest as a preventive measure on the request of FBI. The Ukrainian businessman was previously arrested by the Austrian police. The date of the court extradition hearing was not decided yet. It is also known that the businessman refused to be bailed out for 125 million euros and filed a complaint against the court decision.

The Day will follow the progress of this case. And so far, three important questions appeared around this story. And a lot in the future of Ukraine depends on the answers to them.

Question No. 1: What are the real reasons for Firtash’s arrest, and will it become a trigger for the process of dealing with all Ukrainian oligarchs?

Question No. 2: Who will take possession of the businessman’s assets (including those earned in a quite legal way)?

Question No. 3: Who will replace the eliminated Ukrainian oligarchs on the Ukrainian market?

We tried to find the answers to these questions with the help of experts.

The real reasons for Firtash’s arrest are still quite unclear. The official statement says the arrest took place on an FBI warrant. A spokesperson of the Austrian Federal Criminal Police Force cited suspicions in being involved into the creation of an organized criminal group and said that the detention “has nothing to do with the current political situation in Ukraine.” Group DF says the real reason is an investigation in the United States of the circumstances of an investment project in India in 2006, in which Firtash allegedly participated. Firtash is not wanted in Ukraine yet: the Ministry of Internal Affairs did not announce him on the wanted list, the Prosecutor General does not investigate criminal cases against him, and according to Oleh Makhnytsky, acting prosecutor general, there was no official information received by the Prosecutor General’s Office from other countries.

But if the investigation on Indian cases has been carried out in the United States for several years, why was Firtash arrested now? He has surely been to Austria, Hungary, and other countries, where American justice could have gotten him before.

Stepan Havrysh, former deputy secretary of the National Security and Defense Council, said during one of the television shows once: on the one hand, the legal problem related to dirty money and financing of illicit, by American laws, transactions is quite obvious. “However, it can be viewed as a political step, a signal to Ukrainian oligarchs, for them in particular to start a dialog with the new Ukraine’s government. It is clear that this issue is contradictory, but I think this is a very powerful signal for all Ukrainian oligarchs who cooperated with ‘the family,’ with Yanukovych personally, who were not only members of his team, but also stock holders and partners. [Who does the hint relate to? Rinat Akhmetov? Serhii Kurchenko? – Author]. They were given time to start working with the new government, which needs to be able to rely on them. And if this does not happen, their assets will be checked as well, by controlling bodies of the United States in particular.”

Director of energy programs at Nomos Center Mykhailo Honchar thinks that in this situation, the current rulers of the country have to reject the rules of the game established by their predecessors. “It is known that certain business favorites are supported during one government, and the change of government causes corresponding consequences. The government has changed now, that is why according to the logic of this unwritten rule, the redistribution of assets and business of oligarchs must take place automatically. But this must not be done this time. Otherwise, the country will be destroyed in both political and economic senses,” Honchar assures.

It seems that the choice has already been made, says Andrii Novak, chairman of the Committee of Economists of Ukraine. “When one of the wealthiest persons of the country is arrested, this undoubtedly indicates that his assets are probably to be redistributed,” he explains. Novak is convinced that the international community “will not stop at Firtash’s arrest.” “There will be other, similar actions aimed at Ukrainian oligarchs who have connections with businesses in Russia, Gazprom, and other Russian companies in oil and gas sectors,” Novak predicts. It is likely that Akhmetov is to follow Firtash, since in his native Donetsk region, where Serhii Taruta rules with his “blessing,” almost no measures are taken to fight separatism, unlike the situation in Dnipropetrovsk oblast, where Ihor Kolomoisky is in charge.

The Day also asked Dmytro Oliinyk, chairman of the Federation of Employers of Ukraine, whether the arrest of Firtash was related to someone’s claims on his property. “The Federation of Employers has always been standing up for the interests of private property, because they affect the investment climate and factors that bring investments to Ukraine or cause the withdrawal of capital and investments. We have always had this stand, and today, in the light of the events in Crimea, where private property is seized, especially that of Ukrainian state and private enterprises, we are especially persistent about it. Unfortunately, there are cases when criminals disguised as self-defense, with which they have absolutely nothing to do, come to private enterprises and try to rule them. Our position is absolutely clear here: private property must be untouchable. This is one of the main conditions of developing business in Ukraine.” Obviously, Oliinyk does not have a direct answer to this question. But what he said can be interpreted in the following way: Crimean Titan and the largest soda plant in Europe, or some

other enterprises that belong to Firtash, are already under attack, partially because their owner is absent.

Does this mean that if someone is arrested in a foreign country, it is to someone else’s advantage in his own one? Who can share Firtash’s assets? Who will replace the current oligarchs in case redistribution of the domestic market takes place?

“These might be foreign investors as well,” Novak says, but it is unlikely there will be any Russian ones among them. Besides, the chairperson of the Committee of Economists of Ukraine is convinced that foreign investors will be given access only to those projects which will hardly survive without serious foreign investments and new technologies.


Oleksandr NARBUT, president of the Kyiv Institute for Energy Research:

“The arrest of Firtash is clearly a signal. In the first place, for his partners in government on the Ukrainian as well as on the Russian side. This is a signal to Ukrainian oligarchs, who allow themselves to take time to think whose side they are on in the conditions of Russian aggression, and act according to old cliches and schemes. They publish absolutely immaculate statements in favor of the preservation of Ukraine’s sovereignty, but in non-public sphere they help Russian ‘political tourists.’ It is useful for the Ukrainian business to interpret this signal in the correct way, because our country requires real consolidation. What is happening in Crimea requires a more responsible stand from large Ukrainian business.

“This signal is also addressed to the current Ukrainian government, which should consider whether it should build very deep relations with business at this complicated stage, thus risking ending up behind the bars later, as it happened to one of the former prime ministers. In any case, the lessons of this detention and the subsequent court trial are yet to be learned.

“Tymoshenko has something to think about in this respect as well. I do not think she helped the arrest of Firtash in any way, but her past is not spotless either. It contains work for the FBI or other similar structures, too. The motifs of signing the infamous gas contracts, which were unprecedentedly unfavorable for Ukraine, and still remain so, are not fully investigated yet. Tymoshenko should ponder over this, consider all the pros and cons of her desire to return to Ukrainian politics. It is for a reason that the current government is called the government of Yatseniuk and Tymoshenko.”

Rostyslav KRAVETS, lawyer, senior partner at the law firm “Kravets and Partners”:

“It is no secret that Dmytro Firtash took gas trade, one of the most profitable and shady sectors of Ukrainian economy, which was previously controlled by Yulia Tymoshenko, under his full control. On the one hand, according to multiple messages in mass media, it was through Firtash that the Kremlin received control over strategic economic facilities in Ukraine, such as oblast gas companies, chemical plants, etc. I have an impression that the United States use Firtash’s arrest as a tool of economic pressure on Russia. And besides, many are convinced that Firtash can shed light on the rapid enrichment of the Yanukovych family. The majority of Firtash’s assets are to go bankrupt or transferred to the charge of the state. It should not be forgotten that he personally is not the nominal owner, they are owned by foreign companies. So, direct nationalization will not be completely legal, but giving the state charge over them, since managing and maintaining them is unfeasible, is quite realistic.

“I do not think his arrest is a step or even a hint at the redistribution of large capital. Unfortunately, all large capital in Ukraine today is built on illegal schemes and tax evasion. So, the help of FBI is not required to deal with him.

“And again, I think that there are no such persons in Ukraine who would be ready to take these assets from the state. So, they can be reprivatized or nationalized.

“Will other oligarchs follow Firtash? It will depend on the policies that the new government will choose to implement. Taking away or forcing to pay for the previously privatized property is a way to nowhere. It would be much better to change the tax laws in a way that will make everyone pay taxes. In order to achieve this, VAT and profit tax must be canceled, and 5 percent turnover tax must be implemented.

Viktor KHMYLEVSKY, president of the Union of Leaseholders and Entrepreneurs of Ukraine, Honorary president of the Association of Employers in Trade and Commerce:

“I am worried that the arrest of Dmytro Firtash, President of the Federation of Employers of Ukraine (and this is a figure of large, even international scale), deals a huge blow to the employers’ image on the national level and to the social dialog in our country in general. Lately, this dialog in Ukraine has been practically virtual even without this. Given some contradictions in the vision and ambitions of separate regional unions and groups within the Federation of Employers, I am afraid that this arrest could wreck the employers. As the letters to the magazine Rabotodatel (Employer), where I am an editor-in-chief, say, the unity of business has always been the determining position of the Ukrainian business environment, and respectively, it had to become the position of the Federation of Employers. Lately, thanks to the Federation’s efforts, some contacts between regions were established, but it failed at inspiring unity. The problem is that the Federation had the lion’s share in the common representative organ on the national level and was actively pushing out branch unions of entrepreneurs from the social dialog.”

By Vitalii KNIAZHANSKY, Natalia BILOUSOVA, The Day