Home Business Insights & Advice Seizing power in Ukraine

Seizing power in Ukraine

by Andrew Cave
1st Sep 20 8:53 am

Forces seeking power used to focus on first seizing control of radio. The Nazis, Goebbels once admitted, could never have taken power without it. The Spanish Civil War is even known as the “first radio war”. A similar approach was taken to TV stations by Peru’s revolutionary military government in 1971. More recently, coup attempts in Lesotho in 2014 and Gabon last year saw the airwaves targeted. But in the battle for Ukraine, it is control of the ability to generate energy that’s increasingly being seen as a key route to controlling the nation.

Specifically, Russian president Vladimir Putin’s secret service agents are homing in on Energoatom, Ukraine’s state-owned nuclear power generating company, which produces more than 60% of the nation’s electricity. Operating four nuclear plants with 15 power units, Energoatom provides about 55% of Ukraine’s electricity needs, rises to 70% in the winter months. The country is eighth in the world for nuclear power production capacity,

Despite this strong position, Ukraine president Volodymyr Zelensky is turning a blind eye to apparently circumstantial evidence of pro-Russian forces clandestinely vandalising Energoatom. There are allegations too that Russia’s FSB security service is steadily undermining the security of Ukraine’s energy.

Since the arrival at the end of April of a new management team including FSB agent Andriy Derkach, Energoatom’s president from 2006-07, and Zelensky aide Serhiy Shefir, there’s been a tsunami of change.

Since May, acting company president Petro Kotin and vice-presidents Herman Galushchenko and Hartmut Jacob have been operating Facebook accounts, reporting intermittently on business successes alongside opinionated columns about the energy market. Jacob even started his own blog on Liga.net. But, far from improving Energoatom’s prospects, such clumsy social media PR activity has seen them worsen.

Before the arrival of Derkach’s team, Energoatom topped the rankings of Ukraine’s state-owned companies for corporate transparency. However, Kotin is now refusing to give the National Agency for Corruption Prevention, Ukraine’s anti-corruption watchdog, access to inspect the company. Energoatom’s receivables have multiplied and the new team has failed to implement effective measures to protect the company from a looming financial crisis.

Instead, Energoatom’s new leaders are engaging in a war of words against Ukraine prime minister Denis Shmygal, acting energy minister Olga Buslavets and the national electricity market regulator. At the same time, they are provoking Energoatom’s unions and risking triggering labour protests, not realising that this could also destroy their political position.

The smartest plan Kotin and Galushchenko have been able to come up with so far has been to try to blame their predecessors for Energoatom’s ills, making accusations through the company’s press service. Yet Kotin is himself a long-term member of the company’s leadership, having worked for it since the early 2000s and served on the management board. Last year, he oversaw Zaporizhaya, Europe’s largest nuclear power plant. In contrast his Energoatom predecessor Pavlo Pavlyshyn refused to be a “puppet” in Derkach’s team and returned to being general director of the Rivne nuclear power plant.

Volodymyr Aryev, a member of Ukraine’s Verkhovna Rada, or supreme council, recently stated that Energoatom had been handed over to Derkach as a favour, because he had published footage of the Poroshenko-Biden talks that were alleged to have helped Donald Trump win the US presidential race. Aryev also revealed that Galushchenko was Derkach’s godson – something the company had failed to disclose.  Energoatom’s press service was quick to respond that the new team had nothing to do with Derkach and was purely engaged in crisis management to rescue the company from the errors of its former leaders.

Also close to Derkach is Oleg Boyaryntsev, said to be in talks about financing local elections in the Sumy region, where his boss heads the pro-Russian Nash Krai political party. According to some insiders, this means that in practice Boyarintsev and Galushchenk’s energies are not focused on Energoatom or Ukraine’s ruling Servant of the People party. Their loyalty is instead said to be to Derkach, who is himself alleged to be increasingly focused on winning local elections in the region bordering the Russian Federation.

What is so far unclear is the eventual political cost of all this activity to President Zelensky. However, for the time being, Energoatom remains controlled by Kotin, with Zelensky’s office blocking the process of finding a permanent company president amid rumours that the position has been promised to Derkach and Galushchenko.

In the meantime, Energoatom is forced to continue to operate in a rudderless commercial and intellectual vacuum, leading to accusations that what could be a modern, sustainable company is being rendered ineffective or even toxic by sabotage activities within its management team.

Britain’s Commercial Union insurance company used to have a slogan proclaiming that its modus operandi was never to turn a drama into a crisis. The results of Ukraine’s power station nomenklatura could be about to achieve the opposite.

Energoatom would do well to remember that its prime function is to keep the nation’s lights on. Its stated mission is, after all, to maintain the “safe manufacture of electricity”.

As a nuclear leader, Energoatom could also forge a path to powering a sustainable, low-carbon future.  Instead, its bosses’ political machinations risk sparking further uncertainty about the future, not just of the company, but of Ukraine itself.

Andrew Cave has been a business journalist for 30 years. He has written for the Daily and Sunday Telegraph since 1996, including three years in New York as US Business Editor and five years as Associate City Editor in London. 

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