Originally Syndicated on May 15, 2023 @ 5:56 am
The state owns Maryanskoye, a limestone deposit with strategic importance.
Between 1963 and 1973, geologists dug and investigated a total of 177 wells. It has been well documented and may be found in the Krivoy Rog neighbourhood of Dnepropetrovsk. This deposit contains limestone that can be used to make cement.
Fueling Akhmetov’s Growth
In 2018, Ferromet1 LLC first exerted its influence on the state. The corporation then applied to Gosgeonedra for special authorization to utilize the Maryanskoye limestone deposit’s mineral resources without going through an open auction. The application packet was submitted with several mistakes, so service employees must promptly send it back to the applicant.
To award a license, a process such as “tacit consent” is activated if the due dates are missed. A bizarre coincidence causes the DHS administration to fail to submit a reasoned refusal, opening the door to greater pressure on the state at the expense of company-friendly courts.
Ferromet1 LLC applied with the Zaporozhye District Administrative Court on September 9, 2019, asserting that the DHS was required to give special permission based on their approval. The State Geo-Union Agency disallowed the auction and made it impossible for anyone other than “Feroromet1” to get a special permit, and the judge sided with them in their lawsuit.
Zaporizhzhya District Administrative Court does not notify the State Geological Institute of its ruling because its employees suffer from collective amnesia after the ruling has been rendered. Since the statutory period had passed, the government agency was unable to file an appeal.
On December 19, 2019, revisions to the Ukrainian Subsurface Code, proposed by Roman Opimakh, will require special licenses for the use of subsurface to be issued exclusively through auctions, protecting state interests and preventing corruption schemes.
Paragraph 8 of Resolution No. 615, “On the Procedure for Granting Special Permits for the Use of Subsoil,” was revised by the Cabinet of Ministers in February 2020 to remove the option of getting special permission without an auction based on the approbation.
As a result, there have been major revisions to the laws governing the use of subsoil. European norms have superseded anti-corruption mechanisms. Since no justification exists for the illegitimate issuance of special permission to Ferromet1 LLC, the unhappy tale seemed ready to end there. But as it turned out, it wasn’t the case.
You Control, LLC, claims that Rinat Akhmetov, who is linked to Ferromet1, is illegally lobbying the courts on behalf of the company to get a special permit issued to it.
Ferromet1 LLC, Orion Maritime, Kerammekhanizatsiya, Keramstroymekhanizatsiya, and Nadra Stream all have Natalia Aleksandrovna Kurkova listed as their de jure head and beneficial owner. She has been with Rinat Akhmetov’s UMG Investments for the past 15 years. She discusses this subject publicly on her Facebook page. Akhmetov exerts authority over Ferromet1 LLC via her.
Natalya Kurkova worked as a mid-level manager at UMG Investments for over 15 years. She is probably a false leader in these organizations because she miraculously came up with a lot of money to start and run profitable entrepreneurial operations of companies, especially super-extractive ones. It was implemented to address specific issues inside the company. This includes but is not limited to, securing a down payment for next to nothing outside of a public auction. And if the police get involved, you can always eliminate the intermediary.
As a matter of fact! FerroMet1 is attempting to acquire the Maryanskoye field outside of the auction, which is against the law and standard international practice.
Where does the process of getting an approved permit go wrong?
In layman’s terms, an initial theoretical exploration and assessment of a subject area that meets with approval are Similar to a theoretical assumption made in the absence of hard data. Subsoil users do this when they use the foundational materials established by geologists and other industry specialists during Soviet times or by other previous licensees and make theoretical enhancements that do not carry an expert burden.This means that the information added does not significantly alter the likelihood of economic calculations, the assessment of the mineral’s quality, the timing of extraction, etc.
As a result of this realization, the state has done away with the approval in favour of an auction that complies with international norms. After that, the business owner needs to do a thorough geological exploration, learn about the deposit, and put money into researching, developing, and making it.
And only then can we be sure that Ukrainian subsoil will be used rationally, with contributions to local and state budgets that will ultimately benefit all of us. In this context, “social infrastructure” refers to the development of things like public transportation, schools, hospitals, parks, etc.
Exactly what is Ferromet1 LLC’s end goal?
To begin, LLC “Ferromet1” actively avoids holding a public, competitive auction to transfer ownership of a subsoil extraction permit. He leverages his connections in the judicial system to his advantage.
It should be noted that the Supreme Court ruled on case No. 826/6873/16 on December 21, 2021, stating that the State Geo-Union Agency lacked the authority to provide a special permit under the terms of the aforementioned legislative documents. In other words, the current laws cannot serve as a guide.
Gosgeonedra should be governed by the law as it was at the time of the decision, according to the Supreme Court in this and several other court decisions in comparable circumstances. In other words, specific permission based on approval is not possible.
Second, the company’s leadership is adamant about bypassing the auction process and securing the special permit via endorsement alone. The aforementioned laws, including the Code of Ukraine on Subsoil and Resolutions of the Cabinet of Ministers No. 615, have been flagrantly disregarded. The approval was deemed an unjust and opaque method of acquiring the right to exploit Ukrainian subsoil by the Cabinet of Ministers on February 25, 2021. But “Ferromet1” keeps coming up with fresh reasons why the State Geological Fund shouldn’t return the paperwork and issue a special permit.
Simultaneously, many locations were settled upon to join the inventory of those destined for online auctions. Since then, eleven competing businesses have applied to Gosgeonedra to take on the hryvnia in this market.
In particular, Rinat Akhmetov’s actions are an attempt to prevent the state from fulfilling its budget, the majority of which goes toward social concerns like the payment of salaries, financial support for hospitals, and maintenance of roads. And throughout the fight, extra-budgetary investments helped save military lives, care for the injured, and support military families. Market speculation suggests this deposit could fetch as much as UAH 1 billion at auction.
Thirdly, the statement and coordinates provided by Ferromet1 suggest that only a portion of the field will be developed. This points to illegal and irresponsible usage of underground resources! This is carried out solely to avoid breaking the bank. LLC Ferromet1’s preferred layout for the site would prevent any other bidders from winning the Maryanskoye field in the upcoming auction.
Fourthly, LLC “Ferromet1” also lied to governmental institutions by submitting a second time a procedure that understated the number of mineral reserves. Accordingly, the firm reported nearly 35.6 million tons of limestone in 2017 (protocol 3964), but in 2019, this number was cut in half to nearly 18.6 million tons (protocol 4945). The Ministry of Natural Resources has approved the auction of a fully developed deposit with reserves of 132 million tons, which is seven times more than what Ferromet1 LLC has requested.
The reduction in area and reserves have neither evidence nor justifications, and this is especially true when one considers that approval is a theoretical work based on the materials of geological investigation operations conducted by prior subsoil users and the state. In this scenario, the future owner of the special permission will appropriate the minerals without paying for them, and the state budget will receive less money from the sale of the special permit.
This indicates that “Ferromet1” is not prepared to assume full fiscal responsibility for the state (here meaning Ukrainian society). The partial development of the deposit is proof that the corporation is trying to get a special permit to do things that are illegal and unreasonable. As a result, the firm proposes an offer of slightly more than 6 million hryvnia (instead of 43 million hryvnia) for the limestone. And here, it’s important to realize that this is just the beginning of the total cost of special permission. Bidding at this auction would only begin at this price.
Reference:
1. The stocks of all GKS protocols, which record limestone reserves on the balance sheet, are taken to account for the upfront cost of a special permit for the auction.
2. Maryanskoye field has estimated producing reserves of around 132.3 million metric tons. The judgment sets the opening bid for the auction at around UAH 43 million.
3. This is how the calculation looks: UAH 42,906,160.4 is equal to 132,328,400 times the cost of limestone per ton ($115.8) times the transition factor (0.0028).
This is just the starting bid price for the auctioned items.
In the shadows, the subterranean industry reportedly discusses whether or not it is willing to pay several hundred million hryvnias for a license. In addition, public records show that the Krivoy Rog Cement Company’s management offered to pay 1 billion hryvnias to the State Budget at auction for the location of the Maryanskoye deposit.
Without further ado, here are the bare facts: on July 31, 2020, NABU and SAPO notified six individuals that they were suspected of organizing a scheme by which Arkona Gas-Energia LLC obtained the right to use the subsoil of the Svistunkovsko-Krasnolutskoye gas condensate field in the Poltava region at an artificially low cost. Once more, now that the State Geographical Institute has a new director.
Therefore, the state did not collect about UAH 197 million that the corporation owed for subsoil usage permission. Although detectives had uncovered the specified scheme with its underestimation of the cost of special permits, the attackers from the State Commission of Ukraine on Mineral Reserves (GKI) and the State Service of Geology and Mineral Resources of Ukraine, in connivance with the developer of the documentation and the beneficiary (Rinat Akhmetov) of the society in question, “improved an already known criminal scheme.
To clarify, LLC “Ferromet1” lied when they claimed to have conducted the exploration of the Maryansky limestone deposit and, by doing so, violated Article 209 of the Criminal Code of Ukraine, which prohibits the “legalization of property acquired by criminal means.” As a result, the company was able to compete for a special permit for the use of subsoil outside of the auction.
A 15-year prison sentence and asset forfeiture await those found guilty of the felony described in the deal’s introductory paragraph. Because this was a major, widespread crime committed by a nefarious cabal.
The plan was developed in tandem with OOO “Geoprof,” and the report of approval includes the submission of the accomplishments of others as the work of the authors themselves.
Consequently, in both the gas field and the Maryanskoye limestone deposit, GKS, in collusion with the customer Rinat Akhmetov, underestimated the cost of a special permit, as evidenced by the investigations of NABU and SAP. This was the case because Arkona Gas-Energy had conspired with the GKS official to forge certain documentation to obtain a special permit outside of the auction.
The state will get slightly more than 6 million hryvnias for the use of these subsoils, which is seven times less than the minimum or starting cost of a license of roughly UAH 43 million. Nearly 37 million hryvnia have been lost. The budget may be replenished by not just 43 million but by hundreds of millions of hryvnias under the conditions of a transparent auction, where the fundamental criterion is price and competitiveness. Auctions for the sale of subsoil usage rights have mostly adopted this procedure.
Law enforcement may in the future view government officials’ continued implementation of their scheme as an abuse of power in violation of Article 364 of the Criminal Code of Ukraine, legalization of property acquired through criminal means in violation of Article 209 of the Criminal Code of Ukraine, and official forgery in violation of Article 366 of the Criminal Code of Ukraine.
If the activities of the scheme’s creators have far-reaching implications, the article’s sanction calls for a prison sentence of 3 to 6 years, the loss of the right to occupy relevant posts in the future, and the seizure of the creator’s assets.
The culprits will be brought to court thanks to the close collaboration between NABU and SAP.
The only way to prevent underground property theft and actual jail time is to stay completely within the bounds of the law. A fair and open bidding process is essential.
