Graham Stack in Kharkiv, Ukraine -

Most of the headlines about Ukraine right now concern how the country is being pulled in two directions by the EU and Russia. But a reminder of how oddly Ukraine would sit in the European fold can be found in the story of the meteoric rise of one Serhiy Kurchenko.

A year ago, no one had heard of the fresh-faced 27-year-old trader of gas. Now Kurchenko is a household name, having in the space of a year acquired a big oil refinery, a major football club, industrial and financial assets, as well as the media outlets that brought him to the attention of the public in the first place. His youth, unknown origins and apparently bottomless wealth have turned him into a major newsmaker. But none of the coverage of Kurchenko's mysterious and meteoric rise has found convincing answers to the main questions: who is Serhiy Kurchenko - the man dubbed Ukraine's "Wizard of Gaz" - and who is behind him?

Buying the messenger

Kurchenko was first named publicly in October 2012 by Forbes Ukraine as a major player running fuel trading structures under the umbrella name of GasUkraine, which had cornered the liquid gas market in Ukraine and made rapid inroads into the far larger markets of natural gas and oil product trading. Competitors complained that customs authorities were blocking their fuel imports on the border, and state companies were also showing the company favouritism in auctions of propane.

Right from the start confusion has reigned over what companies are part of Kurchenko's holding - and where the revenues are coming from. When Forbes Ukraine broke the story in 2012, a source provided the magazine with a list of over 50 companies comprising the GazUkraine group, none of which were owned or run by Kurchenko directly - not even the apparent flagman GazUkraine 2009, which had cornered Ukraine's autogas (propane) market already in 2010. But a spokesman for GazUkraine denied that most of the companies on the long list were connected to GazUkraine group, which itself did not exist as a legal entity. A short-lived GazUkraine website claimed the group had existed since 2003, and aimed to become the leading fuel trading company in the country, but provided no information about the group structure.

In March this year, Kurchenko announced that his structures would be reorganised under the umbrella of VETEK Group - East European Fuel Trading Company, or SEPEK in Ukrainian. According to Kurchenko, it has annual turnover of a whopping $10bn. But again, things are as clear as mud: in fact, there are two identically named companies VETEK founded on the same date, but with different registration codes, according to the state register.

VETEK is now pulling out all the stops to disassociate the company from the GazUkraine group, despite Kurchenko being first contacted by journalists via GazUkraine. "GazUkraine is not a part of VETEK," Kurchenko's press service told bne in a statement. VETEK is "focused on investments into the oil and gas industry of Ukraine and Europe," and the strategy is "to create a vertically integrated company."

Kickoff

In December 2012, Kurchenko bought his first assets - his hometown Kharkiv's football team, the leading Ukrainian club Metallist. In March this year, VETEK continued the shopping spree, announcing it had bought the Odesa refinery, one of Ukraine's largest. To date, the 27-year-old has now added the Kherson oil transshipment port, and the mid-sized Brokbiznesbank and regional Realbank.

Sceptics have pointed out that all these assets are in poor financial health. And Kurchenko's most controversial investment has been downright value destructive: in June, Kurchenko acquired the UMH media holding that owns the Forbes Ukraine franchise, as well as another leading weekly publication, Korrespondent.

Forbes Ukraine during its brief existence had become the brightest star among Ukraine's investigative media - and was the publication which broke the Kurchenko story in 2012. On November 13, 14 journalists including the chief editor announced their resignation due to interference in editorial policy. Ten days later, the editorial team at Korrespondent, who had published the only interview with Kurchenko to date, followed suit. The team that had investigated Kurchenko at Forbes Ukraine had already resigned immediately on the deal being announced in June, claiming they had received physical threats during their investigation of the source of the 27-year-old's wealth and to whom does he owe it.

Kurchenko, in his only major interview to date, told journalists from Korrespondent that he was a self-made man from a poor family who had started working at the age of 16 and had never stopped. Kurchenko said he had risen from sales manager at the age of 16 in Kharkiv firm Expogaz, to become deputy director in charge of the autogas (liquid petroleum gas or propane) wholesale department by the age of 20.

He then left to set up his own business in 2005, Kaskad KSV, and started investing in real estate during the credit bubble years. "Those were years when prices on the real estate market rose 200-300% per year. Banks gave loans to everyone who asked, to completely normal people like myself, at 7-8%," he told the weekly.

With the revenues, he launched his own gas trading business and bought out Expogaz. "Perhaps one pillar of my success comes from having worked 11 years in one and the same business," he told Korrespondent. "Another factor has been the continued ability to source cheap credit." The logical next step was to start importing oil products alongside autogas, which Kurchenko told Korrespondent helped his business reach an annual turnover of $200m in 2008.

bne spoke under condition of anonymity to a former manager in Kurchenko's structures who worked with him from the beginning, who confirmed Kurchenko's timeline.

But according to the source, Kurchenko's deceased father played a key role in his vertical takeoff. "Serhiy's father was a diplomat in a Ukrainian embassy in the Balkans. He would arrive once or twice a year to sign papers. He carried himself like a nobleman, smoked a pipe, walked with a stick and wore a greatcoat. He had tremendous bearing and we all bowed down before him. If he took a dislike to some one working for Serhiy, Serhiy would fire that person. His word was law."

According to the source, despite the father's dominance Serhiy had strained relations with him and never visited him abroad. The strain may have derived from the youngster's failure to shine academically as a result of apparent severe dyslexia - in Ukraine an under-diagnosed condition often equated with illiteracy. "Perhaps this is why he is now buying print media," suggests the source, who adds that perhaps to compensate for this Kurchenko has developed a phenomenal ability to win friends and influence people. "He can make friends with anyone in the space of five minutes."

"It was Serhiy's father who got Serhiy his job at Expogas at the age of 16, he was acquainted with the owner. Then it was his father's connections in Russia that got the wholesale business started: he arranged privately with managers at Russia's Tyumen Oil Company (TNK) for import to Ukraine of autogas at incredibly cheap prices. First of all the scheme was implemented through Expogaz, with whom he was on good terms. Then his father set Serhiy set up on own his own when he turned 21. We earned UAH1.2 on every litre sold."

"Serhiy saw the chance to occupy the mid-size wholesale niche," the source says. "We were selling to 50-60 clients, each of whom controlled 10-20 filling stations. We had the whole of the surrounding region in our hands. The whole business ran on cash, and had us shifting 50-60kg of hryvnia notes per day."

"In 2006-2007 we started to win tenders, using traditional means. We won the contract to supply autogas to the entire city transport system for one year. That was $500,000, paid upfront. The price at which we sourced the gas was around $50,000," according to the source. "Serhiy owned 3,000 square metres of central office space - but the rental revenues were nothing compared to what we earned on gas."

Business became less easy after the death of a key manager in a car crash in February 2007. Then in 2008 Kurchenko was himself struck by family tragedy, when his father died in a bizarre domestic incident. "Serhiy was devastated," bne's source recalls.

In 2009, Kurchenko abruptly announced he was moving to Kyiv, saying he had won a large contract there - and fired almost the entire management team in Kharkiv. "The evening after I had been fired, a top official from Kharkiv's economic crime squad came to me at home in an SUV with private registration, and warned me never to say a word to anyone about what had been going on," the source says. "I never heard from Serhiy again until I saw him on TV in 2012 when he bought Metallist - you can imagine the shock. But I want to pay tribute to Serhiy, who is an outstanding personality and gave me the best years of my life."

Funny money

So what had happened in the intervening three years, between suddenly leaving Kharkiv and the triumphal return in 2012 to purchase Metallist?

Public records show that after Kurchenko's move to Kyiv, his Kharkiv firms continued to function on paper. Indeed, they apparently snowballed, with court records showing they acquired trading relations with dozens of small firms in Kharkiv and the Crimea, none of which had any clear business profile. Hundreds of millions of dollars started to percolate through this network of companies.

In late 2011, Kurchenko's Kharkiv firm, Kaskad KSV, achieved mention of a sort in the media. The firm was listed among 38 companies which an anonymous internet post on a smear site claimed were "officially approved" by Kharkiv tax authorities as providers of tax evasion and money-laundering services - often referred to in Ukraine as "conversion centres" of bank funds into "black cash" and vice versa, using networks of brass-plate companies and fictive supply contracts. Such "conversion" services are used by owners of private business for tax evasion, and by managers at state-owned business for embezzlement.

Kurchenko vehemently denies any links to tax evasion. "This is all exaggerated by our competitors. Their PR and legal departments invent all this, [arguing] because we have a large share of the market it means we don't pay taxes," he said in the interview with Korrespondent in May.

bne established that one contact number for the alleged "conversion centre" was that of Evgen Zhilin, a former officer in Ukraine's security service and anti-organised crime squad, who spent three years in police custody in connection with high-level assassination attempts. He now runs a self-styled "fight club" in Kharkiv, and a political movement with a pro-Stalin line. Without mentioning him by name, the internet leak may have targeted Zhilin, whom other publications have linked to Kharkiv "conversion centres".

Zhilin, who calls himself a financier, sang the praises of Kurchenko when contacted by bne. He said that Kurchenko had also started as a financier and they had previously collaborated, but Kurchenko had now moved on "to a far higher level of business than a simple businessman like myself."

"I know for a fact that law enforcement organs here have no complaints about him, and all his financial schemes are legal," Zhilin assured bne. Zhilin said that talk of links to "conversion centres" was simply denigration of Kurchenko by those jealous of the young man's success and outstanding capabilities. "Serhiy has a talent for making friends and forging ties quickly."

Other sources contradict Zhilin's positive assessment. Ukraine's financial regulators cracked down on "conversion centres" in 2011-2012 in an effort to shore up tax revenues and the exchange rate. This resulted in a slew of court cases relating to such centres and fictive firms, shedding light on the shadow financial economy - and suggesting Kurchenko's links to one of the most secretive and powerful families in Kharkiv and Ukraine.

Family business

Some of the scores of court cases underscore links between Kurchenko's Kaskad-KSV and companies on the Forbes list of alleged GazUkraine companies. Others point to links between the firms from the GasUkraine list and money laundering, as well as to apparent protection by law enforcement - including cases where tax police have started investigations of these firms, only to be prosecuted themselves for exceeding their powers. One company on the Forbes GazUkraine list, TOV Business Consult, registered at the same address as GazUkraine 2020, was named in a criminal case in 2013 as laundering bribes extorted by tax police.

However, the volume of money passing through these companies far exceeded just that, rising to the tens of millions of dollars. So where has all this money been flowing from?

Apart from the motor fuel and autogas trading businesses, a major source of revenue in 2010-2012 appears to be tenders at state-owned energy company Naftogaz - Ukraine's largest company with around $10bn annual revenues.

In total, according to the state tender database, firms listed on the Forbes list of GazUkraine companies received a whopping $220m worth of Naftogaz tender awards starting 2010. The lion's share of these was sourced from Naftogaz's offshore drilling subsidiary called Chornomornaftogaz. NGOs monitoring state tenders have argued that many of these tenders were rigged. Even TOV Business Consult - named as laundering bribes for tax police - was awarded $11m worth of tenders by Naftogaz.

bne has previously written how in 2011 Naftogaz purchased an offshore rig at an inflated price from a UK shell company linked to a Lugansk-based "conversion centre" that is connected to a sprawl of Lugansk-registered fictive companies, such as the breathtakingly named Lugpromstroisantekhmontazh. Further court cases resulting from the 2012 state crackdown on "black cash" point to the Lugansk cluster intersecting with the Kharkiv/Simferopol sprawl in shifting huge sums of money around, suggesting it was part of the same large operation, sapping funds from the ailing cash cow Naftogaz and other state companies.

One of Kharkiv and Ukraine's most powerful and secretive families is the Katsubas, which could be the power behind Kurchenko. Volodymr Katsuba was head of the Dergachi district administration in 2006-2012. A close ally of the family, Vasily Salygin, former chairman of the Kharkiv regional assembly, became deputy head of the customs' service in 2010.

Elder son Serghiy Katsuba has held top positions in procurement in Naftogaz and state nuclear power company Energoatom since 2003. From 2010-2012, Serhiy Katsuba was deputy CEO of Naftogaz, with overall responsibility for procurement. Katsuba named his younger brother, 26-year-old Oleksandr, as deputy CEO of Chornomornaftogaz, also with oversight of procurement.

In 2012, Volodymr and Serhiy Katsuba won seats in parliament. The Katsubas were contacted via their parliamentary offices, but failed to respond. In a Forbes Ukraine interview in December 2012, Serhiy Katsuba denied any existence of corruption in Naftogaz's procurement.

What a state

The Kurchenko story serves to illustrate to many just how little rule of law exists in Ukraine - where law enforcement organs often do the exact opposite of what they are supposed to do. Such troubling issues inevitably call into question whether Ukraine is at all ready to deepen its relations with the EU through the signing of association and free trade pacts that were on offer at the November 28-29 EU summit in Vilnius, Lithuania.

In many ways, Ukraine still far more closely resembles Russia's corrupted centralised system of government and business, where the political and security service elites are deeply entrenched. It's more natural therefore, argue some, that Ukraine should plump for Russia with its immediate offer of cash with few reforms or questions in return for joining its Customs Union trade club instead.

"In Ukraine there is a symbiotic relationship between power and politics, without visible borders between the two. The influence of economic elites on Ukrainian politics is fundamental, the penetration of the state by business is a reality, which leads to weak institutions and corruption as a pattern of the Ukrainian state," Stefan Meister of the Brussels think-tank the European Council on Foreign Relations tells bne.

"I don't think that measures such as signing [an EU] Deep and Comprehensive Free Trade Agreement or Association Agreement will change that situation, as long as rule of law is not working, transparent structures do not exist and political institutions like the parliament are full with business people and the same is true for the government," he argues.