A few days ago, before a stockholders’ meeting at Ukrnafta, the skies were literally and figuratively cloudless. The Ukrainian oil company had done very well (using the price conjuncture as well) and was now able to pay record dividends to its stockholders, particularly to the state, which holds a 50% interest plus one share, totaling over UAH 1.3 billion. Earlier, considering the hardships connected with the replenishment of the central budget, this decision was made by the company’s supervisory board. So this point on the agenda turned into a real hit, with everything else paling in comparison; it seemed the stockholders only had to vote for it.
The stockholders’ meeting unanimously approved the board’s 2004 progress report, but it never got around to approving the payment of dividends. The stumbling block was their allocation. Serhiy Pereloma, the first deputy chairman of the board of the National Joint-Stock Company (NJSC) Naftohaz Ukrainy (this holding company controls Ukrnafta’s government interest), moved to postpone the allocation of dividends until the next meeting scheduled for June 20. Of course, he had the decisive vote, so stockholders and the Ukrainian state are still to receive their dividends.
Few of those present at the meeting realized what had just happened. Mr. Pereloma adamantly refused to explain his move to the rest of the stockholders. When they reminded him of the government’s social obligations, they heard a curt reply, which sounded very much like a veiled warning: “The state isn’t directly represented at this meeting.” At first he declined comment to The Day’s reporter, but then said, “I’m here to represent a national joint stock company, not myself. I wasn’t authorized to comment on anything.
“Would you comment on this incomprehensible decision if you were acting on your own behalf?”
“I certainly would.”
“Would your decision be aimed at helping the company’s progress?”
“Absolutely.”
Ukrnafta’s CEO Ihor Palytsia also declined to comment on the stockholders’ decision, although in the past he was willing to share his thoughts with the media. He said he was sure that Ukrnafta’s board was well aware of the government’s stand with regard to containing the price of oil. At the same time, he told
The Day that the postponement of dividend payments would not affect the company’s financial status, which is quite stable at the moment, and its stocks will continue to increase.
Since there is no answer to the big question, various theories must be considered. The first and most moderate one is that NJSC Naftohaz Ukrainy and the government have once again realized that by paying such record dividends, the company is also raising its ratings on the stock market and its capitalization, which are securing its own large market development resources. Those who have a controlling interest are afraid that, without revenues as a financial source, the company will lower the oil and gas extraction rate.
However, a more likely theory is that the government, which was not directly represented during the stockholders’ meeting, is more concerned with keeping Ukraine’s largest oil company under control rather than stabilizing the oil market, which seems to rely only on the administrative resource and is expecting another price hike. By refusing dividends, it seems to be challenging the company and declaring war in the privatization sphere, which until now seemed such a comfortable realm. What next? Without a doubt, this decision brings into question the very existence of the company, especially in terms of a vertically integrated oil company. It is also safe to assume that Ukraine will have fewer oil products and their prices will be even higher.
Meanwhile, Premier Yulia Tymoshenko appears to be in high spirits. She believes that the gas prices in Ukraine, despite Russia’s record high oil export duty, must remain unchanged: “I believe that the prices we have today will be retained,” she told a recent press conference. She also noted that Russia, by increasing the export duty, is offering Ukraine oil supplies at prices that are higher than on the world market. She explained the situation, saying that Russia has become a monopoly oil supplier for Ukraine and that its supplies are meeting 77% of Ukraine’s needs. Most likely the government here will continue to pressure Russian oil traders to refrain from increasing the prices. Mrs. Tymoshenko believes that the prices of oil products set by the government will allow oil refineries and filling station owners to carry on business normally.
The Ukrainian ministers of economy and finance traditionally deviate from the cabinet’s guidelines. Economy Minister Serhiy Teriokhyn said a few days ago that the government no longer wants to contain gas prices at UAH 2.99 a liter. He told journalists, “We’ll move the prices of oil products along the corridor, starting at UAH 2.99 per liter, which we have now.” He added that, lest the government be accused of keeping gas prices in check, they will adjust them to Platt’s dynamics, meaning world market costs. He also said that this price-setting mechanism would be submitted within the week, but didn’t specify the date of enactment. Mr. Teriokhyn declared, “The government will slacken prices after setting up an intervention reserve that can last for 90 days,” adding that this may take three years and that the government has started forming this intervention reserve. Finance Minister Viktor Pynzenyk noted that, following Russia’s oil export duty increase, the Ukrainian finance ministry cannot keep the price of A- 95 gas at UAH 2.99. Gas sellers in Ukraine can still bypass cabinet’s decisions by making other gas prices equal to that of A-95, by increasing the A-98 price, or by simply refusing to serve gas, referring to administrative orders that state they can sell gas only by cashless settlements.
