Kolomoisky defends grip on Ukraine's state-owned oil sector

By bne IntelliNews March 23, 2015

Graham Stack in Kyiv -


A dispute between Ukraine's most powerful oligarch and the government deepened on March 21, when Ihor Kolomoisky, head of the industrial Dnipropetrovsk region and owner of Ukraine's largest bank, defended his grip on two state energy companies.

The clash is the first major standoff between the new pro-EU government in Kyiv and the country's big oligarchs who have shaped much of Ukraine's course for over the past 20 years. Under President Petro Poroshenko, who is a powerful businessman himself,  the government is trying to contain the oligarchs in key areas to boost revenues and combat corruption. Yet at the same time it is politically dependent on them for party sponsorship, control of television, running regions, and the funding of Ukraine's war effort against Russian-backed separatists in the east of the country.

Around 40 Kalashnikov-bearing masked men and an armoured personnel carrier lined up in front of the Kyiv headquarters of Ukraine's state-owned oil company Ukrnafta on March 21, as workmen started welding steel security barriers into place, seemingly intended for the building's defence. Some reports said that the men were from the irregular Dnipro batallion of volunteer fighters, which is funded by Kolomoisky. By other accounts they were a private security detail.

The move followed the entry of reportedly armed personnel from a private security firm as well as volunteer fighters into the headquarters of another state-owned company, the Uktransnafta oil pipeline operator, during the night of March 18. Kolomoisky, who was spotted at the Ukrtransnafta building by a reporter from Radio Liberty, swore at the reporter, saying "Russian saboteurs" had attempted to infiltrate the offices.

Loosening the grip of a decade

Both episodes result from attempts to reassert state control of assets that are formally owned by the state, but have been in reality controlled by Kolomoisky for over a decade. With the government strapped for cash and starting to act on corruption, a bid to break Kolomoisky's grip on the companies had been widely anticipated – despite his crucial support  for the new pro-EU government last year, and for Ukraine's war effort against Russian-backed separatists in the east.

Ukraine's energy minister Volodymyr Demchyshyn on March 18 fired the incumbent manager of 100% state-owned Ukrtransnafta, who despite state ownership of the company was openly loyal to Kolomoisky.

Kolomoisky protested that the minister lacked the authority to do this, and that such a step should be a collective cabinet decision. He apparently supported the incumbent Oleksandr Lazorko, who prevented the new appointee from entering the offices.

On March 19, Ukraine's parliament passed a law that potentially removed Kolomoisky's control over Ukrnafta, Ukraine's largest producer, refiner and retailer of oil. The law reduced the quorum needed for joint stock companies shareholder meeting from 60% to 50%, with immediate effect. This jeapordises Kolomoisky's decade-long control of Ukrnafta, despite owning only around 43% of the stock, with the state holding 50% +1 share.

Because of the quorum law, Kolomoisky has been able to block any shareholder meetings that could introduce management who might oppose his interests, and he has allegedly been able to exercise control of the company's finances. 

Kolomoisky gave his version of events in 45-minute interview to his TV channel 1+1 on the evening of March 21. He said that pipeline operator Ukrtransnafta was a key component in Ukrnafta operations, the smooth operating of which is essential for stable functioning of Ukraine's only operating oil refinery at Kremenchug, owned by Ukrnafta. His enemy was not the state, Kolomoisky said, but oil trader Ihor Eremeev, owner of the Continuum chain of filling stations, and the head of the People's Will parliamentary group.

Out comes the dirt

Kolomoisky accused energy minister Demchyshyn of having given no warning of his intention to replace Kolomoisky's manager at Ukrtransnafta, and threatened to drag into the open compromising material against the minister.

“The comrade minister should understand that all is not well in his biography," he said, "and we will expose all his black affairs using legal means. We will not let him sleep, because falsity should be punished,” Kolomoisky warned.

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