Leshchenko: Ally of Putin friend Medved­chuk rig­ging LPG mar­ket

Kyiv Post - - Business - BY OLEG SUKHOV SUKHOV@KYIVPOST.COM

An Is­raeli busi­ness­man with links to pro-Krem­lin politi­cian Vik­tor Medved­chuk, who is in turn a friend of Rus­sian Pres­i­dent Vladimir Putin, now con­trols up to 40 per­cent of Ukraine’s im­ports of liq­ue­fied pe­tro­leum gas.

Nisan Moiseyev, the owner of gas trader Pro­ton En­ergy, boosted his clout on the mar­ket in May, when Rus­sia’s Fed­eral Ser­vice for Tech­no­log­i­cal and Ex­port Con­trol gave the com­pany a mo­nop­oly on Rus­sian LPG sup­plies to Ukraine.

Pro­ton En­ergy buys the LPG from state-owned oil firm Ros­neft, and cur­rently con­trols up to 40 per­cent of Ukraine’s LPG im­ports. The fuel is in­creas­ingly used in au­to­mo­biles as an al­ter­na­tive to ga­so­line.

Moiseyev is an as­so­ciate of Medved­chuk. Ra­dio Lib­erty has pub­lished video footage of Moiseyev and Medved­chuk get­ting out of Medved­chuk’s pri­vate jet and kiss­ing each other.

Al­though air travel be­tween Rus­sia and Ukraine is banned, Medved­chuk’s jet has been ex­empted by Ukrainian au­thor­i­ties and is al­lowed to fly be­tween the two coun­tries.

More­over, law­maker Sergii Leshchenko and other crit­ics be­lieve Moiseyev el­bowed his way into the mar­ket with the help of Pres­i­dent Petro Poroshenko, the Se­cu­rity Ser­vice of Ukraine and the Rus­sian au­thor­i­ties.

Leshchenko also ar­gues that the al­leged col­lu­sion trig­gered an LPG price hike in Au­gust, al­though this claim is dis­puted by some an­a­lysts.

Medved­chuk’s spokesman Oleh Bo­vavin de­nied Mevd­ed­chuk has any links to the LPG mar­ket, while the Pres­i­den­tial Ad­min­is­tra­tion did not re­spond to re­quests for com­ment.

SBU spokes­woman Olena Hitlian­ska also de­nied the ac­cu­sa­tions, ar­gu­ing that ex­perts had re­futed Leshchenko’s claims.

Blocked im­ports

In an Aug. 29 blog post, Leshchenko ar­gues that the re­dis­tri­bu­tion of the LPG mar­ket started in Novem­ber 2016, when the SBU’s anti-cor­rup­tion unit blocked im­ports of LPG by 16 in­de­pen­dent traders. The SBU said im­ports were blocked be­cause it was in­ves­ti­gat­ing the com­pa­nies for al­leged tax eva­sion and fi­nanc­ing Krem­lin-backed sep­a­ratists. Ukraine im­ports LPG from Rus­sia, Be­larus and other coun­tries.

The anti-cor­rup­tion unit is headed by SBU First Deputy Chief Pavlo Dem­chyna, an as­so­ciate of Poroshenko’s top al­lies in par­lia­ment, Ihor Kononenko and Olek­sandr Hra­novsky.

The im­port block­ade trig­gered a ma­jor shakeup on the LPG mar­ket. The blocked traders and Leshchenko ar­gue that the se­cu­rity ser­vice’s crim­i­nal case lacked any sub­stance and was merely an ef­fort by the SBU to re­move com­peti­tors to the Swiss-reg­is­tered Pro­ton En­ergy from the mar­ket.

Sanc­tions

Sub­se­quently the SBU also or­dered an ex­am­i­na­tion of im­ported LPG tanks to look for poi­sonous sub­stances, and or­dered Ukraine’s state rail­way mo­nop­oly Ukrza­l­iznyt­sya to check if there were any ex­plo­sive de­vices on trains that trans­ported LPG.

In Fe­bru­ary, Dem­chyna asked First Deputy Prime Min­is­ter and Econ­omy Min­is­ter Stepan Ku­biv to im­pose sanc­tions on the traders by block­ing their busi­ness op­er­a­tions, and Ku­biv ap­proved the re­quest.

As a re­sult of the block­age, only four com­pa­nies were al­lowed to im­port LPG. Th­ese in­clude Glusko, a sub­sidiary of Moiseyev’s Pro­ton En­ergy, and three com­pa­nies linked to Pro­ton En­ergy: Kreativ Trad­ing, Wexler Global LP and Gikka Lim­ited, ac­cord­ing to a Ra­dio Lib­erty in­ves­ti­ga­tion.

Mean­while, in 2016, Glusko bought Ros­neft’s as­sets in Ukraine.

How­ever, the SBU and the Econ­omy Min­istry had to un­block LPG im­ports by Moiseyev’s com­peti­tors and re­move the sanc­tions from Fe­bru­ary to March un­der pub­lic pres­sure.

Poroshenko’s role

Crit­ics of the Ukrainian au­thor­i­ties claim that Pres­i­dent Petro Poroshenko played a role in the re­struc­tur­ing of the LPG mar­ket.

“Last fall Poroshenko de­cided to give this mar­ket as a gift to Vik­tor Medved­chuk…,” Leshchenko said. “The crack­down on the LPG mar­ket could not have been car­ried out with­out Poroshenko’s bless­ing. And given what we know about the in­cum­bent pres­i­dent, it’s hard to be­lieve that he would have au­tho­rized an over­haul of the in­dus­try and mak­ing Medved­chuk a ma­jor player there with­out get­ting a cut.”

Price hike

Leshchenko also at­trib­uted the latest 52 per­cent hike in LPG pric- es in Au­gust to col­lu­sion be­tween the Ukrainian au­thor­i­ties and Medved­chuk.

How­ever, Ser­hiy Kuyun, head of oil and gas con­sult­ing firm A-95, ar­gued that the latest price hike was due not to the SBU’s ac­tions but to high de­mand in Ukraine for LPG, un­der­de­vel­oped LPG in­fra­struc­ture, in­clud­ing a lack of stor­age fa­cil­i­ties, as well as short­ages caused by re­pairs at oil re­finer­ies.

“Over the past three years, LPG con­sump­tion has risen by 50 per­cent to 1.5 mil­lion tonnes,” he said. “This is one of the high­est fig­ures in the world.”

He said that LPG is in such high de­mand that any mi­nor prob­lem can cause dis­rup­tion on the mar­ket.

“We’ve got­ten rid of Rus­sian oil and ga­so­line, but are still de­pen­dent on Rus­sian LPG,” he ar­gued.

Of­fi­cials’ re­ac­tion

The price hike prompted such an uproar that Ukraine’s top lead­ers were forced to re­act.

“We set the task of de­creas­ing LPG prices by the sec­ond half of Septem­ber, and any­one who is found to have com­mit­ted vi­o­la­tions will be pun­ished,” Poroshenko said on Aug. 30.

Prime Min­is­ter Volodymyr Groys­man on Aug. 29 asked the Anti-Mo­nop­oly Com­mit­tee, the State Fis­cal Ser­vice, min­istries and law en­force­ment agen­cies to iden­tify the rea­sons for LPG prices hikes, and to take mea­sures to de­crease prices.

“The LPG price hikes show signs of col­lu­sion,” he said. “This is sab­o­tage against Ukraine.”

Demon­stra­tors protest in front of the build­ing of Ukraine’s SBU se­cu­rity ser­vice on Aug. 30 against the SBU’s al­leged ef­forts to help pro-Krem­lin politi­cian Vik­tor Medved­chuk con­trol the liqui­fied pe­tro­leum gas mar­ket. One of the posters reads “(Pres­i­dent Petro) Poroshenko + Medved­chuk = trea­son.” (Volodymyr Petrov)

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