A fight for control of Ukraine’s largest oil refinery threatens the country’s oil supplies from Russia while igniting intra-governmental rivalries
A fight for control of Ukraine’s largest oil refinery threatens the country’s oil supplies from Russia while igniting intragovernmental rivalries at home.
Poltava Region’s Kremenchuk oil refinery, the centerpiece of a joint venture called Ukrtatnafta, which includes interests connected to Russia’s Tatarstan republic and Ukraine’s state oil and gas company Naftogaz Ukrainy, had its oil supplies shut off this week and is now being guarded by armed men following the replacement of its CEO on Oct. 19.
Tatar-supported CEO Serhiy Hlushko was replaced following a decision by a regional Ukrainian court. The government of Tatarstan and the Tatneft oil company, both principal shareholders in Ukrtatnafta, responded by cutting off oil supplies to the refinery and accusing Ukraine’s Fuel and Energy Minister of engineering the takeover.
“The events of Oct. 19 are the culmination of a conflict that has been going on for several months at the enterprise. It was started by the current head of the Fuel and Energy Ministry Yuriy Boyko,” Tatarstan’s trade representative to Ukraine Rostislav Vakhitov told a press conference this week.
Vakhitov also accused newly instated CEO Pavlo Ovcharenko, who had headed Ukrtatnafta in 2003-2004, of siphoning $130 million in company funds since returning to his position.
Deputy Prime Minister Andriy Klyuyev, considered a rival of Boyko in Ukraine’s energy sector, called Ovcharenko’s return a “raider’s attack.” Boyko has dismissed the accusations and called for a legal study of the matter. Russian Minister of Industry and Energy Viktor Khristenko told a press conference on Oct. 24 that his government would support Tatneft in the dispute. Economy Minister Anatoly Kinakh said the conflict could lead to an oil shortage in Ukraine, as Kremenchuk is a major refinery in the country.
Ovcharenko said his company was already getting oil from Ukraine’s leading oil producer, Ukrnafta, and was holding talks to get supplies from other oil companies in Russia. He added that Ukrtatnafta was expected to report losses of Hr 400 million (around $80 million) due to the purchase of oil by the former management at inflated prices.
Volodymyr Saprykin, an energy analyst at Ukraine’s Razumkov Center, said the Kremenchuk refinery provides around a third of the country’s oil needs, but that importers from the Baltics, for example, could fill the gap in the short term.
“Theoretically this is a threat. The issue will probably continue to be hashed out in the courts,” he said.
The Ukrtatnafta joint venture was created by Ukrainian and Tatarstan presidential orders in the mid-90s. Tatarstan agreed to supply oil; Ukraine contributed the Kremenchuk oil refinery to the joint venture.
Shareholders with roots in Tatarstan include the republic’s property fund, with a 28.7 share; Tatneft, with 8.6 percent; US-registered Seagroup International with 9.9 percent; and Switzerland’s Amruz Trading, with 8.6 percent.
The US and Swiss-registered companies were added to the country’s list of shareholders in the late 90s, effectively giving the Tatar side 55 percent control of the refinery.
Over the years, the Ukrainian government has tried to overturn the sales of the shares to the US and Swiss registered companies. This May, Naftogaz took control of the 18 percent share package belonging to US and Swiss companies, giving it a 61 percent majority and reducing the Tatar stake.
