Graham Stack in Kyiv -

Two maritime scandals involving Ukraine shipping companies unfolded at the end of July, featuring one import consignment of cars with a surfeit of parties claiming ownership, and an export consignment of armoured vehicles apparently still in search of a willing owner. The events point to how Ukraine's weak rule of law disrupts relations with potentially lucrative trading partners.

In the last week of July in Libya's eastern city Benghazi, three leading politicians were assassinated, 1,200 prisoners escaped jail after riots, and two car bombs ripped through the city - but the biggest headache for 25 local Libyan businessmen were apparently unscrupulous Ukrainians.

According to the businessmen, in March the Ukrainian-owned cargo ship Faina was transporting a cargo of 600 Hyundai, Kia, and Toyota vehicles from the Jordanian port of Aqaba to Benghazi. After proceeding through the Suez Canal, the ship mysteriously veered off course and vanished - only to reappear at Ukraine's Black Sea port of Illichevsk, near Odesa, where it has remained ever since.

The Libyan businessmen rushed to Odesa and hired lawyers, only to have their worst fears confirmed - according to documents supplied to Maritime Bulletin and confirmed to bne, the entire ship's cargo had already been sold for $20m to a Ukrainian one-man company registered in Odesa called Alco Invest, by a Panamanian offshore vehicle called Wellgos PQ.

The cargo ship Faina, and its owner Odesa-Israeli businessman Vadim Alperin, are no strangers to controversy. In 2009, the ship's name hit world news when it was seized by Somali pirates - and revealed to be carrying a shipment of 33 Soviet-made T-72 tanks, ostensibly bound for Kenya, but in reality for government of South Sudan, then still part of Sudan and subject to arms embargos. Frantic activity was then needed to keep the weaponry out of the hands of Somali rebels. The crew finally walked free after five months captivity.

This time round, it is again Alperin's crews who are taking the brunt of the dispute - on July 17, the infuriated Bengazi businessmen seized what they believe to be another of Alperin's ships, the Etel, which had docked in Benghazi, and barricaded the crew of 19 in their quarters. Emergency diplomacy then kicked in to control the situation, with Ukraine acknowledging the linkage to the Faina's missing cargo. "Whatever the motivation of the attackers, it does not justify the use of force against people, intimidating them and endangering their lives and health," Ukrainian Deputy Prime Minister Konstatin Hryschenko said August 1, during a visit to Tripoli to conduct talks on the issue.

Carjacked

Back in Ukraine, the battle for the cars is now being waged in courtrooms. "Alperin, as shipper of highly sensitive state weapons consignments, is very well connected in Ukraine and can fight his corner," renowned investigator Mikhail Voitenko of Maritime Bulletintells bne.

Voitenko was involved in mediating the Faina controversy in 2008, and then fled his native Russia in 2009 after breaking the story of the mystery ship Arctic Sea, apparently hijacked in the Baltic Sea, and suspected of carrying a secret Russian arms cargo. "According to the Libyan side, Odesa police initially acted correctly in launching an investigation of the cargo at their request, but then the General Prosecutor's office intervened from Kyiv to take control of the case, and the investigation slowed to a crawl," Voitenko says.

Alperin could not be contacted for comment.

According to bne's enquiries, the Libyans' claims are very credible, and show that major business structures may indeed be involved on the Ukrainian side, apart from the cargo shipper itself. Wellgos PX, the Panama company the Libyans claim fraudulently sold the car-cargo to an Odesa shell structure, is owned by three companies - Norwell Inc, Kenmark Inc. and Platinex Corp., all registered at the same address in the Commonwealth of Dominica, a low-profile offshore haven in the Caribbean known to specialists for its extreme level of secrecy.

The address of all three owners of Wellgos PX - at Copthall 8, Roseau, Dominica - is that of a company registration agent, Isla Offshore. According to the Interfax Spark database, about a dozen Ukraine companies have owners registered at the Copthall 8 address. Among these companies is major Ukrainian car importer Intercar Ukraine, the official Volkswagen dealer in Ukraine. Intercar Ukraine is a subsidiary of the Belarus-based company Atlant-M, which holds 37% of the Belarusian new car import market, and lesser shares of the Russian and Ukrainian markets.

Intercar Ukraine is owned by Global Cars Corp., registered at Copthall 8, Roseau, and two major Atlant-M dealerships in Kyiv are linked to other offshores at the same address - Auto-motion Corp. and Prime Provisions Corp. "Atlant-M has no relationship to the incident with the Faina," the company assured bne.

Atlant-M is apparently still owned by the trio who set it up in 1991, Sergei Savitskii, Oleg Khusaenov and Igor Malgin, who also hold a majority stake in Belarus bank Minsk Transit bank.

Intriguingly, Atlanta-M is not the only major Ukrainian car importer to have connections to the same obscure Dominican address. "International Business Group Limited", also at Copthall 8, Roseau, owns an Odesa customs brokerage with the same name, which in turn owns two dealerships, ZS Avtoelit and Luks Avtoservis. The former company owns Odesa's main Audi dealership, Audi Centre Odesa South, according to Interfax Spark. The companies are run and believed controlled by prominent local businessman Evgen Deev. Deev declined to comment to bne.

According to the Ukrainian embassy in Libya, as quoted by media, a Ukrainian court of first instance found in favour of the aggrieved Libyan merchants on August 1, and ordered the cargo to be shipped on to Benghazi. "Our sailors will be released as soon as the vehicle cargo arrives in Bengazi," an assistant to the Ukrainian ambassador in Libya told media August 2. But with strong Ukrainian business interests potentially likely to keep pressing their claims in the courts, it may be too early for Ukraine's long-suffering sailors to get their hopes up.

Cracks in Iraq

In parallel to the new Faina mess in Libya, a major Ukraine shipment of armour to Iraq was reported stuck on board its cargo ship for months, after Iraq refused to accept the allegedly defective consignment.

A local Odesa news site quoted a source in the Odesa company White Wale Shipping on August 2 as saying that the SE Pacifica cargo ship had docked in Iraqi port Umm Qasr in the spring, but the Iraqis spotted cracks in the bodies of the 42 APCs and refused to unload the cargo. Since then, online vessel trackers confirm that the SE Pacifica has been loitering in the northern part of the Persian Gulf - apparently fully loaded and unsecured - and the shipping company has not been compensated for its losses.

As bne has reported, in 2009 Iraq agreed to purchase $560m worth of Ukraine-built APCs and Antonov An-32 planes, but the deal hit the rocks after power in Ukraine changed hands in 2010. The original contract envisaged around 20% of the sum to be paid out in commissions, roughly half to Iraqis, and half to Ukrainian "lobbyists" incorporated in UK, Singapore and BVI, apparently linked to the former management of state arms exporter Ukrspetseksport.

But the company's new leadership, closely linked to the ruling Party of Regions as of 2010, was apparently loath to make the payments as planned, to either side. The Iraqis had consequently shown increasing reluctance to accept deliveries under the contract, under the pretext of real or imagined defects in the equipment. In 2011, it appeared that deliveries had started moving again, but the apparent plight of the SE Pacifica points to renewed problems.

In a sign of panic about the deal, on July 11 Ukrspetseksport got a new acting CEO, Oleksandr Kovalenko. Kovalenko had been first deputy head of Ukrspetseksport in 2004-2010 under former president Viktor Yushchenko and thus part of the old guard who set up the deal in 2009. In the spring of 2010, as the former management was removed root and branch, he went into semi-retirement - and his return now looks like a last gasp attempt to get the deal back on the road, perhaps by bringing the original Ukrainian "lobbyists" back on board. Kovalenko is believed to be currently in Iraq in talks. Ukrspetseksport declined to comment to bne on the shipments, citing confidentiality.