ANALYSIS: A closer look at the disturbing solution to the Ukrainian-Russian gas conflict (01/08/06)

ANALYSIS

A closer look at the disturbing solution to the Ukrainian-Russian gas conflict

by Roman Kupchinsky
RFE/RL

January 4

The solution to the ongoing gas conflict reached between Russia's Gazprom and Naftohaz Ukrayina, the Ukrainian state oil and gas company, announced on the morning of January 4 raises more questions than it answers.

According to Interfax, Aleksei Miller, the head of Gazprom, announced that an off-shore company, RosUkrEnergo, will be the middleman for gas sales from Russia, Turkmenistan, Uzbekistan and Kazakhstan to Ukraine and sell a mixture of gas from these countries to Ukraine at a price of $95 per 1,000 cubic meters. Earlier, RosUkrEnergo had acted as the intermediary for Turkmen gas sales to Ukraine.

RosUkrEnergo is the company that took over the role of another off-shore company formed in December 2001, Hungary-Eural Trans Gas (ETG).

In December 2001, ETG signed contracts with Gazprom and Naftohaz Ukrayina to be the intermediary for gas shipments from Turkmenistan to Ukraine and was paid by the Ukrainian side with 13 billion cubic meters of gas for its services. ETG then sold this gas in Europe at substantially higher prices. ETG soon came under suspicion in the media of being involved with Russian organized crime figures and in July 2004 during the Ukrainian-Russian business forum in Yalta, Vladimir Putin and Leonid Kuchma announced that ETG would be replaced by a new company, RosUkrEnergo.

RosUkrEnergo was touted as a "totally transparent" successor to Eural and was registered in Zug, Switzerland, on July 22, 2004. It consisted on the Russian side of Arosgas Holdings AG, named in the founding documents as a company "affiliated with GazpromBank" and GazpromBank, a wholly owned Gazprom subsidiary.

On the Ukrainian side, RosUkrEnergo was represented by a company called Reiffeisen Investment AG, a member of the Reiffeisen Zentral Bank Group. Reffeisen Investment CEO Wolfgang Putschek stated that his company is not a partner in RosUkrEnergo, but merely manages the portfolios of a "number of private Ukrainian investors" in RosUkrEnergo. Mr. Putschek refused to name these investors, citing Austrian confidentiality laws. However, none of these so-called "investors" had any relation to the Ukrainian government and were merely acting as private individuals.

When the new Ukrainian government of Viktor Yushchenko came to power in January 2005, one of the first acts of Prime Minister Yulia Tymoshenko was to call for a criminal investigation into RosUkrEnergo, calling it a "criminal enterprise." Soon afterwards, the head of the Security Service of Ukraine, the SBU, Oleksander Turchynov announced that a criminal case had been launched against RosUkrEnergo.

The investigation abruptly ended in mid-August 2005. Mr. Turchynov told RFE/RL that President Yushchenko told him in mid-August to stop "persecuting my men" and that the investigation of RosUkrEnergo was "creating a conflict with Russian President Putin." Mr. Turchynov would not elaborate on why Mr. Putin was so upset by the investigation.

Soon after Mr. Turchynov's removal as head of the SBU on September 8, 2005, the Ukrainian website Obozrevatel reported on September 21 that the SBU officer in charge of the investigation of RosUkrEnergo, Andrii Kozhemiakin, was transferred from the case to other duties. Mr. Turchynov confirmed this information for RFE/RL.

Gazprom has not come under any official scrutiny in Moscow for its role in the RosUkrEnergo or Eural Trans Gas gas schemes. The lone critical voice was that of Moscow-based Hermitage Capital Management, whose spokesman told The Moscow Times on June 16, 2005, that Gazprom is losing out on $478 million in annual revenues from the RosUkrEnergo deal and that this money is going to unknown beneficiaries participating in RosUkrEnergo via Raiffeisen Investment.

How the inclusion of RosUkrEnergo into the settlement of the Ukrainian-Russian gas conflict will play out in the West is not yet known, but it will raise many eyebrows in Europe and the United States. The American FBI has been investigating RosUkrEnergo for some time now, and European law enforcement agencies are also aware of the allegations in this case.

Roman Kupchinsky is the former director of the Ukrainian service at Radio Free Europe/Radio Liberty.

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