The International Monetary Fund has recalled Wim Fonteyne, its senior economist responsible for corporate governance reform in Ukraine, after the government forced management changes at state-owned gas giant Naftogaz.
The IMF recalled Fonteyne after the Cabinet of Ministers suspended the work of Naftogaz supervisory board to be able to fire the company’s CEO, Andriy Kobolyev, and replace him with Yuriy Vitrenko, news website Novoe Vremya reported on April 30.
Many believe this decision violated Ukraine’s corporate governance rules. “The reason (to recall Fonteyne) may be the complete failure of corporate governance reform,” the undisclosed source told Novoe Vremya.
The government installed acting energy minister Vitrenko as the new CEO of the state-owned oil and gas company on April 28, according to Ukraine’s Cabinet of Ministers, but Kobolyev said in a farewell message to his team he would appeal his dismissal.
Novoe Vremya’s source added that this move also shows the failure of the agreement between the IMF and Ukraine, putting further financing of the country at risk.
The IMF and Ukraine agreed in June 2020 to a conditional $5 billion loan agreement, but Ukraine hasn’t received any money since an initial $2.1 billion installment because the government has not met its commitments to the fund, including an effective fight against corruption, the independence of the National Bank of Ukraine and other issues.
“All this may lead to the need for issuance, inflation, rising borrowing costs and possible default of Ukraine. Not the best news for the country’s leadership,” the source added.
International donors concerned
The Cabinet of Ministers dismissed the supervisory board for two days to be able to fire Kobolyev directly without the consent of the board members.
International donors, including the European Union, the European Bank for Reconstruction and Development, the European Investment Bank, the World Bank and International Finance Corporation issued a joint statement on April 30 expressing their concerns over Kobolyev’s sudden ousting.
They called on the Ukrainian government to “make critical management decisions in state-owned enterprises in full compliance with the principles of recognized corporate governance standards.”
“We are seriously concerned about the recent events in Naftogaz of Ukraine — the state oil and gas company of Ukraine, where the powers of the supervisory board have been temporarily suspended and in order to dismiss the current management,” the statement read.
The government’s decision to fire Kobolyev also provoked an outcry from Kobolyev loyalists.
Before Vitrenko took charge on April 29, the management of Naftogaz called the move “legal manipulation,” according to a statement published by the company on April 28.
“It is a clear signal to investors… that the state-owned enterprises in Ukraine are unpredictable and that their operations may change depending on the political situation,” Naftogaz said.
On April 29, U. S. State Department spokesman Ned Price wrote on Twitter that the Ukrainian government’s “respect for corporate governance, transparency and integrity in the appointment of personnel in the energy sector — whether government or state-owned enterprises — is key to maintaining confidence in Ukraine’s commitment to reform.”
His view was shared by the ambassadors of the G7 countries, including Canada, France, Germany, Italy, Japan, the U.K. and the U.S.
The diplomats issued a joint statement on Twitter, saying that “effective management of state-owned enterprises, free from political interference, is crucial for Ukraine’s competitiveness, prosperity and fulfillment of its international obligations.”
