April 15, 2021

Top U.S. official calls on Ukraine to crack down on oligarchs, including gas billionaire

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Ronald Zak, AP

Dmytro Firtash attends a hearing at the Austrian Supreme Court in Vienna during his battle against U.S. extradition in June 2019.

A senior U.S. State Department official has said it is time for Ukraine to tackle corruption and weak institutions, including going after Dmytro Firtash, whose natural-gas holdings have made him one of the country’s most notorious, and powerful, oligarchs.

The April 8 comments by George Kent, the deputy U.S. assistant secretary of state who oversees Ukraine, come as President Joe Biden makes Kyiv’s progress on reforms a greater priority in the bilateral relationship.

Speaking at a meeting of the U.S.-Ukraine Business Council, Mr. Kent said graft and a weak judiciary made up an “internal threat” in Ukraine, and he compared it with the external threat Kyiv faced from Russia.

Russia has amassed a substantial number of forces on its border with Ukraine, and moved others into the occupied peninsula of Crimea. That has raised alarms among Western observers who fear an escalation of the seven-year conflict in eastern Ukraine.
Mr. Kent said that seven years after Ukrainian citizens drove from power the corrupt administration of President Viktor Yanukovych, the judiciary system remained “flawed,” while oligarchs continue to call the shots.

“The time has now come…to start making the tough decisions to rein in the influence of oligarchs and the systemic corruption,” Mr. Kent said.

Ronald Zak, AP

Dmytro Firtash attends a hearing at the Austrian Supreme Court in Vienna during his battle against U.S. extradition in June 2019.

In his speech, Mr. Kent highlighted Mr. Firtash, a tycoon who made his initial wealth trading Russian natural gas in the 1990s, as an example of Ukraine’s flawed justice system.

Mr. Firtash became the official partner of Russian state-controlled gas giant Gazprom in the trading firm RosUkrEnergo, the monopoly importer of natural gas to Ukraine during the late 2000s. He made hundreds of millions of dollars during the short lifespan of RosUkrEnergo, which analysts called an unnecessary middleman.

U.S. officials have also alleged that Mr. Firtash has ties to Russian organized crime.
“Everyone knows that he started out as the front for Russian gas interests,” Mr. Kent said.

In March 2014, U.S. prosecutors unsealed an indictment charging Mr. Firtash with corruption in connection with an Indian titanium project that the U.S. aerospace giant Boeing was studying.

U.S. officials have sought Mr. Firtash’s extradition from Vienna since then. He has denied the charges, saying they are politically motivated.

Ukraine has never charged Mr. Firtash with a crime. He continues to make millions of dollars a year in the country’s graft-ridden energy industry through his control of gas-distribution companies.

“Why is it that it is the U.S. who indicts and goes after corrupt Ukrainians?” Mr. Kent said.

“It’s time for the Ukrainian leadership and the justice system – rather than not making decisions against corrupt oligarchs – to use Ukrainian institutions to go after corrupt Ukrainians and hold them to account,” he said.

Ukrainian President Volodymyr Zelens­kyy has recently made moves against other powerful business interests, including imposing sanctions on Viktor Medvedchuk, a tycoon close to Russian President Vladimir Putin.

Mr. Zelenskyy’s administration has also gone after former officials at PrivatBank, the lender once owned by tycoon Ihor Kolomoisky, who is considered to be one of Mr. Zelenskyy’s main benefactors.

Mr. Kolomoisky is under criminal investigation in the United States for money laundering. The Justice Department is seeking to seize three U.S. office buildings he allegedly bought with laundered money.

Mr. Kolomoisky denies the allegations.

But Mr. Firtash, unlike Mr. Kolomoisky, has so far avoided official pressure from the Zelenskyy government.

Mr. Firtash has also had a part to play in the political drama surrounding the final years of President Donald Trump.

According to U.S. court filings, in September 2019, Mr. Firtash allegedly wired $1 million to the American wife of a Soviet-born businessman named Lev Parnas. Mr. Parnas is a former donor to Mr. Trump and an associate of Rudy Giuliani, Mr. Trump’s personal lawyer.

According to Mr. Parnas, and other legal filings, Mr. Firtash allegedly provided key documents that Mr. Giuliani used to further a discredited claim that Mr. Biden engaged in wrongdoing in Ukraine. That claim was a key point of Mr. Trump’s losing 2020 election fight against Mr. Biden.

Mr. Parnas has said that in exchange for Mr. Firtash’s help in the effort to damage Mr. Biden, he told Mr. Firtash they would make his U.S. legal troubles disappear.
In his speech, Mr. Kent also appeared to back a recent move by Mr. Zelenskyy to fire two judges from the country’s Constitut­ional Court.

Mr. Zelenskyy’s decision sparked concern in the West he was reaching beyond his powers and interfering with the independence of the judiciary.

Mr. Kent said the integrity of institutions was just as important, adding that corrupt judges lead to “corrupt independent institutions.”

The two judges were believed to be beholden to oligarchic interests and blocking critical reforms necessary to put Ukraine on the path toward European integration, Ukrainian anti-corruption advocates claim.

In response to a question on whether the West was failing to stop the flow of corrupt Ukrainian money into its banking system, Mr. Kent said recent Justice Depart­ment actions against Mr. Kolomoisky showed the United States is taking a tougher stand on the issue.

As for the external threat, Mr. Kent reiterated the Biden administration’s stance that the Russian military buildup near Ukraine “is worrisome.” He also commended Kyiv for its “restrained and responsible” response to those actions.

Copyright 2021, RFE/RL Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave. NW, Washington DC 20036; www.rferl.org (see https://www.rferl.org/a/us-calls-on-ukraine-to-crack-down-on-oligarchs/3119 4077.html).