On February 19, the National Security and Defense Council of Ukraine (NSDC) imposed sanctions on Ukrainian tycoon and politician Viktor Medvedchuk and his wife, Oksana Marchenko (Pravda.com.ua, February 19). Medvedchuk is a leader and people’s deputy of the pro-Russian party Opposition Platform–For Life, the largest opposition faction in the Ukrainian parliament. Moreover, he is a close acquaintance of Russian President Vladimir Putin. The NSDC sanctions list also includes five Russian nationals and Ukrainian national Nataliya Lavreniuk. The latter is Marchenko’s friend and the common-law spouse of Taras Kozak (already under sanctions), a people’s deputy from the same political party and Medvedchuk’s business partner. Apart from targeting those eight individuals, sanctions were imposed on nineteen associated businesses, including firms that own aircraft and operate direct flights from Kyiv to Moscow as well as a number of joint stock companies registered in Russia, Moldova and Portugal (Pravda.com.ua, February 20). These measures came two weeks after Ukrainian President Volodymyr Zelenskyy ordered the shutdown of several television channels—ZIK, NewsOne and 112—connected to Kozak. The move was described by Zelenskyy as a necessary step to fight Russian propaganda. But according to the Security Service of Ukraine (SSU) and the NSDC, these actions were motivated by more complex issues. Specifically, the three aforementioned TV channels were being financed by limited liability company trading house Don Coal (Rostov, Russia), which receives revenue from smuggling coal out of the Luhansk and Donetsk “people’s republics” (LPR/DPR) (Pravda.com.ua, February 4).
According to NSDC Secretary Oleksiy Danilov, the decision to sanction Medvedchuk and his wife was also based on documents provided by the SSU relating to a criminal case the Ukrainian special services opened against the couple: namely, they are suspected of sponsoring terrorism in LPR/DPR (Interfax, February 19). SSU Chairperson Ivan Bakanov confirmed that the SSU is investigating a scheme to smuggle coal supply from LPR/DPR to Russia and Ukraine; moreover, he admitted that this investigation related to companies associated with Medvedchuk and Kozak (Ssu.gov.ua, February 19).
Sanctions against Medvedchuk and Marchenko, which include 12 points, are effective for 3 years. They freeze all of the couple’s assets; ban the use and management of their property; restrict trade operations; block the transit of resources, flights and shipment across Ukraine; prohibit the withdrawal of capital from Ukraine; suspend economic and financial obligations to them; terminate the issuing of permissions and licenses on the import and export of currency; and restrict cash withdrawals from cards discharged by foreign residents (Pravda.com.ua, February 19).
Additionally, Zelenskyy, by decree (66/2021), put into effect the decision of the NSDC to return to state ownership 1,433 kilometers of the Samara–Western Direction oil pipeline, which transports Russian petroleum products to Europe (President.gov.ua, February 19). The Ukrainian section of the pipeline is operated by the company PrykarpatZakhidTrans, which, since 2017, has been reportedly linked to Medvedchuk (Zn.ua, February 20). On the Russian side, the pipeline is connected to the Novoshakhtinsk Oil Refinery, located in Rostov Oblast, which converts oil into bitumen, mazut (heavy, low-quality fuel oil) and gasoil (analog of diesel fuel). Marchenko owns 75 percent of this refinery, and Lavreniuk, who, since 2015, has Russian as well as Ukrainian citizenship, owns 25 percent. Allegedly, sanctions against both Marchenko and Lavreniuk were introduced because of this particular property (Zn.ua, February 19).
The Novoshakhtinsk refinery is among the top 100 biggest companies in Russia. In 2015, NZNP Trade LLC, which is controlled by Marchenko through a chain of offshore companies, won a tender for the development of one of the three largest oil fields in the Khanty-Mansi Autonomous Okrug of Russia. The reserves of the field are estimated at more than 130 million tons. Produced oil from the field is processed at Novoshakhtinsk. Next to the plant, on the Don River, there is an oil terminal. Medvedchuk’s wife owns eight oil tankers that have frequently been sighted anchored to the terminal (YouTube, February 21). Reportedly, the Novoshakhtinsk plant enjoys the full support of the Ministry of Energy of the Russian Federation and transports its products by fuel trucks through the Rostov region, Krasnodar Krai and the Kerch Strait Bridge to Russian-occupied Crimea. Additionally, the fuel is smuggled into LPR/DPR. Importantly, Marchenko’s tankers, under Russian and Maltese flags, transport semi-finished petroleum-derived products from the Novoshakhtinsk plant, via the Rostov port, down the Kerch Strait and across the Black Sea, all the way on to the Port of Houston, Texas, in the United States. During 2020, the overall supply to customers outside Russia was estimated at about $150 million. The US buyer, ExxonMobil, has purchased petroleum products not directly from the Medvedchuk-Marchenko plant but from the Swiss company NewCoal Trading AG, which is believed to be associated with the family of Russian parliamentarian (United Russia political party) Gleb Khor. From November 2019 to June 2020, Russia’s share of semi-finished gasoline products to US-based plants reached almost 60 percent; and an eighth of that came from Medvedchuk and Marchenko’s refinery (Radiosvoboda.org, September 3, 2020).
Although, at first glance, sanctions against Medvedchuk and Kozak may seem effective and tough, they are unlikely to cause huge trouble to the pro-Russian oligarchs. Medvedchuk and Marchenko possess nearly 100 companies registered in Russia, Crimea and other countries (Espreso.tv, February 21). Sanctions against a handful of businesses are unlikely to harm the couple. Also, both Kozak and Medvedchuk have strong connections not only with the Russian authorities but also with Belarusian top officials. Both tycoons keep part of their assets in, among other places, the Belarusian financial entity Absolutbank. The bank is fully controlled through a chain of companies by Alyaksei Aleksin and Mikalay Varabey, Belarusian oil and banking businessmen close to President Alyaksandr Lukashenka. Most importantly, wealthy Belarusian tycoons are involved in a corporate scheme for supplying sanctioned Russian diesel fuel (with Belarusian certificates) to the Ukrainian market (Nashigroshi.org, February 15). PrykarpatZakhidTrans, co-owned by Varabey, is only one part of that larger scheme. Additionally, Varabey is linked to the resale of Russian and LPR/DPR coal to Ukraine. As a result, sanctions may not cause problems to Medvedchuk but will certainly affect the fuel business in Ukraine and in Belarus, disrupting fuel supplies and provoking price increases. To achieve maximum efficiency, sanctions against Medvedchuk and his associates will need to be more comprehensive and coordinated with the European Union, the United States and other countries.