03.03.2025 Investigations Tenders

American Economic Expansion in Ukraine: Will the US Presence Help to Overcome Schemes in the Energy Sector?

Зеленский: Трамп может сыграть решающую роль в завершении войны

The United States has decided to gradually establish control not only over Ukraine’s subsoil but also over key state assets. But are we ready for large-scale privatization under the control of Western corporations?

After the recent visit of U.S. Treasury Secretary Scott Bessent to Kyiv, it became clear that the U.S. is not only seeking access to Ukraine’s natural resources, but is also actively seeking stakes in the largest and most profitable state-owned companies. The new US administration has a clear strategy: Ukrainian state assets should be partially transferred to Western corporations. But what does this mean for our country and its future?

First steps towards privatization

Давос 2025: розпочинається Всесвітній економічний форум

At the World Economic Forum in Davos in January 2025, Ukrainian officials took the first steps toward privatizing strategic assets. Vice Prime Minister and Minister of Economy Yulia Svyrydenko offered international investors to buy stakes in companies such as Ukrnafta and Sense Bank (formerly Alfa-Bank Ukraine). Western financial groups are already actively studying the terms of possible deals, which suggests that privatization may take place much faster than expected.

Strategic state-owned companies in the crosshairs: who is on the priority list?

One of the biggest areas of interest for US corporations is Ukraine’s energy sector. State-owned giants such as Ukrgazvydobuvannya and Ukrnafta may be the first candidates for partial privatization. In addition, critical facilities for the country’s energy security, such as Energoatom and Ukrenergo, which control the production and distribution of electricity in Ukraine, are at risk.

To recap: At Ukrenergo, we have repeatedly documented overstated repair costs, non-transparent procurement and dubious transactions. The result is debts that are now being “repaid” through tariffs.

At the same time, Naftogaz is selling off a strategic resource – gas – to private companies at half price. Manipulations have been recorded, whereby one day Naftogaz buys gas at 33 UAH per cubic meter, and its subsidiaries, including Ukrnafta, sell the same gas on the domestic market at 17 UAH. Daily losses are over UAH 100 million.

Another company, Energoatom, spent 52 million on overpriced materials and another 340 million on pipes during the blackouts, and in both cases the tender was won without competition by companies related to the company’s management, including Atomenergoresurs.

So perhaps the presence of the United States in the activities of these companies will help restore transparency in procurement?

Schemes of Ukrgasvydobuvannya: manipulation of drill pipe procurement

One of the numerous cases demonstrating corruption fraud at Ukrgasvydobuvannya is the procurement of drill pipes.

It all started in October 2024, when Ukrgasvydobuvannya announced two procurement procedures for drill pipes totaling UAH 426 million. It would seem that the logic of the auction should have demanded that the lowest bidder should win. But in reality, this is not how the situation developed.

Two bidders entered the first procurement: DP-MASTER MANUFACTURING CO. LTD and MIK LLC. DP-MASTER offered a price almost equal to the expected value, reducing it by only 0.095%. Instead, MIK LLC submitted a price that was UAH 14 million less than the expected value. At the same time, the favorable offer was rejected, and the winner was a company that did not submit a real bid. It sounds strange, because the logic of procurement should dictate that the winner is the one who saves the budget.

When Ukrgasvydobuvannya announced the second procedure, the same companies participated again. This time, DP-MASTER almost didn’t reduce its price, and MIK LLC offered 7.1 million less than the expected price. And again, it was rejected.

Despite the AMCU’s attention to the procurement and support for MIK LLC, Ukrgasvydobuvannya did not change its earlier decision. It justified this by numerous violations on the part of MIK LLC: non-compliance of the pipes and their Chinese origin. It all looks like a game in the interests of one “right” supplier.

Thus, Ukrgasvydobuvannya does not conduct real bidding, choosing a pre-determined winner, despite the lack of benefits for the budget. We have already filed a complaint about this, but have not yet received a response.

Will Ukraine benefit from such initiatives?

On the one hand, this situation is indeed reminiscent of the loss of partial sovereignty, as the country’s key economic assets may fall into the hands of foreign corporations. However, from an economic point of view, this process may have certain advantages. In a situation where many state-owned enterprises are on the verge of bankruptcy or functioning only thanks to government subsidies, the entry of foreign investors can help bring them to a profitable level. In other words, instead of losing money on the maintenance of unprofitable enterprises, investors will receive well-organized and transparent functionality.

The US will pay taxes in Ukraine, create jobs and actively support infrastructure development. At the same time, strict control over management will be ensured, which should minimize corruption schemes that are flourishing in the current environment. And the domestic oligarchic groups that currently control a large part of the economy will be deprived of their influence over assets.

On the other hand, will we be able to cope with such gigantic changes? If strategic enterprises, which are sources of financial revenues to the budget, are controlled by foreign companies, part of their profits will go to other countries.

Despite all the pros and cons of privatization under the control of Western corporations, there is an important question of how to maintain a balance between economic gain and national interests. In order to avoid the withdrawal of a significant portion of national assets, a clear strategy needs to be developed that will allow the Ukrainian government to maintain control over critical areas of the economy.

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