Publication: Monitor Volume: 5 Issue: 78

On a request from President Leonid Kuchma, the Ukrainian Prosecutor General’s Office has launched a massive attack against misappropriations in Ukraine’s most lucrative industry–energy. Speaking at a press conference on April 21, Deputy Prosecutor General Olha Kolinko unveiled the scale of corruption: Over 360 criminal cases have been instituted against electricity officials and managers for embezzlement of state funds; some 167 million hryvnyas (US$42 million) of the stolen money has recently been “voluntarily returned” to the state.

Kuchma began his “sweep” of the energy industry in February by sacking First Deputy Premier Anatoly Holubchenko, who had supervised the energy sector, and replacing Energy Minister Oleksy Sheberstov with Ivan Plachkov (see the Monitor, February 19). On April 17, Kuchma fired both two deputy energy ministers for abuse of power and the chairman of the commission for regulation of electric energy, Zynovy Butsyo, “for serious flaws [in procedure].” Several lower-level officials have been also fired. They are now under investigation (Studio 1+1, April 21; Ukrainian agencies, April 17).

The prosecution demands both canceling earlier sales of stakes in regional power distribution companies for alleged gross legal violations in the privatization process, and revoking the government decision to allow the Ukrainian Credit Bank (UCB) temporarily manage three of the companies. The UCB, incidentally, is a part of the financial empire of Hryhory Surkis, one of Ukraine’s “oligarchs” considered a member of Kuchma’s inner circle. Last year, the cash-strapped government rather hastily sold large stakes in several of Ukraine’s twenty-seven regional power companies–ostensibly to be able to pay mounting wage and pension arrears. Those companies enjoy a monopoly on electricity supplies in their respective regions, and are thus considered among Ukraine’s most attractive properties. A large portion of the shares apparently ended up in several murky off-shore firms (AP, April 20; Den, April 21).

The situation in the energy sector is exacerbated by the mass failure of cash-strapped consumers to pay debts for electricity, which have exceeded 5 billion hryvnyas (US$1.25 billion). Since April 1, the government has cut electricity to several thousand enterprises in what has proved to be a largely vain attempt to offset the debt. Energy Minister Ivan Plachkov noted recently that a total of 870 government law suits have been initiated on the basis of that debt (Inter TV, April 16; UNIAN, April 17). Problems within the energy sector remain one of the most disputed issues in Ukraine’s relations with the International Monetary Fund, and were cited as part of the Fund’s basis for suspending the Extended Fund Facility program to Ukraine last autumn. –OV