How a 29-year-old Ukrainian tycoon made a killing on Russian gas

By Stephen Grey, Tom Bergin, Sevgil Musaieva and Jack Stubbs
FAST RISER: Serhiy Kurchenko, a businessman from east Ukraine, expanded his interests hugely when the former Ukrainian president Viktor Yanukovich was in power. Among other assets, Kurchenko, pictured here in 2013, bought an oil refinery, a football team and stakes in two banks. REUTERS/Stringer
Comrade Capitalism series, part 6: Serhiy Kurchenko, who is suspected of acting on behalf of the former Moscow-backed president of Ukraine, gained $100 million on gas supplied at a preferential rate.

Русский язык (Russian translation)

KIEV – A young businessman accused of being a frontman for former Ukrainian president Viktor Yanukovich made $100 million or more from buying Russian gas at a preferential rate and selling it on at higher prices, according a former senior employee and a Reuters examination of official data.

Serhiy Kurchenko, 29 years old and a self-declared billionaire, made the money by selling cheap gas supplied by companies run by Dmitry Firtash, a prominent Ukrainian oligarch. Firtash has long-standing business connections to Russia and his companies were able to buy gas cheaply from Gazprom, the giant gas company run by allies of Russian President Vladimir Putin.

Some Ukrainian politicians and gas industry experts, briefed on the transactions by Reuters, said they believe the deal was a way for Firtash to reward former president Yanukovich for political favours that had benefitted Firtash’s business empire. Profits from the arrangement were destined for Yanukovich, they allege.

“Everybody in Ukraine knows that he (Kurchenko) is the wallet to pay off Yanukovich,” said Viktor Chumak, a senior Ukrainian lawmaker and the former head of the parliament’s anti-corruption committee. Reuters was unable to confirm the purpose of the favourable deals or whether Kurchenko passed proceeds to Yanukovich.

The details of the gas deals are likely to add to the controversy surrounding Kurchenko. Ukrainian officials have been investigating both him and Yanukovich since earlier this year, though those inquiries have focused on deals involving petroleum products and banking, not the natural gas deals uncovered by Reuters. Both men fled Ukraine after Yanukovich’s overthrow in February and are now living in Russia.

In a series of articles, Reuters has examined how people favoured by the Kremlin have profited from Russia’s state spending and natural resources. This brand of capitalism extended to Ukraine, which Moscow has never really accepted as a fully independent state, and which Putin has tried to influence through gas supplies.

Kurchenko stands accused by the current Ukrainian government of systematically evading millions of dollars in tax with the collusion of officials in Yanukovich’s administration. Vitaly Yarema, general prosecutor of Ukraine, said Kurchenko was under investigation for allegedly failing to pay the state $130 million in tax and allegedly stealing $180 million from bank investors.

Ukrainian officials say Kurchenko was closely connected to Yanukovich, who was toppled over his attempts to align Ukraine with Russia rather than the European Union. The former president is himself accused by the current Ukrainian government of stealing millions of dollars from the state.

The Ukrainian secret service described Kurchenko in October as the “chief financial officer” of what has become known in Ukraine as “the family,” a term for associates of Yanukovich. In an interview this month, Arsen Avakov, Ukraine’s interior minister, told Reuters: “Kurchenko was simply a manager” for the Yanukovich family. “His biography was clean – simply because he was a young man – and that was why they put him as a front for the family.”

On March 24, the general prosecutor’s office of Ukraine announced an investigation into “the establishment of a criminal organisation” by Kurchenko, who it described as “close to the ‘family’ of former President of Ukraine Viktor Yanukovich.”

And on May 19, a statement from the Ministry of Internal Affairs accused Kurchenko of manipulating the fuel market with the support of “patrons,” including former government ministers. Avakov, the interior minister, told Reuters that Kurchenko was suspected of tax offences relating to oil deals. “This scheme is only possible when the president is covering everything (up), and closing his eyes. It is the Tsar’s business.”

 

Kurchenko did not respond to requests for comment. He has previously denied the allegations of tax-dodging and said he has no corrupt links to Yanukovich; he has said he is the victim of political persecution. “I am an honest Ukrainian businessman,” he said in a statement posted in March on the website of his company, Vetek Group.

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One thought on “How a 29-year-old Ukrainian tycoon made a killing on Russian gas”

  1. Sir…I suppose in a fdgelling democracy, the courts would be relied on quite often to answer constitutional questions, from which precedents would be established.I thought somewhat about this sort of question yesterday. Where does respect for justice come from? How does respect for a court or for judges arise?It seems to me that courts have at least two different functions: to do justice and to appear to do justice. The first of these is important for convincing at least some of the directly interested parties to a dispute that the question was decided justly. The second of these is important for establishing general popular belief in and respect for a system of justice.As an oversimplification, I say that soviet courts only performed the second of those two functions. The prosecutor did justice (decided who was guilty) in criminal matters, and various administrative organs or party organizations did justice in civil matters. The courts provided a public show, exposing some of what was otherwise a largely secret or hidden process.In a fdgelling democracy, the role of the courts must certainly be heavily influenced by the local history. In particular, the historical development of British common law and the British system of different kinds of courts and the American history of developing a system of justice (several provisions in the US constitution were introduced to prevent abuses that were perceived in the British court system of the time) is likely to have very little influence in the Ukraine compared with the influence of the soviet system of justice. In simple words, you got to see where they are coming from to know where they are going.

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