Category Archives: News

Firtash Arrested in Austria

Firtash - Group DF

Dmitro (Dmitry) Firtash was arrested in Vienna today on an FBI warrant for organized crime stemming from a 2006 investigation.

Readers of this blog (from five years ago, at least) are well aware of his role in Ukraine’s energy sphere.

He is most well-known perhaps for being the central Ukrainian behind RosUkrEnergo, a gas middleman from back in the day.  Before being outed as the Ukrainian businessman behind the venture, he was notoriously camera shy.  Since then, he has worked to burnish his image (though the creepy corporate shot above is a bit weird) and expand his Group DF assets.

Some reports link Firtash with infamous gangster Semion Mogilevich, though he has disputed this connection.  When Mogilevich was surprisingly arrested in Moscow in 2008, some thought that it might resonate down to Firtash and others.  However, Mogilevich was released on bail, despite being listed as one of the FBI’s top 10 most wanted, and Firtash continued to grow his business.

He and Tymoshenko have a long-standing feud. As she emerges more powerful in the latest round of Ukrainian leadership, it could be expected that he may suffer as a result, especially given Ukrainian politicians’ propensity for retribution. His arrest is also being viewed as a means of putting pressure on Russia, sending a message to oligarchs with ties to the country that they could be targeted as part of the Washington’s frustration with Putin’s moves in Crimea.

I haven’t written here in a long time (clearly), but upon seeing the big news, I decided to take a break from finals studying and post something.  Maybe I’ll follow up with more later.  Follow me on twitter if you want: @hansstege

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Shtokman, Gazprom, and Ukraine gas prices

With a decision on Russneft’s future likely a couple months away and part II of my post on RosUkrEnergo still in the works, lets catch up on a bit of news concerning Gazprom. First off, Norwegian oil major StatoilHydro will join the French firm Total in cooperation with Gazprom in developing the giant Shtokman gas field. Sort of. While StatoilHydro has agreed to participate in the currently ongoing planning and exploration phases, it is reserving judgment on a rumored $800 million investment until a more detailed prospectus is released in 2009. From Forbes.com:

Market rumours have suggested StatoilHydro could have agreed to pay Gazprom 800 mln usd in return for its 24 pct stake in Shtokman, however the firm this afternoon said no payments have yet been made.

‘When it comes to potential bonus payments, we haven’t paid any bonuses yet, but if there is a positive investment decision in 2009 there will be a cash bonus paid, but I can’t comment on amounts at this stage’, said chief financial officer Eldar Saetre.

Similar to the deal Gazprom made with Total, this agreement offers shares to StatoilHydro in the special-purpose company to manage engineering, financing, construction and exploitation of installations at Phase 1 of Shtokman field development. Gazprom owns a 51% stake in that firm, Total a 25% share, and now StatoilHydro has the remaining 24%. Meanwhile, the license for the reserves as well as “all the rights for marketing of the commodities will be retained by Gazprom.”

Shotkman is still years for development, beyond just the 2009 date for further preliminary research. StatoilHydro, a majority government-owned oil and gas company formed following the recent merger between Norwegian firms Statoil and Hydro, has the experience to work in harsh conditions. But no project of this magnitude and difficulty has ever been attempted — the risk and expense levels will be huge.

In other Gazprom news, CEO Alexei Miller was recently elected chairman of Gazprom Media, which controls the television channels NTV and TNT, as well as press outlets Izvestia and Itogi (among others). Some analysts, citing Miller’s deteriorating health, speculate that this is a type of “golden parachute” for the well-connected chief executive. However, heading Gazprombank (where he is the chairman) seems to be a more fitting position for the technocrat with an economics background. The move also contradicts previous assertions by Gazprom that it is working on spinning off its media arm as a more independent part of the Gazprom Group.

Gazprom Media reported over $100 million in profits last year, which is a stark increase from the losses the division had been suffering from for much of the past. The previous chairman, Alexander Dybal, got bumped up to head of the newly empowered Gazprom Neft, possibly a reward for turning around the debt-ridden media holding company. By inserting Miller, perhaps Gazprom may be attempting to put a further legitimate face on the media group as it seeks to take advantage of this additional revenue stream — particularly as Russia heads into its parliamentary and presidential election seasons.

In another bit of news, Ukraine’s President Yushchenko weighed in on expectations for price negotiations with Russia over next year’s cost of natural gas:

“Given the trends on energy markets, the optimal, rational price for gas at the Russia-Ukraine border, the price which would be viewed with some understanding by most of the market, is about 150-160 dollars per 1,000 cubic metres.”

My own hunch is something closer to $170, but some analysts are going as high as $190. Everyone seems resigned, however, that the price will rise from the current $130. Of course, that’s just one half of the equation — Ukraine will likely attempt to renegotiate its price for transiting Russian gas through its territory. These tariffs are a major source of income for state energy company Naftogaz Ukrainy, and it relies on them for offsetting the market price of gas against the capped residential end-user price. Hopefully the upcoming negotiations will not be as contentious or controversial as those in late 2005 / early 2006, although the recent government shake-up in Ukraine following snap parliamentary elections, as well as renewed calls for completely changing the structure of the Central Asian-Russian-Ukrainian gas trade by removing middleman RosUkrEnergo, will add plenty of uncertainty to the bargaining table.

Recent news roundup

Ministers will block Gazprom move on UK (The Observer/Guardian)

The government has given its strongest indication yet that it would block an attempt by the Russian energy group Gazprom to take a significant stake in a UK energy company.

Putin puts policy bluntly to EU (The Chicago Tribune)

VOLZHSKY UTYOS, Russia — President Vladimir Putin, emboldened by Russia’s vast oil and natural gas wealth, bluntly rejected European criticism of his crackdown on political foes, saying Friday that “like it or not,” Russia’s Western neighbors would have to accept it as a partner.

“Both Russia and the EU are interested in the development of relations with each other, and they will develop whether we like it or not,” Putin said apparently referring to Europe’s growing reliance on Russian energy resources.

EU must see Putin is not a democrat (The Telegraph)

Putin and Merkel at the conference…As EU leaders met for the second day of a summit with Mr Putin in Samara, a city in the Urals, Mr Kasparov and 26 activists and western reporters were detained in Moscow after allegations that their tickets were forged meant they missed their flight.

…Members of the pro-Kremlin youth wing Nashi, dressed in white coats and presenting themselves as medical orderlies, handed out leaflets suggesting that Mr Kasparov was deranged.

After more than five hours – minutes after the last flight to Samara had departed – the group was released. A police official at the airport reportedly blamed a computer problem that meant Mr Kasparov and his companions could not be issued with a ticket.

Russia sues US bank; laundering case cited (New York Times)

The Federal Customs Service of Russia is seeking $22.5 billion in damages from the Bank of New York Company over accusations of money laundering in the 1990s.

The bank “committed violations of Russian law that resulted in damages of $22.5 billion to the state” from 1996 to 1999, Maxim Smal, a lawyer for the service, said by phone after filing the lawsuit in the Moscow Arbitration Court yesterday. Andrei Stukov, head of the Customs Service’s legal department, confirmed the amount of damages sought, via a spokeswoman.

Mr. Smal said the suit was “almost entirely based” on an investigation in the United States that ended in 2005 with the bank agreeing to pay $38 million to settle two criminal investigations and admitting it failed to report $7 billion in suspicious Russian transactions. The American investigation “uncovered very serious violations,” Mr. Smal said, but he declined to elaborate, saying more details will be revealed today at a news conference in Moscow.