January 28, 2008 / 5:18 PM / 11 years ago

UPDATE 1-Mogilevich arrest "spells end" for gas middlemen

(Adds details, background, comment)

By Simon Shuster and Marcin Grajewski

BRUSSELS/MOSCOW, Jan 28 (Reuters) - The arrest of suspected crime boss Semion Mogilevich should signal the end for shadowy middlemen in Ukraine’s $6.5 billion gas trade with former Soviet states, Ukraine’s Prime Minister Yulia Tymoshenko said Monday.

Tymoshenko has previously said Ukrainian-born Mogilevich, arrested last week in Moscow, is behind RosUkrEnergo, a mysterious joint venture which has a monopoly on the sale of Russian and Central Asian gas to Ukraine.

Mogilevich and the Ukrainian businessmen who own 50 percent of RosUkrEnergo have denied any links with each other. Russia’s gas monopoly Gazprom, which owns the other half, declined comment. “As far as gas transit from Uzbekistan, Tajikistan and other countries is concerned, we don’t need any shadowy intermediaries,” Tymoshenko told reporters after talks with European Commission President Jose Manuel Barroso in Brussels.

“There will be transparency in our government and society. It also concerns energy policy,” she said, responding to a question about the detention by Russian police of Mogilevich.

Since regaining the premiership last month, Tymoshenko has resumed a campaign against RosUkrEnergo, which won its monopoly in January 2006 after the price dispute that led Russia to shut off gas to Ukraine in mid-winter.

That jeopardised supplies to Europe, which counts on Russia for 25 percent of its gas needs.

Industry analysts have repeatedly questioned why Ukraine and Russian state gas monopoly Gazprom need RosUkrEnergo at all, since they could deal directly with each other.

Tymoshenko told the BBC’s Panorama programe in 2006 that she had “no doubts whatsoever” that Mogilevich was behind RosUkrEnergo, according to a transcript on the BBC website.

A Ukrainian security service investigation found “many indications” that Mogilevich indirectly controls the firm.

Mogilevich is wanted by the U.S. Federal Bureau of Investigation for alleged fraud, money laundering and racketeering. The Ukrainian security service SBU says it has no ongoing investigation regarding him at present.

Analysts said Mogilevich’s detention could mark the end of the firm’s grip on the gas mains of Ukraine.

“Mogilevich does not have any real political support and RosUkrEnergo is going through rough times due to these attacks from Tymoshenko. So this looks like some cautionary house-cleaning from the Russian side,” said Yevgeny Volk, analyst at the U.S.-based Heritage Foundation.

Stanislav Belkovsky, head of the National Strategy Institute in Moscow, said that a “critical mass of people in Ukraine has emerged against the existence of this middleman structure and at the same time, there is a group of people on the Russian side whose interests are in alignment with [Tymoshenko’s]”.


Mogilevich’s lawyer, Alexander Pogonchikov, said his client would be held for two months and was facing charges related to tax evasion at Arbat Prestige, a big Russian cosmetics chain whose owner, Vladimir Nekrasov, was also arrested last week.

Pogonchikov declined to comment on whether the arrest was linked directly or indirectly to RosUkrEnergo. He also declined to say whether Mogilevich had any ties with the company.

The Ukrainian half of RosUkrEnergo is largely controlled by businessman Dmitry Firtash, although market analysts have repeatedly questioned whether he is ultimate beneficiary of the stake.

Firtash said in an e-mailed statement dated last Friday that he has never had business relations with Mogilevich and was in no way connected to him, nor to Arbat Prestige.

“Neither the DF Group nor Dmitry Firtash himself has personally any interest in, or affiliation with Arbat Prestige,” it said.

“At no time has Dmitry Firtash had business relations with Mr. Mogilevich. Mr. Mogilevich has never worked for, or been affiliated with, or profited from dealings with Centragas, a company owned by Dmitry Firtash and a partner in RosUkrEnergo”.

Centragas is 90 percent owned by Firtash and 10 percent by Ivan Fursin. Fursin himself could not be reached for comment.

RosUkrEnergo spokesman Andrei Knutov, asked for comment on Tymoshenko’s remarks, said: “We don’t comment on politics or political rhetoric.” (Reporting by Marcin Grajewski and Simon Shuster, additional reporting by Kiev bureau, editing by Anthony Barker)

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