April 7, 2015 / 4:31 PM / 5 years ago

Ukraine challenges oligarchs' grip on energy companies

KIEV (Reuters) - Ukraine’s judicial authorities moved to curb the influence of the super-rich on Tuesday by challenging tenders that gave leading businessmen control over key power companies under ousted president Viktor Yanukovich.

Ukrainian President Petro Poroshenko (L) talks to oligarch Ihor Kolomoisky during a representing ceremony of a new governor of the eastern Dnipropetrovsk region in Dnipropetrovsk March 26, 2015. REUTERS/Mikhail Palinchak/Ukrainian Presidential Press Service/Handout via Reuters

The legal actions targeted the 2012 and 2013 sell-offs of electricity-generating companies in eastern Ukraine to holdings of multi-billionaire Rinat Akhmetov and a close associate, and of a power distributor in the west of the country.

State assets in Dniproenergo and Donbasenergo and a main power distributor in the Zakarpatya region were sold off for low prices in tenders limited to a few favored participants, the prosecutor’s office said in a statement.

“These privatizations ... were drawn up in such a way as to artificially create the conditions for acquisition of the state assets by specific individuals, which significantly narrowed down the circle of potential purchasers,” it said.

The move against Akhmetov, Ukraine’s richest man, and other oligarchs close to the disgraced Yanukovich appeared to be part of concerted moves by the pro-Western leadership to end cronyism and break the influence of the super-wealthy on political life.

In a statement on Tuesday, Akhmetov’s DTEK holding company said it saw no reason to review the privatization of Dniproenergo, which it said had been carried out legally.

It said it any such action by the prosecutor’s office would be a violation of the fundamental rights of private ownership and rebound on government privatization plans later this year.

President Petro Poroshenko began the drive to curb oligarch power by sacking tycoon Ihor Kolomoisky as Dnipropetrovsk region governor last month after a bid to put a legal brake on his commercial interests in the oil industry.


Poroshenko, under pressure from Western financial institutions and potential donors to clean up in exchange for bail-out money, has since announced a campaign to clip the wings of oligarchs who try to buy influence with lawmakers.

He appears to have set his sights on the gas industry, the battleground for competing oligarch interests ever since independence from the Soviet Union in 1991.

Some deputies are pushing for legislation that will curb the power of another tycoon, Dmytro Firtash, the owner of Group DF.

Firtash, who was arrested in Vienna last year on charges of bribery, still controls an empire built up under Yanukovich controlling much of Ukraine’s regional gas distribution network.

“They (the oligarchs) want chaos, not order. I want the de-oligarchisation of the country,” Poroshenko told Channel 5 television on Saturday.

An eastern Ukrainian steel and coal magnate Rinat Akhmetov who is considered Viktor Yanukovych's main financial backer answers journalist's question during his news conference in Kiev, March 30, 2006. REUTERS/Ivan Chernichkin

Akhmetov’s DTEK company paid $147 million for 25 percent of Dniproenergo’s state assets in 2012, two years after Yanukovich was elected, to boost his extensive energy and steel holdings.

Control over Donbasenergo went to Ihor Gumenyuk, a friend of Akhmetov and member of Yanukovich’s Regions party, in a 2013 tender in which his Energoinvest Holding snapped up 61 percent of the state share for $90 million.

Half the state share in the Zakarpatya power distributor was sold in early 2012 for about $18 million, only slightly above the opening price, to a company run by Russian businessmen.

Additional reporting by Pavel Polityuk; Editing by Tom Heneghan

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