A Stockholm Conspiracy The Underbelly of Ukrainian Gas Dealings

The agreement in early 2009 which restarted gas deliveries from Russia via Ukraine to Western Europe, was hailed as a success. But since Viktor Yanukovych became Ukrainian president in February, many of those involved in the deal have been arrested. Furthermore, the president's friends have profited handsomely while the state has lost a fortune.



The official address of the Lukyanivska pretrial detention center, named after the Lukyanivka neighborhood of Kiev and located just behind the Defense Ministry barracks, is Degtyaryovskaya uliza 13. It is a whitewashed brick building, complete with watchtowers and barbed wire, a blue steel door and a gray sliding gate. A harsh winter wind howls along the street, and the women waiting in front of the entrance with packages under their arms are shivering in the cold. The prison, a building that dates back to the 19th century, is one of the most notorious in Kiev. Although it was designed to house 2,800 prisoners, it is now overfilled with 4,000 men. One of the prisoners, Igor Didenko, says that it's horrible "to so much as touch a spoon or a cup here."

He was on his way to the dentist when he ended up in Lukyanivska. The 46-year-old is no longer the youngest, and on that afternoon his dentist was going to attach crowns to posts that had been implanted in his mouth. It was July 9, a Friday, and the weekend was about to begin in a summery Kiev, but before Didenko could mount the stairs to the dentist's office, he was lying on the asphalt in the middle of the courtyard.

Masked men had thrown him to the ground, tied his hands together and pushed him into a car. They were members of the "Alpha" special forces unit, an elite group within the Ukrainian intelligence service SBU. He was treated like a dangerous criminal when they took him to Lukyanivska, where he has now been imprisoned for almost six months.

There were petitions for clemency after his arrest. Filaret, the patriarch of the Orthodox Church, put in a good word for him, as did Leonid Kravchuk, Ukraine's first president, three dozen members of parliament, businesspeople and scientists. But the petitions have been ignored.

'After My Blood'

Why was someone like Didenko so important to the government that he was arrested like some Mafia boss? Why does Didenko believe that it is possible "that agitated political groups are after my blood in prison," as he shouted into the courtroom from the caged area where he was being held during his arraignment? And why is Yulia Tymoshenko, the prime minister of Ukraine until March of this year, claiming that Didenko's arrest proves "that the country has fallen into the hands of criminal organizations?"

There is nothing particularly exciting about Didenko's biography. He was born near Vinnytsia in central Ukraine in 1964. He studied commercial information technology and eventually became a businessman. For more than a decade, he served as vice-president of Naftogaz, the large state-owned gas company, and even headed the company for a long time. He has a wife and children, and a house in Kiev's upscale "Golden Gate" residential neighborhood.

"Didenko was a respected professional, a manager," says Sergei Vlassenko, a lawyer and a member of parliament, who is working with Didenko's attorneys. "He wasn't a politician."

Nevertheless, the Didenko case is highly political. It reveals the inner workings of Ukraine: how some multimillionaires are using this country -- which many non-Ukrainians only associate with the TV images of brawls in parliament -- as a vehicle for their business deals; and how the legal culture of Ukraine, a country seeking European Union membership, is being increasingly undermined.

A Giant Budgetary Hole

Didenko's story is the tale of a major deal that has to be of interest to the West, because it suffers every winter as a result of turbulence in Ukraine, even though it has trouble understanding the underlying causes. The deal involves 12 billion cubic meters of natural gas, worth billions of dollars, and an arbitration award that has torn a giant hole into the country's budget.

Billionaire Dmitry Firtash, 45, is one of the lead actors in this drama. He is one of the most powerful men in Ukraine and has been successful in the gas and chemical business for years. Valeriy Khoroshkovsky, 41, also plays a leading role. He is a media mogul, a former economics minister and steel magnate who is sometimes referred to as the "Ukrainian Berlusconi." Khoroshkovsky is also head of the Ukrainian security service, an intelligence agency which also has policing and public prosecutor duties -- a total of 30,000 employees. Finally, Viktor Yanukovich plays a leading role. The 60-year-old is a former locomotive engineer and miner who was convicted in his younger days of participation in a robbery and assault before rising to become prime minister in 2002. Since February, he has been Ukraine's president.

Igor Didenko is the final character of note.

The story began in January 2009. Only 12 hours into the new year, Russia had declared a gas war on neighboring Ukraine. On Jan. 1, at 11:48 a.m., Moscow time, the chief engineer at a compressor station near Kursk in western Russia closed a valve on a pipeline. His boss, the head of Russia's Gazprom Group, had ordered him to cut off the flow of gas to Ukraine -- in the middle of an icy winter.

The sudden shutdown of the pipeline didn't just affect Ukraine. Within a few days, the rest of Europe, dependent as it is on Russian gas -- some 80 percent of which is delivered via Ukraine -- likewise felt the squeeze. Poland, Hungary and Bulgaria reported a drastic drop in pressure, and Slovakia declared a state of emergency on Jan. 6. "The Kremlin is letting Europe freeze," the papers wrote.

Trying Western European Patience

The Continent had become accustomed to the Russian-Ukrainian gas wars, which regularly flared up in the dead of winter. But this time the conflict lasted almost three weeks, severely trying the patience of Western Europeans.

Once again, Moscow and Kiev had been unable to agree on a new delivery price. The Russians had demanded $450 (€344) per 1,000 cubic meters, while the cash-strapped Ukrainians felt that $235 was more appropriate. "You are taking millions of citizens in Europe hostage," a Bulgarian member of the European parliament shouted at Russian and Ukrainian representatives.

But a surprise ceasefire agreement was reached on Jan. 19. Then Ukrainian Prime Minister Tymoshenko had scored a coup in Moscow. She returned from a meeting with Russian Prime Minister Vladimir Putin with a 10-year agreement on future gas deliveries in hand. Putin's concession was a 20 percent discount on the global market price.

But two other documents, each with substantial appendices, were also signed in Moscow, documents that were long kept secret from the public. They applied to RosUkrEnergo, or RUE, the intermediary that had handled the gas deals between Russia and Ukraine until then.

RosUkrEnergo is the company that would put Igor Didenko in prison.


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