The courts are demanding the repayment of old debts by companies controlled by Dmytro Firtash, which could lead to their collapse

Blast from the past will deprive chemical plants their future

Photo: Ukrinform

The daughter company of Naftogaz of Ukraine – Gas of Ukraine – remembered of the debts that the chemical companies controlled by Dmytro Firtash owe for gas supplied in the previous years and decided to demand their repayment now. As a result, on June 17 the Severodonetsk company Azot controlled by Firtash lost the case in the Economic Court of Luhansk on the exacting of the gas debt owed to the Gas of Ukraine enterprise. Azot is obligated to pay back UAH 508.9 mn for unpaid fuel acquired on contract back in 2009-2010.

This is already the second trial in Ukrainian courts regarding the chemical company in Severodonetsk. As Capital wrote, on June 18 the Kyiv Economic Court ruled to exact from Azot and Nadra Bank (which is also controlled by Firtash) UAH 271.5 mn on the claim of PromInvestBank pursuant to a previous loan issued to the company.

Summing up the debts

The fact that the state-run enterprise Azot is not the only debtor to Gas of Ukraine is posted in court rulings on the specialized government portal Single Registry of Court Rulings. Several other enterprises controlled by Firtash owe major debts – RivneAzot – UAH 446.4 mn, Stirol – UAH 870 mn, Cherkasy Azot and other companies owe UAH 370 mn to Gas of Ukraine. In total, the debts of the enterprises controlled by Firtash run up to UAH 2 bn. “The sum is so high that it could bring the plants that Firtash controls down to their knees, particularly those in the eastern part of the country (Stirol and Azot – Capital). Their future production plans are not clear, which means they are doubts whether they could manage to deal with such a huge debt burden,” Director of the Infoindustria information company Dmytro Hordiychuk told Capital.

Such intensity of the losses of Firtash’s companies through the courts give Hordiychuk grounds to suggest that the businessman is a victim of political persecution and has lost considerable lobbying power in the current government. “It is strange that all of a sudden these old matters have unexpectedly come to the fore,” the expert noted.

Ostchem does not recognize its debt

Employees of Ostchem informed Capital that it is too early to speak of the defeat in the gas case of the Severodonetsk plant. “Exacting of UAH 508.90 mn from Azot is a subject of dispute in the courts. The ruling of the court is being appealed by Azot through appellate courts, which is why it is too early to speak about debts,” company representatives confirmed. The company also informed Capital that RivneAzot owes nothing to Gas of Ukraine. “As concerns the aforementioned debt of RivneAzot, it was been paid back in October 2012,” a representative of Ostchem assured.

How was the debt accrued?

On April 15, 2011, then Premier Mykola Azarov said during his visit to China that Ukraine had agreed with Russia to the supply of 4 bn cu m of gas at a preferential price of US $170 per 1,000 cu m for Ukraine’s chemical industry. Azarov noted that this agreement was reached after half a year of talks with Gazprom in February 2011. He said that thanks to this agreement chemical enterprises managed to produce competitive fertilizers and supplied them to Ukrainian farmers.

Firtash made all attempts to deny the supplies of cheap gas to his plants. “I don’t know what gas Azarov had in mind, but I will say that our nitrogen plants buy gas from Central Asia at the price higher than US $170 per 1,000 cu m. Naftogaz does not have any relation to this agreement,” Firtash confirmed back then.

But, clearly, chemical plants took the bait of the statement of the former premier of Ukraine and signed gas agreement, though they paid US $170 for gas expecting promised discounts. In the end, in 2011 industrial consumers paid US $232-306 for 1,000 cu m of gas, not US $170. Today, Gas of Ukraine is demanding the compensation of the difference between the promised and actual price.

Earlier, former president of Azot Oleksiy Kunchenko told a correspondent of Capital about certain agreements on cheaper gas. He also said the gas debt had exceeded more than UAH 500 mn when he was still the director of the company. Later, the management of the chemical plant admitted in a personal conversation that it rushed to believe in the agreements with the government.