Publication: Eurasia Daily Monitor Volume: 5 Issue: 106

The government of Ukrainian Prime Minister Yulia Tymoshenko will have to revise its decision to banish the U.S. company Vanco from the oil and gas fields in the Ukrainian part of the Black Sea. The Ukrainian Prosecutor-General’s Office (GPU) has ordered the government to restore Vanco’s license to develop the fields, and the National Security and Defense Council called on the cabinet to repeal its order annulling the production-sharing agreement with Vanco. Tymoshenko insists, however, that the deal with Vanco was not transparent.

On April 25 the Environment Ministry revoked the license to develop the Black Sea oil and gas fields that was issued in December 2007 to Vanco Prykerchenska, a subsidiary of the U.S. company Vanco Energy. Tymoshenko accused President Viktor Yushchenko of lobbying for Vanco, but Yushchenko denied the accusation and called on Tymoshenko to review her decision on Vanco. She disobeyed, however, saying that the conditions of a production sharing deal concluded in October 2007 did not suit the government. She also expressed strong doubts about the ownership structure of Vanco Prykerchenska, a subsidiary of Vanco, which received the license to work in the Black Sea. Vanco threatened to sue Ukraine in international courts (see EDM, May 21).

The GPU appealed on May 17 against the Environment Ministry’s revocation of Vanco Prykerchenska’s license. This means that the Ministry has to repeal its decision. This, however, has not happened to date. On the contrary, on May 21 the Tymoshenko government unilaterally terminated the production sharing deal with Vanco. Tymoshenko said that her government would defeat “any kamikaze who sues” in international courts. First Deputy Prime Minister Oleksandr Turchynov denounced the “attempts to protect Vanco using the GPU.” He also said, “I hope that the United States will investigate the corrupt scheme which was used to force a U.S. company to appear in the role of mediator, covering shadowy economic interests.”

Turchynov’s strong words failed to impress U.S. Ambassador William Taylor, who on the same day expressed his disappointment over the government’s decision. Taylor noted that the Ukrainian government should respect contracts and suggested that it launch a dialogue with Vanco.

Tymoshenko, speaking on a talk show on Ukraina TV on May 29, insisted that the deal with Vanco was not transparent. She said that two Ukrainian business tycoons and certain officials, rather than Vanco Energy, were behind Vanco Prykerchenska. “One of the companies behind the Black Sea deal, I think, belongs to Rinat Akhmetov,” said Tymoshenko. “Another company belongs to Dmytro Firtash, the individual who brought RosUkrEnergo to Ukraine. Another company, 25 per cent [of it belongs to] unidentified Ukrainian officials at the very top. It is generally impossible to detect who is the founder here.”

Earlier Vanco Energy had said that it had three partners in Vanco Prykerchenska: DTEK Shadowlight Investments linked to Russian businessman Yevgeny Novitsky, and the Austrian-registered Integrum Technologies. DTEK is controlled by Akhmetov, Ukraine’s richest businessman and one of the leaders of the Party of Regions (PRU), which is in opposition to Tymoshenko. Tymoshenko apparently believes that Firtash is behind Integrum Technologies. Firtash is the co-owner, jointly with Gazprom, of RosUkrEnergo, a company from which Ukraine has been buying Russian and Central Asian gas since 2006. Tymoshenko unsuccessfully tried to banish RosUkrEnergo from the market early this year.

Firtash and his Group DF issued a statement on June 2 saying that Firtash had no links whatsoever to either Vanco Prykerchenska or Integrum Technologies or any other company affiliated with Vanco. Group DF Chief Executive Robert Shetler-Jones said that Tymoshenko should stop making “groundless” statements about Firtash’s connections to Vanco.

Tymoshenko also complained on May 29 that the National Security and Defense Council (SNBO) threatened that she and Environment Minister Heorhy Filipchuk would be held criminally liable for abolishing the deal with Vanco. On May 30 the SNBO advised Yushchenko to order the government to rescind the decision on Vanco.

SNBO Secretary Raisa Bohatyryova said that an expert group that was set up by Yushchenko’s decree of May 20 to check the Vanco deal established that Vanco had won the tender in 2006 legally and that it was prepared to fulfill its contractual obligations. Vanco Energy hailed the SNBO’s decision and said that it was ready for talks with Tymoshenko.

The SNBO is chaired by Yushchenko, and its decisions are binding according to the Ukrainian constitution. Tymoshenko is a member of the SNBO, but her team on this body is outnumbered by Yushchenko’s people. Bohatyryova is a member of the PRU. It is believed that she belongs to the “business wing” of the party, whose informal leader is none other than Rinat Akhmetov. This wing is more prone to compromise with Yushchenko than PRU leader and former Prime Minister Viktor Yanukovych. Tymoshenko suspects that Yushchenko plans a new ruling coalition with the PRU, in which there will be no place for her party (UNIAN, May 20, 21, June 2, 3; Interfax-Ukraine, Ukrainska Pravda, May 21; Ukraina, May 29; Channel 5, May 30; Reuters, June 2).