Kiev, Ukraine. The European Bank for Reconstruction and Development (EBRD) has advised that the Ukrainian energy giant Naftogaz is in so much trouble, it is now set to collapse in days without more international assistance to save it. Unlike most Ukrainian corruption dramas, this one has a number of Americans tied to it, explaining the arrival of a FBI corruption task force in Kiev recently.

 

The European Bank for Reconstruction and Development has warned Ukraine’s Poroshenko Administration that the possible collapse of the country’s energy sector reform could “shatter international confidence” in the current Kiev government.

 

According to a confidential letter sent by Sir Suma Chakrabarti to Prime Minister Volodymyr Groysman and President Petro Poroshenko, the chief of the multilateral lender underlined that “the reform of Naftogaz, which is just recognised as one of the most meaningful reforms undertaken under your leadership, is at risk of collapsing within the next few days”. This letter, seen by a number of correspondents in Kiev, was dated April 7.

 

Ukraine has been warned by the EBRD head that the implementation of the corporate governance action plan for the state-owned gas utility signed earlier between the bank and the Ukrainian government is being “unduly delayed” by the lack of enactment of the required legislation.

 

After months of consultations, the draft state ownership policy for Naftogaz still contains provisions that go against the spirit of the corporate governance reform, thus compromising the intended independence and insulation of the company from undue political interference, according to the letter.

 

“Naftogaz also need to become, as originally agreed, an entity of private law,” Chakrabarti added. “I am asking you to do all that is necessary to have Naftogaz’s new charter and necessary enabling legislation in place before the end of this month.”

 

Director EBRD Chakrabarti also warned of negative effects from the threatened resignation of the independent board members of Naftogaz. This move might not only “severely damage” the company at a time when its transformation is finally beginning to take hold, but could also “shatter the international confidence in your government’s commitment” to reform and restructure Naftogaz and other state-owned enterprises in Ukraine, according to the letter.

 

On April 6, four of the independent board members Paul Warwick, Markus Richards, Charles Proctor and Yulia Kovaliv sent a letter to the Ukrainan government indicating their conserns over the situation in the company. Without “material progress” it would be “inappropriate and untenable” for them to continue as supervisory members, they said in the letter.

 

 

 

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