Vitrenko appointment to Naftogaz violates anticorruption legislation, corruption prevention agency concludes

The National Agency on Corruption Prevention (NACP)
concluded that the Cabinet violated anti-corruption legislation by concluding a
contract with Yuriy Vitrenko as CEO of Naftogaz (NAFTO), the agency reported on
June 15. It issued a resolution demanding that the Cabinet implement measures
to terminate the contract, as well as cancel certain articles of Cabinet’s
April 28 resolution based on which Vitrenko was appointed as Naftogaz CEO. The
NACP explains its decision by legislation on the conflict of interest that does
not allow Vitrenko (who was an acting energy minister before April 28, and at
this position allegedly prepared government resolutions on Naftogaz) to occupy
top positions in Naftogaz for one year.

Ukraine’s Cabinet is going to question the resolution
of the NACP in courts, Justice Minister Denys Malyuska commented the same day.
In his post in social media, Malyuska hinted that the NACP’s resolution is
impossible to implement. In particular, he recalled that the Cabinet’s
appointment of Vitrenko as Naftogaz CEO on April 28 was possible because that
day the Cabinet had taken on the powers of the company’s supervisory board (as
the Cabinet had fired for a couple days the entire board in a scandalous way).
“Does it mean that, in order to implement the NACP order, Cabinet again has to
terminate the power of the supervisory board members of Naftogaz?” Malyska
commented. He also expressed his doubt that a one-year ban to occupy positions
in Naftogaz can be applied to Vitrenko, who was an acting energy minister for
less than one year.

Vitrenko called the NACP’s ruling “illegal” and an
indication of applying of “selective justice.” He claimed he had no power to
influence Naftogaz at his position as acting energy minister. He also stated
that the one-year ban on taking a top position in Naftogaz by a former official
violates the spirit of the law as such item was designed to prevent official’s
preferential treatment over private companies in exchange for future employment
there. Also, he provided an example when a former deputy infrastructure
minister (which controlled Ukrainian Railways) was appointed as acting CEO
of Ukrainian Railways in 2017, and the NACP found no conflict of interest
there.

Alexander Paraschiy: The NACP’s
conclusions clearly made reputational damage to Vitrenko and the Cabinet, even
in the case that they are able to challenge them in courts. Meanwhile,
for  international observers, the ruling only confirms what the independent
members of Naftogaz supervisory board hinted in their open letter in early May.

We agree with Malyuska that it would be very hard for
the Cabinet to cancel Vitrenko’s appointment without jumping into new scandals.
However, the easiest way to do it is to fire Vitrenko on the initiative of the
Naftogaz supervisory board. As some of board members were the first to point at the conflict of interest
in Vitrenko’s appointment and showed their disrespect for Vitrenko in the
previously mentioned letter in May, it seems that they would be glad to
initiate such dismissal.

Key question now is – whether all this will prevent
Naftogaz from issuing a new Eurobond in order to smoothly and timely refinance
its USD 335 mln bond maturing in July 2022. Thus far, we see the likelihood of
smooth refinancing as high. Clearly, to eliminate the existing risks, it is
important that the situation around the appointment of Vitrenko is resolved as
soon as possible (either he is dismissed, or he is able to challenge the ruling
of NACP soon).