Newspaper article International New York Times

Where Gas Kingpins Cast a Long Shadow

Newspaper article International New York Times

Where Gas Kingpins Cast a Long Shadow

Article excerpt

With another energy crisis looming, brokers may not have the same political capital as before.

Natural gas pricing wars between Russia and Ukraine, like the one breaking out now, have generally ended badly for the two countries and for Gazprom, the Russian energy monopoly.

But not for Dmitry V. Firtash, a Ukrainian businessman who made a career and a fortune as a middleman in this troubled energy trade. For more than five years, Gazprom sold Mr. Firtash fuel at reduced prices. He resold it to the Ukrainian state energy company, Naftogaz, and other clients in Ukraine at a markup, making billions of dollars along the way.

Throughout the former Soviet Union and Eastern Europe, such gas middlemen, who arrange big-ticket deals between suppliers and buyers, have been essential to the region's energy dealings, as well as to its politics. An open question after the change of leadership in Ukraine this year is whether a new gas middleman will play a role in the current pricing dispute.

In the past, players like Mr. Firtash have helped broker solutions. Worried about higher energy prices, European governments accepted murky arrangements with the middlemen to ensure a steady flow of natural gas.

This was the case in 2006, when Gazprom and the post-Orange Revolution government in Ukraine failed to agree on a price, but did reach a deal to trade through a mystery intermediary. The identity of the trader was such a secret that Gazprom did not release his name for months after signing the contract, eventually doing so through an anonymous leak in a newspaper. It was Mr. Firtash and a minority partner, Ivan Fursin.

An energy crisis in Ukraine now seems imminent, analysts say. In an analytical note published recently, the policy research group IHS wrote of the two sides' intransigence: "A new gas war between Russia and Ukraine could spark an actual war."

But this time around, the middlemen may not have the same political capital to work out a deal. In the months after the Ukrainian revolution, such players have come under increased scrutiny for their business and political activities.

One 27-year-old gasoline trader in Ukraine was wholly unknown to his countrymen before the Ukrainian edition of the magazine Forbes wrote about him. Stung by the criticism, the young billionaire, Serhiy Kurchenko, bought the publication last summer, then hired a new editor. Mr. Kurchenko is now wanted in Ukraine for evading customs duties, his whereabouts unknown.

In addition to buying Ukrainian news media to try to control criticism, the middlemen have also spread their businesses abroad. One former gas middleman and the prime minister of Ukraine in the mid-1990s, Pavlo Lazarenko, bought the Southern California mansion owned by the actor Eddie Murphy for $6 million. He later served several years in an American prison for money laundering. …

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