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. Last Updated: 07/27/2016

Embattled Naftogaz Chief Resigns

Itar-TassIvchenko and Alexei Miller, head of Gazprom, at a press conference after signing the gas supply deal in January.
Oleksiy Ivchenko stepped down from his post as head of Naftogaz Ukrainy on Thursday amid growing concern over the state monopoly's mounting debts and possible new price hikes in Russia's controversial gas contract with Ukraine.

The Ukrainian government has accepted his resignation from the post, government spokesman Valentin Mondriyevsky said Thursday, Interfax reported. A spokeswoman for Naftogaz said Ivchenko had tendered his resignation in order to take up a parliament seat he had won in March's elections.

Ivchenko, a protege of Ukrainian President Viktor Yushchenko, had been under growing fire for runaway spending and for his role in negotiating Ukraine's controversial Jan. 4 gas agreement with Russia. Under the deal, the price Ukraine paid for gas nearly doubled and a monopoly on imports was handed over to secretive trader RosUkrEnergo.

Opposition politicians -- including former Prime Minister Yulia Tymoshenko, who is eyeing a return to the prime minister's post in ongoing coalition talks -- have slammed the deal as a betrayal of national interests.

Tymoshenko and other critics have said the January deal could open the way for Russia to leverage Naftogaz's mounting debts and take control of Ukraine's strategic pipeline system, through which 80 percent of Russia's gas exports to Europe run. Further price hikes, which could come as soon as July because the deal is valid for only the first six months of this year, could further exacerbate the company's financial position.

Yushchenko insisted in an interview with Ukrainian media published Thursday that Ukraine would not agree to further price hikes. But Gazprom spokesman Sergei Kupriyanov reiterated that the Jan. 4 contract only set the price of $95 per 1,000 cubic meters until the end of June. Gazprom deputy CEO Alexander Medvedev has said Russia could offer a lower price if Ukraine agreed to relinquish control of its national pipeline network to Gazprom.

In recent months, Ukraine's finance minister, Viktor Pynzenyuk, has targeted Ivchenko for overseeing runaway spending as the company's debts rise.

Ukrainian weekly Zerkalo Nedeli recently cited an audit into the company's finances conducted by Ukraine's security service, the SBU, as showing Naftogaz had run up nearly $6 billion in loans over the last two years. Other Ukrainian media have said Naftogaz has already run up debts of $700 million to RosUkrEnergo for gas supplies this year. Ratings agency Fitch lowered its rating for Naftogaz by one notch earlier this year, citing concerns over its finances following the January deal.

Naftogaz on Thursday declined to comment on its financial situation.

Vladimir Polokhalo, a deputy in Tymoshenko's bloc, said Ivchenko's resignation was a wise move given the mounting possibility of investigations into his role as head of Naftogaz and a signal that he feared Tymoshenko's return to power. "This will save him," Polokhalo said. "It will give him parliamentary immunity from serious investigation."

Polokhalo said it was an indication Tymoshenko might be coming out on top of coalition talks with Yushchenko's party despite the deep personal animosity that appears to have prevented the former Orange Revolution allies from forming a new government until now.

"If he was sure that Tymoshenko would not be PM and that [current Prime Minister Yuriy] Yekhanurov would remain, then he would not have stepped down, he said."

Market players also cheered Ivchenko's resignation. "Generally speaking, everyone will be happy to see the back of him," said Peter Bobrinsky, head of equity sales at Kiev-based investment bank Concorde Capital.

"He was not only a bull in a china shop, but he was also perceived as incompetent," he said, adding that Ivchenko had done little to help tense negotiations with Gazprom over the New Year by refusing to speak Russian.