Corrupt export quota distribution schemes, introduced during the reign of Viktor Yanukovych by then-Minister of Economy Igor Prasolov, continue to operate in the domestic scrap metal market.
This is discussed in a story by Alina Strizhak on the TV program “Nashi Groshi”.
Before heading the ministry in 2012, Prasolov headed Rinat Akhmetov's SCM company, and his wife, Natalia, had a joint business with Viktor Yanukovych's son, Oleksandr.
As minister, Prasolov created a commission to determine how much scrap metal should be sold abroad and to whom.
The commission is comprised primarily of ministry employees, such as Yuriy Petrovsky, Director of the Department of Foreign Economic Activity. It also includes metallurgists, including Nikolay Abrasimov, a representative of the Metallurgprom association, and representatives of the State Fiscal Service, the Ministry of Internal Affairs, and the Security Service of Ukraine.
An employee of one of the exporting companies spoke to the program anonymously about the commission's corrupt practices.
According to him, most quotas are allocated to "shell companies" that then sell export tickets to real entrepreneurs.
"This commission previously met quarterly. In November, 589 tons were distributed among 149 companies. Of these, only about 20 can be identified as actual exporters. The rest are completely unknown. In other words, these are companies that are specifically allocated quotas, which are then resold," the source said.
Journalists analyzed the list of quota recipients. Some of the companies belong to the family of MP Andriy Kiselyov (Opposition Bloc), who has been described in the media as a classmate of Oleksandr Yanukovych.
There are also companies owned by Ukrainian businessmen Valeriy Kryshtal and Yevgeny Kazmin. Many of the businesses are owned by Iranian-born businessman Ali Omran, who was in a business partnership with Arsen Ivanyushchenko, the son of Yuriy Ivanyushchenko. Omran himself describes this partnership as forced.
The list also includes about two dozen small entrepreneurs. The rest are unknown companies with no apparent business activity. They account for a third of the export quota.
The program's journalists attempted to locate some of the quota recipients, such as the company "Intertorgmash." It turned out that the company's registered address did not exist, and residents of a nearby building reported that the prosecutor's office had recently sought the company.
According to a program source, reseller firms are selling quotas at prices ranging from $8 to $12 per ton.
"For example, our company is allocated 20 tons per year. We can export 20 tons. We can work harder and export more. But we no longer have quotas. So, what we do is we approach these intermediaries: 'Guys, we need quotas.' 'How much do you need?' '10 tons.' 'Okay, that'll cost $10 per ton. That's it, we've imported $100."
The Ministry of Economic Development acknowledges the corruption inherent in the quota system and promises to resolve the issue within a week or two. The planned option is to award quotas to those scrap metal suppliers who sell a portion of their scrap to Ukrainian metallurgical companies.
Procurement companies are critical of this option, fearing it will make them directly dependent on buyers. The Ukrainian metallurgy industry is essentially comprised of five private financial and industrial groups: Rinat Akhmetov's Metinvest, Viktor Pinchuk's Interpipe, Lakshmi Mittal's ArcelorMittal (Kryvorizhstal), and two groups with Russian investments: Evraz and the Industrial Union of Donbas.
The biggest beneficiary of Russian companies is the owner of Chelsea Football Club (London), Roman Abramovich.
According to market participants, the current quota system is already forcing scrap metal suppliers whose quotas have expired to sell scrap to metallurgical plants at significantly lower prices than the global market price of $250-300 per ton.
The difference is approximately $100 per ton, which will save steelmakers over $300 million per year.
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