State incurs tremendous losses in corporate conflicts

On June 19 the parliament accepted the query of People’s Deputy Hryhory Omelchenko to the Prosecutor General’s Office and the Security Service about the necessity of investigating the sale of the controlling interests in the Ukrainian companies Ukrnaftoprodukt, Eksimnaftoprodukt, Kyivmisknaftoprodukt, and Krymnaftoprodukt to foreign entities (our newspaper repeatedly broached this subject late last year and even received assurances from Prime Minister Anatoly Kinakh that the government had decided to cancel their privatization).

Nevertheless, “illegal sales of the controlling share packages of the said state enterprises,” to quote the query, must have indeed occurred. The query says that “some circumstances of those sales became the subject of an investigation in the Kingdom of Belgium” and emphasizes that, while inquiring into the transactions and financial operations between Belgium’s Tractabel and Central Asia’s Kazakhoil, the Belgians “found a mysterious disappearance of several billion dollars during the implementation of a joint business project,” Interfax-Ukraine reports. According to Mr. Omelchenko’s information, Kazakhoil owns the controlling shares of the Ukrainian Ukrnaftoprodukt holding company and has repeatedly drawn on the latter’s financial resources to launder its own money. The people deputy claims that last May some anonymous foreign individuals became owners of the over $1 billion controlling share packet of Eksimnaftoprodukt, Kyivmisknaftoprodukt, and Krymnaftoprodukt. Interestingly, as long as six months ago the then chairman of the parliamentary committee for organized crime and corruption control, Yury Karmazin, predicted to The Day that the Eksimnaftoprodukt and other oil-supply companies privatization scheme might inflict billion dollar damage on Ukraine. Now the Prosecutor General’s Office and the SBU will have to find out who these enterprises’ sold shares belong to and to prosecute the guilty executives, in other words, take measures to undo the damage done to the state.

In fact, it is an open secret who stands behind this scheme. As long ago as last December, Ukraine’s first President and People’s Deputy Leonid Kravchuk told The Day, “I have taken up this matter with the only aim of protecting state interests, without knowing that this would touch the interests of Derkach...”

Moreover, also on June 19, the Ukrainian Problem Research Center presented the results of an expert study, “The Urgent Problems of the Energy Sector: the Causes and Development Prospects of the Situation,” conducted in collaboration with the Kyiv-XXI center for political science and economic analysis. The study focused on corporate conflicts and their likely consequences in the fuel-and-energy complex. The polled politicians, experts, executives, and journalists assessed the fuel and energy situation as alarming, with such appraisals as “uncertain,” “close to critical” and “critical” accounting for 75% of the replies. Those polled named, among others, such causes as inconsistent government privatization policy and corporate conflicts between company owners. In addition, most of those polled (52.5%) forecast that corporate conflicts will only worsen the energy situation which will become “chronic,” infecting other economic sectors that can also see a redistribution of their property.

Also very significant are answers to the almost rhetorical question whether the state, in the person of central and local executive bodies as well as law enforcement and fiscal authorities, should intervene in the settlement of corporate conflicts. It turned out that top sector managers, while supporting state intervention as such, are wary of the involvement of law enforcement in corporate conflicts. The respondents from all the groups polled oppose this. Has this opinion been caused by the current passivity and helplessness of the law enforcement bodies in such situations, which the National Security and Defense Council, parliament, and the media have repeatedly pointed out?

Summing up the results, Liudmyla Kozak, one of the initiators of the survey, emphasized that the situation in the sector could be defined as “a borderline case fraught with explosive potential.” She noted that corporate conflicts were being aggravated not so much by objective as by subjective reasons (first of all, the political motives of some pressure groups).

The survey results were supported by People’s Deputy Volodymyr Bronnikov, member of the parliamentary committee for the fuel-and- energy complex, who addressed a roundtable on the energy situation. According to him, the energy sector of Ukraine is still being decapitalized, which presents a threat to this country’s energy-related and national security. The people’s deputy thinks these and political aspects of energy sector management are responsible for the alarming sensations of top managers in this leading branch of the economy.

Indeed, denationalizing oil facilities worth about a billion dollars is a serious blow to national security. The query author suspects the blame should be put on the group of People’s Deputy Andriy Derkach who has also become, as a result of a political bargain over the leading posts, chairman of the Enerhoatom supervisory board. Apparently, we are still to hear about the consequences of this appointment for the nuclear agency weakened by the machinations of some notorious commercial entities – unless, of course, the temporarily headless Prosecutor General’s Office intervenes. The doubts about the effectiveness of the guardians of law do not seem to be terribly unfounded. For instance, the Prosecutor General’s Office did not intervene in the Eksimnaftoprodukt affair, when it was necessary to urgently appeal against the court ruling that ran counter to this country’s interests.

This whole situation, which by all accounts goes beyond the limits of the energy sector alone, is a good lesson above all for the new parliamentary leadership. The Day once warned that the “advent” to Verkhovna Rada of odious figures under the umbrella of pro-government parties threatened to tarnish their reputation. Using the services of Derkaches, “tactical considerations,” etc., will not cancel the necessity of sooner or later making crucial decisions on no less crucial matters.