KYIV

The head of state-owned Naftogaz – Ukraine’s largest oil and gas company – was sacked by government order – a day after the company posted poor results for 2020.

The government move included a two-day suspension of Naftogaz’s Supervisory Board – normally responsible for key personnel decisions.

The company’s management said the move underscored contempt for recognised principles of corporate management and one member of parliament said it could jeopardise Ukraine’s programme of the International Monetary Fund (IMF) credits – already suspended and subject to a review of a wide range of government policies.

Naftogaz CEO Andriy Kobalev, who had held the post since March 2014, was summarily dismissed and replaced by Yuri Vitrenko, his former deputy. A day earlier,  had presented abysmal company results – a loss of $685 million for 2020 which he blamed on low demand for hydrocarbons and low commodity prices against the background of the COVID pandemic.

The government website said Vitrenko would take up his duties immediately, from Thursday. Kobalev said he learned of his dismissal from media reports.

“The manner in which a series of decisions was taken today concerning the management bodies of Naftogaz illustrates a return to the practice of heavy-handed direct operation of state enterprises,” the Naftogaz management statement said.

Signal to investors

The dismissal, it said, amounted to a signal to investors that “the working conditions of state enterprises of Ukraine are unpredictable and can be changed depending on political expediency”.

Inna Sovsun, a member of the opposition Holos Party who sits on parliament’s Energy Committee, said the sudden moves could endanger much-needed IMF tranches under a standby arrangement agreed last year.

“The government replaced Naftograz’s leadership very unexpectedly,” Interfax-Ukraine news agency quoted her as saying. “This is a violation of Naftogaz’s statutes and a violation of our obligations to the IMF on upholding Naftogaz’s independence.”

The government and central bank are engaged in discussions on resuming the disbursement of tranches under the $5 billion standby arrangement – only one tranche of $2.1 billion has been disbursed.

The central bank says issues related to its independence have been resolved but the Fund is known to be uneasy about corruption in Ukraine and independence of the judiciary. Government ministers say Ukraine is on track to secure resumed tranches from September.

Kobolev is credited with combatting corrupt practices during his time at Naftogaz, but has faced criticism over a failure to boost gas production.

In addition to being the former no 2 at Naftogaz, Vitrenko also served as Ukraine’s acting energy minister since late last year. He told Interfax-Ukraine that the change was a response to “inefficient management. The state must be an active owner.”

Economic commentator Serhiy Fursa said the moves negated Ukraine’s bid to marshal Western support and entrench Western practices of management and policy. And it would be welcomed in Moscow, he said, because of Kobolev spearheaded successful legal action against Russian gas giant Gazprom.

“What does it mean? Accountability is no more than a pretext..so they went on the offensive. Went against the law, Went against our agreements with our Western partners and went against our IMF programme,” he wrote on NV.UA.

“And you ask why we still don’t have an IMF programme. And why we are still not in NATO. Here’s the reason.”