The supervisory board of Ukraine’s state-owned oil and gas company Naftogaz is resigning following the government’s decision to replace the firm’s CEO – a move that has raised concerns among Kyiv’s Western backers.
On April 28, the government announced the dismissal of Andriy Kobolyev, Naftogaz’s chief since 2014, citing the “unsatisfactory” results of the company’s operations last year, when it posted a loss of nearly $700 million.
The supervisory board, which was temporarily suspended in order to dismiss Kobolyev, issued a statement on April 30 saying that all its members were submitting notice of their resignations, effective from May 14.
“The Supervisory Board will use the coming two weeks of its notice period to help the Company as much as it can to deliver an orderly transition and will inform the Shareholder in detail early next week,” the statement said.
The unexpected move to fire Kobolyev threatens to complicate talks to access a $5-billion bailout from the International Monetary Fund, with Ukraine’s international partners warning that integrity and transparency in such decisions were key to maintaining confidence in the country’s commitment to reform.
The European Union, the European Bank for Reconstruction and Development, the European Investment Bank, the World Bank, and the International Finance Corporation said in a joint statement on April 30 that they were “seriously concerned” about recent events at Naftogaz.
“We call upon the leadership of Ukraine to ensure that crucial management decisions at state-owned enterprises are taken in full accordance with the basic tenets of recognised corporate governance standards,” they said.
The U.S. State Department earlier said that the “calculated move” showed “disregard for fair and transparent corporate governance practices.”
The matter is set to be on the agenda when Secretary of State Antony Blinken visits Ukraine on May 5-6.
Ukraine’s western backers tied financial aid for the country to concrete steps to clean up state enterprises such as Naftogaz, one of the country’s largest companies by revenue.
Naftogaz has long been the object of corruption schemes by officials and oligarchs, but the situation began to change after the 2014 upheaval that swept pro-Kremlin President Viktor Yanukovych from power.
Naftogaz’s new CEO, Yuriy Vitrenko, told reporters on April 30 that the concerns of international partners were “understandable” and “a number of problems needed to be resolved.”
The company needed to return to profit, said Vitrenko, who was serving as acting energy minister before his appointment.
Naftogaz has said the 2020 loss reflected lower demand, lower gas prices, and provisions for bad debts.
Kobolyev’s moves toward transparency won him support among Western investors and donors.
He was credited with overseeing an energy overhaul that helped Ukraine to narrow its budget deficit, and leading the former Soviet republic to a multibillion-dollar win in a legal dispute with Russian energy giant Gazprom in 2018.
He also faced criticism for increases in heating costs.