After boost from Perry, backers got huge gas deal in Ukraine

KYIV, Ukraine — Two political supporters of U.S. Energy Secretary Rick Perry secured a potentially lucrative oil and gas exploration deal from the Ukrainian government soon after Perry proposed one of the men as an adviser to the country’s new president.

Perry’s efforts to influence Ukraine’s energy policy came earlier this year, just as President Volodymyr Zelenskiy’s new government was seeking military aid from the United States to defend against Russian aggression and allies of President Donald Trump were ramping up efforts to get the Ukrainians to investigate his Democratic rival Joe Biden.

Ukraine awarded the contract to Perry’s supporters little more than a month after the U.S. energy secretary attended Zelenskiy’s May inauguration. In a meeting during that trip, Perry handed the new president a list of people he recommended as energy advisers. One of the four names was his longtime political backer Michael Bleyzer.

A week later, Bleyzer and his partner Alex Cranberg submitted a bid to drill for oil and gas at a sprawling governmentcontrolled site called Varvynska. They offered millions of dollars less to the Ukrainian government than their only competitor for the drilling rights, according to internal Ukrainian government documents obtained by The Associated Press. But their newly created joint venture, Ukrainian Energy, was awarded the 50year contract because a governmentappointed commission determined they had greater technical expertise and stronger financial backing, the documents show.

Perry likely had outsized influence in Ukraine. Testimony in the impeachment inquiry into Trump shows the energy secretary was one of three key U.S. officials who were negotiating a meeting between Trump and the Ukrainian leader.

White House and State Department officials have testified that the president would only meet with Zelenskiy if he committed to launching an investigation into Joe Biden and his son Hunter. In the impeachment inquiry against Trump, the officials have also said that U.S. military aid to Ukraine was being withheld until Zelenskiy publicly announced such an investigation.

The sequence of events suggests the Trump administration’s political maneuvering in Ukraine was entwined with the big business of the energy trade.

Perry made clear during trips to Kyiv that he was close to Bleyzer, a UkrainianAmerican investor and longtime Perry supporter who lives in Houston, and Cranberg, a Republican megadonor who provided Perry the use of a luxury corporate jet during the energy secretary’s failed 2012 presidential bid.

Perry’s spokeswoman said Wednesday that the energy secretary has championed the American energy industry all over the world, including in Ukraine.

“What he did not do is advocate for the business interests of any one individual or company,” said Shaylyn Hynes, the press secretary for the Energy Department.

Jessica Tillipman, who teaches anticorruption law at George Washington University, said even if Perry did seek to influence foreign officials to award contracts to his friends, it is likely not illegal.

“My gut says it’s no crime,” she said. “It’s just icky.”

Zelenskiy’s office did not respond to requests for comment.

In a statement to AP, Bleyzer denied that Perry helped his firm get the gas deal.

“I believe that Secretary Perry’s conversations with Ukrainian government officials, if they in fact took place, did not play any role in Ukrainian Energy winning its bid,” Bleyzer said Tuesday. He said the process was competitive and transparent and “will hopefully serve as an example of how the Ukrainian energy market can be opened for new investments.”

Amy Flakne, a lawyer for Cranberg’s company Aspect Holdings, said Wednesday that Perry and other U.S. officials supported “a fair, competitive process to bring foreign capital and technology to Ukraine’s lagging energy sector.”

“Aspect neither sought, nor to our knowledge received, special intervention on its behalf,” Flakne said.

‘Freedom Gas’

As Trump’s energy secretary, Perry has flown around the globe to push for U.S. exports of liquefied natural gas, which he calls “Freedom Gas.” He’s made multiple trips to Ukraine and other former Sovietbloc nations, where shipments of American gas and drilling technology take on strategic importance as a potential alternative to continued dependence on imports from Russia.

Ukraine has long suffered from a reputation for political corruption, particularly in its oil and gas sector. In the chaotic days following the breakup of the Soviet Union, the newly independent Ukrainian government sold off many stateowned businesses worth billions to a cadre of wellconnected oligarchs who amassed immense fortunes.

As Ukraine sought economic and security support from the U.S. and other Western democracies, those countries pressed it to put in place a more open and transparent process for awarding oil and gas exploration rights on state land.

At the urging of Western partners, Ukraine’s government created a process requiring that exploration contracts be put out to bid and awarded following review from a selection board appointed by the president’s cabinet of ministers. The board recommends the winners, pending final approval from the ministers.

Those Western partners also advised Ukraine to appoint an independent supervisory board at Naftogaz, the stateowned energy company, as a guard against corruption and selfdealing.

In February, the Ukrainian government opened up bidding for nine oil and gas blocks encompassing 4,428 square miles of land. Ukrainian Energy, the joint venture between Bleyzer’s investment firm SigmaBleyzer and Cranberg’s Aspect Energy, submitted a single bid for the largest block, which covers 1,340 square miles.

Under the contracts, the winning bidder is awarded exclusive rights to extract petroleum for up to 50 years. After the initial costs are recovered, the company and the government split the profits.

An internal review of the proposals by the Ukrainian Ministry of Energy and Coal Mining obtained by the AP show they were not the highest bidder.

The only competing bidder, UkrGasVydobuvannya, offered more than $60 million for the first phase of the project, compared with $53 million from Bleyzer and Cranberg, the document shows. UGV is Ukraine’s largest domestic gas producer and is a subsidiary of Naftogaz, the stateowned company where Perry sought to replace board members.

Despite the lower upfront investment, the selection board gave the Americans higher scores for technical expertise and overall financial resources, according to the document reviewed by AP.

Of the nine gas deals awarded on July 1, Bleyzer and Cranberg’s bid was the only one of the winners that didn’t include the participation of a Ukrainian company. UGV won four of the remaining bids.