Emerging Markets

A Bird-Watcher's Guide to Ukraine, Russia, Sanctions, and Oligarchs


Tracking a story such as Ukraine’s from afar is, I imagine, like scanning the horizon to watch which way a flock of birds might break. You strain your eyes for the telling silhouette, the beating of a wing that catches your eye. You try to look in the right direction, and you wonder if one flutter might be followed by another.

After Ukrainian President Viktor Yanukovych fled the capital and then the country, reporters sifted through soggy documents fished from a reservoir near his weirdly opulent home1. As journalists blow-dried and photographed paperwork for curtains that reportedly cost €290,000 ($403,100), you might have started to wonder: Could this tumult shed some light on the doings of Ukraine’s oligarchs?

They are a notoriously secretive lot whose names, like their counterparts in Russia, are often followed by rumors of links to corrupt officials and organized crime. How much exposure might the Kremlin have to Ukrainian oligarchs and their ties to Russia? Not that anything you read about the documents at Yanukovych’s place suggested as much, but they got you to thinking.

The news that as Yanukovych’s regime collapsed, former Prime Minister Yulia Tymoshenko was released from prison in Ukraine furthered your curiosity. Tymoshenko had been put behind bars in 2011 on charges that she abused power by inking a gas agreement with Russia. Among the implications of the deal was that it cut out a middleman company named RosUkrEnergo, which was co-owned by Ukrainian businessman Dmitry Firtash and the Russian state-controlled energy giant Gazprom (GAZP:RM).2

The point for the patient watcher is this: Firtash and Tymoshenko are not friends—they are on what one might call “racketeering lawsuit” terms.3

Through his business dealings with Gazprom, Firtash is almost certain to be in a position to know about the workings of the Russian elite. What’s more, he reportedly acknowledged to U.S. Ambassador William Taylor Jr. in 2008 that he operated, at least earlier in his career, with the blessings of Russia’s Semyon Mogilevich—he of the FBI’s 10 most wanted.4 Writing in a secret 2008 diplomatic cable, Taylor recounted a conversation with Firtash in which he said he “needed, and received, permission from Mogilievich when he established various businesses, but he denied any close relationship to him.” Both before and after the publication of the cable by WikiLeaks, Firtash said he did not have ties with Mogilevich.

All of which suggests that Firtash knows things that Moscow would prefer remain quiet.

The White House announced this week that 11 in Russia and Ukraine, including Yanukovych, had been hit with U.S. sanctions in light of efforts to “undermine democratic processes and institutions in Ukraine; threaten its peace, security, stability, sovereignty, and territorial integrity; and contribute to the misappropriation of its assets.” The list did not have the sorts of names you might have been thinking about when you saw the story about the documents at Yanukovych’s home.
 
But a few days earlier, the U.S. Department of Justice announced that based on an investigation of an alleged international corruption conspiracy:

“Dmitry Firtash, 48, a Ukrainian businessman, was arrested Wednesday by Austrian authorities in Vienna on a provisional arrest request based on charges filed in the Northern District of Illinois … the U.S. government will seek his extradition.”

And a Vienna court set the highest bail ever in Austria: $174 million. For its part, the U.S. Justice Department wanted to be sure something was clear: “Firtash’s arrest is not related to recent events in Ukraine.

Firtash’s company, Group DF, said it had the same understanding.Firtash arranged for a statement through his spokesman: “The reason for my detention in Vienna last week was without foundation and I believe strongly that the motivation was purely political.”

So, like a watcher of birds, you keep your eyes on the horizon, waiting for what might come next.

1. The website, YanukovychLeaks, is here.

2. Instead of describing those involved with such terms as pro-Russia or pro-West, it’s sometimes helpful to consider business and relationships in Ukraine. For instance, Firtash was allied with Yanukovych, a man now protected by Russia. But Firtash also told diplomats that he had ties to former President Viktor Yushchenko, a man who is decidedly not chummy with Moscow; he came to power during the Orange Revolution that the Kremlin saw as a Western-backed plot.

3. Tymoshenko v. Firtash, 11-02794, U.S. District Court, New York (Manhattan).

4. The FBI’s release on Mogilevich is scathing and available here.

Lasseter is a reporter for Bloomberg News in New Delhi.

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Companies Mentioned

  • GAZP:RM
    (Gazprom OAO)
    • $137.25 RUB
    • -1.31
    • -0.95%
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