Court orders Ukraine to pay Russia UAH 3.2 bln for UESU

Ukraine’s Kyiv Economic Court ruled Ukraine must pay UAH 3.2 bln (USD 0.4 bln) in connection with United Energy Systems of Ukraine’s failure to deliver goods pursuant to a contract, which was guaranteed by the Ukrainian government, according to media reports. The Russian Defense Ministry filed the lawsuit on September 10, 2012 and cited Ukraine’s Cabinet of Ministers and the State Treasury Service as defendants in the case. A second criminal case is pending against former Prime Minister Yulia Tymoshenko over the alleged embezzlement of USD 0.4 bln in state funds by UESU, which she headed in 1995-1997. Yesterday’s ruling opens the door for the Ukrainian government to open a new lawsuit against Tymoshenko to seek compensation for its assumption of the damages.

Brad Wells: We noted when this case first surfaced that its timing during the parliamentary election campaign implied political motives. The systematic nature of court rulings implicating wrongdoing by Ukraine’s opposition is supportive of that and provides more “evidence” of the alleged missteps of Tymoshenko and her associates. The Ukrainian government has the right to appeal the decision of the economic court (and we believe that it will), though it will likely opt to draw out that process until after the election in order to play up the issue for votes and paint itself again as having to clean up its predecessor’s mess.