United Energy Systems of Ukraine

United Energy Systems of Ukraine, (UESU) (Ukrainian: Єдині енергетичні системи України, ЄЕСУ), was a natural gas trading company in Ukraine. In the years 1995 and 1996, it was the largest natural gas importer in Ukraine. The company was affected by a series of financial irregularities leading to criminal charges against the principals and closure of the company in 2009.

United Energy Systems of Ukraine (UESU)
IndustryOil and gas
FoundedUkrainian Petrol Company (1991)
Defunct2009
HeadquartersKyiv and Dniepropetrovsk, Ukraine
Area served
Ukraine
Key people
Yulia Tymoshenko (November 1995 - January 1997)
Oleksandr Tymoshenko (January 1997 - 2009)
Hennady Tymoshenko (died May 2012)
Alexander Gravets (vice president and co-owner)
ProductsNatural gas
Revenue$4 billion (1996)[1]

Origin
Yulia Tymoshenko

In 1989, Yulia Tymoshenko founded a family cooperative in Dnipropetrovsk. In 1991, Tymoshenko, her husband, Oleksandr, and Olexandr Gravetsas created the Ukrainian Petrol Company, a vendor of gasoline to farmers in Dnipropetrovsk Oblast. In 1995, the company was reorganized into the United Energy Systems of Ukraine.[2]

UESU bought gas from RAO Gazprom (Russia). However, UESU was largely held by a Turkish company, United Energy International Limited (UEIL) and the perhaps inflated payments of Ukraine gas customers was filtered through a number of international locations (allowing a distribution of profits – hundreds of millions of dollars – amongst the energy oligarchs involved), before Russia was paid.[3]

Growth and decline

In 1997, UESU formed a consortium that was responsible for supplies of natural gas to Ukraine from Russia.[4][5] By 1996 and 1997, UESU was the biggest gas trading company in Ukraine and had branched out into other areas.[6][7] In early 1997, it controlled several banks, had stakes in metallurgy and machine building companies and in two airports; participated in Bulgarian and Turkish pipelines; and controlled several local and national newspapers.[1] It controlled 80% of Ukraine's natural gas supply and accounted for an estimated eights of Ukraine's GDP.[8]

The decline of UESU related to shifts in power in Ukraine, leaving the principals exposed to criminal charges and the company exposed to heavy taxation.[7]

Potential conflicts of interest

Pavlo Lazarenko, Vice Prime Minister of Ukraine in 1995, was a part owner of UESU. He allocated gasoline quotas to private companies, giving priority to Itera and UESU.[6][1] Lazarenko resigned in 1997.[7][1]

In December 1996, Yulia Tymoshenko was elected to the parliament of Ukraine and resigned from the presidency of UESU. Hennady Tymoshenko, her father in law, became UESU president.[1] Tymochenko was Minister of Fuel and Energy (1999 - 2001) and later, prime minister (2005 and 2007 - 2010). In September 1997, UESU was accused of dumping.[1] and at the end of 1997, UESU was excluded from the natural gas market of Ukraine.[7]

Charges against principals

Lazarenko

In 1999, Lazarenko was arrested in the US and charged with corruption and money laundering. Between 2000 and 2004, Yulia Tymoshenko's ties to Lazarenko were investigated.[9] UESU was dissolved in 2009.

Olexandr Tymoshenko and Valery Falkovych

In August 2000, Ukrainian police arrested Olexandr Tymoshenko and Valery Falkovych (first deputy general director). Tymoshenko was charged with embezzling US$800,000 in public funds through the export of rolled metal to Asia during the 1990s.[10] On 9 August 2001, following a decision of the Kyiv Sviatoshynsky District Court of the Kyiv region, Tymoshenko and Falkovich were released from custody and all charges against them were dropped. This decision was supported by the Court of Appeal of Kyiv region and the Supreme Court of Ukraine. On 30 April 2002, the Kyiv Svyatoshinsky local court of the Kyiv region dismissed all criminal charges against Oleksandr Tymoshenko and admitted that the actions of the Prosecutor General of Ukraine were illegal.

In early 2012, Oleksandr Tymoshenko received political asylum in the Czech Republic.[11][12]

Yulia Tymoshenko

Yulia Tymoshenko was arrested on 13 February 2001 and released on 27 March 2001. She was charged with forgery and gas smuggling.[13] In May 2004, Kyiv's Appeal Court cancelled the lodging of criminal proceedings against her.[14] In December 2005, the Russian Prosecutor General's Office closed all criminal cases against Tymoshenko.[15]

Mykola Syvulskyi

Syvulskyi, a former deputy minister of finance was arrested and charged in September 1998. It was alleged he had illegally siphoned funds from Ukrgazprom (predecessor of Naftogaz) to UESU.

Further charges

In July 2011, the Ukrainian security service opened a criminal investigation into the embezzlement of $405 million by UESU in 1997.[16]

In April 2012, Tymoshenko faced five charges: organising and attempting to appropriate a large sum of public funds in 1997 and 1998 through receiving value added tax (VAT) (Part 3 of Article 27, Part 5 of Article 191 of the Criminal Code of Ukraine); tax evasion by the UESU Corporation (Part 3 of Article 27, Part 3 of Article 212 of the Criminal Code); the non-payment of income tax (Part 3 of Article 212 of the Criminal Code); and, committing a crime via official forgery (Part 3 of Article 27, Part 2 of Article 366 of the Criminal Code).[17]

Kyivsky District Court of Kharkiv closed the case on 28 February 2014,

"The court has ruled that criminal proceedings on charges against Yulia Volodymyrivna Tymoshenko regarding crimes committed under Part 3, Article 27, Part 5, Article 191, Part 2, Article 15, Part 3, Article 212, and Part 2, Article 366 of the criminal Code have been closed close due to the prosecutor's dropping of the charges." (Kostiantyn Sadovsky, judge.)[18]

References
  1. Rutland P. "The Challenge of Integration." M. E. Sharpe 1998 pp. 173–174 ISBN 0765603594.
  2. Varfolomeyev O. "Will Yulia Tymoshenko be Ukraine's first woman prime minister?" Archived 25 November 2006 at the Wayback Machine Prism The Jamestown Foundation 4(3) 6 February 1998 Accessed 4 February 2007.
  3. "American International Law Cases Fourth Series: 2009." Oceana editorial board. Oxford University Press, 2011 p.2906 ISBN 0199758921, 9780199758920.
  4. "Staff Country Report Ukraine." IMF 1997 p. 26
  5. Kuziod T. "Ukraine: State and Nation Building." Routledge 1998 p61 ISBN 0415171954
  6. Åslund A. "How Ukraine Became a Market Economy and Democracy." Peterson Institute for International Economics 2009 pp. 173–174. ISBN 0-88132-427-2
  7. Wilson A. "Ukraine's Orange Revolution." Yale University Press, 2006 p.20 ISBN 0300143915, 9780300143911.
  8. Pond E. "The Rebirth of Europe." Brookings Institution Press 2002 Second edition p.147 ISBN 0815771592.
  9. Zarakhovich Y. "Ukraine's Iron Lady." Time 30 January 2005 Accessed 26 May 2010.
  10. "Central Europe Review – Ukrainian News Review." Ce review Ukrainian news website.
  11. "Husband of Ukraine's Tymoshenko wins Czech asylum." BBC 6 January 2012 Accessed 6 January 2012.
  12. "Czechs give asylum to spouse of Ukraine's Tymoshenko." Reuters 6 January 2012.
  13. "Yulia Tymoshenko: Ukrain's 'Iron Lady'." The Daily Telegraph 24 June 2011 Accessed 25 June 2011.
  14. "Court closes Tymoshenkos cases." Archived 30 September 2007 at the Wayback Machine Ukrayinska Pravda Dead URL October 2010.
  15. "Ukraine ex-PM warrant cancelled." BBC News 26 September 2005 Accessed 26 May 2010.
  16. "Tymoshenko faces yet another investigation." Kyiv Post 5 July 2011.
  17. "Trial of Tymoshenko in UESU case postponed until December 27." Kyiv Post news website 6 December 2013. Accessed 21 April 2014.
  18. "Kharkiv court drops charges against Tymoshenko in UESU case." Interfax-Ukraine 28 February 2014.
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