KYIV – Dmytro Firtash, the Ukrainian natural gas trader who magnified his wealth with his tight connections to the Yanukovych administration, reportedly was smiling in relief on April 30 when an Austrian court denied an extradition request by the U.S. to try him on criminal charges that include bribery and racketeering.
Yet all signs point to many more battles ahead, and not only with U.S. prosecutors. Mr. Firtash told reporters of his intent to return to Ukraine, though not specifying when, but Ukrainian President Petro Poroshenko made it well aware that what awaits Mr. Firtash upon his return is a campaign to reduce the influence of oligarchs.
During an address to the National Security and Defense Council of Ukraine on May 6, Mr. Poroshenko warned the biggest oligarchs – singling out Mr. Firtash in particular – not to fight his attempts to enhance national security by nationalizing strategic assets in the energy sector.
“I guarantee that no one will end up in the Forbes ratings anymore by skimming off the top of state monopolies and the traditionally corrupt environment in the gas sector,” he said, pointing out that he had signed a bill this week reforming the nation’s gas sector.
“The state won’t be a cash cow to anyone anymore. The wild capitalism in this sphere should end with the passage of this law and corresponding normative acts. I want to this to be heard everywhere, in Kyiv and in Vienna.”
The president’s nationalization campaign began with its attempt to retake control of Ukraine’s biggest oil producer, Ukrnafta, which is controlled by billionaire Igor Kolomoisky. The conflict escalated to involve armed men on both sides and was reportedly resolved only thanks to a phone call from U.S. Vice-President Joe Biden.
Mr. Poroshenko is also waging a battle with billionaire Rinat Akhmetov, whose DTEK company is Ukraine’s biggest producer of electricity and coal. The president wants to resist hiking electricity rates for the public while also forcing DTEK to sell its coal at lower prices, thereby squeezing the company’s profit.
Like Mr. Kolomoisky, Mr. Akhmetov has fiercely resisted the government’s measures and is widely believed to have financed recent protests in Kyiv by hiring hundreds of demonstrators posing as coal miners. Internal Affairs Minister Arsen Avakov estimated that only half of the protesters were actual coal miners.
Mr. Firtash has also been on the president’s radar. [Forbes.com estimated Mr. Firtash’s wealth in 2013 at $500 million.] Parliament on April 9 passed the second reading of a bill “On the Gas Market” that requires private local gas distributors, known as “oblhazy,” to pay rent for using the transit infrastructure that is owned by the state. Mr. Poroshenko signed this legislation on May 5.
Mr. Firtash is widely believed to control the vast majority of the 60 oblhazy operating on the Ukrainian market – a share estimated as high as 70 percent by the informator.su news site.
“As it turns out, practically all the gas distribution networks are state property. And by some strange coincidence, the oblhazy that belong to the Firtash-Lyovochkin group freely use all the distribution networks, which are state property,” Prime Minister Arseniy Yatsenyuk said in early April at a Cabinet meeting. Mr. Yatsenyuk, who has joined the anti-oligarch campaign, called on Mr. Firtash to pay his fair share.
In an earlier measure to curb Mr. Firtash’s abuses, the Cabinet in August 2014 passed a resolution terminating the government’s agreement to rent two iron-enrichment plants to Krymskyi Titan, a titanium producer controlled by the oligarch, at rates far below market prices, reportedly depriving the government of tens of millions of dollars in revenue over the course of more than a decade.
“Firtash’s desire to establish himself in the new Ukraine is understood,” Yurii Lutsenko, the head of the Poroshenko Bloc parliamentary faction, wrote in a May 1 blog on the Ukrayinska Pravda news site. However, “the majority of politicians realized after the Maidan that the money of oligarchs isn’t worth anything compared to public opinion. As soon as we’re able to eliminate the monopoly of oligarchs on the mass media, the time of Firtashes, Akhmetovs and others will end forever.”
Yet the recent anti-oligarch campaign hasn’t impressed most political observers, who accuse the government of populist tactics – aimed at drumming up public support – rather than seriously challenging the oligarchs.
“This is a complete simulation of ‘deoligarchization’ and more of an intramural feud. It’s technologically orchestrated, which is the great cynicism of it all,” said Ostap Drozdov, a veteran Lviv political observer and host of the Drozdov political talk show on Lviv’s ZIK TV network.
Moreover, both Messrs. Poroshenko and Yatsenyuk reportedly enjoyed close ties to Mr. Firtash and cut political deals with him since the Euro-Maidan.
Mr. Firtash’s extradition trial confirmed speculation that he brokered a March 2014 meeting in Vienna between Mr. Poroshenko and Vitali Klitschko, both of whom were considering running for the Ukrainian presidency last year.
The result of the meeting was that Mr. Klitschko formed a political alliance with Mr. Poroshenko and instead ran in the simultaneous elections for Kyiv City Council, which he won handily.
“Either Firtash or [Serhii] Lyovochkin admitted to a document from that meeting but declined to reveal its contents, at the judge’s request, because it had confidential status, as agreed to by all sides,” said Mykhailo Basarab, a Kyiv political consultant. “That agreement with the Firtash-Lyovochkin group was among the factors for Poroshenko’s victory. They certainly had preferences and could have placed some demands on him.”
It was particularly revealing that neither the news programs of the Channel 5 TV network, owned by Mr. Poroshenko, nor the Inter network, owned by Messrs. Firtash and Lyovochkin, covered Mr. Firtash’s trial, nor did they report on the April 30 verdict, Mr. Basarab said. “The news executives didn’t see it as positive news for their employers,” he added.
Meanwhile, Mr. Yatsenyuk was reported by the forbes.ua news site to have ceded control of the Zaporizhia Titanium-Magnesium Plant to Mr. Firtash in early April through indirect arrangements.
“Without a doubt, the fight against certain members of big capital has a very episodic and non-systemic nature,” Mr. Basarab said. “We don’t have any basis to claim there’s a ‘deoligarchization’ process, as Poroshenko is trying to portray it. The president is merely trying to reduce the oligarchs’ influence to a certain extent. We’re very far from separating oligarchs from the political life of the country.”