Managing state-owned oil and gas company Naftogaz pays off, no matter how much money the company loses.

Despite losses of nearly $700 million in 2020, Naftogaz’s top management this year pocketed multimillion-dollar bonuses. The extra money came as a reward for the company’s $5 billion legal victory over Gazprom in 2018. As part of the Stockholm arbitration court agreement, Gazprom and Naftogaz reached a settlement and dropped mutual claims involving a 2009 gas supply contract. Overall, 40 Naftogaz employees shared in $46 million in Stockholm bonuses, which represented 1% of the $4.6 billion settlement (Gazprom paid another $400 million in accrued interest.)

More than $30 million of the bonuses that got paid in 2021 went to six top executives, led by $12.7 million paid to Naftogaz CEO Andriy Kobolyev after his firing by the government on April 28, 2021, and $10.4 million paid to Yuriy Vitrenko, former executive director and current CEO of Naftogaz.


In a July 1 letter to Naftogaz’s supervisory board, Vitrenko, who replaced Kobolyev, called for greater transparency.

In the letter, obtained by the Kyiv Post, Vitrenko criticized the failure to break out individual salaries and bonuses of top managers, a decision adopted by the supervisory board when Kobolyev was in charge of the company.

“The absence of this part in 2020 report (which though, has been published in 2019) negatively impacts the image of Naftogaz and creates the basis for unnecessary speculations,” Vitrenko wrote. “We strongly believe that we shall be open as much as possible with respect to the past to be successful with the future.”

Neither Kobolyev nor Clare Spottiswoode, who as chair of Naftogaz’s supervisory board is paid $230,000 yearly, could be immediately reached for comment on July 6. But in an earlier interview with the Kyiv Post, Spottiswoode defended the decision to conceal individual salaries and bonuses of top executives and report only aggregate amounts, citing what she called unfair public criticism of compensation amounts.


In a Facebook post after this Kyiv Post story was published online, Kobolyev wrote: “I will comment on yet other manipulations and lies regarding the compensation of the top management of Naftogaz a little later. I promise a separate and interesting interview on this topic in the near future,” adding: “My actual monetary compensation for my work in Naftogaz for the period after the extension of my contract in March 2020 amounted to zero hryvnias.”

But Kobolyev’s claim of receiving no compensation contradicts the documents that the Kyiv Post reviewed. According to the documents, Kobolyev even this year mistakenly received an overpayment of $41,830 of the $12.7 million in total compensation. Naftogaz asked him to return the money received “in excess of the company’s actual liabilities,” which Kobolyev did on June 30, 2021, according to the documents.

While Vitrenko called for more transparency, when it comes to his own hefty Stockholm bonuses pegged at $16 million overall by Naftogaz insiders, he was less than forthcoming.

“My compensation was smaller than $16 million,” Vitrenko said. “But I cannot give you a precise number. It will be a breach of my contract. I can be sued for that. Since I was not an executive board member, my remuneration was not public, and was not supposed to be public.” While “employee contracts are confidential, for executive board members there is a requirement to publish the remuneration, at least in line with the requirements for the joint-stock companies,” he said.


In his public declaration of 2020 income and assets, however, Vitrenko listed $10.4 million in compensation from Naftogaz.

The company’s 2020 financial report only discloses overall compensation of nearly $25 million for 17 top officials that year, including five executive board members, and does not detail the Stockholm bonuses approved nor the payout schedule for them.

Such non-transparency, besides a departure from past practice, violates basic principles of good corporate governance for state-owned enterprises and sets a troubling example. If Ukraine’s largest state-owned enterprise, Naftogaz, with $7 billion in revenue last year, doesn’t adhere to basic transparency standards, questions are naturally raised about how the other 3,500 state-owned enterprises can be expected to do the same.

Additionally, according to the Organization for Economic Cooperation and Development guidelines published in 2015, the six-member Supervisory Board of Naftogaz must ensure that “the remuneration of the manager is tied to the performance of the state-owned company and the information is properly disclosed.”


Counting earlier bonsues, Kobolyev’s Stockholm-related bonuses has been estimated at more than $20 million. His base pay was $230,000 in 2020.

The government fired Kobolyev on April 28, 2021, citing the more than $1 billion gap in financial performance between what Naftogaz promised the government and what it actually delivered under his leadership. He had been CEO since 2014. At the end of 2020, Naftogaz told the government it would have a net profit of nearly $400 million – a calculation that factored into the salaries of executives. Instead, the state got nearly $700 million in losses.

To make the switch from Kobolyev to Vitrenko, the Cabinet of Ministers fired the supervisory board for two days and installed Vitrenko, who Kobolyev, in turn, had fired about a year earlier, in May 2020, after sharp differences between the two men who had once worked together in reducing Naftogaz corruption after the EuroMaidan Revolution that ousted Kremlin-backed President Viktor Yanukovych in 2014.

Before the post-2014 reforms, which included the elimination of the RosUkrEnergo gas trading intermediary co-owned by Russia’s Gazprom and exiled billionaire oligarch Dmytro Firtash, Naftogaz was routinely costing taxpayers at least $500 million monthly in losses. Before 2014, Naftogaz was a citadel of corruption, non-transparency, and insider deals.


Additionally, Naftogaz has failed to increase oil and natural gas production during the 30-year history of Ukraine’s renewed independence as a nation, exacerbating Ukraine’s dependency on energy imports and contributing to the company’s financial wars.

Despite the 2020 losses, however, the company still managed to pay $5 billion in taxes in 2020, making it the largest taxpayer, supplying 17% of state revenue.

Hefty bonuses

The supervisory board decided in 2018 to distribute the 1% bonus from the original $4.6 billion Stockholm settlement to about 40 Naftogaz employees. Naftogaz got paid $2.1 billion worth of gas and, with accrued interest, another $2.9 billion in cash from Gazprom.

According to the document that the Kyiv Post reviewed, the supervisory board approved these payouts to other top Naftogaz managers, besides the $12.7 billion to ex-CEO Kobolyev. None was broken out in the 82-page 2020 financial report:

  • Sergiy Pereloma, first deputy chairman of the board — $2.3 million in total compensation, including base pay of $270,000;
  • Otto Waterlander, Naftogaz Group chief transformation officer and member of the executive board — $2.2 million in total compensation, including base pay of $322,000;
  • Petrus Stephanus van Driel, Naftogaz Group chief financial officer and member of the executive board — $1.7 million in total compensation, including $270,000 in base pay;
  • Yaroslav Teklyuk, director for legal affairs and member of the executive board — $3.4 million in total compensation, including $205,000 in base pay.

Excessive secrecy 

In an earlier interview with the Kyiv Post, Clare Spottiswoode, the chair of Naftogaz’s supervisory board, told the newspaper that the supervisory board, at the request of the Naftogaz executive team, decided not to individually break out compensation figures individually “because it is so politically sensitive.”


She defended the supervisory board’s secrecy, even though she acknowledged it was a break from past transparency.

“Why should we expose them to a whole lot of that nonsense when the cost of their services is a tiny portion of” the company’s revenue? “They have delivered remarkable results,” she insisted, citing first-quarter 2021 results showing a return to profitability at $461 million.

Getting appointed to Naftogaz’s supervisory board is also quite lucrative, with its six members led by Spottiswoode making $230,000 yearly, although that figure is not explicitly listed in the 2020 financial report either.

Both President Volodymyr Zelensky, his predecessor, Petro Poroshenko, and ex-Prime Minister Volodymyr Groysman, have criticized what they labeled as excessively high compensation of top executives in state-owned enterprises. In particular, Naftogaz and other state-owned enterprises were criticized for failing to meet their own approved financial plans and production goals.

Spottiswoode and others argue that, if competitive and market-based salaries are not paid to leaders, state-owned enterprises will not be able to attract top talent.

Regardless of what constitutes a proper level of salaries, the issue is transparency, said Andriy Boytsun, an expert on corporate governance in state-owned enterprises who writes a weekly newsletter on the topic.

Boytsun told the Kyiv Post in an interview published on June 1 that there is no justification for withholding from the public financial information of state-owned enterprises, including the pay of top company officials.

“The people as ultimate owners should know how much management gets paid and why,” Boytsun said. While state-owned enterprises are required to disclose individual top salaries, the measure is poorly enforced. And while transparency and corporate governance of state-owned enterprises have improved greatly since 2013, when Yanukovych was still in power, he said: “I cannot be happy with the progress as such until it’s complete.”

Settling scores

Since the Stockholm settlement, Ukraine and Russia struck a five-year agreement under which Gazprom will pay at least $7 billion in gas transit fees over five years, through 2024. The contract includes the transit of a minimum of 40 billion cubic meters of gas from Russia through Ukraine to Europe each year.

Ukraine’s status as a gas transit country is currently under threat if Russia completes its Nord Stream 2 pipeline to Germany, doubling annual capacity under the Baltic Sea to 110 billion cubic members of gas annually.

Meanwhile, Spottiswoode, a fan of Kobolyev, is challenging the April hiring of Vitrenko, who signed a one-year contract. The supervisory board was set to resign but agreed to return. However, Ukraine’s government said it will search for a new supervisory board and a new Naftogaz CEO.

Naftogaz’s current supervisory board

Clare Spottiswoode – chair of the supervisory board

Before joining Naftogaz’s supervisory board, Clare Spottiswoode chaired Gas Strategies, a global gas consultancy, where she still holds a role as a non-executive director of the company.  She served as director-general in the Office of Gas Supply (Ofgas) between 1993 and 1998 driving the liberalization of the gas market in the U.K.  Over the past 20 years, she worked closely with the U.K’s economic and finance ministry and managed private business interests in Great Britain.

Yuliya Kovaliv – deputy chair of the supervisory board

Yuliia Kovaliv worked 10 years in privately-owned Ukrainian and international companies in the energy sector before serving as Chair of Naftogaz’s Supervisory Board in 2016-2017. While being part of the supervisory board, she also held the post of Deputy Head in the President’s Office in 2019-2020 and chaired the Office of the National Investment Council of Ukraine in 2017-2019. 

Bruno Lescoeur – member of the supervisory board

A former member of French electricity giant EDF’s executive committee, French national Bruno Lescoeur also supervised the gas activities of the group and is also the CEO of EDISON, the Italian subsidiary of EDF. Lescoeur has been involved in some of the largest deals and projects in the electricity and gas sector in Europe over the last two decades.

Ludo Van der Heyden – member of the supervisory board

Ludo Van der Heyden is the founding director of the corporate governance initiative at French private business school INSEAD, and responsible for training programs in banking governance at the same school. He holds an engineering degree in applied mathematics from the Catholic University of Louvain and a Ph.D. Degree from Yale University.  Van der Heyden is also the Chairman of the Board of Seisquare, a software company for estimating natural resource reserves, and a member of the Advisory Board of Dutch investment company Bencis Capital Partners.

Nataliya Boyko – member of the supervisory board

Prior to being elected as a member of Naftogaz’s Supervisory Board, Nataliya Boyko was the deputy minister of the energy and coal industry of Ukraine for European integration, coordinating energy projects between Ukraine and the EU. Boyko also worked as a legal and energy consultant in both the private and public sectors. 

Yulia Svyrydenko – member of the supervisory board

Yulia Svyrydenko held senior positions in the Chernihiv Regional State Administration between 2015 and 2019. She was appointed as deputy minister of economy in September 2019 and deputy head of the President’s Office in 2020.

Mariya Sukhan – corporate secretary

In charge of the supervisory board’s liaison between the company’s governing bodies, as well as Naftogaz’s relations with its shareholder, Mariya Sukhan has 20 years of experience in legal practice with international companies behind her. She was elected as corporate secretary to the first independent supervisory board of Naftogaz in 2016 when she launched it. Before joining Naftogaz in early 2015, Mariya Sukhan had been a local practice partner in the Ukrainian office of the international law firm Schoenherr. She graduated as a specialist in international law from the Institute of International Relations of Taras Shevchenko National University of Kyiv.

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