Poroshenko Un­pop­u­lar Yet May Be Un­beat­able in 2019

Pres­i­dent’s al­lies deny ac­cu­sa­tions of prof­i­teer­ing from state firms, de­fense in­dus­try


As­so­ciates of Pres­i­dent Petro Poroshenko are be­ing in­ves­ti­gated for al­legedly skim­ming prof­its from state com­pa­nies through sup­ply con­tracts.

As Rus­sia’s war against Ukraine rages on in its fourth year, the pres­i­dent and his pro­tégés stand ac­cused of prof­i­teer­ing from the de­fense in­dus­try. Firms con­trolled by them have re­ceived lu­cra­tive mil­i­tary con­tracts.

An­other bone of con­tention is the con­tro­ver­sial Rot­ter­dam+ coal sup­ply scheme in­tro­duced by the en­ergy reg­u­la­tor con­trolled by Poroshenko. The scheme has al­lowed coal sup­pli­ers, power com­pa­nies and Poroshenko’s in­vest­ment bank to earn through soar­ing en­ergy and bond prices.

The pres­i­dent de­nies all ac­cu­sa­tions of graft.

In March the Na­tional An­tiCor­rup­tion Bureau of Ukraine charged State Fis­cal Ser­vice Chief Ro­man Nasirov, a pro­tégé of the pres­i­dent, with il­le­gally sus­pend­ing taxes for gas trad­ing com­pa­nies of run­away law­maker Olek­sandr Onyshchenk­o. Onyshchenk­o has claimed that Poroshenko had in­structed Nasirov to de­lay the tax pay­ments.

Poroshenko has de­nied all of Onyshchenk­o’s ac­cu­sa­tions, call­ing

him a tool of the Krem­lin, while Nasirov be­lieves his case to be fab­ri­cated and po­lit­i­cal.

The NABU is also in­ves­ti­gat­ing Poroshenko’s top al­lies, law­mak­ers Ihor Kononenko and Olek­sandr Hra­novsky, and Olga Tkachenko, an ex-aide to Hra­novsky, in a graft case linked to the sta­te­owned Odesa Port­side Plant, a fer­til­izer maker. Tkachenko is an ex-mem­ber of the plant’s ex­ec­u­tive board.

Olek­sandr Vizir, an aide to Kononenko, be­came a mem­ber of Odesa Port­side Plant’s board of di­rec­tors in 2016.

Onyshchenk­o claims he had been pay­ing Hr 2,000 per 1,000 cu­bic me­ters in kick­backs to Kononenko from his com­pany’s nat­u­ral gas sup­plies to the Odesa Port­side Plant and state-owned power pro­ducer Tsen­tren­ergo, which Kononenko de­nies.

Be­fore quit­ting in Fe­bru­ary 2016, Econ­omy Min­is­ter Ai­varas Abro­mavi­cius also ac­cused Kononenko of try­ing to in­stall his pro­teges at his min­istry and many state firms.

One of the pro­teges, An­driy Pa­sish­nik — ex-ex­ec­u­tive di­rec­tor of oil and gas gi­ant Naftogaz — is cur­rently on trial on charges of try­ing to in­flu­ence a state of­fi­cial. Kononenko de­nies Abro­mavi­cius’ al­le­ga­tions.

War prof­i­teer­ing?

Poroshenko and his as­so­ciates have also been ac­cused of prof­i­teer­ing from sup­plies to the mil­i­tary, which they deny.

The Ry­bal­sky Kuz­nia ship­yard, which Poroshenko owns with Kononenko, got gov­ern­ment con­tracts, in­clud­ing mil­i­tary ones, worth $2.5 mil­lion in 2016 and $560,000 in 2017, pub­lic data shows.

Oleh Hlad­kovsky, Poroshenko’s busi­ness part­ner, is a deputy sec­re­tary of the Na­tional Se­cu­rity and De­fense Coun­cil with enor­mous clout over the de­fense in­dus­try.

Hlad­kovsky has man­aged to re­ceive sev­eral lu­cra­tive mil­i­tary con­tracts for his au­tomaker Bo­hdan, which was for­merly co-owned by Poroshenko. These in­clude sup­plies of MAZ trucks, 60 mil­i­tary am­bu­lances worth $2 mil­lion, as well as Hyundai HD65 and Hyundai HD120 trucks, ac­cord­ing to the Nashi Hroshi in­ves­tiga­tive jour­nal­ism project.

Ser­hiy Kra­sulya, a Bo­hdan spokesman, ar­gued that there was no con­flict of in­ter­est be­cause Hlad­kovsky was not in­volved in the com­pany’s man­age­ment de­spite own­ing it.

Ro­man Ro­manov, a for­mer Bo­hdan dealer, heads state de­fense firm Ukroboron­prom.

A re­port by the In­sti­tute of World Pol­icy pub­lished in April men­tioned “a pro-gov­ern­ment lobby where sev­eral pri­vate com­pa­nies ei­ther be­long to those in power or are con­trolled by them and ben­e­fit from pref­er­ences in get­ting gov­ern­ment con­tracts.”

“The biggest prob­lem is that the de­fense sec­tor is mi­cro­man­aged,” said Va­len­tyn Badrak, head of the Cen­ter for Army, Con­ver­sion and Dis­ar­ma­ment Stud­ies. “If some in­vestor wants to come to Ukraine, he needs to go to four par­tic­u­lar of­fices.”

Rot­ter­dam +

An­other highly con­tro­ver­sial scheme is the sup­plies of coal un­der the Rot­ter­dam+ for­mula, which was in­tro­duced last year by the en­ergy reg­u­la­tor headed by Dmytro Vovk, a presidenti­al pro­tégé.

Al­though the coal is sup­plied from Rus­sian-oc­cu­pied ar­eas in the Don­bas and Dnipropetr­o­vsk Oblast to other Ukrainian re­gions, its price in­cludes the cost of al­leged ship­ment from Rot­ter­dam in the Nether­lands and is un­jus­ti­fi­ably high, ac­cord­ing to an­a­lysts. As a re­sult, the price of elec­tric­ity from coal-fu­eled power plants has more than tripled since 2015. Law­maker Sergii Leshchenko claims that Poroshenko and ty­coon Ri­nat Akhme­tov have reached a deal to in­tro­duce the scheme.

Akhme­tov’s DTEK en­ergy group has ben­e­fited from the high coal and power prices in­tro­duced by the Rot­ter­dam+ scheme. DTEK de­nied ac­cu­sa­tions of wrong­do­ing, say­ing that the en­ergy prices were fair.

An­other ben­e­fi­ciary is state-owned power pro­ducer Tsen­tren­ergo, which is al­legedly linked to Kononenko, who de­nies the con­nec­tion. Onyshchenk­o claims that Kononenko had been get­ting $20 per ton from coal sup­plies com­ing from Rus­sian-oc­cu­pied Don­bas, which Kononenko de­nies.

The Rot­ter­dam+ for­mula has also al­lowed ICU, an in­vest­ment bank that ser­vices Poroshenko and is con­trolled by his al­lies, to earn $250 mil­lion, ac­cord­ing to an in­ves­ti­ga­tion pub­lished by the Novoye Vre­mya mag­a­zine.

ICU pur­chased DTEK Eurobonds be­fore the Rot­ter­dam+ scheme was in­tro­duced and prof­ited when their price soared due to the for­mula. The bank de­nies any wrong­do­ing, say­ing that the prices of other Ukrainian cor­po­rate bonds have also soared.

Pro-Rus­sian politi­cian Vik­tor Medved­chuk, who has en­joyed rel­a­tively good re­la­tions with Poroshenko, is also al­legedly prof­it­ing from the scheme. Ac­cord­ing to an Ukrain­ska Pravda in­ves­ti­ga­tion, Hong Kong-based Arida, which is al­legedly linked to Medved­chuk, has sup­plied coal from Rus­sian-oc­cu­pied ar­eas to Tsen­tren­ergo and passed it off as South African coal.

Mean­while, since Novem­ber the Se­cu­rity Ser­vice of Ukraine and the Pros­e­cu­tor Gen­eral’s Of­fice have blocked im­ports of liq­ue­fied nat­u­ral gas by dozens of traders, ac­cus­ing them of fi­nanc­ing ter­ror­ism.

Leshchenko claims the im­ports were blocked to pro­mote the in­ter­ests of Medved­chuk and Poroshenko’s in­ner cir­cle. As a re­sult of the SBU’s ac­tions, the share of gas traders al­legedly linked to Medved­chuk in­creased.

Medved­chuk’s spokesman Oleh Bo­vavin de­nied a link be­tween Medved­chuk and the gas traders but could not com­ment on the Tsen­tren­ergo scheme.

Pres­i­dent Petro Poroshenko’s right-hand man and law­maker Ihor Kononenko (C) stands in par­lia­ment on Feb. 9. He is be­ing in­ves­ti­gated over an al­leged cor­rup­tion scheme at the Odesa Port­side Plant. Fugi­tive law­maker Olek­sandr Onyshchenk­o claims he had...

The Odesa Port­side Plant is at the cen­ter of a cor­rup­tion case in which Ihor Kononenko and Olek­sandr Hra­novsky, top al­lies of Pres­i­dent Petro Poroshenko, are be­ing in­ves­ti­gated. (Volodymyr Petrov)

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