The Oil Deal Funding Ukraine’s Top Pro-Kremlin Politician

President Vladimir Putin at a meeting with Viktor Medvedchuk

Ukrainian legislator Viktor Medvedchuk is a nearby partner of Russian President Vladimir Putin, and a solid Kremlin partner. Another examination uncovers how a deal energy bargain in Russia has gotten him and an accomplice a huge number of dollars.

Through an organization of shell organizations, Viktor Medvedchuk and a long-lasting colleague acquired a rewarding stake in a Russian petroleum processing plant for simply more than $40,000.

This stake created a huge number of dollars in profits. Medvedchuk has since assisted set with increasing and money Ukraine’s greatest supportive of Russia party.

Organizations associated with the two men additionally paid just around $1,000 for a controlling interest in an organization holding rights to build up an almost one-billion-barrel Russian oil field.

In the early long stretches of February 27, 2014, many shooters in plain Russian military uniform raged the parliament of Ukraine’s Crimean landmass, lifted Russian banners, and stood monitor as officials casted a ballot to arrange a choice to split away and turn out to be essential for Russia.

The appearance of the “little green men,” as they were brought in Ukraine, denoted a defining moment in Russian President Vladimir Putin’s endeavors to handle Ukraine after fights overturned his partner President Viktor Yanukovych. However, it was by all account not the only occasion that would help concrete Russian impact in Ukraine that day.

A large portion of a landmass away, in the radiant European seaward sanctuary of Cyprus, a cryptic arrangement was being struck: An enormous stake in Yug Energo, proprietor of a worthwhile Russian petroleum treatment facility, was sold at deal rates to organizations connected to Ukraine’s driving supportive of Russia resistance lawmaker Viktor Medvedchuk and his long-term colleague, individual from parliament Taras Kozak.

An examination by the Ukrainian RFE/RL program Schemes and OCCRP has tracked down that the organizations connected to Medvedchuk and Kozak had the option to get a 42-percent stake in Yug Energo from Russian extremely rich person Sergey Kislov for scarcely more than $40,000 — a little part of what the men would make from the arrangement throughout the next few years.

The Yug Energo stake qualified Medvedchuk and Kozak for a huge part of the benefits from the Novoshakhtinsky petroleum processing plant, a half-billion-dollar office finished a couple of years sooner in Russia’s southern Rostov locale. These profits would add up to a huge number of dollars, reinforcing Medvedchuk’s funds as he organized a political rebound and assisted set with increasing and money Ukraine’s greatest favorable to Russian ideological group, Opposition Platform — For Life.

In 2018, Medvedchuk and Kozak developed their contribution in Yug Energo, expanding their joined stake to 93 percent. Plans originally uncovered Medvedchuk’s association with the processing plant that very year. However, the price tag of the underlying stake has at no other time been unveiled.

Journalists have additionally now uncovered another clear Russian darling arrangement dating to 2016, whereby organizations constrained by both Medvedchuk and Kozak paid about $1,000 for a controlling interest in an organization that holds rights to build up a very nearly one billion – barrel Russian oil field.

The two arrangements were helped out through a perplexing arrangement of offer exchanges and credit arrangements including shell organizations in Cyprus that seemed to bode well, said Graham Barrow, a UK-based monetary violations expert who checked on the records. The organizations included regularly had confusingly comparable names, with stakes changing hands for what have all the earmarks of being undeniably not exactly their genuine worth, he added.

“There is no getting away from that it would seem that a significant resource has changed hands and that, as indicated by the documentation that you’ve seen and I’ve seen, the installment for that is by all accounts fiercely unbalanced to the worth that was moved,” Barrow said.

Medvedchuk and Kozak didn’t answer to questions sent by correspondents. Kislov’s organization, Yug Rusi, additionally didn’t react to questions.

At the point when a columnist for Schemes endeavored to get some information about the arrangement outside of parliament toward the beginning of March, Medvedchuk left.

Medvedchuk, the deal’s main beneficiary, has a long history in Ukrainian politics and enjoys close personal ties to Russia’s leadership.

Putin has told Russian media that he first met Medvedchuk, who is now 66, in the early 2000s when Medvedchuk was serving as chief of staff for former Ukrainian President Leonid Kuchma. In 2004, Medvedchuk and his wife, Oksana Marchenko, honored Putin by making him godfather to their daughter, Daryna. Svetlana Medvedeva — the wife of former Russian President and Prime Minister Dmitry Medvedev — was named the girl’s godmother.

Following Ukraine’s 2004 Orange Revolution, which brought in a pro-European administration, Medvedchuk attempted to muster pro-Russian political forces into a parliamentary bloc, but they failed to win any seats in the 2006 elections. He surfaced again after Yanukovych came to power in 2010, running an organization that campaigned for closer economic ties with Russia.

Following Yanukovych’s overthrow in 2014, Medvedchuk was sanctioned by the U.S. for “violating Ukrainian sovereignty” and by Canada due to his alleged “political responsibility” for Ukraine’s crisis. He spent some time in the political wilderness before emerging once more as an opposition politician, still pushing to realign Ukraine with Moscow.

Medvedchuk’s business partner Kozak, who is often seen as Medvedchuk’s proxy, purchased the 112, Zik, and NewsOne television channels in 2018 and 2019 and promptly transformed them into pro-Russian outlets. He also became a key member of the newly created pro-Moscow party Opposition Platform — For Life, which won 44 seats in parliament the following year.

Both Medvedchuk and Kozak were sanctioned earlier this year by President Volodymyr Zelensky’s administration on suspicions of “financing terrorism,” a move Medvedchuk’s party said brought Ukraine “one step closer to becoming a dictatorship.” Their television channels were also taken off the air.

Eugene Magda, director of the Institute of World Policy (Ukraine) think tank, said that Medvedchuk appeared to be a “key instrument of influence” for Moscow in Ukraine and a “man whom Putin directly trusts.”

“Medvedchuk’s long-standing cooperation with the Kremlin shows that he is ready to defend Putin’s interests… quite consistently,” Magda said.

Medvedchuk and Kozak’s control of the newly built Novoshakhtinsky refinery would prove highly lucrative.

The oil refinery was first opened in 2009 in Russia’s Rostov region by Sergey Kislov’s Yug Rusi holding company. Kislov, who made his fortune in agriculture, said in an interview at the time that it cost roughly 15 billion roubles ($500 million) to build.

The facility became the centerpiece of Kislov’s Yug Energo, which also owned subsidiaries used to ship and sell products from the refinery including diesel fuel, straight-run gasoline, and fuel oil. But the refinery almost immediately ran into trouble. Shortly after its launch, its operating license was reportedly suspended for safety violations by Russian regulators after then-Deputy Prime Minister Igor Sechin ordered a probe into a number of refineries. Sechin, a close Putin confidante, now heads state oil company Rosneft. The refinery also soon faced debt repayment demands from Russia’s majority-state-owned Sberbank, which financed about half the construction costs.

According to local media reports, Kislov was already looking for a buyer by 2011, citing difficulties competing with large state companies and major private-sector producers. Early potential buyers included a Russian state company, Zarubezhneft. But for unclear reasons, the deal never went through.

Despite its troubles, Yug Energo remained a solid earner. Company financial reports show the company was consistently in the black, earning $73 million in profits in 2013.

The profits did not stop Kislov from moving to offload the asset. By the end of 2013, he had initiated a series of opaque and complicated transactions between companies registered in Cyprus that ended with Medvedchuk and Kozak taking a large stake in the refinery.

In December 2013 — as protests against Yanukovych raged in Kyiv’s Maidan Nezalezhnosti square — Kislov set up two companies in Cyprus: Ventolor Investments on December 6, and Teteos Global on December 9. He then transferred a 42-percent stake in Yug Energo to these companies, saying that the shares had been pledged as collateral on a loan from another one of his companies. However, reporters were unable to find any documents proving the loan’s existence. Audit documents show that the shares were valued at just over $1.1 million.

Then, in January 2014, Kislov transferred the two companies’ shares to two other Cyprus shell firms with similar names: The shares of Ventolor Investments were transferred to a company called Ventolor Holding, while the Teteos Global shares were transferred to a company called Teteos Holding.

The handover to Medvedchuk and Kozak took place the following month. On February 27 — the day Crimean parliament was stormed — two Cyprus companies connected to Medvedchuk and Kozak, Kranatoco Trading and Bifilessa Development, took ownership of Ventolor Holding and Teteos Holding, respectively. Inexplicably, the value of the combined 42 percent share in Yug Energo was declared at just $40,989 — nearly 27 times less than they had been worth on the previous transfer.

For financial crimes analyst Barrow, such a deal makes no sense for a legitimate business transaction.

“Normally when you sell a business it’s done very straightforwardly: you have a seller and a buyer, and the buyer buys the shares for the value of the company,” he said. He pointed to how this sale had instead been completed through multiple offshore companies for diminishing returns for subsequent sales. “That doesn’t look like a sensible way of disposing of an asset” that was making tens of millions of dollars in profits, he said. “It’s a bit like giving your bank balance away for nothing.”

Kozak and Medvedchuk can be connected to the Cyprus-based companies Kranatoco Trading and Bifilessa Development through their wives and a network of known proxies. Both men’s wives are fixtures in the men’s business holdings, previous investigations have shown.

At the time of the share acquisition on February 27, 2014, Kranatoco Trading was owned and controlled on paper by two Cypriot citizens named Anna Korelidou and Christina Antoniadou, who have also played roles in several other companies that Medvedchuk has claimed on his government asset declaration. In July 2017, Kranatoco came under the direct ownership of a company ultimately owned by Medvedchuk’s wife, Oksana Marchenko. Medvedchuk has previously stated that his wife has represented his ownership interest in companies in order to avoid U.S. sanctions.

At the time of the oil refinery purchase, the other Cyprus company, Bifilessa, was under the control of two Cypriot proxies. By July 2020, however, ownership was transferred to Kozak’s common-law wife, Nataliia Lavreniuk.

With 42 percent of Yug Energo now under their control, the companies linked to Medvedchuk and Kozak began raking in tens of millions of dollars in dividends.

Company audits show that Ventolor Investments, the company ultimately tied to Medvedchuk, received $31.77 million in dividends in 2014. Teteos Global, the company linked to Kozak, received $13.08 million over the same time period. In 2015, Ventolor received $8.93 million in dividends, while Teteos received $3.68 million. Neither company received dividends in 2016.

Documents after that date are patchy, but the information available indicates that the stakes have remained extremely lucrative. An audit of Teteos shows that the company earned 8.68 million euros ($9.8 million) in 2017. Audits for Ventolor are not available, but documents for Yug Energo show it paid out $80 million in dividends that year — meaning the share flowing to the Medvedchuk-linked company was likely just shy of $23.8 million.

Documents show that the shell companies boosted their combined stake in Yug Energo to 93 percent in February 2018. The details of this deal remain unclear.

Having profited mightily from a Russian oil refinery, Medvedchuk and Kozak also turned their sights on the state-owned Gavrikovsky oil field in the Khanty-Mansi region in the western Siberian plain — an asset also linked to Kislov.

In June 2015, Russia’s Federal Subsoil Resources Management Agency awarded the rights to develop the 136.7-million-ton field to NZNP Trade LLC, a company ultimately owned by Kislov’s Yug Energo and whose main previous function had been to sell products from the Novoshakhtinsky refinery.

The original tender conditions for the field had raised eyebrows at the time. A Rosneft subsidiary had been considered a leading contender. But, according to Russian business media outlets, authorities had made it a requirement that the winner would need to refine oil in Rostov, some 3,500 kilometers away from the deposits. Rosneft’s subsidiary even tried to sue the state institution behind the tender, but later simply recalled its tender application for unknown reasons.

The following year, the Ukrainians took majority control of NZNP Trade and its oil rights. Documents from Cyprus show that the Kozak-linked Teteos Holding acquired a 14.9-percent stake in NZNP Trade for just 202 euros ($224), while the Medvedchuk-linked Ventolor Holding obtained 50.1 percent of the company for $758.

There is no indication that the Gavrikovsky field is online yet. Company documents from 2019 show that the new owners invested just $177,800 in its development that year.

The Novoshakhtinsky refinery, meanwhile, is getting an upgrade. On March 12, a construction company connected to the refinery signed a deal to expand and modernize the facility for an estimated $2.5 billion.

The work, which is due to finish in 2030, will allow for the production of Euro-5 grade gasoline. It will also boost the refinery’s capacity by about 40 percent — and with it, almost certainly, the profits of its owners.