PROFILE: Oleksii Ivchenko, leader of Congress of Ukrainian Nationalists, chair of Naftohaz

by Zenon Zawada
Kyiv Press Bureau

KYIV - Oleksii Ivchenko is not your typical Ukrainian nationalist.

His wardrobe consists of 50 shirts, 100 ties and 100 pairs of shoes, not to mention a collection of suits estimated at $10,000.

He likes cars, too.

"I've changed my Mercedes for the latest model every two years, which I've done for the last 15 years," he famously told Ukrainian journalists in mid-April. "And I won't betray my tradition."

Since taking the helm of the Congress of Ukrainian Nationalists (CUN), Mr. Ivchenko's tenure has marked a sharp departure from where his predecessor, Slava Stetsko, had left the organization upon her death in 2003.

The wife of Yaroslav Stetsko, a close associate of Stefan Bandera, Mrs. Stetsko selflessly dedicated her life in the diaspora in Germany to Ukrainian independence.

When it finally happened, Ukrainians rewarded her devotion with immediate recognition and honor, enabling her to launch CUN as a political party, which she represented upon her election to Ukraine's Parliament.

Mr. Ivchenko's leadership since then has led many Ukrainian nationalists to dismiss or abandon the party once known for its commitment to the cause, as symbolized by Mrs. Stetsko.

While revealing his lack of idealism, Mr. Ivchenko's taste for luxury wasn't necessarily cause for scandal until the muckraking Ukrayinska Pravda website revealed he used government influence and money to whet his appetite.

As chair of Naftohaz, the government's largest enterprise that buys and sells natural gas in Ukraine, Mr. Ivchenko ordered the purchase of a Mercedes S-500, endowed with a 5.5-liter engine, AMG tuning, a refrigerator, television with DVD changer and massage chairs.

He ordered the car's purchase for $227,400 just a year and a half after his predecessor had bought his own new Mercedes S-model. Including registration and insurance fees, the car cost Naftohaz $252,389.

The scandal resulted in yet another embarrassment for President Viktor Yushchenko, who campaigned to end government abuse of power and privilege.

Ukrainian law forbids government car purchases exceeding $100,000.

It especially spoiled CUN's image among Ukrainian nationalists, many of whom have switched their allegiance to the Ukrainian National Assembly-Ukrainian National Self Defense (UNA-UNSO) or the Svoboda All-Ukrainian Union led by Oleh Tiahnybok.

"It's become very fashionable to be a leader of this or another political party in Ukraine today," said Mykola Suzhenko, head of UNA-UNSO in the Sumy Oblast.

"Ivchenko represents this class or caste of people. If we recall the OUN-UPA era, those brothers broke the last pieces of bread among each other. I know CUN guys from my oblast with whom there were times we lived on bread and water and shared everything as brothers. Ivchenko simply pays tribute to those in power," Mr. Suzhenko added.

The Ukrainian public was even more startled by Mr. Ivchenko's indignant reaction to the scandal at an April 21 press conference. Rather than apologizing and proposing to sell the car, he was unrepentant and saw no wrong.

"I've been riding in the latest models starting in 1992," Mr. Ivchenko told reporters. "I was still working in Ivano-Frankivsk, and even in Kyiv many didn't know what a Mercedes was."

He assailed his critics and sarcastically asked them whether they wanted him to drive in a Zaporizhia-made Tavriya instead.

"I believe that the director of such an enterprise as Naftohaz should be riding in the most handsome and expensive car," Mr. Ivchenko declared.

As for using government funds to purchase the most handsome cars, Mr. Ivchenko explained that Naftohaz isn't a government enterprise and isn't financially supported by the government.

"Naftohaz, like every economic entity, is called to earn revenues and pay taxes to the government," Mr. Ivchenko said. "The Cabinet of Ministers requires dividend payments from Naftohaz, which it pays, and taxes, which it also pays. This Mercedes wasn't bought with government money."

Despite Mr. Ivchenko's denials, Ukraine's Cabinet of Ministers owns all of Naftohaz's shares, making it a government-owned enterprise. Therefore, all of Naftohaz revenues, while obtained from private sources, are the domain of the Ukrainian government and its people.

Mr. Ivchenko revealed that he had sold the Mercedes to his nephew's dealership for $230,000, costing Naftohaz more than $22,000.

Following Mr. Ivchenko's defense before the press, President Yushchenko met with him and ordered him to sell the Mercedes.

"Sit in the car that was already there and it won't hurt your status in any way," Mr. Yushchenko said he told him.

He then told journalists: "Mr. Ivchenko's comments were incorrect, his positions were incorrect, and they needed correction. Categorically, government officials and structures are supposed to conduct themselves only properly and adequately according to their needs."

Ukrayinska Pravda revealed a deeper layer of corruption when it reported on April 13 that Mr. Ivchenko ordered the purchase of the luxurious Mercedes from a dealership partly owned by his nephew, Dmytro Bublyk.

Mr. Bublyk also happens to chair the Naftohaz subsidiary, Haz-Teplo, through which Mr. Ivchenko made the Mercedes purchase.

Numerous Haz-Teplo vehicles, as well as the now-famous Ivchenko Mercedes, were insured by a Lviv insurance company, Pro100 Strakhuvannia, where Mr. Bublyk's mother, Tetiana, is the chief accountant, Ukrayinska Pravda uncovered.

Another nephew, Yurii Paniuk, serves as Mr. Bublyk's assistant at Haz-Teplo.

Thus, Mr. Ivchenko not only placed family members into influential positions, but also enabled them to profit through side businesses they created that thrived off Naftohaz money.

Ensuring Naftohaz vehicles with a relative's firm also violates Ukrainian law, which requires companies to compete in bidding tenders to win insurance contracts.

And while Haz-Teplo was purchasing luxurious Mercedes, it had fallen into debt with another energy company, Kharkivhaz, by $1.6 million, Ukrayinska Pravda reported.

Despite repeated attempts, CUN Secretariat Command Chair Stepan Bratsiun was unable to arrange an interview with Mr. Ivchenko for The Ukrainian Weekly.

Fellow CUN compatriot and National Deputy Yevhen Hirnyk declined to comment on the situation.

Mr. Ivchenko became CUN's president at the party's Seventh Assembly elections on April 13, 2003, a month before Ms. Stetsko's death on May 14. Mr. Ivchenko ran against Serhii Zhyshko and won easily. Both were national deputies of the Our Ukraine faction in Parliament, and CUN had already belonged to Mr. Yushchenko's Our Ukraine political bloc.

His leadership soon caused rifts within the party, even before his ascension to power and subsequent scandals.

A rift emerged between him and the ideologically minded Mykola Huk, editor of the party newspaper Natsiya i Derzhava, (Nation and State) who left Kyiv in January 2006 to run for mayor of Drohobych, the second-largest city in the Lviv Oblast.

Mr. Huk won the election as a CUN candidate.

When approached by The Ukrainian Weekly to comment on Mr. Ivchenko and the current state of CUN, Mr. Huk declined the interview request, saying, "I don't even want to recall what happened there."

Born in the village of Khorobriv in the Lviv Oblast in January 1963, Mr. Ivchenko studied engineering at Lviv Polytechnic University, graduating in 1985.

His career started at an Ivano-Frankivsk iron-concrete plant, where he became a director. In 1991 he launched the Hal-Agro company, according to his résumé.

He began working for an Ivano-Frankivsk company called Interhaz in 1995 and became its first vice-president two years later.

In 1996 and 1997 he served as a non-governmental advisor to Ukraine's vice prime minister and prime minister, according to his résumé.

Mr. Ivchenko was elected to the Verkhovna Rada in April 2002.

CUN changed dramatically when Mr. Ivchenko took over its reins, said Dr. Serhii Taran, chair of the Socio-Vymir Center for Sociological and Political Research, which is financed by Ukrainian private enterprises.

Once a primarily ideological group with little financing or access to power, Mr. Ivchenko brought both to the party, he said.

He enabled CUN to begin publishing Natsiya I Derzhava, its prolific weekly newspaper.

Mr. Ivchenko's role in CUN is similar to Petro Poroshenko's role in Our Ukraine People's Union, said Dr. Taran, who earned a doctorate in political science from Duke University in Durham, N.C.

Wealthy businessmen finance most Ukrainian political parties, he said. In return, they gain high-profile positions with access to government.

Following the Orange Revolution, Mr. Ivchenko emerged as one of the few people from the Halychyna region to become major players in Kyiv politics when President Yushchenko selected him to chair Naftohaz in March 2005.

"Under Slava Stetsko, CUN was only popular in one region, only had support from diaspora and had no relation to power," Dr. Taran said. "Under Ivchenko's relationship, the party changed radically, and they had their first access to power. They can create businesses related to energy."

Mr. Ivchenko revealed his capacity for campaign trickery when unveiling the "Ridnyi Dim" (Dear Home) program during the cold months of the 2006 parliamentary elections. Appearing before reporters, Mr. Ivchenko promised free credit to any Ukrainians who wished to exchange old radiators or boilers for new ones.

Nothing came of the program and, in fact, Naftohaz neither allocated nor had the funds necessary for such a program, said Yaroslav Dykovytskyi, acting finance director for Naftohaz.

As Naftohaz director, Mr. Ivchenko's ethical lapses weren't his only weakness.

His résumé reveals experience working for energy companies in Ivano-Frankivsk, serving as first vice-president of a company called Interhaz in 1997, as well as president of a company called Enerhosyntez.

However, his leadership at Naftohaz has brought political crisis, as exemplified by the January 4 natural gas deal he signed alongside Prime Minister Yurii Yekhanurov, to which Parliament reacted by calling for the president's impeachment.

Under the January 4 agreement, Russia agreed to sell Ukraine its natural gas at $95 per 1,000 cubic meters, up from $50.

Few Ukrainian observers or Western analysts saw any advantage for Ukraine in the deal.

Former U.S. Ambassador to Ukraine Carlos Pascual stated in a June 2 commentary that Ukraine's gas deal with Russia "does not protect Ukraine's interests or reflect normal market practices."

As a result of the new gas deal, the Ukrainian government announced it was raising natural gas prices by 15 percent as of May 1 and 85 percent as of July 1.

The announcement roiled Ukraine's trade unions, which protested the increasing utility prices in rallies held nationwide. More than 20,000 workers protested in Kyiv's Independence Square on June 27.

While Mr. Ivchenko has minimal influence on Ukraine's natural gas deals with international partners, which are largely determined by President Yushchenko and Prime Minister Yekhanurov, Dr. Taran said he does bear responsibility for the company's finances, which aren't in good shape.

"Ukraine has already fallen into serious arrears under the new agreement with Russia," Ambassador Pascual noted. "It is unclear why revenues from gas sales and transit have not covered Ukraine's payment obligations."

Security Service of Ukraine Chair Ihor Drizhchanyi submitted a report to President Yushchenko on March 7 stating that Naftohaz's financial state was critical and unstable, accumulating $4 billion in outstanding debt. Naftohaz borrowed the money to obtain floating funds and pay for imported natural gas, the report said.

"As a result of its own floating funds deficit, Naftohaz is unable to fulfill its obligations based on its own assets without foreign borrowing, which makes the company dependent on creditors and doesn't offer the possibility of developing production and making in-time debt payments," Mr. Drizhchanyi wrote.

Borrowing cost Naftohaz $62.1 million in interest payments in 2004 and 2005.

Additionally, Naftohaz owes RosUkrEnergo $600 million and Ukrhaz-Enerho $100 million.

"As a consequence of Naftohaz borrowing credit beyond the foreseen financial plan's limitations, conditions exist for its declared bankruptcy and seizure of assets on behalf of lenders or other creditors," Mr. Drizhchanyi reported.

Finance Minister Viktor Pynzenyk complained in February that Naftohaz failed to pay $120 million in value-added taxes to the government.

All this after Naftohaz concluded 2005 with a $63.8 million profit.

Rather than forcing Mr. Ivchenko to resign after his ethical and professional incompetence, President Yushchenko remained steadfastly loyal and allowed him to remain as Naftohaz chair.

Though Mr. Ivchenko resigned his position in May to take a seat in the Verkhovna Rada as part of the Our Ukraine bloc, Mr. Yushchenko once again displayed his notorious loyalty to his political entourage and nominated Mr. Ivchenko on July 3 to chair Naftohaz's oversight council.

While Mr. Ivchenko's ascension to the CUN presidency may have given the party financing and access to positions of power, it also may have decimated its support among the electorate, Dr. Taran said.

Most patriotic or nationalist-minded Ukrainians support Our Ukraine People's Union, the Yulia Tymoshenko Bloc or Mr. Tiahnybok's Svoboda party, he said.

"It [CUN] is a technical party that enables Ivchenko to be more influential in his political life and position himself as a party leader," Dr. Taran said.

It's hard to imagine, therefore, that Mrs. Stetsko would have devoted her 12 years of political life in Ukraine toward creating a party that inherited the hallowed Ukrainian Insurgent Army legacy, only to have it be reduced to a mere vehicle for an indulgent tycoon's personal gain.

"In our country, there's a small percentage of wealthy, and many poor," said one UNA-UNSO activist who declined to give his name. "If a person truly wanted to do something for the nation, then why would he so act so flagrantly?"

Copyright © The Ukrainian Weekly, July 9, 2006, No. 28, Vol. LXXIV

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