Ukraine's Seizure of Ostchem Assets Threatens to Expose Government Infighting

Ukraine's Interior Ministry has seized the real estate assets of Ostchem, owned by oligarch Dmytro Firtash, as part of its "war on oligarchs". However, the move could expose a rift within the Ukrainian government.

Wed, Jun 17, 2015
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The Ukrainian government has imposed an asset freeze on Ostchem, the largest chemicals, gas and energy firm in the country. Ostchem is owned by the Ukrainian oligarch Dmytro Firtash, one of the country's richest men, who is currently wanted by the U.S. Federal Bureau of Investigation (FBI) on suspicion of violating laws on bribery in the course of his foreign business deals.

A report in BNE IntelliNews said the Ukrainian interior ministry has filed a court request to seize 110 Ostchem-owned real estate assets, adding that 46 have already been seized. In addition, the Ukrainian authorities have launched an investigation into a $10 billion lawsuit that the gas company Rosukrenergo, a subsidiary of Ostchem, won against the state energy company Naftogaz in 2010. Ukraine's Interior Minister Arsen Avakov alleged that officials of Naftogaz were ordered to lose the case deliberately by the government of ex-president Viktor Yanyukovich, and that it amounted to “phenomenally criminal collusion".

Firtash, who recently won a battle against extradition to the U.S. from Austria, his current residence, later appeared on a Ukrainian TV channel he owns to refute the allegations, saying Kiev was using its “war against oligarchs” as a smokescreen to divert attention away from its own economic failings and the war against separatists in the east.

“When they saw that they can’t win the war and realized that something still needs to be done, they started this so-called fight with the oligarchs,” Firtash said. “This isn’t just one…five people, it’s thousands of people…who are creating jobs, who fill the state coffers, and who develop entire regions.”

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“Regrettably, we are now fighting against the government,” Firtash complained.

Political infighting?

BNE IntelliNews suggests that the case threatens to expose infighting between different factions of the Ukrainian government, which is using its war on oligarchs to hide the fact that senior politicians are scrapping amongst themselves over the country's spoils.

The article points out that Firtash has “declared a personal war on the Yatsenyuk government” despite apparently allying with Ukrainian President Petro Poroshenko. It points to a meeting between Firtash, Poroshenko and his main adversary in the Presidental elections, Vitaly Klichko, that took place March 2014. It's alleged that at the meeting Firtash helped convince Klichko not to oppose Poroshenko in the elections in return for legal protection.

But, although the president is apparently on board, Yatsenyuk and his People's Front party made no such agreement with Firtash and remain determined to take him down.

The government’s “deoligarchization” campaign isn't just focused on Firtash, however. Earlier this year, Poroshenko removed billionaire Ihor Kolomoisky as a regional governor as lawmakers moved to take control of lucrative state energy companies away from him.

More recently, authorities honed in on Rinat Akhmetov, Ukraine’s richest man and a longtime backer of ex-President Viktor Yanukovych. Last month, prosecutors announced plans to cancel his DTEK energy holding’s controversial acquisition of a top electricity generator, saying that the process was uncompetitive.

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