Stepping on a rake again: new capitalization

Poroshenko was sworn in as President of Ukraine exactly five months ago, while two weeks before that, he made a campaign promise to sell his business in its entirety, except the 5th TV channel.

Do you remember it? Those uneasy with origins of presidential candidate Poroshenko’s fortune were very glad to hear the promise then. When interviewed by The Day after the vote, some businesspeople said that this statement by Poroshenko came near to being the decisive factor finally determining their choice.

In short, the statement was resounding, correct and much to the point. We all heard it and committed it to our collective memory. Besides Ukrainians, the whole world, especially its business class, did so as well.

The Day has it on reliable authority that Poroshenko’s promise to sell his business in the case of his victory prompted interest from world’s leading food market player, Unilever Inc. The company is interested in acquiring Poroshenko’s confectionery business, incorporated as Roshen. It is said that Unilever stands ready to pay a high price for it and is even considering the option to keep the brand and product line going.

In addition, the opportunity to grab a “tasty” contract attracted attention of the world’s Big Three audit and consulting firms. They closely monitored all statements made by Poroshenko after the inauguration and waited for him finally starting to act on his promises. In addition, their clients are already queuing to have Poroshenko’s business portfolio audited. Indeed, the practice of selling business assets shows that it normally involves dual audit, held by the seller and the buyer. Therefore, Poroshenko would have been unable to transfer his business from one pocket to another without attracting “undue attention.” His assets have started to be monitored by all the major players in the audit market as well as specialized markets, like confectionery industry, machinery industry, and banking. However, the president-elect took a break and began to fulfill another of his campaign promises, called “the peace plan.”

Only after three months of silence, Poroshenko answered a question, posed by Hromadske.TV reporter after the “Strategy of Ukraine 2020” news conference, by stating that he would sell his business and had entered into an agreement with the Rothschild Group to this effect.

Another interesting news that appeared soon afterwards was CEO and co-chairman of Rothschild & Cie reporting that the Rothschilds’ Ukrainian partner in this process would be Investment Capital Ukraine.

We would like to inform our readers that the latter is a Ukrainian investment company that was co-owned and operated by Valeria Hontareva until June 20, 2014. Importantly, she has been appointed to governorship of the National Bank of Ukraine (NBU) on Poroshenko’s recommendation.

By the way, another interesting thing is that Hontareva left the board and sold her share in the company the day after her appointment to the NBU.

Reports of Poroshenko selling his business portfolio stopped coming at this point. Meanwhile, other interesting news started appearing, such as that Roshen, in spite of all prohibitions and boycotts, is still in control of seven percent of the Russian confectionery market, and the International Investment Bank, having the president as its main shareholder and his father Oleksii Poroshenko as the top manager, has increased its share capital by... 50 percent. However, the NBU’s governor Hontareva explained to journalists that the NBU did not see it as any evidence of wrongdoing. “International Investment Bank is a small and relatively stable institution. Its asset growth may be due to the fact that its assets and liabilities are to a large extent denominated in foreign currencies, which have risen due to depreciation of hryvnia,” she said in a comment for Radio Liberty. The president has not provided any explanation of the growth of his business so far, which, as experts note, gives his opponents new weapons, to say the least.

COMMENTARY

Andrii NOVAK, economist:

“The state of the president’s business after his election, when Ukraine is going through what is actually a war, raises many questions.

“Why, when the assets of the banking system as a whole grew by 5 percent, the bank having the president as its main shareholder and his father Oleksii Poroshenko as the top manager has experienced a growth of 50 percent, or 10 times more?

“Why Roshen’s factory in Russia could not start operations for three years, and only following Poroshenko’s election to the presidency, the Lipetsk confectionery factory was suddenly allowed to run at full capacity, despite the fact that Russia was at war with Ukraine?

“Why, despite the ongoing trade war, waged by Russia against Ukrainian products, the company’s share in the Russian confectionery market has not fallen at all?

“Why, after all, the president is not acting on his campaign promises by selling his business?

“The presence of this array of questions suggests that Poroshenko needs to hold a separate news conference dedicated to explaining the state and dynamics of his business after he was elected. He needs, of course, to report how he has acted on his campaign promises as well.

“Otherwise, speculation in the expert and journalistic community can seriously hurt the president, and that harm will be greater than anything brought by frank answers to the questions which the president has actually provoked themselves. By making such a promise and failing to act on it, and worse still, failing to comment on the issue, Poroshenko has been making himself politically vulnerable. His Ukrainian business revenue growth is undermining his credibility as well in an environment where all businesses and the entire economy are showing a rapid decline.”