Ukraine Fires Head of Naftogaz, Risks Unnerving Investors

(Bloomberg) -- Ukraine’s government dismissed the long-serving head of state-run oil and gas company Naftogaz Ukrainy, threatening to complicate talks to access a $5 billion international bailout.

The cabinet on Wednesday dismissed Andriy Kobolyev, Naftogaz’s chief executive officer since 2014, citing a 19 billion-hryvnia ($684 million) loss last year, according to a statement published on its website. Acting Energy Minister Yuriy Vitrenko was appointed as CEO, while parliament approved Herman Halushchenko as new energy minister on Thursday.

The unexpected move risks unnerving Western donors, including the International Monetary Fund, who’ve supported Kobolyev and have already been rattled by a raft of reformists departing President Volodymyr Zelenskiy’s two-year-old administration.

The Group of Seven countries “noted” Kobolyev’s dismissal. “Effective management and governance of state-owned enterprises, free from political interference, is crucial to Ukraine’s competitiveness, prosperity, and Ukraine fulfilling its international commitments,” G7 ambassadors said Thursday in a tweet.

Kobolyev was the chief architect of an energy overhaul that helped the former Soviet nation to narrow its budget deficit. He also lead Ukraine to a multibillion-dollar win in a legal dispute with Russia’s Gazprom in 2018. He did face some criticism, however, as heating costs were gradually increased.

“I certainly have complaints about yesterday’s cabinet’s decisions,” Kobolyev said. “Not in terms of my dismissal, but that they’re now putting an end to corporate-governance reform.”

The company’s position is that the move violates the law on Naftogaz, as well as wider corporate-governance rules, Naftogaz spokeswoman Aliona Osmolovska said by phone.

“This breach of corporate-governance standards is likely to create a new point of tensions with international financial institutions and Ukraine’s other Western partners,” Dragon Capital investment bank said in an emailed report. “Naftogaz is set to experience a turbulent period, as the new CEO is likely to move to rid the management team of Kobolev allies. The prospect of gas prices for households and heating utilities being set below market can’t be ruled out either.”

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