Page 5 - FSUOGM Week 18 2021

FSUOGM COMMENTARY FSUOGM

It added: “The way in which a range of deci- Ukraine, was equally condemnatory. “The
sions were made today regarding the governing recent governmental decision to dismiss the
bodies of Naftogaz demonstrates a reversion to supervisory board of [Naftogaz] for two days in
the practice of manual control of state-owned order to make a decision on the dismissal of the
enterprises.” CEO and its re-election in the same composi-
The company noted the link between tion violates the principles of state-owned enter-
Kobolev’s ouster and the announcement that prises’ corporate governance, disrupts the role
Naftogaz sustained a loss in 2020, saying that of independent supervisory boards in Ukraine
despite its financial setbacks, it had maintained and undermines Ukraine’s agreements with the
liquidity of UAH57bn and remains the big- International Monetary Fund and other stra-
gest contributor to the budget. “Yesterday, the tegic partners,” said the statement, which was
company’s executive and supervisory boards signed by the chamber’s chief communications
presented the results of Naftogaz’s performance officer Yuliana Chyzhova.
in 2020. Despite the crisis and the increase in The statement continued: “Investors rely on
counterparties’ debts due to loopholes created independent corporate governance to protect
by state regulation, the company provided their investment, and this threatens to jeopard-
UAH141bn of revenues to the state budget in ise privatisation, public-private partnerships,
2020, which accounts for 13% of the state reve- and any investment in state-owned enterprises
nues last year,” it said. (SOEs). The business community, united by the
Naftohaz also raised concerns about the pos- American Chamber of Commerce in Ukraine
sibility that Kobolev’s firing might hurt efforts (the Chamber) and the Ukrainian Corporate
to attract investors to exploit Ukraine’s energy Governance Academy (UCGA), is deeply con-
reserves. cerned about the decision of the government
Additionally, it hinted that the personnel with regard to the supervisory board of Nafto-
change could damage Kyiv’s relations with the gaz of Ukraine.
International Monetary Fund (IMF). The fund The chamber called on Ukrainian authorities
has supported Kobolev as he has overseen some to support plans for liberalising the domestic
key energy sector reforms, including the unbun- energy market, reforming SEOs, accelerating
dling of the gas production and transport func- corporate governance reform and strengthen-
tions that are managed by Naftogaz and GTSO ing the role of independent supervisory boards. Naftohaz has
respectively. “The business community calls upon Presi-
“[The] actions of the Cabinet of Ministers dent Volodymyr Zelenskiy, Prime Minister hinted that the
are a signal to all state-owned enterprises [that] Denys Shmyhal and the Cabinet of Ministers firing could affect
working in the interests of the budget and the to completely reboot the corporate governance
people of Ukraine, and not in the interests of and SOE reform effort in the nearest future Kyiv’s relations
individual political forces, will be punished. and ensure independence of the supervisory
In addition, it is a clear signal to investors in boards,” it commented. with the IMF,
Ukrainian issuer securities [that] working con-
ditions of state-owned enterprises in Ukraine Personnel changes which supported
are unpredictable and may change depending Kobolev is something of a controversial figure. Kobolev while he
on political expediency,” the SOE said. On the one hand, he played an active role in
pushing through energy reforms and success- oversaw energy
Business community’s response fully sued Russia’s Gazprom for billions of dol-
Kobolev’s firing also drew criticism from lars – although his successor Vitrenko was the sector reforms
Ukraine’s Western partners, along with the point man on that campaign.
Ukrainian business community and its sup- On the other hand, Kobolev has also been
porters abroad. criticised domestically for gradual increases in
Observers characterised the move as an heating costs, at the behest of the IMF. He has
abuse of corporate governance that could also come under fire for Naftogaz’s losses in
undermine what little confidence still exists in 2020, even though the coronavirus (COVID-
Ukraine’s investment climate. 19) pandemic and gyrations in global energy
“Respect for corporate governance, transpar- markets explain most of its difficulties.
ency and integrity in energy sector personnel Some have speculated that his sacking is just
appointments – whether government or state- the latest ouster of leading reformers within the
owned enterprises – is key to maintaining confi- Ukrainian government.
dence in Ukraine’s commitment to reform,” Ned This trend originated last year, when Zelens-
Price, the US State Department’s spokesman, kiy sacked his whole cabinet, which was staffed
said in a tweet from the official account. by technocratic ministers. Since then, every
Meanwhile, the ambassadors of the G7 coun- high-profile reformer in the government has
tries in Ukraine posted a similar tweet: “[Effec- lost their job, including the governor of the
tive] management & governance of SOEs in National Bank of Ukraine (NBU).
Ukraine, free from political interference, is cru- Kobolev’s successor, Vitrenko, joined Nafto-
cial to Ukraine competitiveness, prosperity & gaz at top management positions in 2014. For
fulfilling its international commitments.” a long time, he was a close ally of Kobolev. But
The American Chamber of Commerce, in late 2019, his powers in Naftogaz were lim-
a leading international business institution ited and he started to openly criticise company
that represents foreign investors’ interests in policies.

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