Firtash/Ostchem repays UAH 3 billion to Naftogaz

December 26, 2015

According to Prime Minister Yatseniuk, Dmitry Firtash, or more precisely one of his companies, Ostchem, has paid a due debt from 2010 of UAH 3 billion.

Jolly good.

A bad debt that should not have been written off – and wasn’t – has been paid, and in full.

That it took the arrest of some of Mr Firtash’s assets in Ukraine to accomplish it was no doubt necessary.  Presumably those assets are no longer subject to arrest now that the debt has been paid – or at least those assets arrested specifically in connection with this particular debt have presumably been released.


A particularly robust and forceful method of credit control and debt recovery has seemingly paid off – Bravo.

However, Prime Minister Yatseniuk is attempting to frame the matter as part of the deoligarchisation of Ukraine and part of the fight against corruption.

Quite how the recovery of a bad debt contributes to the deoligarchisation of Ukraine is somewhat unclear.

The percentage of national GDP controlled by the oligarchy has not reduced due to the repayment of this debt.  The percentage of national employment within oligarch controlled companies has not reduced by the payment of this debt.  The political influence and interference within national politics has not reduced with the payment of this debt.  The “limited access” Ukrainian market place has not become a “free market” with the payment of this debt.

Indeed with the payment of this debt, presuming all arrested assets specifically arrested in connection with this debt will/should now lawfully be returned to the control of Mr Firtash.  Those arrested assets therefore returning to oligarchical control.

There is no denying that the oligarchy have for decades gorged at the public trough through subsidies, recapitalisation of state enterprises in which they hold minority shares, and through bad debt write-offs for debts they created and never intended to pay (knowing there would be State funded recapitilisation and bad debt write-offs).

To be charitable, at a stretch it can be argued that because this debt was not written off (as historically would be the norm), it is a token (and perhaps genuine) gesture toward fighting corruption – against an oligarch that finds himself marooned in Austria due to US desires to subject him to due process over other alleged corrupt activities.

Quite what corruption this has fought (is failing to pay a debt corruption?) and whether the signal it sends will prevent any further corruption amongst the oligarchy or any of the Ukrainian elite remains to be seen.  It is even less clear how Mr Firtash’s Ostchem repaying the debt to release Firtash assets back to his control in any way “deoligarchs” Ukraine.

It is hard to see this as anything more than simply hard-nosed credit control and debt collection of legitimate debt (leaving aside any possible/probable perceived political motivation/persecution, for the debt was indeed due regardless).

To deoligarch Ukraine requires an open free market with numerous competing entities in every market sector, market transparency, a level business and legal playing field – thus ultimately reducing the oligarchy percentage of GDP and national employment to a point where they are simply no longer dominant – but there is no requirement that they be necessarily destroyed for the sake of destruction and remove them from the market place.  It also requires an end to subsidies of State owned companies – indeed it requires the privatising of State owned companies to as many foreign buyers (not shells or fronts) as possible simply to diversify and dilute the national GDP contributers.  Deoligarchisation also requires restrictions upon their odious interference and influence within politics.  Has any of that been accomplished by Ostchem paying a UAH 3 billion debt?

However, deoligarchisation aside, will Naftogaz now go after the other UAH billions that it is owed by numerous other debtors with the same vigorous credit control/debt recovery determination  shown when dealing with Ostchem and Mr Firtash?  Many of those debtors are not oligarch owned entities – but are debtors nonetheless.

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