The former prime minister has took her battle with President Viktor Yanukovych to a U.S. court.
Under pressure at home from three criminal probes, former Prime Minister Yulia Tymoshenko took her battle with President Viktor Yanukovych to a U.S. court, suing a billionaire with close ties to her political rival for alleged racketeering that defrauded Ukrainians of billions of dollars in natural gas.
In court documents filed in April, Tymoshenko accuses Dmytro Firtash, a gas trader and chemicals magnate close to Yanukovych, of manipulating an international arbitration court ruling to defraud Ukrainians of strategic gas reserves. Firtash has denied all wrongdoing.
The lawsuit also accuses the Ukrainian government of colluding with Swiss-registered gas trader RosUkrEnergo, which Firtash co-owns with Russian energy giant Gazprom, to obtain the gas. It effectively alleges that leading government officials are acting in the interests of Firtash rather than the nation’s 46 million citizens.
The sensational claims stem from a deal that Tymoshenko reached as prime minister with her Russian counterpart, Vladimir Putin, in January 2009.
Besides removing Firtash’s RosUkrEnergo from the lucrative bilateral gas trade, the deal allowed Ukrainian state gas company Naftogaz to seize 11 billion cubic meters of gas from RosUkrEnergo. In the transaction, Naftogaz assumed RosUkrEnergo’s $1.7 billion debt to Gazprom – effectively allowing Ukraine to purchase the gas at a preferential price.
Firtash responded in 2009 by filing an arbitration claim in a Stockholm court claiming the agreement illegal. Filed in the U.S. District Court in Manhattan, Tymoshenko’s lawsuit suggests her government was confident of winning the case.
But last year, after Yanukovych narrowly beat Tymoshenko in a presidential election, Firtash's allies took up key places in government.
“The two parties that were facing each other in the Stockholm arbitration were now friends and allies,” the lawsuit alleges, a copy of which was obtained by the Kyiv Post and is available at www.kyivpost.com
After the change in government, Naftogaz now “admitted” that the gas belonged to RosUkrEnergo. The arbitration court ordered it to return the gas and a further 1.1 billion cubic meters in penalties.
RosUkrEnergo redeemed the debt of $1.7 billion to Naftogaz and $810 million to Gazprom. But the huge volume of gas it received is worth around $3 billion. Ukraine, meanwhile, was left to replenish its reserves at the full market price that it now pays to Russia.
Firtash and Ukraine’s current leadership have repeatedly denied wrongdoing, as has Tymoshenko in reference to charges of improper spending against her. Firtash’s press service said on April 27 that he hadn’t received any notification from the court about the case.
“Mr. Firtash stands by the recent decision of the Stockholm Arbitral Tribunal and, as such, does not believe that Ms. Tymoshenko has any grounds for challenging such decision in New York or in any other forum,” his statement reads.
Tymoshenko has come under pressure over the 2009 gas deal in recent weeks, after prosecutors opened a criminal probe alleging that the deal set the price of gas too high, causing the state losses of around $200 million. Several officials involved in the gas deal and the transfer of the gas are currently in detention as they are investigated for alleged abuses of power.
Tymoshenko’s lawsuit alleges that the Stockholm decision allowed corruption by Yanukovych associates, including Firtash, to flourish.
It reads: The arbitration ruling “has been widely perceived as a means of generating huge sums of cash with which Firtash and his associates could continue to illegally fund the pervasive system of corruption that encompasses every level of government, while at the same time suppressing political dissent through intimidation, racketeering and other violations of fundamental human and political rights.”
Tymoshenko brought the lawsuit in the U.S. under the Racketeer Influenced and Corrupt Organization Act and the Aliens Tort Statute, which allows U.S. courts to uphold international law. It names 100 other unidentified individuals and companies alongside Firtash and RosUkrEnergo.
Representatives of both Firtash and the government have consistently denied any wrongdoing in the arbitration case. A spokeswoman for Yanukovych said he had no comment. As the Kyiv Post went to press, RosUkrEnergo had not commented on the issue.
The legal claim restates Tymoshenko’s longstanding allegations that Firtash wields enormous influence within the government through connections at the highest levels.
Firtash described himself as a longtime friend of the president in a recent interview with a French magazine. Yanukovych’s chief of staff, Serhiy Lyovochkin, said last year that he had known Firtash for many years.
Firtash had an option to buy the popular Inter television holding (UA Inter Media Group) from business mogul and secret service chief Valeriy Khoroshkovsky.
Energy Minister Yuriy Boiko has in the past held a board seat on RosUkrEnergo and, according to documents which he has refused to comment on, he held power of attorney over much of Firtash’s assets.
Firtash also has other, dubious connections, according to a U.S. diplomatic cable published last year by Wikileaks. Diplomats quoted the businessman as telling them that he had sought the blessing for business dealings from alleged Ukrainian-Russian mobster Semyon Mogilevich. Firtash denied saying this, but according to a 2006 Financial Times report, he has had business relations with Mogilevich.