Who really owns the Crimean Soda Plant, a prized Ukrainian enterprise privatized last year for about $70 million? The answer, it seems, depends on whom you ask.
A company official says that the prized chemical plant was bought indirectly by a business group linked to a controversial Hungarian-registered gas-trading firm, which controls more than a third of natural gas supplies to Ukraine.
The gas company, Eural Trans Gas, denies the allegations.
On Feb. 2, Hamburg-registered RSJ Erste acquired a 89.48 percent share in the plant, also known as Crimsoda, from Kyiv-based brokerage Clearing House. Incorporated late last year, RSJ Erste paid Hr 352 million for the share, about Hr 6 million more than Clearing House paid for the share in a privatization tender completed late last year.
Located in Krasnoperekopsk, the Crimean Soda Plant is Ukraine’s largest producer of industrial soda and the nation’s only producer of A-class soda, a highly prized commodity on the international market. The factory exports a large proportion of its production – which is used in a wide range of industries, including glassmaking, perfumes, and pharmaceuticals. Great Britain, Italy, Poland, Belarus, and Russia are its main export markets.
Between Highrock and a hard place
Evidence is now emerging that RSJ Erste acquired the soda plant on behalf of companies affiliated with Eural Trans Gas (ETG) and Moscow’s Highrock Properties, although it remains unclear who the companies are and how they are structured.
At a Feb. 10 shareholders meeting, the Crimean Soda Plant’s new shareholders appointed Russian national Valery Spitsa as chairman of the board. At a later date, Robert Shetler-Jones, director of RSJ Erste and director of the two firms that indirectly own shares in ETG (the Cyprus-registered Denby and Benam companies), was also appointed to the plant’s board.
Spitsa’s assistant Volodymyr Bordikov told the Post on May 24 that he did not know the legal ownership structure of the Crimean Soda Plant, but he added that the new owner of the plant is part of a business group affiliated with ETG and Highrock.A tight-lipped Bordikov said an entourage, including representatives of ETG and Highrock Properties, visited the plant this month. “They were presented as representatives of the shareholders,” he added.
Informed sources confirmed Bordikov’s statement.
The group controlling the Crimean Soda Plant appears to have a grip on other chemical companies in the former Soviet Union and is eyeing new acquisitions.
News reports have linked management at Highrock to Nitrofert, an Estonian plant that produces fertilizers from natural gas and other raw materials.
“[In addition to Nitrofert,] they also have a factory at Tajikistan,” Bordikov said.
Informed sources recently told the Post that the group hopes to expand its growing empire by acquiring Rivneazot, a chemical plant based in Rivne oblast.
Austria’s Raiffeisen Investment AG bought a controlling share in Rivneazot for $9 million when it was privatized last year. Vyacheslav Yakimuk, director of the company’s operations in Ukraine, says talks to sell Rivneazot are underway.
Not so fast
Like many businesses in the region, the ownership structures of ETG, the Crimean Soda Plant, Highrock and affiliated companies involve complicated networks of offshore companies, which help beneficiary owners remain anonymous.
ETG spokesperson Boris Shestakov denied that ETG is involved with the Crimean Soda Plant, saying that his company is not interested in the plant or any other Ukrainian enterprises.Meanwhile, Elena Yargina, legal advisor at Highrock Properties, said her company had not made any acquisitions in Ukraine, yet.
“Today, our company has a direct relationship with Nitrofert and has an interest in acquiring other chemical companies in the former Soviet Union,” she said.
“At the moment, there is no legal connection between Highrock Properties, the Crimean Soda Plant or Rivneazot, but we are extremely interested in acquiring such plants.”
Yargina described Highrock Properties as a trading company involved in barter payments made for gas in the CIS, among other things.
She said that Highrock Properties and Nitrofert are part of “a single business group, or business holding,” which she declined to identify by name.
“We made our first capital through trading; now we want to invest it in industry,” she added.
Yargina said her company has had “several contract agreements” with ETG in the past.
Shetler-Jones did not respond to inquiries by the Post.
Unanswered questions
ETG, incorporated late in 2002, is also secretive about its ownership. ETG was originally owned by four little-known individuals: Zeev Gordon, an Israeli citizen, and three Romanian citizens.
Russian gas giant Gazprom almost immediately awarded ETG a lucrative contract to supply Turkmen gas to Ukraine. Controversial Florida-based Itera had previously acted as intermediary on Turkmen gas supplies to Ukraine.
The contract with ETG, sharply criticized by Gazprom minority shareholders who feared it would harm the company’s revenues, gave ETG the right to transport 35.4 billion cubic meters of Turkmen gas to Ukraine a year.
In its first year of trading, ETG posted profits of about $180 million on turnover of $2 billion. The company’s success can be traced to the lucrative Gazprom contract, which will expire in December 2006.
When ETG was established, Gazprom and Ukraine’s state oil and gas company, Naftogaz Ukrainy, distanced themselves from the company, each blaming the other for the company’s arrival as an intermediary. Officials at ETG maintain that their company is not working independent of Gazprom and Naftogaz Ukrainy.
Gazprom officials said they had awarded the contract in response to pressure from Naftogaz, though officials from Naftogaz denied these allegations.
ETG officials have insisted their company was awarded the contract in order to resolve the complex issues surrounding efficient delivery of gas from Turkmenistan.
In an interview with the Post in July 2003, ETG director Andras Knopp said that though Naftogaz Ukrainy and Gazprom did not yet directly own shares in ETG, he expected them to in the near future.
Early this year, ETG’s original owners were replaced with two offshore companies – a step that ETG officials insist could increase transparency within the company. The beneficiary proprietors have not been made public.
Married to the Mog?
News reports published last year by U.S.-funded Radio Free Europe/Radio Liberty have alleged that ETG has links with an organized crime group headed by Ukrainian-born Semion Mogilevich, a man wanted in the United States on fraud and money-laundering charges.
The reports alleged ETG was created by, and works closely with, figures tied to Mogilevich, including management at Highrock Properties. The reports alleged that a Highrock subsidiary was registered at Gordon’s address in Israel.
ETG officials have said their company does have business relations with Highrock, but dismiss reports alleging their company is controlled by Mogilevich as “mere gossip.”
ETG officials said their company plans to sue RFE/RL for libel over the reports.
Former U.S. Ambassador to Ukraine Carlos Pascual last year called upon Ukraine and Russia to modify the Turkmen gas supply arrangement, citing reports that Mogilevich has ties to ETG. Pascual said that ETG’s influence over Ukraine’s gas supplies was a serious threat to the country’s energy security.
