“Ukrainian forests want to be transferred to private hands”. Such statements in the last year can be heard from forest industry experts and foresters. People’s deputies are sounding the alarm, as well as the regional councils of a number of regions, which accept appeals to the central authorities. Nevertheless, for the general public, the topic of large-scale forest reform, which the Ukrainian government is actively implementing at the height of the war, remains “terra incognita”. Just as little known is the figure of a man who is probably behind a grandiose corruption scheme – billionaire Leonid Yurushev, owner of luxury hotels in Kiev and father-in-law of a showman and former people’s deputy from Zelensky’s party – Oleksandr Skichk
Deoligarchization in Ukraine has been put on pause. On February 24, on the anniversary of the start of the full-scale invasion of the Russian Federation, the Cabinet of Ministers of Denis Shmyhal adopted an order that postponed the introduction of the Register of Oligarchs – from April for an indefinite period – three months after the publication of the conclusion of the Venice Commission. Government officials explained this step as a desire to satisfy Western partners who demand to eradicate ties between big business and politics. At the same time, one of the pro-government speakers, the people’s deputy from the Servant of the People and the presidential representative in the Verkhovna Rada, Fyodor Venislavsky, on March 1, in a commentary to Public Radio, said that now the issue of deoligarchization has allegedly lost its “relevance and urgency” against the backdrop of a large-scale war. “The whole country, including representatives of the oligarchy, stands together against Russian aggression,” Venislavsky said. But he added that at this stage he does not consider the oligarchy a threat to the national security of Ukraine.
Indeed, over the past year, a number of the richest Ukrainians have lost most of their assets, and their political influence has naturally decreased (at least, this is how it looks on the surface) due to the concentration of power in the hands of the Supreme Commander-in-Chief during martial law. Individual oligarchs report donations of millions and even billions in support of the Armed Forces and people affected by the hostilities. However, does this mean that the phenomenon of the oligarchy no longer threatens the future of our state?
There is a well-known proverb: “To whom is war, and to whom is mother dear.” For most Ukrainians, the Russian invasion brought grief and material damage. This also applies to many businessmen and even oligarchs. However, always where someone loses, someone else finds new opportunities for themselves. Just now, individual representatives of big business who have access to government offices are creating new schemes for their own enrichment, which, due to the fact that public attention is riveted to the front, are becoming even more daring and large-scale. One of these is the non-public Leonid Yurushev.
Forest reform from the Cabinet of Ministers: first monopolization, then privatization?
On September 7 last year, the Cabinet of Ministers of Ukraine launched a large-scale forestry reform by adopting Decree No. 1003. Against the backdrop of high-profile news from the front, this news did not come to the attention of the mainstream media at that time.
The essence of the reform is best described in one word – “optimization”. This term is most often used by government representatives, motivating the need for changes. “Forest reform” from the Cabinet of Ministers provides for the unification of all 158 state forestry enterprises into one state enterprise “Forests of Ukraine”. The creation of this giant enterprise was completed a month ago – on January 20. Also, instead of 24 interregional departments of forestry and hunting, 9 regional offices are formed.
It would seem: what will change from the fact that the state redraws the structure of its forestry management? In fact, a lot is changing. First of all, Lesa Ukrainy State Enterprise actually becomes a monopoly in the industry, which means the end of the competitive timber market, which, although not without difficulty, has earned in recent years after the introduction of trading on licensed exchanges. A competitive market means market prices and equal access to raw materials for large, medium and small enterprises in the woodworking industry. While monopolization is an ideal field for “gray schemes”, which will be used, first of all, by big business.
Even more ominous is the fact that the creation of a state monopoly can only be an intermediate stage, and the next step will be the privatization of the State Enterprise “Forests of Ukraine”, and therefore all Ukrainian state forests. This threat is directly spoken of by all foresters, whose opinions interrogated specialized edition “Ecopolitics”. The creation of prerequisites for large-scale privatization of national wealth is also mentioned in the appeal of people’s deputies to the president, prime minister, minister of environmental protection and chairman of the State Forest Agency dated July 1, 2022. The appeal was signed by more than 100 elected representatives, including representatives of the pro-government Servant of the People. They say bluntly: if the reform is implemented, “the most valuable forests of the Carpathians and Polissya may end up in private hands.”
The government is reassuring: it is not yet possible to privatize state-owned forests, and this is expressly stated in Decree No. 1003. However, no one can guarantee that tomorrow the Forests of Ukraine state enterprise will not be transformed into a public joint-stock company, whose shares will be acquired by “their own people”. At least, the existence of such a plan for the appropriation of natural resources was announced in February last year by the people’s deputy, the former servant of the people Alexander Dubinsky. Dubinsky is an odious figure, but the scheme he described does not look fantastic: “Buyers of shares in a state joint-stock corporation with the conditional name Ukrles will be able to obtain, for example, the right to lease forests for 50 years and use the land on which they are located. These are the right to harvest, the right to forestry by-products and the right to sell. These are mushrooms, honey, berries. Forestries produce a lot of things.”
It is alarming that the government carries out all the changes in the field of forestry without public discussion, without showing anyone either the strategy or the reform plan. Thus, on December 13 last year, the State Forest Resources Agency promulgated a bill “On the Peculiarities of Management of State Property in the Forest Industry…”, which provides for the liquidation of not only state, but also communal (former collective farm) forestry, which was not discussed at all before. Communal forestries, which are managed by territorial communities, the government now also wants to join the Forest of Ukraine monopoly. Such an initiative has faced strong resistance in regions where community budgets are largely formed from revenues from communal leshozes. Zhytomyr, Chernihiv, Vinnitsa regional councils appealed to the government and parliament with a demand not to allow the adoption of the scandalous bill, which, according to the deputies, contradicts the Constitution of Ukraine, levels the reforms of local self-government and decentralization.
A logical question arises: who benefits from this? More precisely, what interested force is so influential as to decide the fate of the national wealth of Ukraine at a time when Ukrainian defenders at the front give their lives for every square meter of their native land? Moreover, this force is still reaching its limits, despite the protests of the communities, which, it seems, will only grow with time.
The name of the person allegedly involved in a large-scale scheme for the appropriation of Ukrainian forests is unanimously named by both foresters and investigative journalists, as well as individual people’s deputies. This is the billionaire Leonid Yurushev, the owner of one of the largest timber processing complexes in Ukraine, the Ukrainian Holding Sawmill Company and the Korosten MDF Plant.
Yurushev is perhaps the most non-public among the Ukrainian oligarchs. Despite the fact that he came into big business back in the 90s, being, according to media reports, a member of the so-called “Enakiyev group” and being an ally of the Donetsk crime boss Akhat Bragin (“Alik Greka”). During all this time, Yurushev did not give a single comment or interview to the press. On the other hand, he created a large business empire, which includes, in addition to woodworking enterprises, also luxury hotels in the capital (Fairmont, InterContinental Kyiv, Riviera, Alfavito), machine-building plants, and the Yaroslavov Val development company “. Among the former assets of the oligarch are Forum Bank, the Kremenchug Steel Plant, and the Leonardo Business Center.
Leonid Yurushev entered the woodworking business in 2010 by launching Ukraine’s first fibreboard plant, Korostensky MDF Plant. It is currently the largest enterprise of its kind in the country. The location of the plant was not chosen by chance – the Zhytomyr region is rich in coniferous forests. Although according to the standards, wood waste should be used in the production of MDF, in fact, Yurushev’s enterprise cuts down hectares of forest, as environmental activists have repeatedly stated, in particular All-Ukrainian Ecological League.
In general, the billionaire never worried about the environment: in 2012, the work of his plant in Korosten was temporarily suspended by the State Environmental Inspectorate due to the mass death of fish in the Uzh River caused by waste dumping.
By according to local media, in Korosten, the businessman established mutually beneficial relations with local officials. In 2011, Yurushev’s company agreed to become the owner of the Korosten Industrial Park technopark created under the auspices of the city council. After that, the entrepreneur received full cooperation from local authorities. In 2015, also in Korosten, Leonid Yurushev founded the Ukrainian Holding Sawmill Company. Now it is the largest sawmill complex in Ukraine, which annually can process 600 thousand cubic meters of wood. In total, the billionaire’s enterprises are capable of consuming up to three million cubic meters – this is approximately 20% of all logging in Ukrainian state forestries. Interestingly, the creation of UHLK coincided with another reform of the forestry industry in Ukraine – in April 2015, a moratorium was introduced in Ukraine on the export of unprocessed wood, and already in May, the Verkhovna Rada exempted imports of woodworking equipment from VAT. Both legislative innovations had a very positive impact on the profitability of Yurushev’s business.
In general, the billionaire has always been able to fruitfully cooperate with the authorities, getting his people to positions in government bodies. During the time of Yanukovych, Yurushev was called close to the “family” of the president, his companies received preferences and lucrative orders from the state. After the victory of the Revolution of Dignity, nothing changed, thanks to the oligarch’s connections with the then Prime Minister Arseniy Yatsenyuk (Yurushev was called one of the main sponsors of the politician and his Front for Change party). Subsequently, the billionaire found a common language with Yatsenyuk’s successor, Volodymyr Groysman. And already with the current government, Leonid Yurushev has truly family ties: his son-in-law, the husband of the daughter of Elizabeth, Alexander Skichko, was a people’s deputy from the pro-government Servant of the People, and later served as chairman of the Cherkasy Regional State Administration.
Ukrainian forests: how to take control of an entire industry
The idea of Ukrainian forest privatization did not come up today or yesterday. Even during the premiership of the “companion” Leonid Yurushev Arseniy Yatsenyuk, an initiative was voiced to transfer part of the forest fund to a concession. Already in 2017, the Cabinet of Ministers of Yatsenyuk’s successor Vladimir Groysman approved a program for the transfer of forestry enterprises to private hands. The media then also talked about the interest of Yurushev, who had the goal of creating a vertically integrated holding that united not only a sawmill, woodworking and logistics, but also had its own raw material base. In 2017, such plans were opposed by the European Business Association and industry associations of woodworkers, so the program was not implemented. Now the EBA has taken the side of the “reformers” – on August 2, 2022, the Executive Director of the European Business Association, Anna Derevyanko, made a statement in support of the creation of a single State Enterprise “Forests of Ukraine”.
The following year, 2018, the Verkhovna Rada adopted a law amending the Tax Code, which increased tax pressure on forestry enterprises. According to political scientist Pyotr Oleshchuk, the lobbyists for the law were the oligarchs Leonid Yurushev and Yuri Kosyuk. Their goal is to bring state forestries to bankruptcy for further cheap privatization.
The next attempt to launch the “reform” took place the year before last. In August 2021, Secretary of the National Security and Defense Council Alexei Danilov announced a meeting of the National Security and Defense Council on forestry, which should, in particular, consider the creation of an “industrial forest” – in fact, we are talking about reviving the idea of transferring forestry enterprises to a concession. The scheduled meeting never took place. Yurushev was also said to be interested in Danilov’s initiative. It should be noted that the Secretary of the National Security and Defense Council himself has interests in the forest industry – his wife owns a stake in PJSC Kiev Woodworking Plant.
Yurushev wants to grab Ukrainian forests
In 2021, the specialized publication Open Forest reported that the enterprises of the oligarch Yurushev were experiencing a shortage of raw materials due to a 1.5-3-fold increase in wholesale prices for round timber. In particular, the capacities of the giant UHLK, according to the publication, were loaded by no more than a third. Thanks to political connections, the billionaire, according to Open Forest, twisted the arms of the forestry enterprises, forcing them to supply the best raw materials at the lowest price. However, this did not solve the problem. Also on August 17, 2021, entrepreneurs from the Zhytomyr region appealed to the head of the region, Vitaliy Bunechka, with a demand to stop providing preferences to the monopolist.
Yurushev’s woodworking company has been receiving preferences for several years now. So, on September 15, 2020, Prime Minister Denis Shmihal visited Korosten MDF Plant. A month after this excursion, the government introduced the so-called “reductions” for the sale of timber. Unlike auctions, in reductions, the cost of the lot decreases with each step, and does not increase. According to the publication Our Money, it was Yurushev’s firms that were in the lead in terms of purchase volumes at reduction stores. So, only at the auction on January 31 – February 2, 2021, they purchased 155 thousand cubic meters of wood – this is comparable to the annual volume of logging in such an area as Kirovogradskaya.
The timber industry of the Ukrainian industry has long been playing by the rules lobbied by the oligarch Yurushev. People affiliated with the monopolist occupy high positions in relevant state bodies. So, Andrey Zablotsky headed the State Agency for Forest Resources from December 2019 to July 2020. Now he represents the legal interests of the Ukrainian Sawmill Holding Company, a billionaire. Zablotsky’s deputy was Sergei Vlasenko, who is also called the “man” of the oligarch in the media. Vlasenko was a candidate for the position of head of the controversial State Enterprise “Forests of Ukraine”, but took another important post – Deputy Minister of Environmental Protection and Natural Resources.
Ruslan Magomedov, a former employee of Yurushev’s structures, who headed his investment company Astrum Capital for more than 5 years, became a freelance adviser to the head of the Office of the President Andriy Yermak in 2020, and in February 2021 he was appointed head of the National Commission on Securities and the Stock Market. . He still holds this position. The National Commission, headed by Magomed, among other things, issues licenses to stock exchanges that sell timber. We add that, unofficially, the deputy head of the OP Rostislav Shurma, the former manager of the Metinvest group Rinat Akhmetov, is called the curator of the forest industry in Ukraine.
What do we end up with? Control over a significant part of the national wealth of Ukraine wants to get an oligarch, the organizer of “gray” schemes under any government and any president, a former ally of Yanukovych. For many years he received preferences for his business, and he always remained in the shadows, acting non-publicly through the hands of his people in the right offices. This is happening at a time when Ukraine’s Western partners are expecting real deoligarchization from us, the completion of which is one of the conditions for joining the EU. At the same time, the authorities pretend that this issue is “not relevant”. Whether Yurushev paved the way to the head of the office of the incumbent, Andrei Yermak, is still an unanswered question. The situation in the timber industry clearly demonstrates to us that the fight against oligarchic influences is a fight to ensure that Ukraine and its resources continue to belong to the Ukrainian people, and not to marauders who are used to caring only about their own enrichment.
Sergei Nikonov,ORD“, translation Skeleton.Info
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