July, 13

The Family-II, or Who has grabbed hold of the coal business from Yanukovych?

12/19/2016 12:59:33 pm
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Coal “schemes” of the Family are still working today, two years later after Maidan. Moreover, – recently Yanukovych’s coal companies, in fact, became monopolists on the market of coal beneficiation! All this leads to the conclusion that the schemes of the Family have passed under the control of the Family-II. There is no other explanation of what is happening.

The legacy of the criminal regime

Oleksandr Yanukovych got his registration in the coal business in 2010. The coming to power of his father after winning the presidential election coincided with the leave of the famous Donetsk businessman Eduard Prutnik from the Donbas Settlement and Financial Center association (DSFC).

This organization (converted into LLC in 2012), became a coal business platform for a certified dentist. Although O. Yanukovych constantly denied his involvement in the DSFC, secrets are never long-lived.

The DSFC included 6 coal beneficiation plants: Uzlovskaya, Kaliniskaya, Ukraina, Rossiya, Krasnaya Zvezda and Komsomolskaya.

The DSFC also included Vostokuglemash manufacturing and repairing plant of mining equipment. Naturally, the related to it LLC Vostokuglemash Trading House constantly appeared among the winners of tenders for the supply of the shaft lining, hardware and tunneling equipment for a number of the state coal associations in 2010-2013.

Furthermore, the desire to cooperate with the central beneficiation plant of the DSFC group expressed such state enterprises as Krasnoarmeyskugol, Ordzhonikidzeugol, Torezantratsit, Makeevugol, Selidovugol, Snezhnoeantratsit.

In this way, only in 2011 the structure officially earned UAH 1 billion UAH, having won tenders for coal beneficiation for these associations.

Even according to official reporting data, the aggregate net income of the five central beneficiation plants from DSFC was UAH 3,202 billion in 2012.

In addition, the local coal market players have repeatedly stated that DSFC actually swallowed the entire illegal coal mining – the so-called makeshift coalmines. Their owners were left no choice: they could sell coal to the Yanukovych’s structures for a fixed price, or sell it to no one at all. Being feared of losing the markets, makeshift coalmines’ owners accepted the unfavorable conditions...

Further schemes have already been described more than once: the illegal coal was fidgeted on the state mines at low cost and sold to the state-owned companies much more expensive. The notorious golden loaves of bread and toilet bowls were bought for that profit. In addition, there was the state subsidy for each ton of the "extracted coal by the state-owned mines."

There has also been traditional for our coal industry shadow business – production volume was increased due to artificially high ash content. Simply put, coal was mixed with slag dumps and this mixture was shipped. This made it possible to multiply the official income of 1.5 times.

Another scheme, invented by managers of O. Yanukovych, was based on shadow privatization (long term lease) of the most valuable natural resources of state mines – coal seams.

Thus, the “state” coal mining enterprise regularly received subsidies from the budget to support the operations. It mined the private coal, making it totally dependent on owners of coal seams. So the ultimate beneficiary was O.Yanukovych once again.

For example, in the context of SOE Shakhtoupravleniye Yuzhnodonbasskaya №1, LLC Shakha Yuzhnodonbasskaya №1 was founded, in the context of the mine 1-3 Novogrodovskaya SOE Selidovugol appeared LLC Mine Novogrodovskaya 1-3, in the context of the mine Rossiya (also owned by Selidovugol) appeared LLC Shakha Rossiya. And finally, in the context of the SOE Krasnolimanskaya Coal company, the LLC Krasnolimanskaya was founded. Just before Euromaidan, most of these companies got the coal seams in the lease for 10 years. Therefore. their contracts are valid until 2023 and probably include the standard option of auto renewal.

It remains to add that the main consumer of the DSFC coal companies under Yanukovych’s presidency was the last state-owned generating company OJSC Centrenergo, which controlled Tripolskaya, Zmievskaya and thermal power plants.

New owners

After Euromaidan and the Family members’ flight from Ukraine, their semi-legal coal business didn’t remain abandoned for long. Since this was a new direction for the "new" power, there were no fundamental changes in the market before it has returned under the "Donetsk control" once again. Serious redistribution began only since 2016. But first things first.

On July 6, 2015, Donetsk Governor Pavel Zhebrivskyi at the regional state administration meeting said about the need of prompt returning of such coal seams and beneficiation plants to the state ownership.

Since then a year and a half passed, however, the plants still continue to be listed in the property at PJSC Altera Finance – the company, which was previously associated O.Yanukovych.

In March 2016, the Ukrainian General Prosecutor Office raided DSFC’s structures. According to media reports, the investigation was interested in concentration plants Ukraina, Rossiya and Komsomolskaya.

It's been more than six months, but there were no account and property arrests, detention of suspects, no materials of the criminal case were brought to court. It seems that the search was more like pressure, not a persecution.

Moreover, O. Yanukovych’s enterprises continue wining government tenders as if nothing had happened!

For example, in April 2016 concentration plant Komsomolskaya signed a contract for coal beneficiation with SOE Krasnoarmeyskugol for UAH 60.7 million.

The audit on the legality of Gosgeonadra seams lease from SOE Selidovugol by the companies Shakha Rossiya and Shakha 1/3 Novogrodovskaya had no results as well.

The local labor organization achieved this audit only through the courts. But Yanukovych was amazingly lucky once again: the court ordered Gosgeonadra to check the legality of the issuance of the special permit for subsoil usage. The "silly" officials didn’t understand what was required checked the conditions of mining instead, where no violations were found. The court was informed just that.

In early October, the Selidovuglya miners appealed to the Cabinet of Ministers and personally to the Minister of Energy Igor Nasalik with a request to ensure the return to the state of the coal balance reserves, which were transferred to O.Yanukovich’s enterprises.

I.Nasalik promised to help, but the price of these promises is not great. I recall that in May current Minenergougol head expressed readiness for a resolute fight against corruption in the coal sector.

"There are a lot of swindlers who work in the coal industry, but believe me I will plug them out like radishes! It's a question of time. I’ll plug them out or you’ll bury me. It’s        either one thing or the other!" – commented the minister.

Six months later: Nasalik is still alive and no corrupt practices have gone away. But who is behind it that can make even the minister go blind?

Therefore, we can state that the public authorities, including law enforcement agencies, failed in trying to "have a go" at "O.Yanukovich’s enterprises". That would be impossible if he still remained the de facto owner of this coal business.

But if we assume that the beneficiaries have changed, these events receive a simple and logical explanation, as well as raids without consequences, and "sillyness" of Gosgeonadra...

Similarly, it becomes clear why in the summer of 2015 the associated with O. Yanukovych companies received Security Service of Ukraine permission to supply coal to the Donbass uncontrolled territories for the Centrenergo state company.

We are talking about the LLC Donbassuglepererabotka, Bryankovskaya coal company, Shakhtoupravleniye Donbass and OJSC Krasnaya Zvezda.

Now it remains to recall that earlier the media reported about the informal Centrenergo transition to Igor Kononenko, business partner of Petro Poroshenko.

They referred to the relevant statements of Victoria Voytsitska, the member of the Parliamentary Energy Committee, Mikhailo Volynets, the head of the Independent Trade Union of Miners of Ukraine and anonymous sources in the coal sector and in the Verkhovna Rada.

Therefore, if under Yanukovych’s presidency the Centrenergo activities were controlled by his eldest son, now it would be logical to link it with its current "supervisor".

Given the status of I. Kononenko as a longtime friend and business partner of President Poroshenko, we must recognize that only in this case it is possible that companies of O. Yanukovych still function and win tenders. In fact, the state violates the law and creates particularly favorable business conditions for those enterprises.

The favorable conditions were mentioned for good reason. Let's have a look at this table, showing the dynamics of the coal supply by state coal associations to the DSFC factories and other market participants.

State mining enterprises



DSFC beneficiation plants

Other beneficiation plants

DSFC beneficiation plants

Other beneficiation plants

Shakhtoupravleniye Yuzhnodonbasskaya №1





Shakhta Yuzhnodonbasskaya № 3






























As you can see, previously the market was shared between three players for approximately 30%. But this year, especially with the government of V. Groisman and minister I. Nasalik, almost 90% of the national coal volumes was supplied to Yanukovych’s factories!

Moreover, mines that refused to perform illegal orders of state officials to redirect coal to Yanukovych’s factories, were simply stopped because they were not given railway tariffs for coal shipments to other factories. Thousands of Donbass miners were left without work for a few weeks left of work in order to make mines send their coal to Yanukovych!

How powerful their “patrons” should be, so that the heads of the state-owned enterprise Derzhvuglepostach (the sole manager of the state coal) were not afraid neither the public nor the prosecutor's office, without holding any tenders (where is the famous "transparency"?) bypassed the mines and directly entered into an agreement with Yanukovych’s factories? In fact, that has released the state coal flow from legislative regulation. No one has noticed that for three months already!

"On a pro-bono basis"

A source in the Ministry of Energy explained that such somersaults were due to Vitaliy Kropachev who allegedly bought Yanukovych’s plants  Komsomolskaya, Rossiya and Ukraina.

When asked about the status of Kropachev, who is "engaged" with this issue for some reason, the source ironically asked a reciprocal question: "And what was the status of Natasha (Natalia Korolevskaya – the informal supervisor of the coal industry during the premiership of Yulia Tymoshenko – author's note) or Mr. Tregubenko (MP from the Petro Poroshenko Bloc party, until this summer was the supervisor of the coal industry placed by Igor Kononenko  – author's note)?

Minister of Energy Igor Nasalik was more outspoken (he is known for his negotiations with "Tashkent“, the so-called minister of income and fees of DNR). In an interview for Economicheskaya Pravda, he in fact confirmed, and the previous Tregubenko’s "supervision" over the industry, and Kropachev’s present one.

"— I have not worked with Tregubenko. I know him as an MP, and when I started working at the ministry, I told him that I have a different vision on the development of the coal industry....

Kropachev is one of the businessmen who wants to invest in mines. If a person wants to invest money and it involves the minister, why should not I give him that opportunity?... Kropachev is mostly involved in activities for "charging" these eight mines so they could start working. In addition, he helps in upholding the system of the mines, which will be privatized.

— How does he perform his work?

— On a pro-bono basis."

Of course, there is nothing wrong with the fact that people want to invest money and use for ministers for this purpose. But there is more than one question: Where do his money come from? What does "involvement" of the minister mean? And why does he "volunteer" to supervise the industry, if he has his pecuniary interests therein?

Until 2014, Vitaly Kropachev was known as the deputy of Donetsk regional council from the town of Torez and the founder of a number of companies and organizations. He also worked as a commercial director of the SOE Torezantratsit. Almost all of its assets were based on the occupied territory. Where did he find the money to "buy" Yanukovych’s factory and plans to privatize the mines?

However, since September 2014 Kropachev served as a policeman in Tornado, the notorious battalion of Ministry of Internal Affairs of Ukraine. But if police service were so well paid, his fellow policemen wouldn’t now be kept in the pretrial detention facility.

"In fact, we do not know whether someone had bought them. The official owners did not change. Maybe it's just a smokescreen because, first, there were rumors that they were bought by Kropachev. Now they say that the buyer was Kononenko with the help of Salo (Igor Salo is a businessman from Kharkov, engaged in construction – author's note). It is likely to be just a simple agreement that the plants are given up for management, some money was paid to the subsequent purchase... when the money is be paid, the factory will be re-legalized," – says the OstroV’s source in the Ministry of Energy.

So, the question of "buy-out" Yanukovych’s plants remains open. But the fact that the "new Donetsk" Kropachev really started "upholding the system of the mines, which will be privatized", is already in his replacement of almost all coal plants’ CEOs.

This means the ability to control not only the direction of coal flow, but also the logistics of mines. And this is one of the main ways of shadow income and hidden privatization. First, mine supervisors force to buy overpriced equipment from their own structures, that drives her into debt, and then the mines are bought out for a penny. This mechanism has been worked out by both "national" and "anti-national" regimes...

"Yanukovych’s purpose was to create a vertically integrated chain: having coal factories, overtake promising mines, privatize Centrenergo and thus create a mini version of DTEK. Yanukovych simply did not have enough time. Now they plan to implement the same scheme, but involving other people. In 2014, Demchishin didn’t allocate money for the mine’s subsidy, because they really needed to audit and close unprofitable mines. Now about UAH 200 million of subsidies are already reallocated and there will be 200 million more before the end of this year. Next year they plan to allocate UAH 1 billion. This is done in order to invest the money in the industry, then withdraw even more through inflated prices for equipment, gather up a few debts, update the fixed assets of state-owned enterprises for the state money, and then take them back for debts. They will take away the mining assets, buy out the plants and privatize Centrenergo. This is how an energy holding is formed", – says one of the managers of the coal industry.

As we see, it turns out that the state coal-mining industry was made a cash cow for the next "Family" once again. Nothing changes except the faces...

Vitaly Krymov, Serhiy Harmash, OstroV