During court arguments on 29 September, Yulia Tymoshenko pulled out her trump card by saying that the 2009 gas crisis was made inevitable back in 2005 and 2006 when Naftogaz of Ukraine and RosUkrEnergo (RUE) signed an agreement that established a 25-year fixed rate for transit gas transportation from 2005 to 2030 but “forgot” about establishing a set price for gas itself. On 4 January 2006, a Russian-Ukrainian agreement was signed, which set the price for gas for the next six months, simultaneously increasing it by 90%. Tymoshenko said that this agreement put 100% of Ukraine’s gas supplies in RosUkrEnergo’s hands. This agreement was signed by then-President Viktor Yuschhenko, Prime Minister Yury Yekhanurov, Naftogaz of Ukraine Head Oleksiy Ivchenko, businessman Dmytro Firtash, current Minister of Fuel and Energy Yury Boiko and head of the president’s office Sergei Levochkin.
Tymoshenko stated, “Ukraine wouldn’t have had a crisis had it not cynically turned down Turkmen gas and handed it over to RosUkrEnergo. All they were doing was taking money from Ukraine and giving it to Russia. There you have it. That’s what their work entailed. RosUkrEnergo’s charter capital had 20 thousand euros in it – and three swindlers in Firtash, Boiko and Levochkin as its founders – when it was given the right to pump 10 billion cubic metres of gas into Ukraine.”
Tymoshenko made it crystal clear in Kiev’s Pechersky Court that she and her allies would be forced to expose the Ukrainian administration’s corruption, and that a political time bomb had been set.
Tymoshenko had set this “bomb” all the way back on 27 April, still free, when she filed a lawsuit with the U.S. District Court in Manhattan against RosUkrEnergo, a Swiss company, and its co-owner, Ukrainian oligarch Dmytro Firtash
The prime minister’s lawsuit is based on the Racketeering Influenced and Corrupt Practices Act (RICO), which is meant to fight corruption and money laundering. The lawsuit itself demanded that the court declare the Stockholm Arbitration Tribunal’s ruling from 8 June 2010 as legally void. In pursuance of this ruling, Naftogaz of Ukraine returned 12.1 billion cubic metres of natural gas to RosUkrEnergo. Tymoshenko, then the prime minister, ordered the former to take this gas from Ukraine’s underground gas storage facilities at the beginning of 2009. RosUkrEnergo’s debt to Russia’s Gazprom of 1.7 billion dollars served as the grounds for issuing this order, while Gazprom ceded the right to demand that RosUkrEnergo repay its debt to Naftogaz of Ukraine; however, RosUkrEnergo did not rush to pay off its credit debt. The prime minister was forced to interfere to rectify the situation.
In March 2009, however, RosUkrEnergo filed suit with the Stockholm Arbitration Tribunal, which on 8 June 2010 ruled that the 11 billion cubic metres of gas confiscated from the Swiss company should be returned to it with a penalty of 1.1 billion cubic metres of gas. The Shevchenko District Court of Kiev upheld this ruling on 13 August 2010, and then the Ukrainian Supreme Court followed in kind on 24 November.
In carrying out the judicial rulings, Naftogaz of Ukraine returned 12.1 billion cubic metres of natural gas to RosUkrEnergo. To do this, the Ukrainian gas company was forced to increase gas volumes supplied by Russia. Interfax reported on 16 May that in the first quarter of 2011, Gazprom increased its gas exports by 31% “because of consumption increases in Turkey and Italy”, and because of additional 11 billion cubic metres of gas sent to Naftogaz of Ukraine to be returned to RosUkrEnergo.
Tymoshenko and her associates, in appealing to American anti-corruption legislation, demanded that the ruling of the Stockholm Arbitration Tribunal be thrown out. They accused Naftogaz of Ukraine and RosUkrEnergo of being in cahoots in order to trick the Stockholm Arbitration Tribunal and swindle Ukrainian citizens.
Should the U.S. judicial authority declare the lawsuit’s arguments persuasive and satisfy it, then, in accordance with the RICO, the claims would be automatically tripled. Therefore, RosUkrEnergo would be forced to return not 12.1 billion cubic metres of gas to Naftogaz of Ukraine, but 36.3 billion. This volume, which would run at a cost of roughly 10 billion dollars, is comparable to the amount of gas that Gazprom exports to Ukraine annually.
Should Tymoshenko win her lawsuit, RosUkrEnergo will be forced to ask its founders for help in fulfilling the court ruling. In other words, it would be appealing for help to Centragas Holding AG, which is controlled by Ukrainian tycoon Dmytro Firtash, and to Russia’s Gazprom, which owns half of RosUkrEnergo’s shares. Gazprom, in turn, cannot turn down RosUkrEnergo’s appeal for help, because otherwise the latter will file a regression suit against the former, and possibly as part of the very same RICO anti-corruption law, since Gazprom in 2009 virtually gave the green light to Tymoshenko to withdraw gas from storages in Ukraine that belonged to RosUkrEnergo, a subsidiary of Gazprom.
The District Court in Manhattan, however, never even started to consider Tymoshenko’s lawsuit, filed back in April, because the court was not given evidence that copies of the lawsuit had been presented to RosUkrEnergo’s management and Dmytro Firtash. Once a lawsuit is filed, the defendants have 21 days to file their own complaints with the court, and then judicial proceedings begin.
The US judicial system allows for presenting a lawsuit to the defendant through the media. This is exactly what Microsoft did when it filed suit in the Federal District Court for the Western District of Washington against the creators of a botnet, a computer network, responsible for sending out spam mailings. Microsoft presented newspapers publications as evidence that it had presented the lawsuit to the defendant.
Why did Tymoshenko’s associates, now almost six months after they filed suit with the District Court in Manhattan, not follow Microsoft’s example? For the very reason that Tymoshenko, apparently, as an experienced politician, understands that “a rising tide lifts all boats”. These words, attributed to former US President John F. Kennedy also imply that these very boats can be capsized, just like that. That is why no steps were taken to present the lawsuit to the defendant. But now, with Tymoshenko cornered, the likelihood that a political bomb will go off in Manhattan has gone up drastically.
Ukrainian President Viktor Yanukovich and his allies cannot but take into account this possibility, which is why they are taking several muddled steps to decriminalise the articles in the criminal code that are being used to charge Tymoshenko. That way, they will have the opportunity to at least convict her, but set her free at the same time.