Four U.S representatives urged the Ukrainian government to speed up the selection of four new independent supervisory board members for state-run gas giant Naftogaz.
Members of the Congressional Ukraine Caucus Marcy Kaptur, Brian Fitzpatrick, Mike Quigley, and Andy Harris wrote on Oct. 5 that they were “closely monitoring the open competition to fill the independent supervisory board seats at Naftogaz consistent with standards set by the international community.”
“As Ukraine works to strengthen its integration within the community of democracies and the free world, we urge the country’s leadership to continue to demonstrate its commitment to the necessary reforms,” the statement read.
On Sept. 7, Ukrainian Prime Minister Denys Shmyhal announced a competition to choose four new independent members. The government has yet to announce winners over a month later. The selection is supposed to be completed by November.
Naftogaz was once considered a model for corporate reform in Ukraine, having implemented reforms at the national level which led to the slashing of Naftogaz’s sizable deficit.
Before the post-2014 reforms, Naftogaz was routinely costing taxpayers at least $500 million monthly in losses.
Tax revenue from Naftogaz now makes up a significant part of the state budget. In 2020, the company paid $5 billion in taxes to the state budget alone, supplying 17% of state revenue.
However, in 2020, the company recorded losses of nearly $700 million, despite telling the government that it is expected to make profits of nearly $400 million, which led to the ousting of former Naftogaz CEO Andriy Kobolyev.
On April 28, the government dismissed Kobolyev and installed acting energy minister Yuriy Vitrenko, triggering outrage from the supervisory board and sparking a management crisis.
To appoint Vitrenko, the Cabinet of Ministers bypassed the supervisory board and dismissed it for two days to be able to fire Kobolyev directly without the consent of the board members, who denounced the Cabinet of Ministers for using “Soviet-like methods employed to deprive the Supervisory Board of our competence just for a snap-in time in order to replace the CEO.”
Former employees Otto Waterlander, the company’s chief operating officer; Petrus van Driel, the group’s chief financial officer; Yaroslav Teklyuk, the director of legal affairs; and Sergiy Pereloma, the first deputy chairman, joined forces with the supervisory board for a time, before resigning or being dismissed.
Three supervisory board members also resigned in protest. The remaining three board members were then dismissed, which allowed the government to assume the responsibility of the advisory board.
Naftogaz’s temporary supervisory board lacks foreign expertise. Internal conflicts within Naftogaz have interrupted the company’s normal function during a critical moment.
On Sept. 22, Naftogaz CEO Vitrenko noted that it now costs more money to produce gas than to sell it.
This year, the company’s most pressing priority is to prepare for an expensive heating system and increase domestic gas production, amid see-sawing gas prices.
