Ukrainian government changes the voting rules affecting the largest energy company related to Kolomoisky

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January 14, 2015
Mikhail Markiv for Ukraina.ru
Translated from Russian by J.Hawk

Verkhovna Rada adopted a law whose effect is to deprive the odious oligarch Igor Kolomoisky of control over one of Ukraine’s most profitable state-owned companies, Ukrnafta.

Although the Ukrainian government owns the majority of shares (50% + 1 vote), the previously existing law required a quorum of 60% in order to make decisions. Kolomoisky who owns 42% of shares of Ukrnafta was therefore able to block any inconvenient decision by the shareholder council.

[Wiki:

Ukrnafta is a Ukrainian oil and natural gas extracting company, the largest producer of oil and gas in the country.[1] In 2006 to the company belonged some 91% of oil, 27% of natural-gas condensate and 17% of gas extraction from the total extraction of carbohydrates in the state.

The company produces around 3 million tonnes of oil and 4 billion m3 of natural gas per year, having oil proven reserves of nearly 180 million tonnes. Ukrnafta also ownes three natural gas processing plants.]

Poroshenko Bloc deputy Mustafa Nayem called this a revolutionary decision.

“A small revolution had taken place. The Parliament adopted a law to reduce the shareholder quorum from 60% + 1 to 50% + 1. This fundamentally changes the relationship between state and private capital in state-own firms, and ends the machinations of minority shareholding crooks,” – wrote Nayem on his Facebook page.

He added that the law will enter into effect concerning state firms upon signing, while for private firms starting January 1, 2016.

The law was initiated by deputy Oleg Lyashko. He has been in conflict with Kolomoisky for about half a year. What is surprising, however, is that Lyashko was supported both by the Poroshenko Bloc and the Yatsenyuk faction, though not unanimously.

All of this suggests a full-scale campaign against the Dnepropetrovsk oligarch, although Kolomoisky has ways to retaliate, believe the Ukrainian media.

“In the hallways people are saying that the Rada ought to expect an invasion by the Azov battalion, the Dnepr-1 battalion, and the Right Sector, all of which are close to Kolomoisky, writes the Kiev newspaper Vesti.

The Right Sector and other paramilitary formations likely serve as Kolomoyskiy’s insurance against something like that—question is, would he be willing to take drastic action against the government at this point? The law did come as something of a surprise. But what are the motives for the law? The government is risking a lot by provoking a conflict of this sort. And what kinds of decisions would the government undertake next that Kolomoisky’s shareholders might object to? Turning over Ukrnafta to a foreign investment fund, maybe? This is arguably the most plausible scenario, considering there is a lot of money to be potentially made by privatizing Ukrnafta, though at the cost of sacrificing long-term income. From Kolomoisky’s perspective, it is surely preferable to have to deal with pliable Ukrainian politicians and bureaucrats than with rather less flexible Western investment funds with connections to the West Wing of the White House.

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