The oil dispute between Tatneft and the Privat Group will result in multi-million dollar losses for Ukraine.
Last week, the conflict between the former and current shareholders of PJSC Ukrtatnafta escalated. The outcome of this dispute will be determined by a London arbitration court, so the parties will have equal chances throughout the entire process, and the intrigue over the winner will persist until the very end. But even if he loses, Ihor Kolomoisky will have an advantage over his opponent: he will be able to cover any potential losses with state assets.
Bloomberg recently reported on the freezing of the foreign assets of major Ukrainian businessmen. A London court ruling on April 22 stated that Ihor Kolomoisky's French villa and 20 hectares of land in Haute-Savoie (France) were subject to seizure, as were several of Gennadiy Bogolyubov's properties in London, including a house on Belgravia Square near the gates of Buckingham Palace. The assets of Ukrtatnafta CEO Pavlo Ovcharenko and PrivatBank's occasional business partner, Kharkiv tycoon Oleksandr Yaroslavskyy, were also under attack.
Thanks to the efforts of this quartet, several years ago, entities of the Russian company Tatneft were ousted from the founding members of the Ukrainian PJSC Ukrtatnafta, which owns the Kremenchuk Oil Refinery. Then, fresh from the incident, Rustam Minnikhanov's company attempted to restore its stake in the enterprise through the courts, from 8,3% to its previous 55,7%, but failed. Now, the Tatars are making a second attempt. The aforementioned decision of the London court was issued as an interim measure in a case initiated by Tatneft over oil supplies to the Kremenchuk Oil Refinery. Specifically, the company's claim states that it is seeking $334 million in damages and interest because in 2009 the aforementioned businessmen "fraudulently" appropriated funds owed to it for crude oil delivered to the Ukrainian refinery.
Since this case will be decided by a court unspoiled by compelling arguments, it's impossible to predict the winner at this time. However, given the background of previous years, Tatneft's chances are better. This refers to the July 2014 international arbitration ruling, which ordered the Ukrainian state to pay the Russian oil company $112 million in compensation for the "forceful seizure" of Ukrtatneft.
So far, this decision has not been implemented only because PrivatBank's employees are challenging it in the Paris Court of Appeal (the hearing on the merits of the appeal will begin on October 18, 2016). However, Igor Kolomoisky's subordinates have repeatedly stated their willingness to compensate Ukraine for any potential losses should this dispute fail.
Privat will likely make a similar announcement regarding the current "London" trial. However, even if events unfold according to this scenario, the Dnipropetrovsk billionaire will not come out on the losing end. He could use the large losses in the Ukrtatnafta cases as a pretext to reopen the bankruptcy proceedings against this company, which were initiated back in 2013 at the initiative of the private enterprise "Agrotekhbiznes" (Industrial and Industrial Enterprise). According to DS, this process is currently in "dormant" mode (suspended pending the consideration of a related case in which Ukrtatnafta is seeking to invalidate a promissory note presented to it by Agrotekhbiznes). But under these circumstances, Ukrtatnafta's bankruptcy could be reinstated at the first sign of trouble. If this process were to progress to the liquidation stage, the entire property complex of the Kremenchug Oil Refinery could easily be transferred to a new legal entity, thereby wiping out the value of the state-owned 43% of the company's shares.
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