Ukrainian state moves to reduce Kolomoisky’s control of oil sector

The Ukrainian government took several important steps on March 19 to recover its influence its Ukraine’s oil sector, in which a dominant role had been played by the Privat Group, led by billionaire oligarch Igor Kolomoisky.

Parliament voted that day to approve a bill reducing the quorum needed to call a shareholders meeting in any publicly traded company to 50+1 percent from 60+1 percent previously. The law is aimed at increasing the government’s control over Ukrainian oil giant Ukrnafta (UNAF UK), in which the state, via Naftogaz, controls a 50%+1 stake. The private holders linked to Kolomoisky control about 42% of the company’s shares and have operating control via its management, whom the state could not replace with 60% AGM quorum rules. The March 19 voting eliminated a loophole for Kolomoisky that was left in an earlier-adopted version of quorum-reducing law (refer to our news of Jan. 14 for more details).

The same day, the supervisory board of Ukrtransnafta, a Naftogaz subsidiary and the state operator of oil transportation pipelines, decided to place on leave its CEO Oleksandr Lazorko, as reported by the press service of Naftogaz. Lazorko is widely believed to represent the interests of Privat Group and refused to leave the company’s offices. As a result, police forced their way, allegedly injuring several people, in order to install the new board chairman. The conflict drew the arrival of numerous officials, including Kolomoisky himself. Lazorko’s dismissal was initiated by Energy Minister Volodymyr Demchyshyn, who alleged that he deliberately allowed Ukrtransnafta to pay Privat excessive amounts for storage of “technolgoical oil.” Such fees did not exist until July, according to investigations performed by Ukrainian journalists.

Zenon Zawada: We’ve reported on the tension between the two main poles of power in Ukraine, President Petro Poroshenko and Kolomoisky, who also serves as the state oblast administration head (governor) of the Dnipropetrovsk region that is near the front line of the war. Any attempt by the state to reduce expenses and eliminate allegedly corrupt schemes is laudable, if that’s the true aim. Time will tell whether this conflict will be resolved peacefully, which means Kolomoisky will have to sacrifice some revenues, or will escalate into violent clan wars that threaten the stability of Ukrainian statehood.