Igor Bakai. The "Father" of Gas Corruption. Part 1
Igor Bakai is a household name for Ukrainians. He was the first person to pay for Ukraine's gas with food, Leonid Kuchma's quartermaster, and a sworn enemy. Yulia Tymoshenko, the founder of the NAK Naftogaz of Ukraine and the father of the scandalous DUS (State Administration of Affairs).
This is one of the richest people in Ukraine, who became famous for his own huge nature reserves and luxurious palaces (Pshonka and never dreamed of), real estate abroad, as well as grand festivals that he organized for his friends.
History from Skelet.Org about how a man with the intelligence level of a forestry technical school graduate became a multimillionaire in just a few months.
Igor Bakai. The music didn't play for long.
On October 31, Ihor Bakai, former head of the State Property Management Department and former head of Naftogaz under President Leonid Kuchma, was detained in Moscow along with his accountant and assistant, Kostiantyn. The men were released a few hours later, but Bakai remained in pretrial detention.
Those unfamiliar with the rise of Igor Bakai will see a "Russian connection" and a political repression in his arrest. However, firstly, the Ukrainian businessman has been living with a Russian passport for 13 years, and what happened to him in Russia is a logical consequence of what Ukraine failed to do at the time. The former official is suspected of large-scale fraud, allegedly embezzling funds from his business partners. Bakai, on behalf of a commercial organization, entered into a loan agreement with a mining and metallurgical holding company for over 630 million rubles. The funds were transferred to his account, but when the loan expired, the businessman refused to repay.
The prosecutor's office is holding 10 complaints from defrauded individuals, including one from Russian billionaire Alisher Usmanov, considered close to Russian Prime Minister Dmitry Medvedev. He lent Bakai $9 million, but Bakai never repaid it. It is also known that the Ukrainian businessman, along with his accomplices, stole $12 million from Usmanov's company, Metalloinvest Limited, on behalf of Industrial Group "Russian Bear" LLC.
Alisher Usmanov
A Moscow court has remanded the Ukrainian businessman in custody until November 12. He faces up to 10 years in prison. While Bakai remains in pretrial detention, we look back on his career.
Igor Bakai. A promising lumberjack
Igor Mikhailovich Bakai was born on November 17, 1963, in Rivne. His mother, Ustina Artemovna, and his father, Mikhail Vasilievich, worked as a driver. Little is known about the future millionaire's childhood. Skelet.Org I learned that the family was poor. It wasn't easy to feed three children, and Bakai Sr. also had six siblings whom he supported.
The future multimillionaire completed only eight years of high school. History remains silent on why—whether the granite of science was too hard, or necessity forced him.
In 1978, he enrolled in the Bereznevo Forestry College, pursuing a useful and, most importantly, essential qualification—"Forester, Forestry Technician." Incidentally, this diploma would later become the subject of jokes at the expense of the oligarch. After completing his secondary education, Bakai went to repay his debt to his country. After demobilization, he settled in Lviv, taking a cushy but lucrative position as head of the training base for the SK Karpaty football team of the Carpathian Military District. In one interview, Bakai recounted that his job back then consisted of cleaning the grounds, washing windows and soccer balls, mowing the lawn, preparing the players' sauna, and preparing meals. Moreover, he claimed he didn't even receive a salary because he was on active duty. Here, Igor Mykhailovych is clearly playing it down. His tenure coincided with a period of active player sales for the club. The cunning boss practically founded the football transfer market in the country. As a result, the best players were sold, and the team was left with nothing. The only one who got richer from this was the young base commander.
Igor Bakai. The "Father" of Gas Corruption. Part 1
In 1989, according to his official biography, Bakai dropped everything and, obsessed with the idea of building the Baikal-Amur Mainline, went to Yakutia.
It's safe to assume Igor Mikhailovich wasn't a fan of Soviet romanticism. He likely figured out early on where he could make a killing. In the North, "Pavka Korchagin" (or perhaps citizen Koreiko) took up logging. He assembled a small team of nine people and soon rose to the rank of foreman. Incidentally, Bakai's team was teetotal, so they also engaged in another profitable business—vodka sales. Back then, alcohol was rationed, and the resourceful foreman would buy it up and sell it to other workers at exorbitant prices.
If the above is to be believed, Igor Mikhailovich made his fortune in the taiga, selling timber and vodka. But it turns out this is a myth, invented by Bakai's biographers for the sake of a catchphrase. Skelet.OrgThe future oligarch started with crayfish. The kind that go perfectly with beer.
It happened in Belarus in 1989. Igor Bakai was implicated in a criminal case. As deputy chairman for commercial issues and subsidiary production at the Zarya collective farm in the Malorita district of the Brest region, he was accused of abuse of office, systematic embezzlement, and large-scale misappropriation of funds.
It all started on a small scale. In the spring of 1989, a young entrepreneur bought 91 kg of crayfish from three strangers at the market for 3 rubles each, totaling 273 rubles. He sold the goods to the Lviv restaurant for 7 rubles per kg. It's hard to imagine how the future multimillionaire smuggled crayfish back to his native Lviv, but the profit is obvious. Things got even bigger: Bakai found work at the Belarusian collective farm "Zarya," which specialized in crayfish breeding. This allowed him to expand his trade. He circumvented contracts by supplying the Lviv restaurant with crayfish at inflated prices, falsifying invoices. Later, Bakai sold the goods to other Lviv restaurants and cafeterias for cash. According to the criminal case, the deputy chairman sold 3441 kg of crayfish on the side during his six months on the job. Imagine, almost three and a half tons! Incidentally, it's worth noting that Igor Mikhailovich is a true patriot. After all, he sold the crayfish not to some place like Minsk or Moscow, but to his homeland!
Again, based on the case materials, Bakai's profit amounted to 9,500 rubles. This is the amount the prosecutor's office estimated the collective farm's losses at. Of course, this sum was nowhere near what Igor Mikhailovich would earn just five years later from the deal to supply Turkmen gas to Ukraine. But that's not all. The deputy chairman of the collective farm managed to make a buck by renovating the house that had been kindly allocated to him. As a result, he spent 3906 rubles over his allotted amount. The collective farm also paid for bricks ordered by Bakai for the construction of a new house.
And another interesting fact. Igor Mikhailovich's fondness for high-stakes living has long been known. While working at Zarya, he would set the table for foreigners in style. For example, Bakai spent 1000 rubles on treats for a Canadian company to which the collective farm supplied the notorious crayfish.
In the early 90s, trouble began to brew in the hospitable Belarusian land. The authorities uncovered the massive fraud perpetrated by the deputy chairman of the collective farm. But our hero managed to escape, returning to Ukraine. Soon, the Soviet Union collapsed, hyperinflation set in, and the losses inflicted on the collective farm by the future oligarch became simply paltry. However, the criminal case against Igor Mikhailovich had been open even before 1993.
Igor Bakai returned to Lviv from "Yakutia" (Belarus) by chance. In 1991, he came to give his wife his earnings. At the time, Mikhail Gorbachev's law on cooperatives was gaining momentum, and his family persuaded him to stay and invest in his business. Thus, he opened the "Kozatski Stravi" cooperative, which included not only a cafe but also a meat processing plant.
A year later, the newly minted businessman moved to Kyiv and took over the management of the Veles company, as well as establishing Bakai CJSC, Bakai LLC, and the Arbat firm. All of them would later become part of the infamous Respublika corporation. In 1993, at its inception, Respublika was engaged in the sale of food products. But within a couple of years, it had become a monopoly, trading in metals and gas. Thus, the "food baron" Bakai became the "oil king." Incidentally, he repaid his debt of 9,5 rubles to the Zarya collective farm, and the case was then closed.
Igor Sharov
Oh, great "Republic"
The production and commercial corporation "Respublika" was registered on October 26, 1993, in Kyiv. At this time, a certain Igor Sharov, a representative of the "Kirovograd" criminal clan, appeared on the scene. (Read: Kirovograd "King" Igor Sharov: Is Greed a Vice?)
He becomes Bakai's partner and merges his enterprise, Inkopmark, with Respublika. Behind both businessmen stood the then criminal "authorities" of Kyiv, Vladimir Kisel (Ded), Viktor Rybalko (Rybka), Alexander Presman (Semyon Mogilevich's man). There were eight co-founders of the corporation in total. Their composition was constantly changing, but only Bakai was listed as "on a permanent basis."
Initially, the corporation was engaged in the supply of Ukrainian food products abroad. According to Skelet.Org"Respublika" traded in diamonds. In one famous case, the company purchased a batch of precious stones from Alliance Bank for 30 billion karbovanets. The purchase was made at old prices, essentially a pittance, without taking hyperinflation into account. The diamonds were sold to friendly Uzbekistan for 110 billion karbovanets. Bakai profited more than 300% on the deal. This operation was financed by the bankrupt Bank Ukraina, and former Prime Minister Vitaly Masol provided protection.
Skelet.Org I learned that after selling his diamonds, Igor Bakai had become involved in the modeling business. He helped organize the first beauty pageants in Ukraine. It was then that he acquired his first luxury cars with security – he drove a Mercedes-Benz 600 (a "boar" as it's commonly known).
Everything changed in 1994, when Igor Mikhailovich entered the Turkmen market. A food crisis was raging there, but the Turkmen side had no money to purchase goods. Coincidentally, Ukraine was in an even deeper crisis and owed Turkmenistan exorbitant amounts for gas supplies. Then Igor Mikhailovich proposed exchanging food for gas. This was a stroke of genius, unparalleled. It took a genius or someone from a forestry college to build such a partnership. Here's an example: the corporation supplied Turkmenistan with almost 1 million pairs of galoshes in exchange for gas consumed. For the Turkmen, this was a valuable and scarce commodity.
Igor Bakai. The "Father" of Gas Corruption. Part 1
With his proposal, Bakai paid off the 1993 debt for Turkmen gas. That, mind you, was $671,9 million. There was even a Cabinet of Ministers resolution on trade and intermediary activities, making Igor Mikhailovich the first businessman in the country to pay for gas through barter. Meanwhile, the corporation's authorized capital was 50 million karbovanets; at the official dollar exchange rate in 94, that was $4. Clearly incomparable sums. Looking ahead, it should be noted that it was precisely this discrepancy that allowed Respublika to avoid demanding a guarantee for debt repayment. But more on that later. Now, the answer to the main question: who gave the corporation the opportunity to become a monopoly?
Igor Bakai - nephew Leonid Kravchuk, the same one who became president of Independent Ukraine in 1991.
Leonid Kravchuk, a relative of Igor Bakai
Leonid Makarovich decided that stealing money as a family tandem was far more profitable. He gave the green light to the Respublika corporation, which received a quota to supply gas to Ukraine. Since then, Igor Mikhailovich has gained access to two high-ranking governments – that of Ukrainian President Leonid Kravchuk and that of Turkmenistan President Sapermurat Niyazov.
Now for some interesting figures: in 1994, 9,2 billion cubic meters of gas arrived from Turkmenistan to the Respublika corporation. The value of this commodity at the time, according to Ukrgazprom documents, was $460,5 million. The company purchased gas at $50 per 1 cubic meters, or $55 with transit. All of this occurred without any guarantees or signed contracts. Turkmenistan supplied the gas, millions flowed into Respublika's personal accounts, and the corporation briskly shipped the goods, but the supplier companies and the banks that had provided the loans were forgotten. When the situation reached a climax, a working group of the Supreme Council's Budget Committee convened at the initiative of former Prime Minister Leonid Kuchma. The deputies concluded that the issue could not be addressed, lest the legislative branch exceed its authority. They even considered taking the case to court, but the corporation, which had already outlived its usefulness, was ultimately shut down. Meanwhile, the company was audited, and it turned out that its assets included gas, held as "collateral." Its value was $176 million. This sum would have been sufficient to pay off part of Respublika's debt, but this never happened. A fire broke out in the corporation's office, destroying all relevant documentation. These recent events coincided with Kravchuk's defeat in the snap presidential election. Leonid Kuchma received the coveted position of Guarantor. The tax authorities rummaged through the remaining documents and concluded that the corporation had never repaid Ukraine's state gas debt.
Thus ended the era of the gas company "Respublika," which lasted only a year. Bakai and Co. earned approximately $500 million from the deals.
Igor Bakai. How the Gas Evaporated
Leonid Danilovich's rise to power threatened Ihor Bakai with prison. But Kuchma pardoned the gas trader. Skelet.Org It is known that Turkmenbashi himself stood up for him. Sapermurat Niyazov personally called the Ukrainian president and pleaded for his friend.
Bakai behind the back of boss Leonid Kuchma
Under the new government, especially after the appointment of Pavlo Lazarenko as Deputy Prime Minister, who oversaw the fuel and energy sector in Yevhen Marchuk's government, a targeted shaping of the Ukrainian gas market began. Bakai didn't sit idle for long. Following the demise of Respublika, in 1995 the businessman founded Intergas CJSC. Its founders intended it to be a vehicle for more lucrative corruption schemes. Simultaneously, a subsidiary, Intergas Inc., was registered in Pennsylvania, USA. Its main purpose was tax evasion and the transfer of Intergas's earnings abroad. Igor Sharov was appointed director of the offshore company. Interestingly, that same year, Igor Mikhailovich acquired his own "hut" in Pennsylvania. Apparently, after his successful deals, Bakai was planning to move to his millions.
At this time, the country's gas crisis intensified: the IMF demanded that the government abandon its role as guarantor for commercial gas contracts, and Russia's Gazprom, deciding to hedge its bets due to the lack of guarantees, proposed including state-owned Ukrgazprom in the deals. However, the latter was on the brink of bankruptcy. Despite producing gas in Ukraine and paying transit fees, it had no buyers. Ukrgazprom owed the budget approximately $3 million. In 1996, the government wrote off the state-owned company's debts and opened the market to private trading companies. Of course, all of this was cleverly packaged as "price stabilization and the fight against state gas debt."
General Director of UESU Yulia Tymoshenko
The gas market was divided between three companies: United Energy Systems of Ukraine (UESU), Intergaz, and the Ukrainian representative office of Itera. Bakai's company gradually began to displace other gas traders. Igor Mykhailovych also managed to displace gas queen Yulia Tymoshenko from UESU.
Then a battle broke out: Yulia Vladimirovna accused the gas magnate of all the "mortal" sins, but was unable to prove his involvement in the grand schemes for the theft of blue fuel.
Just a year later, Intergaz became a wholesale importer of Russian gas, signing an annual contract with Gazprom for 10 billion cubic meters of gas. This contract was worth $800 million. However, the company only fulfilled 50% of the contract.
Bakai wasn't particularly fond of Intergaz, which was generating dizzying profits. By this time, he was already beckoning to other heights – big-time politics. In 1996, his considerable wealth allowed him to easily win a seat in the Verkhovna Rada elections in Boryspil Electoral District No. 208 (his main competitor was former Defense Minister Kostyantyn Morozov). But he didn't cling to it. In 1997, he was appointed Deputy Minister of Oil and Gas Industry of Ukraine. A year later, the gas magnate became a freelance adviser to Leonid Kuchma.
Everything will be Naftogaz's
Having become Leonid Kuchma's trusted confidant, Bakai initiated the creation of an energy monopoly to concentrate all gas funds in one place. This was extremely advantageous for Leonid Danilovich, who wanted to raise extra money for the presidential elections in a year. According to information Skelet.OrgKuchma set a condition for his “friend”: to provide his campaign with 250 million dollars.
In May 1998, the Ukrainian government created Naftogaz, a national joint-stock company tasked with importing gas into Ukraine, transiting it through the country, and producing its own energy resources. It consisted of three companies: Ukrgazvydobuvannya (production), Ukrtransgaz (transportation and storage), and Trading House Gaz Ukrainy (sales). Leonid Danilovich personally proposed that his advisor become the head of Naftogaz Ukrainy.
Within months, the company monopolized gas supplies to all consumers in the country, ousting other competing gas traders. In his new position, Igor Mikhailovich was able to unleash his creative potential as a major fraudster. He was the first to introduce theft into the system—the unauthorized siphoning of Russian transit gas. Those who lived through the 90s remember the consequences. Ukraine was accused of gas theft, the state lost its reputation internationally, debts to Russia grew exponentially, gas price manipulation and tariff increases for ordinary people began.
How did it happen? Russia supplied Ukraine with 30 billion cubic meters of natural gas in exchange for transit fees at $80 per thousand cubic meters. The Ukrainian monopoly resold the gas to intermediaries, who in turn resold it to companies. At NAK, Bakai launched barter-bill-of-exchange (non-cash) schemes that removed the company's financial activities from the legal sector, earning at least $5 per thousand cubic meters. This amounted to approximately $150 million annually. This was despite the fact that 40% of natural gas sales were controlled by Igor Mikhailovich's commercial firms, specifically Intergaz and its subsidiaries.
Arina Dmitrieva, for Skelet.Org
CONTINUED: Igor Bakai. The "Father" of Gas Corruption. Part 2
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