September 18, 2008

Aide Explains Premier’s Stance on Pumping Caspian Oil to Europe

By lobbying for the originally-planned use of the Odessa-Brody pipeline the presidential secretariat is serving interests of Ukrainian tycoon Ihor Kolomoyskyy and his Pryvat group, Yuliya Tymoshenko Bloc MP Serhiy Pashynskyy, who is believed to be Prime Minister Yuliya Tymoshenko's chief advisor on oil-related issues, has said. He said that, according to his information, Kolomoyskyy is harbouring plans to sell the pipeline to Russian billionaire Oleg Deripaska after getting full control over Odessa-Brody. Pashynskyy denied statements that Tymoshenko is lobbying for Russian interests by refusing to initial an agreement with one of Kolomoyskyy's companies. He said that by doing so the cabinet is disrupting corrupt deals. He following is an excerpt from Maksym Asaulyak's interview with Serhiy Pashynskyy entitled "Premier's oil advisor" and published in the Ukrainian business daily newspaper Delo on 1 September:

Yuliya Tymoshenko Bloc MP Serhiy Pashynskyy has said that the presidential secretariat is lobbying for the hand-over of the Odessa- Brody pipeline to the Pryvat group [led by Ukrainian tycoon Ihor Kolomoyskyy]. Pryvat, for its part, is in talks on the hand-over of Ukraine's oil-processing assets to Russian billionaire Oleg Deripaska.

[Passage omitted: The cabinet has been trying to resolve the issue of the disputed 18.3-per-cent stake in the Ukrtatnafta company.]

[Asaulyak] The Halychyna and Naftokhimik Prykarpattya oil refineries [controlled by Pryvat] said that they have got commercial contracts on pumping 5m tonnes of oil annually through the Odessa- Brody oil pipeline. Do you know who is the supplier?

[Pashynskyy] Neither I nor the cabinet have this information. It is the USA's Shevron, the UK's British Petroleum, Azerbaijan's SOCAR and Kazakhstan;s Kazahoil who have being extracting Caspian oil. No- one else does. Let the presidential secretariat, who is lobbying for the hand-over of the Odessa-Brody pipeline to the Pryvat group, explain which of these companies will fill the pipeline. If Halychyna and Naftokhimik Prykarpattya have the contracts, they should show them and all issues will be resolved immediately. But this is hard to believe as experts agree that there will be no excess oil in the Caucasus until 2010!

[Asaulyak] The cabinet strongly opposed the signing of a contract on pumping oil through the Odessa-Brody pipeline in the originally- planned direction [to Europe]. What exactly did not suit the Cabinet of Ministers?

[Pashynskyy] First and foremost, it is the fact that it was the Milbert Ventures company registered in the British Virgin Islands who ordered the transportation of oil under the agreement. The cabinet found this out 24 hours before the signing of the contract, given the fact that the contract was to be approved by the cabinet first. Here is the question: if oil was to be supplied to Halychyna and Naftokhimik, then why they were not mentioned as the recipients of it?

According to our information, these contracts were drafted by Bankova [Street in Kiev where the presidential secretariat is located] and they were to be signed there. If this happened, we could forget about the Odessa-Brody pipeline for the next 20 years. Although the contract was to be valid for the period of two years, the document grants Milbert Ventures a priority right to extend it. Moreover, the recipient of oil could be changed only following Milbert Ventures' consent even if the executor (Ukrtransnafta - Delo) is offered more profitable conditions.

Now the presidential secretariat seems to have made concessions to the cabinet by proposing that the offshore company be replaced with the Ukrnafta company (in which 50 per cent plus one share belongs to the state and 42 per cent to Pryvat - Delo). I have not seen a draft agreement with this company. I can foresee though that the only thing that would changed there would be the name of the company. The essence remained the same: handing over the Odessa- Brody pipeline to Kolomoyskyy.

[Asaulyak] How can he use the oil pipeline?

[Pashynskyy] The Pryvat group is not likely to pump oil through it. The group does not have Caspian oil, and buying crude products from Iraq is extremely expensive. As I have already said, there is no point in refining oil at Halychyna or Naftokhimik Prykarpattya without first modernizing them, which could take two to three years.

We suspect that Kolomoyskyy wants to establish his control over main assets in the oil-processing and oil-refining sectors in order to sell them later for profit. In fact, to gain control over the contract on pumping oil through the Odessa-Brody means owning the pipeline. According to unconfirmed information, Pryvat is already in talks with [Russian billionaire] Oleg Deripaska. When in Russian hands, the Odessa-Brody pipeline will acquire new colours.

Besides, the presidential secretariat should answer this question: what it is going to do with 400,000 tonnes of technological oil of the Urals type which is currently in the pipeline? At present, its total cost is 280m dollars. The president said on many occasions that we should borrow money to fill the Odessa-Brody pipeline with Caspian technological oil. But what will happen to the oil that is already in the pipeline? Who will get it and at what price, considering that in 2003 its cost was 10 times cheaper.

[Asaulyak] Is there a way to sign a contract on pumping oil in the originally-planned direction bypassing the cabinet?

[Pashynskyy] The presidential secretariat is working on a number of alternatives, including the prime minister's dismissal. This is where accusations of high treason levelled at Tymoshenko stem from. But in my view, this is just a smokescreen intended to hide banal corruption.

[Asaulyak] The presidential secretariat maintains that Tymoshenko is hampering the use of the Odessa-Brody pipeline in the originally- planned direction because she had promised to the Russian leadership that Russian vendors would continue to pump oil in the reverse direction.

[Pashynskyy] This is not a problem. We have ways to ship Russian oil to Odessa by other means. Russia is concerned about something different, our unpredictability. Because we can ban the [Russian company] TNK-BP from pumping oil through Odessa-Brody, and in six months it can happen that we will have beg them to fill our pipeline with oil again.

I want to stress that we are not against the pumping of oil in the originally-planned direction. We are against criminal corrupt schemes. One thing is for sure: as soon as we find the necessary amount of Caspian oil, the Odessa-Brody pipeline will function in the originally-planned regime.

Originally published by Delo, Kiev, in Russian 1 Sep 08; pp 8-9.

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