The authorities have seized the assets of leading Ukrainian conglomerate
The company was raided by law enforcement officers on
Ukraine’s security services have said they seized UAH3.5bn (
“We received a call from an interested party who told me 'we need to do a deal on sale of gas business quickly,' and said our offices were about to be raided. Two hours later the police officers arrived and searched out offices,” Kiryanova said.
Novynskyi transferred control in all his companies to trustees last year to allow him to devote himself full time to the
Amongst Novynskyi’s holding is a minority stake in
Earlier Novynskyi claimed that he was being “persecuted on religious grounds.”
Kiryanova said the raid on the company on
Criminal investigation
A criminal investigation has been opened into the
In addition to metal,
“We shut down operations on Thursday, as the general director could have been arrested. We don't sell gas directly to the city – we sell it on the market – but our field is closest and directly piped gas to the city, which has been under constant Russian bombardment,” says Kiryanova. “Throughout the war despite the danger our staff has continued to work, supplying gas to the city.”
In December last year the government formally sanctioned the reclusive Novynskyi on the grounds of “aiding an aggressor state” based on his religious affiliation with
Under the Ukrainian law there is only one ground for sanctioning a citizen and that is for financing of terrorism, which has to be proved in a court of law.
“Sanctions mean you have to have committed some terrible crime: terrorism,” says Kiryanova. “However, ten months of investigation there has been no trial, no verdict. But now our assets have been arrested on the basis of this charge. Now the assets are being stripped. What needs to happen is to go to court if they think something wrong has been done.”
Register changed
The company’s assets can be seized thanks to the sanctions on Novynskyi, whose name has been returned to the Ministry of Justice’s register of legal entities.
The ownership to of Novynskyi’s shares in the group were transferred to trusts last year and legally registered, but Kiryanova says the trustees have been deleted from the register and Novynskyi returned as the ultimate beneficiary owner of the gas company Ukrgazvydobutok, or UGV, that is a rude violation of Ukrainian laws.
“The Ministry of Justice just opened their own ledgers and added his name,” says Kiryanova. The change of ownership is important, as under Ukrainian law (#2805) the subsoil licenses can be suspended if a company belongsto a sanctioned individual.
However, one of the two gas companies currently under state control is
“If you have a problem with the trusts then you need to challenge the trust itself in court, but trustees are all EU licensed lawyers and the trusts were accepted by the
The criminal charges have brought the business to a halt. If the dispute was a civil case, then the company could continue to operate, but in a criminal investigation, the company’s banks would refuse to work with it, effectively freezing operations.
Gas business in the crosshairs
The criminal case against Novynskyi has been brought on the vague charges of “aiding the aggressor”, but the raid of Smart Holding’s offices on
“They took all the detailed information about our gas fields; propriety geological information detailing all quirks and idiosyncrasies of the gas fields – big volumes of technical information,” says Kiryanova. “If they are investigating how Novynskyi was aiding
Kiryanova says the company has been under pressure from SBU investigations since sanctions were imposed on Novynskyi last year and during questioning, the SBU officers were asking about the gas business as well.
Kiryanova suggests that there is a commercial rival behind the attack and seizure of Smart Holding’s assets and says her suspicions were raised after a number of international investors approached her and offered to buy the company at a knock-down price.
“These were international investors, they said, who wanted to buy the gas business. We checked them out, but these are not strategic investors in the oil and gas business and did not represent any company,” Kiryanova told bne IntelliNews. “Only one of them came up as a former manager at an international oil and gas company, yet they knew the
Negotiations have been ongoing, with the last call on the day of the raid.
“They told us that “we need to do a deal quickly,” and warned that there would be a raid as part of the criminal investigation. I refused and two hours later the raid happened,” says Kiryanova. “It looks like it was a carefully planned operation.”
No property rights
“There are no property rights in Ukraine,” says Kiryanova. “In the matter of a few days all our assets were seized and the company unable to operate. There were no court cases and no way to defend ourselves from the allegations.”
“We are one of the most transparent companies in
As he has got more involved in the church, Novynskyi has been winding down his involvement with the business over the last few years. The trusts were set up so that he could remove himself completely, but leave in place a structure, based on the Cypriot lawyers, that would take care of the business and ensure a smooth transition to his heirs in the future. The trusts were registered with Ukraine’s
“The trusts are governed by Cypriot law but now the authorities say Novynskyi is the actual owner again,” says Kiryanova. “The government is disregarding its own law and that of international law. We have been investing into Ukraine’s gas business, but now there is no rule of law. You cannot protect yourself at all. A criminal case was initiated without any substance and now all the assets are frozen.”
What will happen next is the
In the past, amongst other things, ARMA was charged with corruption in divesting large land plots in
“We can go to court to prove we were not wrong, but everything we had is gone already,” says Kiryanova.
The company’s recourse is to sue the Ukrainian government, as the holding companies for its assets are in countries like
“We have to protect our rights and, unfortunately, we have no other choice than address the claims to the Ukrainian government,” says Kiryanova. “Now it is some corporate raider that will benefit from this, but it will be the government that is liable.”
Smart Holding’s problems come in the same week that famous US investigative journalist
Kiryanova says she is certain that Smart Holding’s problems have nothing to do with the president, but goes on to say: “there is corruption in Ukraine.”
“When you have problems, when you are vulnerable, there are people that will take advantage of that to take what they want,” says Kiryanova. “The system is very corrupt, and the corruption is unpunished. Under the cover of war you can do anything.”
Corruption remains a worry for Ukraine’s allies too. Last September Ukraine nearly ran out of money after Western donors were reluctant to transfer large amounts of cash to cover the government’s ballooning deficit, afraid it would be stolen. As a budget crisis loomed the donors relented and have committed to billions in macro support.
Aware of the problem, Zelenskiy has continued his anti-corruption campaign and especially focused on the oligarchs – another factor going into Smart Holdings’ problems. In February,
“There is a law on oligarchs in
Transparent patriot
Kiryanova says she is working to resolve the problem and keep the company going for the sake of its 3,000 employees.
The company owns a shipyard in Kherson in the midst of the war zone, and another larger one in Chernomorsky. Neither has done any work since the start of the war, but the staff are still being paid so families “can put food on the table.” Likewise, the holding has kept its shopping centers with supermarket chain running, despite the fact that several stores have been destroyed in rocket attacks and the business is running at break-even at best. “If we closed them then where would people be able to buy food?” one manager told bne IntelliNews.
The SBU has offered no evidence to support its claim that Novynskyi is aiding
The group submitted six lawsuits to
They include shopping centres in Berdyansk, Kremenchuk, Mariupol, Melitopol, Severodonetsk and Kramatorsk which were captured or destroyed by the aggressors. From the 24 stores the group owned by 2014, only 50,000 square metres out of a total of 350,000 are left. The rest has been destroyed.
In the biggest claim,
Even if
Novynskyi sanctioned
Novynskyi withdrew from business life and resigned from all his executive roles in 2013. Last year he gave up his ultimate ownership rights as well after transferring the control of all his shares to irrevocable trusts, controlled by a law firm in
“The shares were transferred to a trust before the sanctions,” says Kiryanova. “Now they are controlled by EU licensed lawyers based in Cyrus. However, the authorities say Novynskyi is acting in the interests of Russia.”
Novynskyi is a deeply religious man and member of the UOC, which has come under attack by the Ukrainian government because it was nominally under the Moscow Patriarchy, although the UOC formally cut ties with
This story is complicated, as under former president
Novynskyi remains true to the much larger UOC, which has been worshiping in
This article has been updated to fix various inaccuracies and the misnaming of the company in the headline.
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