Accusations have been flying in parliament this week as coalition parties split over a controversial bill that ostensibly seeks to curb the influence of oligarchs, particularly the billionaire owner of PrivatGroup Ihor Kolomoisky.
The controversy is part of a wider debate over tycoons’ influence on politics and civil society’s efforts to reduce it. Kolomoisky has been accused of having an extensive network of proteges and allies in several factions of the Verkhovna Rada.
The bill proposes a reduction in the percentage of ownership that needs to be represented at a public-private partnership enterprise’s shareholder meeting before a quorum is reached.
Currently the percentage is set at 60 percent, and Kolomoisky has been able to block reform, profit redistribution and changes in ownership at companies such as oil and gas producer Ukrnafta, in which PrivatGroup holds a 42 percent stake and state-owned oil and gas giant Naftogaz owns 58 percent, simply by not turning up to a meeting.
The bill, sponsored by Radical Party leader Oleh Lyashko, seeks to reduce that percentage to 50 percent plus one share, allowing the government to make changes without Kolomoisky’s involvement. Starting from January 1, 2016, privately-owned joint-stock companies would also be subject to the new rules.
Supporters of the bill, passed in its second reading by the Verkhovna Rada on Jan. 13, now accuse parliamentarians who refused to support it, including Prime Minister Arseniy Yatsenyuk’s People’s Front, of catering to Kolomoisky’s interests.
From the People’s Front’s 82 parliamentarians only 13 voted for the bill, prompting its critics to allege that the faction is in Kolomoisky’s pocket.
Journalist Serhiy Leshchenko, a parliamentarian representing the Petro Poroshenko Bloc, lashed out at Yatsenyuk’s faction:
“The People’s Front performed a mass ‘coming out’, admitting their bias in favor of Ihor Kolomoyskyi and their dependence on him,” he wrote in his blog on Jan. 14.
His sentiments were echoed by some media outlets, with Vitaly Sych, Novoye Vremya’s editor-in-chief, writing in a Facebook post on Jan. 13 that “Yatsenyuk’s faction defiantly refused to support a vote in favor of the state and against Ukrainian oligarchs.”
He praised the bill, saying that it showed the reign of the oligarchs was coming to an end and the government was re-asserting control over its assets.
But the law’s critics argue it is a clumsy, vaguely worded populist measure that will do little to reduce the tycoon’s influence. The People’s Front says it voted against the bill because it would not reduce Kolomoyskiy’s influence on Ukrnafta since the government controls the company indirectly though Naftogaz and the law’s wording implies it will only apply when the government owns stock directly.
Viktoriya Syumar, a People’s Front parliamentarian, dismissed allegations that Kolomoisky holds sway over the party.
“The Prime Minister is the person most interested in restoring control over Ukrnafta,” she said by phone, adding that Yatsenyuk’s cabinet had the most to gain by establishing control over the company.
She said the People’s Front supported another bill seeking to reduce Kolomoisky’s influence on Ukrnafta, sponsored by lawmaker Yuriy Derevyanko.
Kolomoisky’s co-ownership of Ukrnafta has become a controversial subject owing to what many view as its questionable corporate governance.
Ukrnafta refuses to sell gas to households, supplying it instead to other companies of Privat group at a low price, reducing Ukrnafta’s own profits and government revenue in favour of Privat group.
Despite $1.4 billion in revenue from January to September 2014, it owes $150 million to the state in mineral resource extraction tax, and had held back $114 million in dividends, finally paid during its first shareholder meeting in three years held in October 2014.
Despite acknowledging a need to bring Ukrnafta into line, business experts were critical of the draft law. Andriy Guck of the Marchenko Danevych law firm told the Kyiv Post it will prove ineffective in Ukrnafta’s case and would lead to frozen corporate conflicts resuming at other companies and new conflicts emerging.
According to the lawyer, if there is political will, the government’s interests can be better protected within the framework of existing legislation. The new regulation only unblocks shareholder meetings, but does not guarantee honest decisions or that honest decisions would not be blocked or appealed in court.
In the meantime, other investors in the co-owned public-private enterprises could be hit by an abrupt change in legislation: their investment valuation, expectations, and business plans would be ruined as the government would be able to take decisions about their investments without them.
Serhiy Severyn, a spokesman for the Dnipropetrovsk Oblast’s administration, said he was not authorized to comment on Kolomoisky’s business. Ukrnafta has not replied to a request for comment as of Jan. 15.
Kyiv Post staff writer Oleg Sukhov can be reached at [email protected]. Kyiv Post staff writer Olena Gordiienko can be reached at [email protected].
