Before Russia invaded Ukraine 500 or so days ago, corruption was the latter country’s biggest problem. Since gaining independence from the Soviet Union in 1991, fat cat oligarchs and government officials consistently conspired to plunder Ukraine’s wealth by eliminating rivals and rigging the judiciary.
The Russian bombs and missiles that have killed and maimed so many have not sufficed to banish the ghosts of Ukraine’s past, however. A hard-fought legal dispute currently before authorities in Kyiv demonstrates just how hard it is to shed old habits.
The Ukrainian pipe manufacturing company Interpipe has filed an anti-dumping action before the Interdepartmental Commission of International Trade against a group of American oil service companies led by Vorex USA, a company based in Erie, Pa. Vorex beat out Interpipe on several public contracts to supply drill pipe and casings to Ukraine’s national energy company, Naftogaz.
Remarkably, neither Interpipe nor any other Ukrainian firm manufactures these types of pipe and would need to import the materials to fulfill the contract.
If the ICIT finds merit in Interpipe’s complaint, three things will happen. The cost of pipe for the gas industry in Ukraine will increase by 52%; Naftogaz will face a $13.5 million shortfall and be unable to sustain drilling operations; domestic exploration and production of natural gas, along with Ukraine’s already battered economy, will be negatively impacted not to say collapsed.
What possible reason could the ICIT — which is headed by First Deputy Prime Minister and Minister of Economy Yulia Svyrydenko and includes representatives from Finance and Customs — have to revisit a matter that had been previously settled, slap a 52% duty on an import of strategic importance and antagonize a valuable American investor?
The answer is Victor Pinchuk, founder and owner of Interpipe. With a net worth of over $2 billion, Pinchuk is one of Ukraine’s richest and most controversial oligarchs. He is married to the daughter of Leonid Kuchma, Ukraine’s former president, and he amassed much of his considerable wealth during his father-in-law’s eight years in office. He served as a member of Parliament from 1998 to 2006 and has been implicated in a string of rushed privatizations, electoral scams and kickbacks that have netted him billions.
Pinchuk’s moves against Vorex reek of the backroom politicking and institutional manipulation that Ukraine’s defenders in the U.S. had hoped were a thing of the past. One would expect that the ICIT sees through this thinly veiled attempt to force a rival out of the market, stifle competition and sole source deals. However, given Pinchuk’s long track record of insider dealings and Ukraine’s sordid history of crony capitalism, U.S. authorities are taking no chances. Rep. Mike Kelly, R-Pa., and others on Capitol Hill have made it clear to the Biden administration that they expect transparency and the rule of law to be respected by the Ukrainian authorities.
U.S. officials in Washington and Kyiv need to hold their Ukrainian counterparts’ feet to the fire on this issue. This goes way beyond a mere trade dispute between technocrats; rather, it gets to the heart of why people are fighting and dying to save Ukraine. Too much Ukrainian blood and American treasure have been sacrificed to allow opportunistic kleptocrats to game the system for their narrow self-interest and Russia’s benefit. Russia has been trying to destroy the Ukrainian energy sector with missiles and drones. What the Russians have so far failed to accomplish may be achieved by Interpipe’s attempts to stall gas production in Ukraine, which is the only possible outcome if the ICIT knocks down the contracts Vorex won fair and square.
Bipartisanship may be rare in Washington these days but pushing Ukraine to reject the moves of its most notorious oligarch against American companies should prompt common cause in the White House and on Capitol Hill. To do otherwise robs Ukraine of any hope for energy independence and provides unjust benefit to Moscow and its invading hordes.
If President Volodymyr Zelenskyy is the face of the new Ukraine — brave, heroic and incorruptible — Victor Pinchuk represents what millions have Ukrainians have been fighting against for years: exploitation, condescension and back-room deals. How the ICIT rules in this case will speak volumes about whether Ukraine is truly serious about exorcising the ghosts of its past.
Adam Ereli is a former U.S. diplomat who served as ambassador to Bahrain from 2007-2011 and as deputy State Department spokesperson from 2003-2006.