US cables detail conflicts of energy minister Boyko
New revelations by whistle-blowing website WikiLeaks show that U.S. officials shared concerns that many have had about Energy Minister Yuriy Boyko, the man once again representing Ukraine in important negotiations with Russia on natural gas supplies.
Critics say Boyko’s alleged involvement in the creation of murky intermediaries in the multibillion-dollar trade means his current role as point man in the gas talks is a conflict of interest.
The stakes are high for Ukraine. The Kremlin has long coveted control over Ukraine’s strategic natural gas pipelines and has since 2006 sharply increased gas import prices – some say to force Kyiv into submission over the issue.
Some analysts and anti-corruption activists are concerned that with current and past energy minister Boyko at the helm of negotiations on Ukraine’s side, vested private interests could take priority over those of the state.
Boyko has dismissed questions of a conflict of interest in the past and brushed aside recent attempts to ask him questions on the topic.
Jailed opposition leader Yulia Tymoshenko, a former prime minister, has long claimed that Boyko, as energy minister in a previous stint, was busy brokering deals that made him and a group of entrusted friends extraordinarily wealthy while supporting Russia’s interests in Ukraine.
Tymoshenko claimed that Boyko was one of the benefactors and founding fathers of controversial gas trading intermediaries in the lucrative gas supply business between Ukraine and Russia.
Armed with such allegations, Tymoshenko and others repeatedly pointed to alleged conflicts of interest Boyko had as energy minister in 2006-2007 and 2010-present.
Such concerns were shared by U.S. officials, according to secret U.S. diplomatic cables made public late last year by WikiLeaks.
If the reported words in 2006-07 of then-U.S. Ambassador to Ukraine William Taylor and other experts are right, Boyko helped to create RosUkrEnergo, the notorious Swiss-registered energy trader that has made individuals close to him wealthy.
“Fuel and Energy Minister Boyko … has repeatedly stressed the positive role RosUkrEnergo plays in affording Ukraine cheap energy. The non-transparent middleman, which Boyko helped create, expects to expand further its influence in Ukraine’s energy market through acquisitions made either by itself or by its subsidiary, UkrGazEnergo,” Taylor allegedly wrote in a 2007 diplomatic cable released by WikiLeaks.
In a separate U.S. diplomatic cable from 2006, another U.S. official wrote: “Based on past experience, any Boyko-bartered deal could well be creative but non-transparent.”
Russian Prime Minister Vladimir Putin (L) exchange documents outlining a gas agreement with his then-Ukrainian counterpart Yulia Tymoshenko in 2009. Less than three years later, Tymoshenko would be out of power and convicted on Oct. 11 of misuse of power in reaching the agreement. (AFP)
RosUkrEnergo is co-owned by Russian gas giant Gazprom and Ukrainian billionaire Dmytro Firtash. Firtash is believed to be a close associate of Boyko and other top officials close to President Viktor Yanukovych.
Firtash has refused to talk about past WikiLeaks’ disclosures involving him, saying that he does not comment on private conversations.
In previously leaked cables, Taylor reportedly wrote that Firtash told him that he backed Yanukovych and showed contempt for Tymoshenko. The ambassador also wrote that Firtash needed initial approval to get into business from organized crime boss Semyon Mogilevich, but insisted that his gas trading business was clean and provided Ukraine with competitively priced gas.
Tymoshenko, an arch-enemy of Firtash and Yanukovych, landed a seven-year prison sentence last year for her part in brokering the 2009 gas agreement that removed RosUkrEnergo from the bilateral gas trade.
After Yanukovych narrowly beat Tymoshenko in the 2010 presidential election, Boyko returned as energy minister and says he is working hard to reduce unsustainably high gas import prices that Tymoshenko’s agreement with Russia imposed on Ukraine.
While he has not so far succeeded, during his first year as energy minister Ukraine admitted to wrongfully buying billions of dollars of gas from Gazprom during the 2009 Tymoshenko-brokered deal. It was returned to RosUkrEnergo.
Under Yanukovych, RosUkrEnergo has not started importing gas again into Ukraine. But another Firtash company, Ostchem, started last year importing gas into Ukraine, sidestepping state energy company Naftogaz with the Gazprom-granted privilege of bringing less expensive Central Asian gas onto the market.
Investment banks in Ukraine have reported that the Ostchem gas is used by Firtash’s gas-guzzling chemical plants.
The imprisoned Tymoshenko has long claimed that Firtash, Boyko, Yanukovych and current presidential administration chief Serhiy Lyovochkin are benefactors of RosUkrEnergo and previous controversial gas trading ventures, such as Eural Trans Gas. All have denied wrongdoing.
Boyko, Lyovochkin and Yanukovych have denied having an interest in RosUkrEnergo.
But Boyko’s ties to Firtash appear to go beyond friendship.
According to a 2005 document obtained by the Kyiv Post, Firtash granted Boyko power of attorney over his assets. The energy minister has admitted to holding a seat on RosUkrEnergo’s board while serving as head of state gas company Naftogaz in 2002-2005. He has since struggled to explain when he was removed from this position.
According to documents leaked by Wikileaks, the U.S. ambassador had a clearly negative view of RosUkrEnergo’s activity in Ukraine. Moreover, he and other U.S. officials saw Boyko and RosUkrEnergo as agents of Russian influence who strived to undermine Ukraine’s state energy company Naftogaz.
In a diplomatic cable leaked by WikiLeaks, Taylor wrote in 2006 that Russia had stepped up efforts to influence Yanukovych, who had returned that year as prime minister after a humiliating defeat in the 2004 presidential election.
“There also seems to be a lot of agreement that there are some in Yanukovych’s circle, including … Boyko … who are very close to Russia and are nudging the PM to move in that direction,” he wrote, according to a cable leaked by WikiLeaks.
In a separate 2006 cable, Taylor wrote that the activity of a newly formed domestic gas trading intermediary company co-owned by RosUkrEnergo, namely UkrGazEnergo, was geared towards becoming a major domestic gas supplier, severely cutting into the business of Naftogaz and undermining it.
Referring to the establishment of UkrGazEnergo, Taylor wrote: It “is further proof of how far former state champion Naftogaz has fallen in less than a year.”
Newly released U.S. diplomatic cables also indicate that Firtash was powerful enough when Boyko was not serving as energy minister to pass on threats of Russian gas cutoffs to high-ranking Ukrainian officials in January 2006.
According to one cable, then-Prime Minister Yuriy Yekhanurov told that he had learned of the threat of a cutoff “in a meeting the day before with Dmytro Firtash, a key figure behind RosUkrEnergo (RUE) and close associate of organized crime kingpin Semyon Mogilevich.” Firtash has always denied any connection with Mogilevich.
These conflicts may be muddying the waters in today’s gas negotiations between Ukraine and Russia, analysts say. “I think in this case [of Boyko], the conflict of interest, is obvious,” said Dmytro Marunych, director of Kyiv-based Energy Studies Institute who spent many years at Naftogaz as a spokesperson. Marunych described Boyko acting in the current round of gas talks with Russian as “both a businessman and a politician.”
“Certainly it is a massive conflict of interest. There absolutely should be an investigation,” said Tom Mayne, a campaigner at the London-based Global Witness, an anti-corruption watchdog which has published investigative reports on RosUkrEnergo and Boyko.
Kyiv Post staff writer Yuriy Onyshkiv can be reached at [email protected].
