Naftogaz: The rematch is going on

Author : Serhiy Fursa

Source : 112 Ukraine

Why resignation of foreigners from the Supervisory Board of Naftogaz Ukraine is a very bad sign
14:04, 21 September 2017

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A rematch is going on. Revenge as a result of dizziness from success. Guys want to get their flows back again.

I do not like to speak about revenge. But sometimes you cannot escape from the fact that even some irreversible changes are subjected to reverse. Using the fact that some areas were reformed significantly and some remained the same as in 2013. As a result, no matter what reforms the National Bank is implementing, it still faces courts that are stuck in 2013. The same can be said about Naftogaz Ukraine. At all conferences, Naftogaz is set as an example of successful reforms, but in fact, it remains in the Ukrainian environment.

Related: Growth or illusion: How to assess Ukraine's economic policy?

Now an offensive against Naftogaz is conducted. It results into the resignation of independent members of the company's Supervisory Board. Politicians and financial-industrial groups might return their control over the company. The effectiveness of the independent Supervisory Board was demonstrated when the head of Naftogaz was finally able to fire the head of Ukrtransgaz, whose accusations of corruption did not fit on A4 sheet. But this experienced business manager immediately became deputy energy minister. After that, probably, the guys felt offended by the Supervisory Board. And the corporate governance reform was signed.

Related: EBRD regrets dismissal of independent members of supervisory board from Naftogaz

What do the members of the Supervisory Board say? Why are they leaving? First of all, they declare political interference in the work of the company. This is not something new for us. This is rather an unpleasant surprise for the foreigners. Energy Community calls for the withdrawal of a bill submitted by the Cabinet of Ministers, which blocks foreign investors from entering Ukrainian gas-transport system. And also the Ministry of Energy is actually trying to maintain control over transportation and storage assets in violation of Ukraine's obligations under the "Treaty on the Establishment of the Energy Community".

Related: Naftogaz risks to lose financing of EBRD and World Bank

Naftogaz has a lot of money now. The company has become profitable. And you can hear hundreds of interviews of Ukrainian politicians who will say that now the company needs some political control. Do I need to translate what these words mean? They mean that the streams are filled and they must be seated. Urgently. We should not forget that the elections are just around the corner. Political control is the worst thing you can imagine in Ukraine. The essence of the corporate governance reform is precisely to remove this political control and fill the supervisory boards with independent directors. Someone who is not connected with Ukrainian groups. The government promised to do this both with Naftogaz and with other state companies. In particular, state-owned banks. But nothing was changed. And foreigners are “squeezed out” from "Naftogaz."

Related: Naftogaz suits Russia in Hague court to get $5 billion due to assets loss in Crimea

By the way, ministers and deputies do this jointly. Deputies, known for their "principled" position, made a number of revisions to the anti-corruption legislation. The deputies did not forget about the members of the Supervisory Boards. In particular, foreign members of the Supervisory Boards need to transfer their corporate rights to the management of a company licensed in Ukraine, declare all foreign accounts, disclose information about incomes in other companies abroad (and this is confidential information). Obviously, with such innovations, not a single foreigner would go into the supervisory boards of Ukrainian companies. They do not need such problems. But this is exactly what our guys need. And they go to success.

Related: Naftogaz, Gazprom, don’t agree on gas prices, Stockholm to decide

Why did the guys become so rude? Because dependence on the IMF has decreased. They are just rubbing their hands and waiting until, at last, they would be able send away these boring bureaucrats, speaking on tedious topics of fighting corruption, corporate governance, fiscal policy. And they already see the light at the end of the tunnel. Attracting funds with the help of issuing Eurobonds is a very bright signal that the moment of independence of corrupt officials is already close. And by the way, this is the unique moment when the authorities and opposition in Ukraine are united. What can this lead to? To leveling a whole series of reforms. State-owned companies are the mainstay of corruption in Ukraine. Supervisory councils of corruption interfere. When you remove supervisory advice, you increase the attractiveness of control over state-owned companies.

Related: Naftogaz is to add $5 billion to the Stockholm court suit against Gazprom

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