Graham Stack in Kyiv -

For 10 years, one of the most bitter feuds in Ukrainian politics has been between a group around controversial gas oligarch Dmitry Firtash and another around former premier Yulia Tymoshenko. The feud destroyed the Orange Revolution – and could now destroy its 'Euromaidan' remake,  advancing the Kremlin's cause in Ukraine. It could also make it very difficult to achieve a real "de-oligarchisation" of Ukraine's politics.

Ukraine's People's Front party – comprising the former core of the Yulia Tymoshenko Bloc - is now moving on to a collision course with Firtash, following an Austrian court's refusal to extradite the oligarch to the US on bribery charges.

The People's Front co-founders – prime minister Arseniy Yatsenyuk, security council head Oleksandr Turchynov and interior minister Arsen Avakov - are longstanding allies of Tymoshenko, and were formerly her key lieutenants in the Batkyvschina party she co-founded with Turchynov.

The three men were catapulted to power in February 2014 after the ousting of former President Viktor Yanukovych and the collapse of his Party of Regions, which left the Batkyvschina party as the dominant force in the Rada. But after Tymoshenko failed in her bid for the presidency against Petro Poroshenko, the three men quit her party to set up their own party in September 2015.

But curiously, they did so without any signs of a major rift – which, given Tymoshenko’s fiery nature, would normally have been expected to erupt. Given Tymoshenko's longstanding rivalry with Poroshenko, she may have reconciled herself to her boys' going it alone, if it put a spoke in Poroshenko's wheels.

And that it did: against all expectations People's Front pipped Poroshenko's eponymous party at the post, taking a tiny lead in the national vote, which ensured that its co-founders stayed in their jobs, and could jointly shape the political agenda with Poroshenko's forces.

This constellation – reminiscent of the ill-fated Orange coalition of 2005 that installed Poroshenko's friend and ally Viktor Yushchenko as president, and Tymoshenko as prime minister – raised fears of a rerun of the feuding that derailed the Orange team: Yushchenko fired Tymoshenko only eight and a half months after coming to power.

The first months of the post-Euromaidan government have been largely a honeymoon, but when in April it became clear that Firtash was going to walk free in Vienna after a massive PR campaign, storm clouds gathered as the People's Front set their sights on Firtash.  

On April 2, Avakov fired a warning shot across Firtash's bows when the interior ministry announced a criminal investigation into officials at Firtash's holding company Ostchem. The charges related to alleged extortion by Ostchem subsidiaries of UAH2.3bn ($600mn at the time) in budget funds during 2010-2011. “Such mutilation of the state is inadmissible!” Avakov said.

On April 29, the rhetoric was ratcheted up a notch when Avakov accused former officials at state-owned gas retail company Gaz Ukrainy of stealing as much as UAH 5.7bn from the state in collusion with Ostchem. As part of the criminal investigation, the interior ministry secured a court order freezing 500mn cubic meters of Firtash's gas.

Yatsenyuk backed up Avakov when he opened a televised government meeting on April 29, explicitly naming Firtash when announcing “criminal proceedings on charges of the embezzlement of state property by officials of NJSC Naftogaz Ukrainy in a plot with the Ostchem company  - a Firtash-[Serhiy] Lyovochkin group -  as a result of which losses amounting to UAH 5.7bn were inflicted on the state”. Yatsenyuk instructed Avakov to take direct control of the investigation.

On May 5, Gaz Ukrainy announced that it was suing Ostchem's subsidiaries for the sum of UAH5.7bn.

On May 14, Avakov told journalists that his ministry was cooperating with the FBI in investigating Ostchem's alleged embezzlement of state funds. "I believe that this [investigation] will be useful both for Ukraine's legal system, as well as for the US legal system, which also has claims against Mr. Firtash," Avakov said, as quoted by Interfax.         "[We] have been working with FBI experts for several days already, exchanging materials and data," he added.

Then on May 25, Avakov said on social networks that the interior ministry had summoned Firtash personally for "questioning and carrying out investigative actions”.

Poroshenko the protector

Firtash responded furiously to the People's Front attack, appealing to Poroshenko to rein in the upstart party. “We consider the recent announcement by Arseniy Yatsenyuk ... that a criminal investigation has been launched against Ostchem Holding ... yet more evidence that our business is continually persecuted by members of People's Front political party," Firtash's holding company Group DF said in a statement. “Group DF calls on President Petro Poroshenko to take measures for ceasing repressions of the group on the part of People's Front officials,” the statement concluded. 

The appeal to Poroshenko was not just rhetorical. As bne IntelliNews has argued, Firtash, and his allies such as former energy minister Yury Boiko and former Naftogaz bosses Serhiy and Oleksandr Katsuba, have appeared to enjoy immunity from prosecution under Poroshenko's presidency, despite weighty charges having been drawn up against them. 

The immunity was strengthened when top Firtash allies Lyovochkin and Boiko formed a new party that entered parliament in October 2014.

This apparent immunity may have been the result of a deal struck with Firtash during the immediate aftermath of the Euromaidan opposition protests. Firtash said under oath during the hearing in Vienna that his group of MPs had on his orders defected from the Yanukovych camp to vote with the opposition, causing the collapse of Yanukovych's power and prompting his flight from Kyiv.

Firtash also said under oath that he had backed Ukrainian politician Vitaly Klichko since 2012, when Klichko was in the opposition to Yanukovych.

Firtash said that at a meeting in Vienna after his arrest, in March 2014, he had agreed to support Poroshenko's bid for the presidency against Tymoshenko, and to that end persuaded Klichko to withdraw from the race and accept instread the post of mayor of Kyiv. "Firtash believed that the unification of democratic candidates Klitschko and Poroshenko brought Tymoshenko's chances to naught," Liovochkin said at the extradition hearing, as quoted by Interfax. Klichko later merged his UDAR party into Poroshenko's parliamentary group Petro Poroshenko Bloc.

Both Klichko and Poroshenko dispute any such Firtash-negotiated deal, and also dispute having received funding from Firtash.

Firtash and his allies' immunity against prosecution in Ukraine seems to have been preserved under a new prosecutor general, Viktor Schokin, appointed by Poroshenko in February 2015 specifically to prosecute activites of the Yanukovych regime.

Despite his reputation as a hardliner and his sudden push to interrogate former supporters of Yanukovych, Shockin quickly made clear that no charges were pending against Firtash. In response to Avakov's announcement of a criminal investigation, the prosecutor general's office said on April 29 that “there are no criminal proceedings in the office of the prosecutor general in which Firtash has received notification of being a suspect in committing a crime”, as quoted by Interfax.

Firtash said following the Vienna decision that he would return to Ukraine as soon as procedural issues could be clarified.

Old Alliance

The alleged Poroshenko-Firtash tie-up, and the bitter antagonism it arouses among Tymoshenko and her allies, is nothing new. It dates back more than a decade, to when Firtash first stepped out of the shadows as owner of a controversial gas trader that dominated gas supplies to Ukraine via Russia, and thereafter became the main apple of discord between the leaders of the pro-Western coalition.

It was immediately after the Orange Revolution, during the presidency of Yushchenko - under whom Poroshenko headed Ukraine's security council -  that Firtash's Rosukrenergo acquired a monopoly position as intermediary in the murky gas trade between Turkmenistan and Ukraine. The move was later justified by Yushchenko as essential to diversify Ukraine's supplies away from reliance on Russian gas.

Yushchenko and Poroshenko's support of Rosukrenergo was one of the reasons behind the split between Tymoshenko and Yuschenko, according to an in-depth investigation by anti-corruption watchdog NGO Global Witness published in 2006. 

In June 2005, Turchynov, at the time head of Ukraine's security service SBU, opened an investigation into Firtash' gas trading intermediaries. In September 2005, Tymoshenko and Poroshenko accused each other of corruption, after which Yushchenko fired Tymoshenko from the post of prime minister.

US diplomats referred to Poroshenko as Tymoshenko's 'nemesis' on a number of occasions, such was the strength of their mutual dislike.

Firtash's gas trading operations then continued unhindered until Tymoshenko returned as prime minister in 2007 and launched a bitter war against Yushchenko, one major front in which was Yushchenko's alleged ties to Firtash.

Following an interruption in Russian gas supplies to Ukraine over a price dispute, the Tymoshenko-appointed management of Naftogaz reached an agreement with Russia's Gazprom in 2009 to exclude all intermediaries from the gas trade, in exchange for Ukraine accepting what Gazprom said was a reference market price for Russian gas, which later proved to be beyond Ukrainian capacities to pay. The agreement freed Tymoshenko's hands to confiscate Rosukrenego gas held in Ukraine's underground storage.

Tymoshenko's deal sidelined both Yushchenko and Poroshenko - who had returned to office as foreign minister - over the deal. Yushchenko later commented that Tymoshenko had expected to face arrest on her return from Moscow to Ukraine.

When Viktor Yanukovych became president in 2010, with Firtash’s business partner Lyovochkin as chief of staff, criminal charges were brought against Tymoshenko over the gas agreement, leading to a seven-year prison sentence. At the same time, Firtash ally Boiko again became energy minister, and Rosukrenergo won compensation from Naftogas for the confiscated gas in a case in Stockholm.

Yushchenko testified against Tymoshenko at her trial. In a number of public statements he sided with the Yanukovych administration and supported her imprisonment. Poroshenko was far more discreet, but while still in office as foreign minister immediately after Yanukovych's election, he talked up Yanukovych, comparing him favourably to Tymoshenko, as reported in leaked US diplomatic cables.

Tymosheno only eventually walked free after Yanukovych's last minute decision to back out of the Association Agreement with the European Union triggered the Euromaidan revolution. As a result, Batkyvshina became the dominant party in parliament, catapulting Turchynov into the position of acting president, with Yatsenyuk becoming prime minister and Avakov interior minister.

Long shadow of Mogilevich

The long shadow of Semyon Mogilevich, the Kyiv-born alleged global crime lord, looms over the origins of the bitter feud that has destabilised Ukrainian politics for more than a decade. The real roots of the feud apparently arise from a bitter and bloody struggle for control over the Turkmen-Ukraine gas trade at the end of the 1990s.

According to the Turchynov-led investigation of Firtash and his intermediaries in 2005, the SBU discovered links between Firtash' intermediaries and Mogilevich, but was pressured by Yushchenko to end the investigation, Turchynov told press at the time. After failing to end the probe, Yushchenko fired Tymoshenko from her post as prime minister, triggering Turchynov's resignation.

“I have to say that as soon as the SBU [Ukrainian Security Service] started investigating this scheme, it came under pressure … President Yushchenko himself ... accused me of persecuting his people, he said the SBU was working against his team. I explained to him that we were working against criminals, not against his team,” Turchynov said in an interview with Ukrainskaya Pravda in September 2005. “The surname Mogilevich isn’t in the [gas trade] agreements or in the ownership documents [of the companies involved] but there are many indications that a group of people under his control could be involved.” Turchynov told the Financial Times during the same period. 

Mogilevich's wife, Galina Telesh, preceded Firtash as director of Cyprus company Agatheas Trading in 2003, which in turn held a share in Firtash' gas trading vehicle Highrock. Global Witness established that Firtash and Mogilevich also shared an Israeli lawyer. Nevertheless Firtash told the Financial Times that he had never met Telesh.

According to leaked US diplomatic cables, in 2009 Firtash acknowledged to US diplomats that he had “needed and received permission from Mogilevich when he established various businesses”. Firtash later said that the cable was not accurate.

But, after Tymoshenko's dismissal as prime minister in 2005, and Turchynov's resignation as SBU head in the same month, Yushchenko's allies, including Poroshenko, turned the tables, accusing Turchynov of having acted in Mogilevich's interests as head of SBU. As recorded in leaked US diplomatic files, Poroshenko was reported to be leaning on the then prosecutor general in 2006 to open criminal charges against Turchynov on this count, which indeed led to an arrest warrant for Turchynov being issued.

Poroshenko denied this to US diplomats, though they remained sceptical. “Poroshenko's claims about his arch-nemesis Tymoshenko and his protestations of innocence re [the prosecutor general’s] moves against Tymoshenko lieutenant Turchynov have to be taken with a large grain of salt,” US diplomats wrote in leaked cables, noting “the extremes to which Poroshenko will go in his rivalry with Tymoshenko”. 

Turchynov's successor as SBU head in 2006, who is also Poroshenko's current choice as SBU head, Nalivaichenko, backed claims that Turchynov had destroyed the Mogilevich files. “All documents relating to the removal from the Ukrainian budget of billions of funds by shadow schemes, linked to Mogilevich, and to [Tymoshenko’s gas trader] UES on the Ukrainian side, were destroyed in 2005,” Nalivaichenko said IN 2010.

İf Ukraine's dossier on Mogilevich had really been destroyed, one motivation, US diplomats speculated, could be Tymoshenko and Turchynov's own alleged links to Mogilevich, in particular “evidence of shady business deals between Mogilievich and Tymoshenko when she headed [gas trader] United Energy Systems in the mid-late 1990s.”

At that time UES was one of the dominant importers of Turkmen gas to Ukraine, and was favoured by, and believed controlled by, then prime minister Pavlo Lazarenko. Lazarenko had previously been governor in Tymoshenko’s and Turchynov’s home region of Dnipropetrovsk, during which time Ihor Fisherman (Mogilevich's henchman, according to the FBI) held a post as his adviser. Turchynov was the organisational force behind Lazarenko's Hromada party, which carried him to the post of prime minister.

In 1998, President Leonid Kuchma abruptly broke with Lazarenko, fired him, cut out Tymoshenko's UES from the gas trade, and facilitated international criminal charges being brought against Lazarenko. Lazarenko was jailed in the US in 2006 for grand larceny and money laundering.

İn the meantime, Kuchma, and then Yushchenko, had handed on the lucrative Mogilevich-linked Turkmen gas trading business to Firtash – infuriating Tymoshenko.

Mogilevich's name featured one final time in relation to the Turkmen-Ukraine gas trade, during the Russian-Ukraine gas dispute in January 2009. On the eve of Tymoshenko's fateful gas agreement with Gazprom, as a result of which Firtash was cut out of the business and his gas confiscated, Russian authorities suddenly arrested Mogilevich in Moscow, though he was later released.

The 2009 deal, combined with Turkmenistan's hiking of export prices to a market level, ended the Turkmen-Ukraine gas racket, but the years of political feuding over who should command the revenues from the trade left behind deep wounds that still today have not healed - and may yet reopen.

None other than John Herbst, the US ambassador to Kyiv in 2003-2006 who signed off on many of the leaked cables quoted above, summarised in a talk held in Kyiv in April 2015 how the legacy of those years still poisons Ukrainian politics today.

"Ukraine has a very serious problem with corruption, because frankly the very top of your elite are corrupt - the very top," Herbst told listeners. "I won't name any names, but even people at the very top who know how to talk to Westerners in reform language, and say all the right things, prospered under the old system. They learned and prospered under the old rules and those rules are very convenient - and if they're convenient for you when you're a minister, imagine how convenient they are for you when you are above that level. (...) These are the leadership you have," he concluded pessimistically.