An Israeli businessman with links to pro-Kremlin politician Viktor Medvedchuk, who is in turn a friend of Russian President Vladimir Putin, now controls up to 40 percent of Ukraine’s imports of liquefied petroleum gas.
Nisan Moiseyev, the owner of gas trader Proton Energy, boosted his clout on the market in May, when Russia’s Federal Service for Technological and Export Control gave the company a monopoly on Russian LPG supplies to Ukraine.
Proton Energy buys the LPG from state-owned oil firm Rosneft, and currently controls up to 40 percent of Ukraine’s LPG imports. The fuel is increasingly used in automobiles as an alternative to gasoline.
Moiseyev is an associate of Medvedchuk. Radio Liberty has published video footage of Moiseyev and Medvedchuk getting out of Medvedchuk’s private jet and kissing each other.
Although air travel between Russia and Ukraine is banned, Medvedchuk’s jet has been exempted by Ukrainian authorities and is allowed to fly between the two countries.
Moreover, lawmaker Sergii Leshchenko and other critics believe Moiseyev elbowed his way into the market with the help of President Petro Poroshenko, the Security Service of Ukraine and the Russian authorities.
Leshchenko also argues that the alleged collusion triggered an LPG price hike in August, although this claim is disputed by some analysts.
Medvedchuk’s spokesman Oleh Bovavin denied Mevdedchuk has any links to the LPG market, while the Presidential Administration did not respond to requests for comment.
SBU spokeswoman Olena Hitlianska also denied the accusations, arguing that experts had refuted Leshchenko’s claims.
Blocked imports
In an Aug. 29 blog post, Leshchenko argues that the redistribution of the LPG market started in November 2016, when the SBU’s anti-corruption unit blocked imports of LPG by 16 independent traders. The SBU said imports were blocked because it was investigating the companies for alleged tax evasion and financing Kremlin-backed separatists. Ukraine imports LPG from Russia, Belarus and other countries.
The anti-corruption unit is headed by SBU First Deputy Chief Pavlo Demchyna, an associate of Poroshenko’s top allies in parliament, Ihor Kononenko and Oleksandr Hranovsky.
The import blockade triggered a major shakeup on the LPG market. The blocked traders and Leshchenko argue that the security service’s criminal case lacked any substance and was merely an effort by the SBU to remove competitors to the Swiss-registered Proton Energy from the market.
Sanctions
Subsequently the SBU also ordered an examination of imported LPG tanks to look for poisonous substances, and ordered Ukraine’s state railway monopoly Ukrzaliznytsya to check if there were any explosive devices on trains that transported LPG.
In February, Demchyna asked First Deputy Prime Minister and Economy Minister Stepan Kubiv to impose sanctions on the traders by blocking their business operations, and Kubiv approved the request.
As a result of the blockage, only four companies were allowed to import LPG. These include Glusko, a subsidiary of Moiseyev’s Proton Energy, and three companies linked to Proton Energy: Kreativ Trading, Wexler Global LP and Gikka Limited, according to a Radio Liberty investigation.
Meanwhile, in 2016, Glusko bought Rosneft’s assets in Ukraine.
However, the SBU and the Economy Ministry had to unblock LPG imports by Moiseyev’s competitors and remove the sanctions from February to March under public pressure.
Poroshenko’s role
Critics of the Ukrainian authorities claim that President Petro Poroshenko played a role in the restructuring of the LPG market.
“Last fall Poroshenko decided to give this market as a gift to Viktor Medvedchuk…,” Leshchenko said. “The crackdown on the LPG market could not have been carried out without Poroshenko’s blessing. And given what we know about the incumbent president, it’s hard to believe that he would have authorized an overhaul of the industry and making Medvedchuk a major player there without getting a cut.”
Price hike
Leshchenko also attributed the latest 52 percent hike in LPG prices in August to collusion between the Ukrainian authorities and Medvedchuk.
However, Serhiy Kuyun, head of oil and gas consulting firm A-95, argued that the latest price hike was due not to the SBU’s actions but to high demand in Ukraine for LPG, underdeveloped LPG infrastructure, including a lack of storage facilities, as well as shortages caused by repairs at oil refineries.
“Over the past three years, LPG consumption has risen by 50 percent to 1.5 million tonnes,” he said. “This is one of the highest figures in the world.”
He said that LPG is in such high demand that any minor problem can cause disruption on the market.
“We’ve gotten rid of Russian oil and gasoline, but are still dependent on Russian LPG,” he argued.
Officials’ reaction
The price hike prompted such an uproar that Ukraine’s top leaders were forced to react.
“We set the task of decreasing LPG prices by the second half of September, and anyone who is found to have committed violations will be punished,” Poroshenko said on Aug. 30.
Prime Minister Volodymyr Groysman on Aug. 29 asked the Anti-Monopoly Committee, the State Fiscal Service, ministries and law enforcement agencies to identify the reasons for LPG prices hikes, and to take measures to decrease prices.
“The LPG price hikes show signs of collusion,” he said. “This is sabotage against Ukraine.”
