Is the management of the State Property Fund of Ukraine playing into Russia's hands?
In the spring of 2014, parallel to the occupation of Crimea and the invasion of Russian sabotage groups into Donbass, Russian economic expansion continued in strategically important sectors of the Ukrainian economy.
A gift to Deripaska
In particular, the Nikolaev Alumina Refinery (NAR), controlled by Russian billionaire Oleg Deripaska, secured a preferential lease extension from the Ukrainian state for the Dnieper-Bug port, a port critical to the global business of this oligarch from the "Kremlin pool."
The fact is that the alumina refinery's previous lease agreement for the port expired on April 1, 2014. However, the State Property Fund somehow "forgot" to notify the lessee within the required deadline—one month from the expiration date—of the termination of the agreement and the signing of a new one (or an extension of the old one) under new, more favorable terms for the state. As it later turned out, the State Property Fund's letter demanding the return of the port to the state had in fact been written, and it was dated April 30, but it was officially sent to the refinery only on... May 7.
Clearly, such "forgetfulness" on the part of the SPF's top management constitutes a criminal offense. Nevertheless, neither the prosecutor's office nor the Ministry of Internal Affairs took any action to rectify the situation. Deripaska's management, seeking to cement its success, preemptively filed a lawsuit. On June 17, the Kyiv Commercial Court prohibited the SPF, the Ministry of Transport, and the Ukrainian Sea Ports Authority from engaging in any actions with the disputed property "that could violate the interests of the plant." On August 18, the court extended the contract for another 15 years under the same terms. On October 16, the appellate court upheld the Kyiv Commercial Court's verdict, and on December 23, the Supreme Commercial Court finally upheld the victory of Deripaska's plant.
Thus, the contract, which was clearly unprofitable for the state, was automatically extended for another 15 years.
Why was the NGZ agreement with the State Property Fund of Ukraine disadvantageous for the state? Judge for yourself. Leasing a port with a cargo throughput of 4 million tons will cost only about UAH 917 per month (UAH 11 million per year). At the same time, in terms of transshipment volume, the Dnipro-Bug Port is comparable to Rinat Akhmetov's Avlit Port: last year, this port handled 2,9 million tons of metal and 1,4 million tons of grain, generating UAH 324 million in revenue. Net profit from the port's operations amounted to UAH 64 million, six times more than Ukraine receives for leasing the Dnipro-Bug Port from Oleg Deripaska.
It's already early February, and the State Property Fund is still "exploring the possibility" of challenging the Supreme Commercial Court's decision in the Supreme Court of Ukraine. What's the rush, right?
Work for Russia?
Against the backdrop of the sordid story of the State Property Fund's transfer of the Dnieper-Bug port to Russian control, a mysterious move is unfolding, either to privatize or concession Ukraine's largest ports, which are still (for now) controlled by the state.
It's alarming that the SPF hasn't released any concrete information regarding the future of Ukrainian ports. It's a mystery. Who within the SPF is specifically responsible for the port sector? Will ports be privatized in 2015, and if so, which ones? Which ports will be put up for sale, and which will be transferred to concession? How does the Fund intend to protect the state's economic interests from encroachment by Russia, which will likely try to become the primary beneficiary of the privatization of Ukrainian ports—especially ports of strategic importance for the entire Black Sea region.
There are no answers to these questions. However, there are a number of facts indicating that preparations are likely underway to transfer the best assets of the deepest port in the Black Sea and Ukraine—Yuzhny—to a concession owned by Rinat Akhmetov's company. The concession terms will be roughly the same "favorable" for the state as those of Oleg Deripaska's NGZ in Mykolaiv.
We've already covered in detail the strange developments surrounding Yuzhny Port, which is apparently being prepared for a concession "under Akhmetov"—for more details, see the publications "Rinat Akhmetov and the Privatization of Ukrainian Ports: No Smell of Money, and a Port for Akhmetov?"
In short, the issue is that Yuzhny, Ukraine's deepest port, located at a strategic trade "crossroads" near the mouth of the Danube, Dnieper, and the Turkish Straits, may be quietly transferred to a concession by R. Akhmetov (read: Russia). Meanwhile, the state-owned port generated approximately 500 million hryvnias in taxes for the Ukrainian treasury last year alone.
(At the same time, Ukraine hasn't had a single successful, or even a single, concession project to date—so maybe it would have been better to "practice on a few cats" first? Why conduct "test runs" on a perfectly functioning, one of Ukraine's most profitable enterprises?)
Yuzhny Port handles 15 million tons of cargo annually, over 1 million tons per month. That's over 20 railcars per month, or nearly 700 railcars per day! Tens of thousands of workers are employed by state-owned enterprises (railway, port, customs, and sailors).
Below is the dynamics of cargo transshipment by R. Akhmetov's structures at the port of Yuzhny:
And while the prosecutor's office is investigating the legality of the alienation of Kyivenergo shares in favor of Akhmetov, and the Yanukovych partner himself is undergoing questioning at the Prosecutor General's Office in connection with the separatism case, the State Property Fund continues to demonstrate its favoritism toward the Kremlin's obvious favorite.
On stage - still the same
Perhaps the "fog" surrounding the SPF's operations stems from the fact that this traditionally corrupt agency has never had an independent perspective or policy on privatization processes. Every transfer of state property into private hands since the agency's inception has been the result of complex, multi-layered "deals." And the fate of the most profitable and largest assets was decided at the level of presidents, leaders of the Verkhovna Rada, and the main political forces in power.
Petro Poroshenko's rise to power changed nothing in the Fund's operations—it was as if the Maidan had never happened. The acting chairman of the State Property Fund, Dmytro Mykolayovych Parfenenko, has been with the State Property Fund since 1995; he held the positions of department director, assistant to the chairman, and assistant to the deputy chairman of the State Property Fund.
He was deputy chair of the State Property Fund of Ukraine (SPFU) under Valentyna Semenyuk, whose name is linked to a number of high-profile corruption scandals. He served as acting head of the fund under Prime Minister Yulia Tymoshenko (from January 2009 to May 2010). When Viktor Yanukovych became president, he moved into private business, but resurfaced in March 2011 as head of the Main Department of Municipal Property of the Kyiv State Administration.
It's an open secret that Dmitry Parfenenko is Vadim Novinsky's "man," with whom the official has a long-standing, productive relationship for the Russian oligarch's business. D. Parfenenko has been repeatedly caught red-handed in the media giving preferential treatment to entities belonging to Novinsky's Smart Holding. It's worth remembering that "Novinsky's business" and "Akhmetov's business" are essentially one entity, controlled from the Russian Federation (for more details, see the article "Rinat Akhmetov is a Myth"). Just like the "DPR" and "LPR," "Oplot" and "Russian Spring," the "militia" and Girkin.
It's no surprise that when D. Parfenenko finally "left" the State Property Fund, he soon assumed the post of chief administrator of municipal property in Kyiv. And soon, at the end of 2011, Kyiv quietly parted ways with its blocking 25% stake in Kyivenergo, which was acquired by R. Akhmetov's company, DTEK. In effect, D. Parfenenko represented the interests of Novinskyi-Akhmetov's business interests in the Kyiv City State Administration.
Following Poroshenko's victory in the presidential election and the appointment of Arseniy Yatsenyuk as Prime Minister, Dmytro Parfenenko was returned to the State Property Fund, allegedly at the initiative of the Cabinet of Ministers. It's not hard to guess whose interests this served. Moreover, not only Arseniy Yatsenyuk but also Petro Poroshenko are now demonstrating a more than favorable attitude toward Rinat Akhmetov and his partner, Viktor Novinsky. As a result, Akhmetov's businesses are free from any harassment, not only in Crimea, from militants in Donbas, but also in a Ukraine free from Putin's thugs.
On June 23, 2014, Dmitry Parfenenko began “executing.”
Against the backdrop of Ukrainian Prime Minister A. Yatsenyuk's announcement that the government intends to carry out "the largest privatization in 20 years" in 2014, Parfenenko's return to the State Property Fund looked promising for the latter's owners.
Significantly, the entry into force of the lustration law has had no impact on the personnel policy of the "renewed" State Property Fund. For example, Igor Nikolaevich Mironyuk, the Fund's deputy chairman, who has held the position since April 2010, has not been dismissed from his post, barring him from holding any senior government positions for 10 years—as required by law.
Another deputy chairman, Vitaly Lyudvikovich Pilkevich, has held leadership positions at the Fund since 1995, nearly 20 years! He certainly has invaluable experience, considering all the scandals surrounding privatization and the State Property Fund over the past two decades.
The only new face at the SPF is Deputy Chairman (the third), Yuri Valentinovich Nikitin. The position of "deputy" was created for him by a separate Cabinet of Ministers order on August 8, 2014. Why the Fund functionally needed a third "deputy," who is this person, and what his powers are—you won't find answers to these questions. Nor will you find detailed biographies of any of the SPF's current leaders.
The question of personnel in the management of the State Property Fund is not idle, because the Fund's officials have enormous opportunities to manipulate state property at their own (their clients') discretion.
The paradox: if the State Property Fund announces a privatization tender, but even the relevant ministry refuses to approve it, the sale of the desired asset to the "right people" can still take place, and everything will comply with the State Property Fund's procedures. And neither the Prosecutor General's Office nor the Security Service of Ukraine will be of any assistance. All that's left are the courts and the relevant legal proceedings...
Sergey Fedorov, "Argument"
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