Oleg Pryimak has a fishy job.
The lanky businessman manages a rare, post-Soviet breed of state-owned enterprise: a British Virgin Islands-registered offshore with 100 percent Ukrainian government ownership.
Ukraine’s state offshore Fishing Company S. A. owns a fleet of five oceangoing Soviet-era fishing vessels, commissioned by the Cabinet of Ministers in 1997 to create an oceanic fishing fleet run with the help of Crimean business partners.
For years, the company appears to have been as corrupt as it sounds, with perennial news reports accusing the company of draining millions from the state budget.
But Pryimak has been fighting to clean the company out: commissioning an independent forensic audit and fending off an attack from the enterprise’s former Crimean business partners in an offshore legal battle that has dragged on for years.
“We are not some shady corrupt business,” Pryimak told the Kyiv Post in an interview. “We need to make sure that our interests are preserved.”
Last year, the company made its first profit since creation. Now the question is: Can the company hold together as it engages in high-seas litigation? And can it eventually be sold?
The Professor Mykhailo Aleksandrov is one of five remaining oceanic fishing vessels owned by the Ukrainian government. The owners of the Aleksandrov defaulted after years of mismanagement that left the ship sinking in debt. (Courtesy)
Wild ‘90s
Fishing Company S. A. was born out of a 1997 Cabinet of Ministers decision to found an oceanic fishing fleet. Then-Prime Minister Valeriy Pustovoitenko signed a proclamation ordering the fleet’s creation, moving the 250 fishing ships inherited from the Soviet Union into the shell company.
To finance the fleet, the Cabinet of Ministers ordered state-owned Oschadbank to loan the firm $10.6 million to help build what Pryimak referred to as a miniature of the Soviet fishing fleet.
Calling the Soviet fleet “tremendous,” Pryimak said that there were “250 ships sailing the high seas with no commercial value. We now know that this was to maintain a military presence, as the Chinese are doing now.”
So why was Ukraine trying to replicate this?
The story quickly gets murky. Over the years, many of the ships have been sold, leaving only five under Fishing Company S. A.’s control.
A 2001 report by the Rada’s Accounting Chamber accused the company of siphoning $10.7 million out of the state budget over the first four years of its existence.
“This is a characteristic example of howling red tape,” said chamber head and former first deputy prime minister Valentin Simonenko in an interview with Dzerkalo Tyzhnia at the time. “It’s not a resident company, it’s a high-profit enterprise not only freed from taxes to the state budget.”
Attack from Crimea
Fishing Company S. A. trudged along through to 2014, lending money to third parties along the way while registering its ships in Sevastopol.
Charter agreements were concluded between Crimean businessmen and the company by which the Crimeans would receive a portion of the profits from contracting out the ships to an operator while agreeing to pay dividends to the Ukrainian government.
In practice, the government received no benefit from the arrangement. By the time of the 2014 EuroMaidan Revolution and Russia’s subsequent annexation of Crimea, the firm was deep in debt, owing millions of dollars to related party creditors, according to an audit report reviewed by the Kyiv Post.
The Crimean businessmen — whose identities Pryimak would not provide and which could not be confirmed by the Kyiv Post — foreclosed upon two of the ships in Cypriot court through an intermediary shell company.
The Ukrainian government has managed to win back one of the ships in the courts, and remains embroiled in litigation over another.
“If they had been located in Crimea, it would have been easy for them to use the Russian flag,” Pryimak said. “But so far, they’ve only managed to receive a couple charter agreements and accrue some new loan indebtedness.”
Cash rules everything around me
Through legal threats, Pryimak said that he had succeeded in getting the company to deliver a dividend to the Ukrainian budget for the first time in its history last year. The firm brought Hr 13 million ($501,000) to the state budget.
If the other side misses a payment, Pryimak said, “that’s grounds for us to declare them in default under the charter agreement, and take the vessels away.”
In June, the owners paid an additional tranche of Hr 26.6 million ($1.02 million).
Now, the task for Pryimak is to find a way to sell off the remaining ships.
The fishing agency official estimated the total value of the company at Hr 150 million ($5.7 million).
“We can privatize them under the charter agreements,” Pryimak said. “The charter agreements would become the problem of the new owner.”
Pryimak will run up against the country’s ongoing failure to enact mass privatization — a stated priority of the post-EuroMaidan government that has been widely condemned as a failed policy.
But Pryimak hopes that fish companies elsewhere in the former Soviet Union — apart from Russia — will take an interest in what he has to offer.
“We need to make sure that our interests are preserved,” he said.
