SBU Launches Criminal Investigation in Regard to RosUkrEnergo

KIEV, Ukraine -- The State Security Service (SBU) has launched probes into alleged violations by gas trading firms that allegedly siphoned more than a billion dollars from state coffers when they worked as intermediaries handling Turkmen gas supplies to Ukraine.

SBU chief Oleksandr Turchinov told the Post on June 17 that an investigation has been launched into the activities of Swiss-registered RosUkrenergo and intermediaries that handled Turkmen gas supplies to Ukraine in previous years.

SBU Chief Oleksandr Turchinov

Like its predecessors, RosUkrEnergo acts as an intermediary in transiting gas from Turkmenistan across Russia and other former Soviet states to the Ukrainian border. Its shareholder structure remains a bit cloudy.

Company officials have said that affiliates of Russian gas giant Gazprom and Austria’s Raiffeisen Investment AG own parity 50/50 stakes in the venture.

Turchinov told the Post that Raiffeisen Investment AG, according to his information, acts as a nominal shareholder representing private interests of individuals whom he declined to name for fear of revealing inner workings of the investigation.

Turchinov said RosUkrEnergo, a company which has an annual turnover of more than a billion dollars, could not have been created without the approval of the most influential people in Russia and Ukraine. Severe infringements were discovered in the company’s dealings, he said, adding that such schemes involve siphoning of funds which should have flowed into the state budget, rather than having been diverted into private hands.

A RosUkrEnergo top manager revealed to the Post in an interview last week that Raiffeisen Investment’s role in RosUkrEnergo was bound to contractual arrangements with Ukrainian clients, which he could not identify.

On June 16, Oleksy Ivchenko, chairman of Ukraine’s state oil and gas company Naftogaz Ukrainy, told the Post that he does not know whose interests Raiffeisen Investment represents. His announcement has fueled speculation that private business interests, not the state, are receiving gains from the transit of gas from Turkmenistan, which supplies Ukraine with more than half of its gas.

Turchynov believes the “actual shareholders are hiding behind this structure [Raiffeisen Investment].”

Also, in Turchinov’s words, the SBU is investigating wrongdoings pertaining to Eural Trans Gas, a Hungarian-registered firm which earned more than a billion dollars in annual turnover by handling Turkmen gas supplies to Ukraine before RosUkrEnergo was appointed as intermediary this year.

Officials at Russian gas giant Gazprom and Naftogaz Ukrainy have in recent years distanced themselves from Eural Trans Gas, whose ownership structure remains hazy to this day.

RosUkrEnergo and Eural Trans Gas were chosen as intermediaries for the transfer of Turkmen gas into Ukraine when Yuriy Boyko headed Naftogaz. Boyko, appointed chairman by former Ukrainian President Leonid Kuchma, was removed from his post earlier this year by President Viktor Yushchenko.

Turchynov said the SBU investigation also centers in on alleged wrongdoings committed by former top managers at Naftogaz.

“There were a lot of violations which pertain to the intermediaries, and also to the administrators,” Turchinov said.

Intermediaries such as RosUkrEnergo and Eural Trans Gas generate billions of dollars in revenues annually transporting gas they don’t own through pipelines, which they also do not own. They are essentially paper companies granted lucrative privileges whose existence has proven difficult to explain for top managers at Gazprom and Naftogaz. Minority shareholders at Gazprom insist that their company could handle the transit itself; some Ukrainian officials insist that Ukraine should also have a share in the business.

Gazprom and Naftogaz announced in July 2004 that Eural Trans Gas would be replaced by the newly established RosUkrEnergo starting 2005. ETG has acted as intermediary in the previous two years, having replaced Florida-registered Itera, which handled the transit earlier.

In the July 2004 statement, Naftogaz and Gazprom insisted that the Swiss company was 50 percent owned by a subsidiary of Gazprombank and 50 percent owned by Raiffeisen Investment AG, a subsidiary of Austria’s Raiffeisen Banking Group.

RosUkrEnergo officials told the Post back then that other parties could be brought into the venture in order to raise investment needed for projects involved with modernization of pipelines and other areas.

At the time, Boyko said Naftogaz could in the future become a shareholder in RosUkrEnergo.

Married to the mob?

It remains unclear who the beneficiary shareholders of ETG and and RosUkrEnergo are, and whether Gazprom and Naftogaz Ukrainy control the company. Gazprom and Naftogaz Ukrainy have repeatedly denied owning ETG, but ETG officials say their company does not operate independently of the Ukrainian and Russian gas companies.

Press reports have linked ETG with Ukrainian-born reputed mobster Semion Mogilevich. Mogilevich is wanted by the FBI on money laundering, racketeering and fraud charges.

Several of the media outlets that alleged those links were forced to retract their claims after they lost lawsuits brought against them by ETG.

Former U.S. Ambassador to Ukraine Carlos Pascual last year called upon Ukraine and Russia to modify the Turkmen gas supply arrangement, citing reports that Mogilevich has ties to ETG. Pascual said that ETG’s influence over Ukraine’s gas supplies is a serious threat to the country’s energy security.

Ukraine consumes more than 70 billion cubic meters of gas annually, producing about 19 billion cubic meters and importing the rest from Turkmenistan and Russia.

British-born Robert Shetler-Jones, who first came to Ukraine in late Soviet days, has links with both ETG and RosUkrEnergo.

A report produced by Moscow-based Hermitage Capital Management, itself a minority shareholder in Gazrpom, lists Shetler-Jones as director of companies which are shareholders in ETG.

Shetler-Jones serves as an advisor to RosUkrEnergo. It’s a position which puts him side-by-side with some of the most influential executives involved in lucrative gas dealings between Ukraine, Russia and Turkmenistan.

Shetler-Jones told the Post earlier this year that he no longer has any affiliation with ETG, which has been linked by press reports to Mogilevich.

In early 2004, a company he owns acquired a controlling stake in the lucrative Crimean Soda Plant (Crimsoda), in Krasnoperekopsk, Crimea. Hamburg-registered RSJ Erste early last year paid $70 million for Crimsoda. Last year, RSJ Erste also established a joint venture with Ukraine’s government, which gave RSJ nearly half of Krymsky Titan, a lucrative titanium business.

Shetler-Jones has refused to reveal where he raised funding for the acquisitions, for fear of linking his creditors with Mogilevich. He insists that he is the owner RSJ Erste, and that he is not acting as a shell for others.

“I am the owner of RSJ Erste. I have no other partners in the business,” he said, adding that he acquired the factories using credit lines.

Source: Kyiv Post