Ukraine faces sharp criticism from US and EU after dismissal of top management of state-owned company

Ukraine faces sharp criticism from US and EU after dismissal of top management of state-owned company

WASHINGTON – Ukraine has come under fire from Western governments and international financial institutions for sacking the management of the state-owned energy company, to an extent that critics say undermines years of anti-corruption reforms.

A previous attempt to oust the leadership of national oil and gas giant Naftogaz Ukrainy was led by allies of President Donald Trump, who were also linked to the efforts of Trump’s personal lawyer Rudolph Giuliani to find information damaging on then-presidential candidate Joe Biden and his son. , Hunter. This attempt failed, but the Ukrainian government has now achieved the same goal, raising alarms in Washington and Europe.

The move threatened to damage US and European relations with Ukraine, just as Kiev had gained a wave of Western support in recent weeks amid a massive build-up of Russian troops at its borders.

Naftogaz had been described by US and EU officials as an achievement in the country’s long-standing fight against corruption. But the Ukrainian cabinet suspended the company’s supervisory board on Wednesday and dismissed CEO Andriy Kobolyev, in office since 2014.

The government last year called the company’s losses of about $ 684 million and what it called low levels of gas extraction “unsatisfactory.”

The Biden administration has expressed serious concerns about the sudden upheaval, which took place just days before US Secretary of State Antony Blinken’s trip to Ukraine next week.

“This calculated decision – using a procedural loophole – to oust top experts from the boards of several key state-owned companies reflects a disregard for fair and transparent corporate governance practices and complicates long-standing efforts to reform the sector. Ukrainian energy sector and improve its investment climate. State Department spokesman Ned Price said Thursday.

Andriy Kobolyev, managing director of Ukrainian oil and gas company Naftogaz, speaks at a press conference after a meeting with the European Commission Vice-President for Energy Union and representatives of the Russia at EU headquarters in Brussels on January 21, 2019.John Thys / AFP via Getty Images file

The Ukrainian Embassy in Washington, DC, did not immediately respond to a request for comment.

John Herbst, former US ambassador to Ukraine, said the move would undermine a key part of efforts to root out corruption and open up opportunities for potential Russian-backed interference.

“This is a worrying development,” said Herbst, now a member of the Atlantic Council think tank.

Before the reforms were introduced after 2014, corrupt actors had managed to siphon large sums of money from the gas company, and dismantling the management would reopen the door to similar practices, according to Herbst.

If postponed, “it would remove one of the few sources of strength from the Ukrainian economy and budget,” Herbst said, adding: “It may be that some Russian affiliated hands could benefit from the removal of assets.”

The previous effort to oust Naftogaz’s leadership from Naftogaz was revealed during Trump’s first impeachment inquiry, with allies of the former president – and some senior officials – pushing for a change at the top of the government. company, NBC News previously reported.

Two Florida businessmen, Lev Parnas and Igor Fruman, who were helping Giuliani try to unearth damaging information about Biden and his family, also embarked on efforts to install new board members and the leadership at Naftogaz, NBC News reported in 2019. missed.

In a joint statement by the European Union, the European Bank for Reconstruction and Development, the European Investment Bank, the World Bank and the International Finance Corporation, officials said they were “seriously concerned about the recent events of the Ukrainian national oil and gas company, Naftogaz. , where the supervisory board was temporarily suspended in order to dismiss the current management team. “

The statement added: “We call on Ukrainian leaders to ensure that crucial management decisions in state-owned enterprises are taken in full compliance with the basic principles of recognized corporate governance standards.”

Naftogaz is one of Ukraine’s most valuable companies, transporting billions of dollars of natural gas every year. Under Kobolyev’s leadership from 2014, Naftogaz went from losing billions of dollars a year to making a profit by 2018, contributing a substantial share of government revenue through payments from taxes and dividends.

Kobolyev, the CEO sacked by the government, said past experience had shown the terrible effects of what he called political interference in Ukrainian state-owned enterprises.

“Political interference in Ukraine’s energy sector has had disastrous consequences for our country,” Kobolyev told NBC News in a statement.

“We cannot afford to go back to the days of price manipulation and oligarchic middlemen, which Russia exploits to expand its influence in Ukraine and hold back the country,” he said. Sheltered from political interference, the comprehensive reform process in Ukraine does not stand a chance. “

Kobolyev has clashed with a succession of governments, with officials in the current administration accusing him of being overpaid and letting gas prices soar too high.

In her testimony to House impeachment investigators in October 2019, Marie Yovanovitch, the former U.S. ambassador to Ukraine fired by Trump after Giuliani’s demands, called Kobolyev “as clean as possible.”

The former diplomat said Kobolyev was “fearless and determined to shake everything up somehow.”

Oleksiy Honcharuk, who served as the country’s prime minister from August 2019 to March 2020, called the move a step backwards from anti-corruption reforms designed to prevent political interference in state-owned enterprises.

“This is a decision against the reform of corporate governance in Ukraine,” Honcharuk said. “Over the past five to seven years,” he said, the changes at Naftogaz had been “one of the main pillars of all anti-corruption efforts in Ukraine”.

Vitaly Shabunin, head of the Anti-Corruption Action Center, a non-governmental organization, criticized the government, saying it had jeopardized Western support at a time of danger with Russia, calling it “betrayal” .

The government appointed Yuriy Vitrenko as the new CEO and, at his first press conference, said he had spoken to President Volodymyr Zelensky about his appointment and that an increase in gas extraction in Ukraine was “a national security issue ”.

Veronika Melkozerova reported from Kiev.